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Initially, multinationals invested mainly within the developed countries, avoiding such risks and obstacles as poor infrastructure, poor communications and questionable policy environments in terms of foreign currency restrictions and the free flow of investment funds. However, since the 1990s these companies have switched their investments to developing countries. On one hand, this is because of improvements in infrastructure and investment environments, and on the other, because of increased global competition between multinationals, especially from developing countries, particularly China.
Chinese multinationals began expanding overseas in 1992, when Deng Xiaoping made his famous southern tour and advocated a push for foreign investment in the Chinese market. Since then China's state-owned companies have accumulated huge amounts of capital, making them capable of investing in world markets. Chinese companies mostly set their sights on developing countries, focusing on infrastructure projects such as building stadiums and highways, which are greatly needed in many African countries, for example. At the same time China began investing in energy projects and natural resources, to meet development needs at home. This trend has been particularly strong since the late 1990s and has intensified in recent years.
Since last year, Chinese companies working overseas have been victims of criminal or terrorist attacks, with Chinese lives lost in Pakistan, Nigeria, South Africa, Kenya and Ethiopia. Just last month nine Chinese were among 74 people killed in an attack on a Chinese petroleum company in Ethiopia. Such tragedies were rare in the past, especially involving civilian companies. The media have made much over these incidents, some of which were described as terrorist attacks. However, there might be other stories behind the tragedies -- rooted in resentment toward outsiders engaged in economic activity for their own benefit, or otherwise involved in local affairs.
Money-making is the legitimate purpose of multinational companies. Involvement in politics is generally considered illegitimate activity for such companies. For example, the United States has been strongly criticized for the political involvement of its companies in Guatemala in the 1950s and in the Soviet Union in the 1980s.
Should governments keep away from their country's multinational businesses abroad? Many political risk analysts support a no-involvement policy, as they are suspicious of governments' intentions to use companies as strategic tools. But how can governments remain blind to the fact that companies may be doing business in ignorance of international norms and with potential negative local social impact?
We are living in an era of globalization. There are many problems waiting to be solved. People face various natural disasters, like floods and droughts, sandstorms and starvation. These negative scenarios are especially common in Africa. There are also such problems as illegal drug production, human trafficking and pirates threatening human life in ocean areas. Most notably we are facing global warming and biological crises. In these circumstances, how can multinationals and their governments remain committed only to profit-making?
Multinationals need regimes that control their investments and management. Sovereign governments have the obligation to supervise their nationals' activities and ensure that companies are conducting their business in line with global interests and sustainable development. The chief executives and public relations experts at these big companies need to have a broader vision - not just making money and promoting their own interests, or even those of their states, but keeping in mind the global interest. This mindset would definitely help avoid further attacks on their activities in the future.
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(Zhang Quanyi is an associate professor at the Zhejiang Wanli University in Ningbo, China, and a PhD candidate at Shanghai International Studies University, studying policy making and collective identity. He is currently a research fellow at the School of International Studies at Yonsei University in Seoul, Korea, under a grant by the Korea Foundation. He can be contacted at qyzhangupi@yahoo.com. ©Copyright Zhang Quanyi.)
