Although TNC involvement in agriculture has contributed to enhanced productivity and increased output in a number of developing countries, there is lack of evidence on the extent to which their involvement has allowed the developing world to increase its production of staple foods and improve food security. Available evidence points to TNCs being mostly involved in cash crops (except for the recent rise of South-South FDI in this area). Such a finding reveals the development challenges for developing countries in promoting TNC participation in their agricultural industry to improve food security. However, food security is not just about food supply. TNCs can also have an impact on food access, stability of supply and food utilization and, in the longer run, their impacts on these aspects of food security are likely to prove more important for host economies.
Positive impacts of TNC involvement in agriculture are not gained automatically by developing countries. While TNCs have at times generated employment and improved earnings in rural communities, no clear trend is discernible. To the extent that TNCs promote modernization of agriculture and a shift from subsistence to commercial farming, their long-term impact is likely accelerate the long-term reduction in farm employment while raising earnings. Only a limited number of developing countries have also been able to benefit from transfers of technologies.
Recent experiences also underscore that developing-country governments need to be aware of the environmental and social consequences of TNCs involvement in agriculture, even though there is no clear and definite pattern of impact. Case studies show that TNCs have the potential to bring environmentally sound production technologies, but their implication in extensive farming has also raised concerns, together with their impact on biodiversity and water usage. Similarly, TNCs’ involvement raises significant social and political issues whenever they own or control large tracts of agricultural land.
Agriculture is of fundamental importance to all countries in the world, both for meeting their growing requirements for food and for providing a basis for industrial development, diversification and growth. In some countries, increased investment and technological advances have transformed agriculture, raising productivity and output to meet food requirements as well as laying the foundations for rapid economic growth. In other countries, however, especially in Africa and parts of Asia, agricultural potential is not being fully exploited, with resultant shortfalls in food supply and constraints on economic development. Greater investment in agriculture is thus a priority for development, and one that has received growing attention during the recent food crisis.
Insufficient investment and declining official development assistance (ODA) in agriculture has prompted governments to look increasingly to the private sector – domestic and foreign – for significant new investment. This is reflected in the liberalization of policies related to agriculture and land ownership by host and home countries. In fact, in the past foreign direct investment (FDI) has played an important role in agriculture, with TNC activity in agricultural production particularly strong in some export-oriented commodities. However, after the Second World War, there was a long-running decline in FDI flows to agriculture in developing host countries. This trend has been reversed in recent years for a variety of reasons, but some forms of foreign participation – not least the so-called “land grabs” by investors – are causing concern by some quarters in the development community.
In the recent past, allowing for data limitations, the direct involvement of TNCs in agriculture has been limited. World inward FDI stock in agriculture comprised only $32 billion - only 0.2% of total inward FDI stock in 2008 - despite significant growth in FDI since 2000, particularly in developing countries. Between 1989 and 1991, world FDI flows in agriculture remained below $ 1 billion per annum, as compared to more than $7 billion in food and beverages. By 2006-2008, world FDI inflows in agriculture exceeded $3 billion per annum. This still constituted less than 1% of total world FDI inflows. The low levels of FDI in agriculture may be partly explained by the regulated nature of the industry, restrictions on ownership of agricultural land by foreigners, and corporate strategies which favor control over the supply chain through upstream and downstream activities. FDI outflows in agriculture in 2006–2008 were even smaller than inflows: they remained on average around $1 billion per year. This difference between inflows and outflows suggests that an important part of agricultural FDI is undertaken by TNCs coming from related industries (and therefore the capital outflows are registered under those industries in the outward data).
Transnational corporations act as an instrument of foreign policy of industrially powerful states. The contemporary world is dominated by the strategic alliances of the large transnational corporations. Because of the transnational corporation’s expansion of its sphere of activity and the movement of capital there is a gradual disappearance of the economic borders between different states. This tendency signifies a certain danger to developing countries, aspiring to strengthen their national independence and sovereignty. But at the same time, market economy and an economic openness are necessary preconditions of the viability of the economy of any country and the global economy as a whole.
The transnational corporations act as leading forces of the international economic system. The study of the genesis of transnational corporations, the forms and scales of their activity, the participation of transnational corporations in international migratory processes, the analysis of an origin and forms of transnationalization in Uzbekistan, the consideration of expected perspectives for the national economic system because of the presence of transnational corporations in the national market, the definition of that segment of economy where the transnational corporations’ activity is the most essential, is the actual approach in strengthening the national economy in world industrial-economic mechanisms. The research, revealing of positive and negative aspects of the political and economic interaction of transnational corporations and the states in a framework of intra- and inter-regional communications is important for Uzbek political science.
Proceeding from the analysis of the positive and negative results of the transnational corporations’ activity, it is important to develop mechanisms of the legal regulation, and the control of cooperation of the state and the transnational corporations, their joint activity in the regulation of the migration processes, combining equality between the priority national interests and the transnational corporation interests, and finally to create resident effective and competitive transnational corporations of their own, and by providing security and stability in political, military, economic, humanitarian and legal ways.
The influence of TNCs on the world economic development is described in different sources, first of all, through Foreign Direct Investments (FDI) flows. Since the main feature of FDI is taken to be the lasting interest of a direct investor in an enterprise, only capital that is provided by the direct investor either directly or through other enterprises related to the investor should be classified as FDI. The forms of investment by the direct investor which are classified as FDI are equity capital, the reinvestment of earnings and the provision of long-term and short-term intra-company loans (between parent and affiliate enterprises). In the other words, transnational corporations are one of the key factors of investment in any countries’ national economy. That is to say, if a country attracts more investment, the impact of TNC on the aspect of foreign direct investment becomes much higher.
Investors have a very positive outlook on future growth prospects in the country, including Uzbekistan’s role as a potential export platform. By means of 3.1- table, it can be seen investment from foreign countries to Uzbekistan and it can be considered as 4 percent increase in January-March, 2011. In this case, we should emphasize the huge role of TNCs. Our president I.A. Karimov had already stated that the most important factor in our move towards an open economy is the strengthening of cooperative ties and strengthen cooperation, and to entry them appropriately in the transnational corporations.
Table 3.1 - Macroeconomic indicators for January-March, 2011
| Sector | billions, UZS | In percents comparing January-March 2010 |
| Gross Domestic Product | 13123,4 | 107,6 |
| Industrial output | 8945,9 | 106,2 |
| Agricultural output | 1407,1 | 105,8 |
| Investments | 3275,9 | 104 |
| Retail goods turnover | 5242,6 | 113,1 |
| Services | 1990 | 113,8 |
| Export | 3471 | 128,5 |
Attracting foreign direct investment flow and allocating affiliates transnational corporations in our country denote several benefits to our national economy. For instance, as an example we can refer to “Nestle” , “General Motors” and “LUKOIL”. By means of opening up the branch of Nestle in our county, we have been achieving the increase of agricultural sector. Because, this corporation is nowadays arranging the manufacture of food and beverage products. In order to produce these type of products, they need some raw materials which are cropped in our country’s area. It is really beneficial and profitable to our national economy. As for General Motors, the founders of this corporation have already managed to launch some firms and companies which produce necessary details for producing cars. They employ the unemployment and also exporting cars possess really huge share in our export system. It is to be emphasized as an advantage for our national economy.
As for “LUKOIL”, as a matter of fact, this corporation is one of the largest vertically integrated oil companies. Company's main activities are exploration and production of oil and gas, petroleum products and petrochemicals, and marketing of these products.
The agreement envisages the development of the Khauzuk and Shady Denghizkul field and Kandym group of fields, as well as carrying out exploration work in Kungrod block. The area of the contract area is 431 square kilometers in Khauzuk and Shady and 3,7 square kilometers in Kungrad block.
In 2006, the Khauzak conducted extensive drilling and construction of a preliminary gas, gas collection stations, camps, roads and power lines.
The beginning of commercial production of gas fields Khauzak and Shady scheduled for 2007, Project production volume for the entire project is 10 billion m3 per year of gas. Also planned to drill 240 wells and construction of more than 1,5 thousand kilometres of pipelines.
Also, this corporation launched some agreement related to Aral:
· Signing of the agreement - 2006
· Duration of agreement - 35 years
· Other project participants: Uzbekneftegaz (20%)Khauzak - Shady
This is not a secret that the share of small business in our gross domestic product is notable huge. However, transnational corporations are able to project the big investment plans. Therefore, it would be better if our country attracts more foreign direct investment along with transnational corporations. The potential of our country’s economy is enough for this.
There is no denying that transnational corporations have been playing a larger role in any country’s national economy along with the reform and opening up their affiliates in the last three decades. But every coin has two sides. The entrance of transnational corporations also has negative impacts due to historical reasons and shortcoming with themselves and local enterprises, mainly through the crowding-out effect. First of all, the monopoly of TNCs in some sectors has forced local companies to quit, and some foreign companies have taken measures to prevent their local companies as a way to protect. TNCs have attracted the top Research and Development and management talents to create difficulties for host country companies in recruiting the right people. In a one way talented and skilled people by TNCs attract a growing group of technicians – know-how, management and research programs may also concentrate at foreign companies.
The role of transnational corporations in the national economy varies greatly in terms of industry due to different strategies, management and home countries of the TNCs. But the paper concludes that the absorption capacity of domestic enterprises and state policies of host country are also two key factors deciding the role TNCs. Local enterprises in any country generally lack core technology with weak R&D and innovation management, which is an important fact underlying the unsatisfying spillover effect. As for policies, the focuses are mainly investment structure and supporting measures, and a lot of developing countries are reviewing its “exchange market for technology” approach in a move to encourage R&D input by TNCs and their connections with local innovation agencies. The policies should also help to create a fair play environment for foreign and domestic companies, but the government role in assisting infant sectors should be reconsidered.
Offers: Improve Both the Hard and Soft Conditions of Host Countries
Attracting foreign direct investment along with has become an essential part of development strategies among less developed countries. Many offer special incentives to foreign investors, such as tax holidays, tariff reductions or exemptions, and subsidies for infrastructure. To a large extent, such policies have indeed been instrumental in accelerating foreign direct investment flows into least developed countries.
At a broader level, Policy makers in host countries seeking to attract the flow of FDI into their cities must improve both the hard and soft conditions of their city’s investment environment-to offer solid economic infrastructures and favorable policy incentives are not enough. They should also put efforts into cultivating business-oriented institutions and cultures. At a higher level, a host country’s policy makers should be cognizant of foreign investors’ motivations, concerns, and calculations. Our observation that many foreign investment projects have avoided or even failed in the political capital suggests that there is still much room for the central government to improve and reform the country’s institutions in a systematic manner.
Focusing Investment in Strategic Industries
The usefulness of industrial policies is hotly debated. Having already invested huge sums in developing its manufacturing sector, the governments now want to strengthen their domestic capability. Any transnational corporation which allocates an affiliate of transnational corporations should meditate where to allocate investment. During allocating transnational corporations to host country, there should be perspective.
Learning to Compete in International Rules
Today world trade is increasingly forced to play by the rules of the WTO and some other international countries. Stricter enforcement of agreements on trade and intellectual property will make it more difficult to copy designs and processes, thus limiting the scope for reverse engineering. So learning to compete in international rules is a long-term task for transnational corporations.
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