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Multinational Corporations And Poverty Eradication – Analysis

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We tend to question the share of wealth from big business to the rest of the world. We tend to believe that Multinational corporations (MNCs) must play a pivotal role in promoting well-being and equity in our society. Of course, MNCs have several types of ‘role’ and ‘scope’ to play in modern society. They hardly work on their own because they know they can be more effective (if and) when they work in collaboration with some local and international stakeholders such as the government, the UN agencies, or NGOs in the host countries.

One of the most prominent contributions from MNCs to the host countries is through their corporate social responsibility (CSR) programs. CSR is, in fact, more than a series of ‘feel-good’ activities that MNCs organise for the local community and subsequently promote them in the media. We are familiar with the concept of donating money, building schools, or planting trees in front of the cameramen from the influential media. Those days are gone. There are a lot to explore and be creative when it comes to CSR strategies. However, there is a universal view among anti-globalisation groups that MNCs are narrow-minded with their CSR ideas. Some even argue that MNCs are socially and environmentally destructive, evil and insincere.

CSR has tended to deal with a handful of common social issues, while marginalizing other challenges. Developmental concerns of poorer countries are often left unaddressed, including issues such as “the cost” and impact of CSR initiatives and instruments on smaller enterprises, the situation of workers and whether MNCs or large retailers cut and run when their suppliers come under the CSR spotlight.

Although CSR activities from MNCs in developing countries is increasingly gaining attention, issues of particular concern to activists in the developed nations such as child labour, human trafficking, environmental degradation and sweatshops, are those which dominate the CSR agenda.

A notable omission in the CSR debate is the role of MNCs in contributing to global poverty. Words such as ‘poverty’, ‘engagement’ or ‘development’ are often used in the CSR discourse, but they remain undefined. There is, in fact, a tendency to view poverty as a local (and regional) problem, and marginality as a residual effect that businesses can attempt to mitigate. An overall reluctance to engage with the roots of poverty and the role of business in perpetuating these structural issues has caused CSR to manifest as programmatic, micro-level initiatives targeted at very specific and selective social goals, thereby limiting the attainment of broader sustainable development outcomes.

My main argument is, due to lack of creativity and understanding of the issues, most modern MNCs fail to deliver the long-term prospect to eliminate poverty in the host countries.

In my current research project, I am exploring the nature of CSR from 2 Australian subsidies in Thailand and Laos. One of my case is a gold mining company, ‘Akara Mining’ (a Thai-Australian subsidy). Their CSR activities are quite innovative and well-linked with various issues on poverty. From the series of interview with various stakeholders in Pijit province, where the mine is located, I found that poverty eradication was not set as a CSR objective of the organisation. Most of their CSR activities, however, seem to focus on long-term benefits of economic and wealth development, which will indirectly improve the condition of poverty among the locals. Apart from supporting the community through social and cultural activities, their CSR strategies tend to focus on (1) income generation and (2) sustain educational development.

The income generation scheme has been implemented in conjunction with the local council and the local government officers. Villagers were contacted by the local officers and the company CSR team to engage in this scheme. In this case, the mechanism of the local governance helps the company to choose those who are considered ‘poor’ and ‘lack skills’. The next step is to provide options for their potential career. Some villagers chose to join the pig farms project and some chose to join the agricultural demonstration project. With the ongoing technical and financial supports from the company, villagers started to see the positive roles of the organisation. Obviously, the long-term plan and responsibilities from this organisation contribute to the success.

The second story that confirms my argument was a story from SIEMENS, a gigantic conglomerate from Germany. After a series of interview with their CSR team in Thailand, I have noticed similar pattern to the previous case. Although they do not perceive poverty as a direct threat, they have been working on this issue indirectly. They do not give money and run away. Most of their CSR activities focus on long-term education development. The organisation promotes various activities such as ongoing donation to various libraries in rural schools, creating educational schemes that support the work of science teachers and students in rural Thailand, and promoting career in science and technology with people from low socio-economic background. SIEMENS understands that, as an MNCs, it is important for them to work through the mechanism of the local government to achieve long-term skill development to eradicate poverty in the country.

The stories from two MNCs from Australia and Germany locating in Asia confirm that MNCs have to demonstrate their continuous efforts to support the locals. They also need to learn to be creative in their contributions. On each of these social and economic issues, MNCs are going to play more pivotal role in the progress of poverty condition in developing countries. This is not a bad thing, as MNCs know they have a lot to gain by establishing socially and environmentally friendly business practices.

Corporate engagement requires time and resources from their headquarters. However, engagement with the locals is compelling. All ‘decent’ MNCs must look carefully at how their organisations are engaged, consider what more they can do to eradicate poverty, and act. As suggested by the United Nations, we can end poverty by 2015, MNCs in developing nations must work together with the local governments to make this issue a reality. And the best wat to do it is do it with ‘creativity.’


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Nattavud Pimpa

Nattavud Pimpa is a senior lecturer in international business at RMIT University (Australia). He is interested in relationship among ASEAN and Australia, Trade in South East Asia, and Poverty and Multinational Corporations in South East Asia.

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