11Negative role (implications) of Foreign Direct investments   and Multinational   Corporations   in developing countries

 They promote regional income inequalities in economy. This  is because  most  of the production, and business  activities  of foreign  investors  are mainly  concentrated   in urban  areas  neglecting   the rural areas.  This creates regional imbalance.

1. They lead to profit repatriation.  Private foreign   investors   take back. The   profits   made to their home countries   instead of re-investing   them in the countries   where   they operate.  This leads to low capital accumulation    in the economy.
2. They   undermine   the provision   of basic essential goods and services which   are   non-profit making.  This is because   they aim at venturing in activities which are profit maximizing.
3. They lead to technological unemployment.   This  is  due  to  increased   use  of  capital-  intensive techniques   of production   and inefficient  firms being  pushed  out of the production   process  due  to stiff competition.
4. They lead to emergence of private foreign monopolies. This  increases  consumer   exploitation   as private  foreign  monopolies   restrict  output  and  charge  high  prices  with  the  aim  of  maximizing profits.
5. They lead to rural-urban migration. This is because most of the business activities   of foreign investors are concentrated   in urban centers due to poor infrastructure   in rural areas.  This leads to congestion and increased cost of living in urban areas.
6. They lead to over dependence of the economy on developed countries. This increases   foreign dominance   and control of the economy   in terms of resources   and economic   decisions   through foreign direct investments.
7.    They lead to divergence between private and society interests. This is because private   foreign investors   aim at maximizing   profits   at the expense   of the society.   In the process,   they cause negative externalities   in form of environmental    degradation   and depletion   of natural   resources hence failure of the economy to be self-sustaining   in the long-run.
8.    They out compete the local investors. This is because foreign investors   have huge capital and they have the capacity to operate on a large scale.  They  have  the ability  to reduce  prices  of their products  to a much  lower  level  than  the local  investors   and  this undermines   the  growth  of local firms.
9. They interfere in the politics of developing countries. Foreign  investors   use  their  economic power  to influence  national  policies  and politics  of the  countries   in which  they  operate   in their favor. This results into loss of independence   in local decision making.
10. They reduce the net benefits in real terms of foreign capital investments. This is because the foreign investors ask for too much tax concession   inform of tax holidays, investment   incentives, subsidies and protection   from the outside competitors.   This makes it costly to the government.