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The Impact of Globalization…


Well, after US imposed Globalization to the world where there is free trade with no import/export tax or tariffs barrier or import quota, the world begin to feel the impact of Globalization.

The Impact on Developed Countries

In developed countries such as USA where the minimum wage is around US$ 7/hour or around US$ 1,200/month, the salary is considered too high for many Multi National Companies (MNC). The operational cost become high/inefficient.

So they move their factories to China, Vietnam, Malaysia, Indonesia, etc where the minimum wage start from US$ 100/month only. Quite small, isn’t it?

So we will find US or European brands with “Made in China” label or else in their products.

With labor cost only 1/12 compared to one in Developed countries, many big companies could minimize their operational cost to 1/3 to 1/5 of original cost. Yet, they try to maintain the previous price to get more profit. The price will down only 10%-20%.

Well, no wonder unemployment rate in Developed countries will become higher and higher. Now in September 2011, 1 from 6 people in US are poor with annual revenue around US$ 22,000 per family with 2 kids. In Indonesia, US$ 22,000/month is enough for a senior manager’s family!

For big companies such as Nike, Rebook, Adidas, etc, it will be more profitable for them to build factories in Developing countries with wage only 1/12 than maintain their factories in Developed countries. Especially when there is no import/export tax across the border.

The Impact on Developing Countries

In the developing countries of course there are some job opening in factories such as Nike, Rebook, etc. But there are more loosing their job because the local industries going bankrupt cannot compete with the giant companies. For 1 giant MNC, at least there are 1000 local companies closed.

Since there is no trade barrier, big companies will prefer to export their products to Developed Countries for higher price and higher profit.

But the local people will hard to find their daily needs because of that. They have to buy their daily needs with price almost equal in Developed Countries. The price go up!

For example, in Indonesia we have to buy gasoline around US$ 1/liter. It’s almost the same with gasoline price in US. Otherwise, the big oil companies such as Chevron, Exxon, Total will export their oil to developed countries.

So, the local people should buy their daily needs with higher price. Almost the same as in developed countries such as US or UK. But their salary is still “local”.

Both people in Developed and Developing countries will suffer.

But who gain profit?

Of course those greedy MNCs.

They get cheaper labor cost and could sell their products with (almost) the same price. With money they have, they could buy local companies and maintain their monopoly. For example, Danone has buy Aqua (local mineral water), while Phillip Morris buy local cigarettes factory Sampoerna and BAT buy Bentoel in Indonesia.

Globalization/Free Trade only benefit a few big companies. Not people!

The small barrier such as 20% of import/export tax and import quota (at least 50%) is still needed to protect people.

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