Effects of the transnational corporations activity from the sustainable development perspective.

Ivan, Mihail Vincentiu ; Iacovoiu, Viorela

1. INTRODUCTION

Most of the authors consider that the sustainable (human) development is possible only in case there is a stable balance between the economic, social and natural environment, the coverage areas thereof and the related contextures. Another aspect that most of the experts agreed is that transnational corporations (TNC), by means of the foreign direct investments (FDI), are the forwarders of the globalization, representing the main source of the technical progress and, deriving there from, of the development of highly competitive global economies characterized by "the importance of technology' and "the speed of changes" (Rosca, 2006).

What seems to be less obvious and consequently highly controversial is that in their fever for profit and the urge to maintain their competitive advantages that flaw rapidly, the major transnational corporations leave aside the ethical, moral and social issues or place them in the background. In this respect, J. Stiglitz (2003) points out that the impact of globalization on the emerging countries describes very controversial aspects. On one hand, the impact materializes in benefits that consist in higher rhythms of economic growth, the significant reduction of the transport and communication costs, the elimination of the artificial barriers against the circulation of goods, capitals, services, labor force, knowledge and technologies. On the other hand, the globalization's acts of defiance bear several negative effects, such as: deepening the disparities between the rich and the poor; life that became more insecure; domestic companies that turned vulnerable following the foreign companies competition. This context raises the question whether and up to what extent the activity of the transnational corporations affects this balance?

2. ENTERPRISES RESPONSABILITIES

Considering that the act of promoting the sustainable development involves a new vision over the functions and responsibilities of the enterprises, European Union introduced the concept of "corporate social responsibility" according to which the enterprises are called to voluntarily assume new and important liabilities and social responsibilities that do not derive from the demands of obtaining profits (EC, 2001).

These new responsibilities target both the "internal" aspect, corresponding to the enterprise-related activities and the "external aspect", in other words, that related to the interaction between the companies and the actors beyond the enterprise doors (table 1).

As a consequence, following the growth of the TNC economic power based on an increased globalization, the European Union, by the practiced policies, aims at developing the social and moral behavior of the enterprises in view of creating a new corporation type to play an increasingly more active role in building a "trans-industrial "society. In this new society, the TNC role changes radically, the corporations turning into a "global servant" with responsibilities in respect of the "living" embodied by the Human-Society-Environment relation (Rosca, 2006).

As from this approach on the corporation role, we propose to emphasize the effects of the TNC over the Central and Eastern European countries (CEE) from the sustainable development point of view. In this respect, we shall analyze the Human Development Index in relation to the FDI attracted by the CEE countries (inward FDI stock per capita).

3. DATA ANALYSIS

3.1 Human Development Index

Nowadays, in order to emphasize the economic progress by taking into account the social and environmental aspects as well is used the Human Development Index (HDI) that quantifies the three main dimensions: a long and healthy life (the life expectancy index); knowledge (the education index); a standard of decent life (the GDP index).

According to the HDI level, countries are grouped into three main categories: high human development (1.000-0.800), medium human development (0.799-0.500) and low human development (0.499-0.000). Pursuant to the data included into the latest Human Development Report (2007/2008), the Central and Eastern European countries recorded an ascending HDI evolution, so that in 2005 they enroll within the highly human developed countries (table 2).

Several main issues are to be observed concerning the comparative analysis of the HDI level corresponding to the CEE countries. Firstly, during the beginning of the period (1990) all countries, except for Romania (0.777) and Bulgaria (0.794), were listed within the highly human developed countries, recording HDI values that exceeded 0,800. Secondly, the place occupied by every country at the end of the period (2005) resembles to that occupied during 1990, except for Estonia, that falls and Poland that marks one position.

The HDI survey must take into consideration the fact that, as per the experts, this composite index does not outline the aspects concerning the deterioration of the natural environment. Consequently, the Human Development Index may experience a long term improvement, under the deterioration of the natural environment. In this respect , it is to be remarked the evolution of several developed countries, namely Japan, Austria, Italy and Ireland that recorded, during 1990-2003, an ascending HDI trend simultaneously with the dramatic aggravation of the environment conditions (Carbon Dioxide emission per capita increased with 30% in Ireland, 25% in Austria, 22% in Japan and 16% in Italy).

The lack of HDI relevance in measuring the sustainable progress, meaning that it doesn't comprise the aspects related to the natural environment perceived as integrant part of the Living embodied by the Human-Society-Environment relation, is also reflected by the evolutions registered by the CEE countries submitted to analyses. For instance, Slovenia, the only Central and Eastern European country where the degree of air pollution has not reduced during 2003 as opposed to 1990, records an HDI increased ascending trend, ranking, during 2005, the first in the hierarchy of the analyzed CEE countries, registering an index level that exceeds 0,900. Meanwhile, countries inside which the pollution level decreased significantly (around 50%), namely Bulgaria, Estonia and Romania, record significantly reduced HDI values.

3.2 The correlation between the HDI and the FDI

The correlation analyses between the HDI and the inward FDI stock per capita, in 2005 (table 3), allow the emphasis of some aspects we consider relevant. Firstly, Slovenia, ranking the 5th in what concerns the foreign capital inputs, ranks the first place in relation to the sustainable development. As compared to the former, Estonia experiences the opposite trend, ranking the 1st as per the attracted FDI level (7,059USD/capita) and only the 6th as per the sustainable development (0.860). Secondly, except for the two above-mentioned situations the rankings held by the countries submitted to analyses as concerns the foreign capital inputs equal or stand close to those held in relation to the HDI level.

We have to underline the case of Romania and Bulgaria, countries ranking the bottom (position number 8, respectively 7) in the hierarchy of the countries submitted to analyses, both under the aspect of the foreign capital inputs and the HDI level. We believe that, considering the previously presented aspects, this evidence suggest that lacking massive foreign direct investment inputs, the economic and social results are significantly lower than those registered in other Central and Eastern European countries, like Hungary and the Czech Republic.

Also, it has to be noticed the case of Estonia too, country where the transnational corporations, by means of the achieved FDI, sustained the economic progress (as for 2005 the FDI stock represented 90% of GDP) without bearing though, a significant positive impact on the social component.

4. CONCLUSION

The surveys performed in case of the CEE countries confirm the aspects that Stiglitz outlined, with the only mention that the intensity of the TNC activities impact on the economic, social and natural environment from the host country differentiates according to the level and the structure of the foreign capital inflows, as well as the realistic conditions existing within the implanting economy.

In our opinion, through direct or indirect impact on the economic, social and natural environment of these countries, the transnational corporations played an active role in the sustainable development of the CEE countries. On one hand, they have sustained the economic growth, thus generating positive effects on the social environment. On the other hand, negative effects have been registered at both the social level and the economic environment too.

Consequently, by means of the impact over these three components of the sustainable development and the relations in-between, the foreign direct investment inflows generated by the TNC may sustain or hinder the making of an economy based on ethics and ecology.

5. REFERENCES

Rosca, I.Gh. (2006). The knowledge society, Economic Publishing House, pp.205;494-496, Bucharest

Stiglitz, J.E. (2003). Globalization and its discontents. Economic Publishing House, pp.30-47;378, Bucharest

*** Green Paper, Promoting a European framework for corporative responsibility (2001), European Commission, pp.8, Luxembourg

*** World Investment Report 2006: FDI from Developing and Transition Economies: Implications for Development, UNCTAD, New York and Geneva

*** Human Development Report 2007/2008: Fighting climate change: Human solidarity in a divided world, UNDP

Tab. 1. New enterprise responsibilities in the context of the
sustainable development

"Internal" Aspect "External" Aspect

Investments in the human capital: Integrating the
training the employees to company within the
permanent education; providing local community:
good personnel training; promoting granting job places,
more complex relations between incomes, cooperation
work, family and leisure time. with other enterprises.

Non-discriminatory practices Respecting the human
against the ethnic minorities rights: promoting fair
 moral, legal and political
 relations at regional
 level and with the media
 outside the community

Work safety and protecting the Voluntary involvement
employees' health at the working in respecting the
place requests of
 a clean global
 environment.

The management of the impact on
the environment and the natural
resources: cutting the natural
resources consumption, mitigating
pollution, cutting the water
waste, practicing the win-win
opportunities relation (good for
business and environment as well)

Tab. 2. HDI trend for the CEE countries, 1990-2005

Countries 1990 1995 2000 2005

Slovenia 0.851 0.857 0.891 0.917
Czech 0.845 0.854 0.866 0.891
 Republic
Hungary 0.813 0.817 0.845 0.874
Poland 0.806 0.822 0.852 0.870
Slovakia -- -- -- 0.863
Estonia 0.813 0.792 0.829 0.860
Bulgaria 0.794 0.785 0.800 0.824
Romania 0.777 0.772 0.780 0.813

Tab. 3. The correlation between the HDI and the inward FDI
stock per capita (2005)

 Inward FDI
 HDI stock/capita

Countries Value Rank USD/capita Rank

Slovenia 0.917 1 2,469 5
Czech 0.891 2 5,504 3
Republic
Hungary 0.874 3 6,015 2
Poland 0.870 4 1,590 6
Slovakia 0.863 5 2,676 4
Estonia 0.860 6 7,059 1
Bulgaria 0.824 7 982 7
Romania 0.813 8 806 8