1.Poor Governance: Most developing countries where the MNCs are located face problems of poor governance. This also inhibits the effective operation of the MNCs. For example, although Kenya has a relatively comprehensive commercial and regulatory framework, based on the British model and the basic institution necessary for their implementation and for markets to function, corruption and poor governance have undermined the effectiveness to the point of creating widespread mistrust of the courts, making both enforcement of contracts and security and resolution of disputes very difficult. Corruption in key areas such as the customs administration have also impacted on transaction costs, through delays and payments necessary to release imported goods arriving at the ports. Poor governance has also taken the form of occasional government intervention for political reasons, in the working of the regulatory bodies or even in the running of private firms. All of this has made it difficult for MNCs and other private investors to operate as they are not assured of the sustainability and predictable of reforms.
2.Weak Legal and Administrative Framework: The legal and administrative framework is a key element of the investment climate and effective operation of any enterprise, MNCs included. MNCs depend on effective operation of markets. For markets to function effectively in a globalized environment, legal and regulatory institutions must be in place, providing a body of legislation to enable corporate entities to function, contracts to be drawn up and enforced and collateral to be pledged and enforced, as well as providing clear rules governing entry and exits, competition and the tax regime. It is almost evident that legal and regulatory framework deficiencies exists in most countries and these poses a challenge to the operation of most MNCs.
3.Inadequate skilled Labour Forces: The human resource structure of most MNCs requires the use of highly skilled labour force, especially from the middle level management position. However, such highly skilled manpower are deficient especially in developing countries where the MNCs are established. Thus recruitment of the appropriate number of competent and skilled manpower becomes a challenge to effective operation of the MNCs. This challenge may be compounded by rigid work permit entry requirements that may have been put in place by the country. Related to this is the issue of the skills mismatch that is found in the most countries, particularly the developing countries. Most of the developing countries operate under obsolete and outdated curricula, poorly equipped training institutions with weak instructional capacities. Many of the MNCs have lost confidence in the local training and conduct their own enterprise-based training. This adds to the costs of labour and employment difficulties.
4.Low Labour Productivity: low productivity is central to the competitiveness of MNCs and their growth potential. Labour productivity in most developing countries is low as compared to those of other economies competing in the same global markets. The low level of labour productivity if augmented with high labour costs that is manifested in some countries, especially due to labour market rigidities is an important factor that hinders effective operation of MNCs.
5.Poor infrastructure : Good and effective infrastructure is critical for effective operation of MNCs. Efficient infrastructure is important in improving the livelihood and state of security in a country. Infrastructure in this case encompasses transport, telecommunications, energy, water, sewerage and sanitation and meteorological services. These infrastructure facilities are highly limited in most countries, especially in developing countries. Such deficiencies pose a great challenge to the effective operation of MNCs. The operational constraints that MNCs face in regard to poor infrastructure are in terms of production losses due to power outages and delays in power connections, high costs of telecommunications and slow connections, especially internet, shortage of water, poor or dilapidated roads and almost non-existent railway system delays and congestion at ports entry and infrequent flights.
6.Poor infrastructure : Good and effective infrastructure is critical for effective operation of MNCs. Efficient infrastructure is important in improving the livelihood and state of security in a country. Infrastructure in this case encompasses transport, telecommunications, energy, water, sewerage and sanitation and meteorological services. These infrastructure facilities are highly limited in most countries, especially in developing countries. Such deficiencies pose a great challenge to the effective operation of MNCs. The operational constraints that MNCs face in regard to poor infrastructure are in terms of production losses due to power outages and delays in power connections, high costs of telecommunications and slow connections, especially internet, shortage of water, poor or dilapidated roads and almost non-existent railway system delays and congestion at ports entry and infrequent flights.
Kavungya answered the question on May 2, 2019 at 12:49