Foreign Direct Investment and Economic Development
Part 3
In the bellow excerpt from a United States Report on Chad show that most of Chad is receiving financial aid and investment due to their newly discovered oil reserves.
In the bellow excerpt from a United States Report on Chad show that most of Chad is receiving financial aid and investment due to their newly discovered oil reserves.
Chad Project Section 3
The article in the link above describes ExxonMobil, a Multi-National Corporation (MNC) that has invested in Chad's rich oil fields. It describes ExxonMobil as a greedy corporation that promised to help Chad improve its infrastructure and overall country status, but ultimately has made Chad worse off since arriving there.
In the beginning of their business, in 1996, ExxonMobil saw the potential in investing in Chad's one billion barrels of oil. They started drilling and exporting the crude oil to their pipelines and out of the country to be refined. There is not a single oil refinery in Chad for their own oil to go to. This started making the Chadians upset, since their country was supposedly rich with oil, but was not seeing any of the promised benefits. The infrastructure that ExxonMobil promised has still not arrived. Chad's official airport still only has one plane that does every trip. Also, there are no roads for people to travel from city to city, and those people who are fortunate enough to have cars do not have any gas stations to fill their cars up at.
While ExxonMobil has been investing in Chad and giving them a great sum of money to continue drilling for oil and exporting their crude oil, they are harming the country more than helping it. ExxonMobil willingly made their deals with almost the most corrupt government in the world. They understood that the people of Chad would not receive the benefits that money could bring, since the corrupt government simply pocketed the money from ExxonMobil.
In this specific case of ExxonMobil, this FDI has greatly hurt the economy. By allowing the corrupt government to gain rewards and continue staying in power, the economy's development is suffering. There are no infrastructure projects planned for the people, and there are no improvements being made to health care, sanitation or education. In the case of human development, ExxonMobil is enabling Chad's government to continue to do nothing for its people. While this FDI may indeed help boost Chad's overall economic output and therefore growth, it is not near the amount necessary in Chad. The overall increase in output doe not make the country any better off if they have a corrupt government. If Chad had a fair government, then they could improve development after economic growth. however, since Chad's government is in the top corrupt governments in the world, FDI would not help the country in any way, since the money will be used on the selfish whims of the corrupt leader. Also, MNC's should help boost the country's tax revenues, but this article states that Chad's government gave extremely large tax breaks to ExxonMobil for drilling oil in Chad, diminishing the increase in GDP and growth the country could have had.
Foreign Direct Investment should have positive impacts on the country, from increasing employment to increasing education, training and infrastructure, and increasing the government's tax revenue. However, the tax breaks, when thought of as subsidies, show that the overall revenue that can be brought in by taxing the MNC is greatly diminished by the government's choice to allow this FDI with a tax break.
The article in the link above describes ExxonMobil, a Multi-National Corporation (MNC) that has invested in Chad's rich oil fields. It describes ExxonMobil as a greedy corporation that promised to help Chad improve its infrastructure and overall country status, but ultimately has made Chad worse off since arriving there.
In the beginning of their business, in 1996, ExxonMobil saw the potential in investing in Chad's one billion barrels of oil. They started drilling and exporting the crude oil to their pipelines and out of the country to be refined. There is not a single oil refinery in Chad for their own oil to go to. This started making the Chadians upset, since their country was supposedly rich with oil, but was not seeing any of the promised benefits. The infrastructure that ExxonMobil promised has still not arrived. Chad's official airport still only has one plane that does every trip. Also, there are no roads for people to travel from city to city, and those people who are fortunate enough to have cars do not have any gas stations to fill their cars up at.
While ExxonMobil has been investing in Chad and giving them a great sum of money to continue drilling for oil and exporting their crude oil, they are harming the country more than helping it. ExxonMobil willingly made their deals with almost the most corrupt government in the world. They understood that the people of Chad would not receive the benefits that money could bring, since the corrupt government simply pocketed the money from ExxonMobil.
In this specific case of ExxonMobil, this FDI has greatly hurt the economy. By allowing the corrupt government to gain rewards and continue staying in power, the economy's development is suffering. There are no infrastructure projects planned for the people, and there are no improvements being made to health care, sanitation or education. In the case of human development, ExxonMobil is enabling Chad's government to continue to do nothing for its people. While this FDI may indeed help boost Chad's overall economic output and therefore growth, it is not near the amount necessary in Chad. The overall increase in output doe not make the country any better off if they have a corrupt government. If Chad had a fair government, then they could improve development after economic growth. however, since Chad's government is in the top corrupt governments in the world, FDI would not help the country in any way, since the money will be used on the selfish whims of the corrupt leader. Also, MNC's should help boost the country's tax revenues, but this article states that Chad's government gave extremely large tax breaks to ExxonMobil for drilling oil in Chad, diminishing the increase in GDP and growth the country could have had.
Foreign Direct Investment should have positive impacts on the country, from increasing employment to increasing education, training and infrastructure, and increasing the government's tax revenue. However, the tax breaks, when thought of as subsidies, show that the overall revenue that can be brought in by taxing the MNC is greatly diminished by the government's choice to allow this FDI with a tax break.
In the graph left, it can be seen that the positive of FDI would be the gain in tax revenue, the orange triangle. If this were the case in Chad, they would be gaining revenue and be able to increase human development throughout the whole country. However, since Chad's government gives tax breaks to ExxonMobil, they move down the graph from(P1, Q1) to (P2, Q2), effectively relinquishing all of the orange triangle revenue.
To conclude, Chad is a remarkably interesting country when coming to foreign direct investment. The majority of FDI that they receive is from petroleum exporting Multi-National Corporations, such as the United States based ExxonMobil. The effect that this multi-national corporation has had on Chad is that it enables a corrupt leader to continue ruling and not provide his citizens human freedoms and development needs. These Multi-National Corporations have promised to increase growth and development, but it has all been a front to get into the nation and strip as much oil as possible then leave. Chad is full of potential for FDI, but they need to get their government straightened out before any good can come of any investments into the country.
To conclude, Chad is a remarkably interesting country when coming to foreign direct investment. The majority of FDI that they receive is from petroleum exporting Multi-National Corporations, such as the United States based ExxonMobil. The effect that this multi-national corporation has had on Chad is that it enables a corrupt leader to continue ruling and not provide his citizens human freedoms and development needs. These Multi-National Corporations have promised to increase growth and development, but it has all been a front to get into the nation and strip as much oil as possible then leave. Chad is full of potential for FDI, but they need to get their government straightened out before any good can come of any investments into the country.