Finance Companies send remittances too!
We all know that immigrants send money home, but did you know that large corporations and international enterprise do the same? They start their businesses in the developing world and then they leave with all the resources and most of the profits – though they also increase the socio-economic standards of the country by providing their hosts with jobs, small investments and sometimes employee benefits. And sometimes they become so powerful like the East Indian Company in the early nineteenth century that they influence democratic and political happenings in the country.
In Pakistan and many other developing countries there are many foreign companies running a variety of businesses from oil refineries and automobile plants to pharmaceuticals and banks. Though these companies mostly employ Pakistanis and are essential for the health of the Pakistani economy, they are just like any migrant working in another country. They send money back to the home country and only retain the minimum needed to make more money and survive on the risky global market.
Take the Standard Chartered Bank (Pakistan) which is a part of the English Standard Chartered Bank group, employs over 4,000 people and is the largest foreign commercial bank in Pakistan. Employment by such a foreign bank raises the social economic standards of the country by ensuring that more money comes into general circulation but as it becomes a major stakeholder it also increases the vulnerability of the economy and the people who depend on the bank’s money. What if it withdraws operations from the country? Perhaps due to the instability caused by war which might be possible given the precarious state of Pakistan’s foreign relations. What would happen to over 4,000 people, their households and the general circulation of money then?
As the government has placed almost no restrictions on the remittances foreign companies send back home, Pakistan qualifies as an ideal ground for foreign investment. With attractive and better customer services, foreign banks now control 16 percent of total deposits, 33 percent of all trade and 1 billion dollars of foreign currency in Pakistan. As the investment pool of these companies and banks increases, competitors are eliminated or acquired. With their larger profits and revenues and mass production, foreign companies can make better products at lower prices. This forces local small-scale producers to compete and come up with even cheaper products at the cost of quality, slowly reducing their market share.
According a unofficial report by the IMF foreign companies like foreign banks can afford superior risk management skills and models and thus can increase their profits. Also, as more and more developing countries like China and India are opening their doors to foreign banks these banks can cut into the market share held by domestic banks by buying most of the stock of state owned banks, thus syphoning off profits from the host country to the country of origin. China, for example, with its booming economy had until recently closed its doors to most foreign investment companies and especially banks. It has succeeded in becoming one of the largest world economies because it has kept all of its money inside its borders, eliminated foreign competition and generated revenue by exporting its home products.
According to the BBC India is the biggest recipent of remmitances send back home. However as more and more foreign companies infiltrate India to boost their profits with cheaper labor, remittances sent back home by migrants are a good means of balancing out the inweard and outward flow of money. The global economy is now ruled by a group of very large investment companies and it is they who decide how and where to lead it. The world has arrived at a point in time when some business man can decide your financial future and your social economic conditions. These very large investment companies are so entangled in the network of investment that one withdrawal can lead to the fall of the global economy and the start of a new global financial depression.
However, even if remittances might form one of the largest movements of money across borders, they do not destabilize the social economic standards of various countries as is done by foreign investment by large investment groups. Foreign investment is sometimes essential for a country, but such investment needs to be restricted and governed by strong laws so that most of the profits generated remain in the host country benefiting the country itself, the people – and the company too.
Tags: banks, China, corporates, finance, india, pakistan, remittances