ITN use among children younger than five years increased dramatically across
Africa from 2 per cent in 2000 to around 38 per cent in 2010. Improved tech-
nology in Rapid Diagnostic Testing (RDT) even in remote rural areas and
provision of related equipment and training have permitted more accurate diag-
nosis and hence correct and quick (so more effective) treatments for those
infected with malaria (Roll Back Malaria, 2011).
MNCs and technology transfer
From independence until the mid-1970s many developing countries viewed
MNC investment with suspicion. It was widely regarded as exploitation of the
local economy and the establishment of foreign monopoly control, hence as a
form of new or ‘neo’ colonialism’. In 1973 the military coup in Chile was
backed by foreign firms angered that the government of Salvadore Allende had
nationalized copper mining. In the 1960s the Indian government, in the belief
that scarce resources were being lost through royalty payments to MNCs for
technology use,prohibited FDI in certain sectors and restricted royalty
payments and conditions of technology transfer in others. In response to these
restrictions, Coca-Cola and IBM stopped production in India in the late 1970s.
Since the 1980s,there has been a much greater acceptance and even enthu-
siasm worldwide for FDI, and policy has reflected this enthusiasm. Of 145
regulatory changes made by 60 countries in 1998, 94 per cent created more
favourable conditions for FDI (Gorg and Greenaway, 2004:171). In many
cases interventions have gone beyond liberalization; and have provided
substantial public subsidies for FDI. Ireland offers a corporate tax rate of 12.5
per cent to all manufacturing firms locating there. In India the 1990s saw full-
scale liberalization of trade policy and rules governing MNC activity; and 100
per cent foreign ownership was permitted in the sensitive energy sector.
Inflows of FDI increased from $200 million in 1991 to $3.2 billion in 1997 and
over $20 billion in 2005/06.
Developing countries hope that encouraging FDI will result in the import of
more advanced foreign technologies and will promote technological spillover
for local firms in various ways: the demonstration effect (local firms may adopt
MNC technology through imitation or reverse engineering); labour turnover
(workers trained by MNC may transfer knowledge to local firms or start their
own firm); and vertical linkages (MNCs transfer technology to firms that are
potential suppliers of intermediate goods or buyers of their own products).
Negative horizontal spillover effects may occur if MNCs siphon off domestic
demand or bid away skilled labour from domestic firms (Saggi, 2002). While
happy to benefit from the low wages and access to raw materials and markets
of developing countries, MNCs tend to leave core R&D work in their high-
skill developed-country head office with its extensive links to universities and
research institutes/laboratories. The resulting preference for transferring the
more low value added aspects of production is likely to limit the amount of
Technology and Economic Growth 113