Globalization, Extractive FDI and the Effects of Multinational Corporations on Conflict Situations in Developing Countries




Onwudiwe, Ruby

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This dissertation explores the concept of globalization as a new world era, and examines changes in the patterns of global FDI flows, with a focus on Extractive FDI inflows to Third-World or developing countries. It looks at the increased presence of multinational corporations (MNCs) in the extractive regions within developing countries as an indicator of increased FDI to those regions. Using both a single and multi-casestudy approach, it critically examines the linkages between the infusion of FDI into the extractive sector of developing economies and the lack of economic development and failure to realize any tangible benefits of FDI in those regions. With a focus on Nigeria and the Niger delta region in particular, the course of this research is directed by the following questions: 1.) Why has Nigeria not gained more from its oil industry? 2.) What effect does foreign investment in the extractive industry have on the balance of power among the international oil companies, local leaders and authorities? 3.) Does extractive FDI and the activity of oil exploration and production increase the likelihood on internal conflict within the Niger delta – and some other countries? The hypotheses are as follows: - Nigeria has not realized much benefit from its oil industry (in terms of poverty levels, unemployment rates and per capita income) as a result of an endemic culture of corruption which has pervaded the elite and government officials (federal, state and local) and led to weak governmental institutions. - Without the implementation and enforcement of development-enabling policies, foreign investment (particularly in the extractive industry) tips the balance of power among investing entities, local leaders and authorities in favor of investing entities, such that they have significant influence over key decisionmaking processes in host countries, thereby eroding host countries’ sovereignty. - There is a relationship between extractive FDI, the activity of oil exploration and production and the persistent conflict situation in Nigeria which is owing to the contentious nature of oil. This study contributes to the literature by examining the relationship between oil exploration and production using FDI inflows as a proxy indicator, conflict patterns and the resultant lack of economic development in Nigeria. It also offers the opportunity to assess the differential impact of extractive and non-extractive FDI on conflict. The term ‘Extractive’ FDI refers to foreign indirect investment that is directed towards the extractive sector particularly in the mining of oil and petroleum products as well as gold, diamonds and other gemstones. All other types of FDI, i.e. FDI directed towards other sectors of the economy, are referred to as ‘non-Extractive’ FDI. It is the position of this research effort that a deeper understanding of the underlying correlations between Extractive FDI and the tendency towards conflict in developing countries as well as an understanding of the factors that fuel the conflict, will chart the way for changing the dynamics of those relationships in order to achieve economic development. It will also help to formulate what the role of governments and MNCs should be in promoting relative peace and harmony in conflict-torn regions.



Niger Delta, Multinational Corporations, Conflict, Foreign Direct Investment, Globalization