Offshoring has become a common business practice in today’s economy. It allows any company to secure inexpensive products which can later be sold at a huge markup. Unfortunately, the practice of offshoring is often met with huge amounts of criticism. A clear example of this is the way in which Nike is almost always under attack by activists for using offshoring in developing countries. I am certainly not going to defend the practices of Nike, but I do want to defend the general theory behind offshoring. The benefits to the company are obvious, so I will focus on the merits of offshoring to the developing world. First, having an offshoring facility helps develop skills that would otherwise remain non-existent in their country. People always associate offshoring with manufacturing, although recently many technology companies have sent programming and tech support facilities half way across the world. This serves as proof that offshoring has lead to a marked increase in their skills. As well, offshoring can help lead to capital generation in developing countries. Spending millions of dollars to set up a facility as well as the additional wages and taxes provides their economy with a huge boost. When done properly, this additional capital can be reinvested in their economy helping them develop the rest of their economy.
However, there are far too many examples of when offshoring has produced negative results. When the principles above are ignored, offshoring can be detrimental to a developing country and actually cause their economy to stagnate or regress. Many governments will provide excessive tax benefits preventing much additional capital from entering their country, and the wages paid to hourly workers do not even reach the UN’s worldwide poverty level of $1 per day. This can create a dependence on the offshoring company for survival although in such a way that makes economic growth impossible. To solve these problems, global regulations must be instated by the UN and the World Bank to ensure that offshoring is done in a way that will benefit both parties of a partnership.
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