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MNE and Government Policy

MNE and Government Policy. Chapter11. Multinational Enterprises. Main engine of globalization Mainly FDI Exports and imports Technology transfer Some have sales larger than many nations’ GNPs Main target of anti-globalization movements. Effects of FDI and MNE. Balance of payments effect

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MNE and Government Policy

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  1. MNE and Government Policy Chapter11

  2. Multinational Enterprises • Main engine of globalization • Mainly FDI • Exports and imports • Technology transfer • Some have sales larger than many nations’ GNPs • Main target of anti-globalization movements.

  3. Effects of FDI and MNE • Balance of payments effect • Capital inflow to host country  Positive effect on B/P for host country initially • Demand for home country equipments and related products and earning repatriation  Negative effect on B/P for host country later • Home countries may impose capital outflow restrictions. • Host countries may impose repatriation restrictions, asset valuation controls.

  4. Effects of FDI and MNE • Growth and Employment Effect • Positive effect on host country: additional job creation and more efficient use of resources • Negative effect on host country: suppression of local enterprises and entrepreneurs • Home country’s labor claims that their jobs are taken by host country’s workers. • Desirable FDI for host country: highly differentiated product and possession of scarce resources

  5. Effects of FDI and MNE • Political Concerns • Foreign policy instrument of home governments Extraterritoriality (Home governments apply their laws to MNEs in host countries) • Concern over control of sensitive sectors of host countries • Self-interest seeking powerful economic animals with no consideration of their impacts on environments, labor, societies and culture. • Causing government corruptions (lobbying, bribery)

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