Question

How have the policies of countries playing host to MNCs changed over time? What are the main conditions that determine whether states or multi-national corporations (MNCs) have advantages in negotiations? Please use material from the textbook and class discussion in your answer. Appropriate examples will be helpful.

Answer 1

Policies of the countries while being in negotiation with the MNCs has taken new shapes with time and over period of time, the past policies have changed. Besides, the stage of the development in a particular country, need of the development in particular areas also give shapes to the policies. When a country starts in the beginning and lacks resources, funds and a plant for the development, then it is the MNC who has the bargaining power in the policies made by the government. Such nations require huge investment in infrastructure project building health institution and in industries that can create jobs. Due to this reason, the MNCs get tax holidays for their operations, free land and utility for the setting up business units and other benefits as well as preferential treatment. Once the country develops its infrastructure and regulatory framework, then it starts better negotiations with the new MNCs as well as existing MNCs when the past agreement comes to the renewal. For example, it can be seen in the case of countries like India. When, globalization started in early 1990s, then the Indian government invited MNCs for investment and offered different benefits. It created a better opportunities for the MNCs. But, today the government is in better stage to negotiate and looks after the best interest for the Indian consumers. China is also doing the same and any MNC now not falling in line with the state policy, is moving out of the country. While, the African nations who are still in the early stage of the development become the easy opportunity of the exploitation of the local resources in the name of development due to the poor policies in place.

Hence, with the development of the institutional framework in the country, regulations and better policy planning, the power of negotiation & bargain has shifted from MNCs to the government in all the countries.

Main conditions are as follows:

1. The degree of political stability, law & order situation and economic circumstance of the country. With higher level of political stability, good economic progress and proper law and order, makes the government in a better position during the negotiation.

2. Need of investment. If government is in dire need of the investments, then MNCs are in better positions during the negotiation process.

3. Availability of the resources in the country. A government should own resources so that MNCs can be attracted and they can be persuaded to come to the country. It will give the government a better position in negotiation.

4. Ease of doing business and presence of transparency with suitable infrastructure. Such developments would attract the MNCs and they can offer a better deal to the government. Hence, the government will be in a better position if they offer transparent system and suitable infrastructure.