Foreign Ownership: When Hosts Change the Rules
Foreign Ownership: When
Hosts Change the Rules
The forces of globalization, which have led to more liberal trade regimes, new technologies, managerial innovations and the creation of new competitive pressures are all exerting a worldwide strong impact. These global developments gave idea to the policy makers of every host country to balance the economic considerations, national sovereignty goals and other policy objectives.
That is the reason why the governments all over the world are vying to greater domestic ownership of foreign operations within their borders to retain more corporate earnings, exercise more managerial control, and meet the demands of local constituents.
Restrictions on foreign ownership have taken many forms: Canada’s former Foreign Investment Review Act, France’s Nationalization schemes, Korea’s foreign remittance regulations and“Mexicanization” programs which correlate throughout the world. These different policies differ but they have common features particularly when it comes to exemptions. Generally, the greater the level of exports, Research and Development expenditures, foreign exchange savings and high technology associated with a certain project, the greater the probability that prohibitions on majority foreign holdings can be relaxed. However, governments persistently increased on the reduction of foreign holdings over a specified period.
Legislations that require foreign companies to dilute their equity in overseas subsidiaries were passed and approved. Because of this effort, political pressure for national control of multinational corporations (MNCs) is on the rise that threatened the business status of many companies with foreign subsidiaries. At best, these laws will herald shared ownership and control. At worst, this could mean a reluctant departure from the host country. Surprisingly, few multinational companies remain unaffected as the consequences of such legislations are actually favorable to them in so
Hosts Change the Rules
The forces of globalization, which have led to more liberal trade regimes, new technologies, managerial innovations and the creation of new competitive pressures are all exerting a worldwide strong impact. These global developments gave idea to the policy makers of every host country to balance the economic considerations, national sovereignty goals and other policy objectives.
That is the reason why the governments all over the world are vying to greater domestic ownership of foreign operations within their borders to retain more corporate earnings, exercise more managerial control, and meet the demands of local constituents.
Restrictions on foreign ownership have taken many forms: Canada’s former Foreign Investment Review Act, France’s Nationalization schemes, Korea’s foreign remittance regulations and“Mexicanization” programs which correlate throughout the world. These different policies differ but they have common features particularly when it comes to exemptions. Generally, the greater the level of exports, Research and Development expenditures, foreign exchange savings and high technology associated with a certain project, the greater the probability that prohibitions on majority foreign holdings can be relaxed. However, governments persistently increased on the reduction of foreign holdings over a specified period.
Legislations that require foreign companies to dilute their equity in overseas subsidiaries were passed and approved. Because of this effort, political pressure for national control of multinational corporations (MNCs) is on the rise that threatened the business status of many companies with foreign subsidiaries. At best, these laws will herald shared ownership and control. At worst, this could mean a reluctant departure from the host country. Surprisingly, few multinational companies remain unaffected as the consequences of such legislations are actually favorable to them in so