Should governments that are for private foreign investment adopt a Lassiez faire policy and allow investors to come with their own terms?
Historically, some governments have granted very liberal terms to private investors and recouped themselves by merely taxing them.
There is always political pressure even in these countries to bridle the dominance of the multi-national corporation (MNC) by buying shares in the organisation so as to have a seat on its board of directors.
Countries that are anti-foreign direct investment have often suffered stagnation.
A good example was Tanzania, under president Julius Nyerere who was advocating Ujama (familihood or African socialism).Andean (Latin America’s) countries are another example.
At times, a foreign company was allowed to establish its branch on condition that it would surrender most of its shares to locals after some time.
This was known as ‘indigenisation’.
In most cases, a private foreign corporation would simply pull out because it did not want political interference in its operations.
It is only in big and populous countries such as China and India where drastic conditions would be imposed and yet retained the presence of foreign investors.
The reason is simple. The host market was too vast to be abandoned.
To some people, a multinational company is a resurrection of the imperial corporations which prepared the way for colonialism in host countries.
The British East India Company, for example, was instrumental in annexing India to the British Empire.
In Southern Africa, the British South Africa Company of Cecil John Rhodes was responsible for colonising Zimbabwe and Zambia.
The current MNCs are seen as agents of neo-colonialism despite the capital, skills and technology they bring into the host country.
It is possible to reconcile the interests of the MNCs and the host State.
There is no doubt that the MNC comes to a country not to develop it, but to make profits.
No private foreign firms will come to a country to build roads, bridges and lay down physical or social infrastructure.
The MNCs regard this as the responsibility of the State. This is why they prefer a country where the basic infrastructure is already laid down by the State.
The State, on the other hand, thinks mostly in terms of what impact the foreign investment will have on the overall growth of the country.
To this end, the State taxes the profits of the corporation. The State also wants the corporation to reinvest most of its profits in the host country to create jobs for people. The less socialistic a State is, the more readily it will accommodate a MNC.
