Economics: Foreign Direct Investment Essay

690 Words Apr 10th, 2013 3 Pages
What impact will the prospect of deprivatization have on investment by managers of privatized firms?

The prospect of deprivatization will impact managers of privatized firms because under this policy, certain past privatization would be declare illegal and the transactions would be reversed. These privatized firms would have to be either run as a state-owned enterprise or sold to another party.

This will affect managers of privatized firms in that they may not have the power to make decisions on their own, decisions will be made by the state and this may limit levels of efficiencies in these firms, also the firms may not respond quickly to changing market conditions due to long process of decision making.

What effect will
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Therefore when the investors are deprived off their firms they will loose and the individuals, government or investors who are accorded the firm will gain.
In some cases where products produced by the government are subsidized then privatization leads to an increase in prices, when the government owns these firms then the consumers will experience a reduction in the price of goods and services produced by these firms and therefore gain.

Assuming more people are hurt by deprivatization than helped, why would a local politician support such a policy?

Politicians want mass deprivatization of these firms due to some disadvantages they cause in the economy, one of this disadvantage is that foreign investors will repatriate profits to their home country and therefore does not benefit the host country, the other problem is that they bring stiff competition to the various industries and host country firms will close down due to competition. Finally the politicians will want investors in the country to invest in these firms and not foreigners and they will not want illegal allocation of these resources to some individuals.
The performances of a government in power is required to safe guard state property and not transfer property to individuals, for this reason therefore politicians may want to increase government popularity by safeguarding public
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