Limit Foreign Control of Key Industries

836 WordsJun 9, 20114 Pages
Should countries limit foreign control of key industries? Companies want to make direct investment because in that way they can control parts of the companies. Even though companies want to do that, there are governments who protect domestic companies, mostly for the reason to protect the majority of the society. Companies are willing to take over control keys in industries for 3 different reasons: - Freedom to pursue global objectives This is of use when a company owns the whole foreign company; they can start treating the world as one market. For example Unilever with CIF and JIF, at the beginning you had in the Netherlands the product JIF (kitchen cleaner) when that worked really well. Unilever started to introduce it in other…show more content…
For example, domestic companies can be harmed if the mother company goes bankrupt even though the ‘old’ domestic company is still making profit. Governments are sometimes establishing laws to prevent FDI in their key industries. This leads to the increase of tension between two countries, which often have to do with political issues. For example, the Vodafone Company wants to invest in the Chinese market by direct investment, in this case the telecommunication business. The Chinese government cancelled the deal because they don’t want to give foreign countries ownership of the telecom market. Which is logic if you compare the issues we have here with our providers, if the governments or the EU didn’t interfere we would pay a lot of money per phone call. Governments have two main reasons to limit foreign direct investment. First there is the balance of payment; this accounting system takes account of all the outflow payment and inflow payments to organizations in a certain country. By intervening the country can hold control over the balance, because foreign direct investment is mentioned on the balance of payment. Also by limiting the direct investment the local company its production will increase and thereby the import numbers on the balance decline. This has a positive effect on the economy because now the local companies will start exporting when the domestic
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