Government Attitudes Toward Foreign Direct Investment - Essay Example

Other stockholders may be attracted to companies due to their improved performance thus enhancing the capital base of the companies. Employees are another set of stakeholders the companies should hold in high esteem. They will be satisfied if they have safe working environment, high compensation compared with other companies and job security. Though employees may be difficult to manage, if abused can tarnish image of the companies for long time. Customers are stakeholders also in the companies.

Higher quality goods, low prices of products, and timely recognition can glue many customers to the companies. Customers are the ones that put companies in business; if they decide not to patronize certain companies, that is enough to cause the companies to collapse. Society basically wants to see corporate responsibility from companies operating within them. Provision of social services, ethical and trustworthy behavior, employing local residents likely would satisfy and make them feel welcome into the companies.

Moreover, the process to satisfy these stakeholders is always difficult for companies operating aboard because of challenges from MNEs' attempts to achieve global objectives across its countries of operation. At any given point in time each country has vary needs to be tackled, so if MNEs objectives and goals do not include such needs there is bound to be problem. Where MNEs locate their plants equally matters because this can influence which countries prosper and which would suffer. Stakeholders in different countries have their own goals which may be different from objectives which MNEs seek to achieve.

In event of such divergence in objectives, MNEs policies and activities may become counter productive.Furthermore, factors that make it difficult in evaluating the overall effects of FDI are: technological development, competitors' actions and government polices. The reasons are that given trade-off between objectives of MNEs it is likely that some stakeholders would gain while others gain. For example in technological advances, operations of MNEs are highly mechanized and computerized which require less individual to man such installation and equipment; many will be left unemployed while those employed will enjoy high compensation.

Many people are against FDI reasons being that actions of MNEs in relation to inequitable distribution of income, political corruption, environmental pollution, social deprivation etc are enormous. On the other hand, others link MNEs to certain actions like higher tax revenue to government, employment, innovation, and increased exports. Either of the arguments is justified depending on whether governments restrict or encourage FDI respectively. On the whole, MNEs have resources and potential that can contribute to various national objectives like increasing production, ensuring national competitiveness, and creating avenues for foreign exchange.

Parts of political and economic concerns host countries have are balance of payment effects which is seen in term of cash flows. This a times could result in deficit. To eliminate these deficits, capital reserves are used or the economy attracts more capital. However, to prevent excessive capital outflows incentives, prohibitions and other government interventions are used. Balance of payment has a characteristic in which gains are considered a zero sum game meaning one country's trade surplus corresponds to another country's deficit.

In order to analyze