35 Interactions Between Host Governments and MNEs Have Been Sometimes Compared

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35	Interactions Between Host Governments and MNEs Have Been Sometimes Compared

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The Answer is The “love” of this equation was built on the benefits that each could bring to the other. To the host government, the MNE represented an important source of taxation revenue, technology, and expertise that could help further national priorities, such as regional development, employment, import substitution, and export promotion. To the MNE, the host government represented the key to local market or resource access, which provided new opportunities for profit, growth, and improvement of its competitive position.
The “hate” side of the relationship - more often emerging as frustration rather than outright antagonism - arose from the differences in the motivations and objectives of the two partners. To be effective global competitors, MNEs sought three important operating objectives: unrestricted access to resources and markets throughout the world; the freedom to integrate manufacturing and other operations across national boundaries; and the unimpeded right to coordinate and control all aspects of the company on a worldwide basis. The host government, in contrast, sought to develop an economy that could survive and prosper in a competitive international environment. At times, this objective led to the designation of another company - perhaps a “national champion”—as its standard bearer in the specific industry, bringing it into direct conflict with the MNE.

A new trend is emerging that is set to alter the MNE-government relationship during the 2010s. Cash-rich governments and their nationally owned corporations in emerging markets, particularly China, are looking to invest in foreign resources, with such investments often packaged as part of a government-to-government diplomatic relationship. Not only are the government investors looking to earn returns on investment, but perhaps more importantly, they are securing the natural resources to ensure the future economic security of their own countries. This policy-based partnership of governments and national corporations engaging in the global business arena via such mechanisms as sovereign wealth funds is significantly different from the “national champion” strategy of an earlier era, and it is certain to have important global competitive implications over the next decades.

35 Interactions Between Host Governments and MNEs Have Been Sometimes Compared

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