Globalisation , the World Economy and MNE's mini essay

Globalisation , the World Economy and MNE's mini - Essay Example However, a host country needs to have a minimum absorptive capacity and the ability to link these investments with domestic enterprises (Ruane & Gorg, 1998). FDI policies affect both potential and existing foreign investments either directly or indirectly. The host country justifiably sets its policies based on information, business failure, and intervention (Lall, 2000; Moran, 1998). Some of the policies include: A government should efficiently analyse and evaluate international firms before they invest in the country. Screening aids in identifying the purpose of the firm and the validity of its actions. Secondly, in ownership restraints, the host state decides to exclude foreign investors from certain parts of the economy (Hill, 2011). Exclusion based on the grounds of healthy competition and national security. For example, India implemented certain foreign ownership policies, which governed the retail sector since foreign traders almost put local supermarkets out of business (Mukherjee, 2005). Finally, performance requirements enable a country to optimize FDI benefits and minimize on the costs employed to the host country. Operational policies assist in controlling the activities of foreign companies in the host country. Governments implement operational activities through site restrictions, export requirements and persistence on partial ‘local content.’ Based on location policies, the state needs foreign investors to lay foundation in regions where they provide labour market. Secondly, based on the industrial activities, firms should locate to regions where they will not disrupt other forms of infrastructure or cause harm to the inhabitants. Export policies aim at managing foreign company exports mainly to create a balance between it and the domestic export (Moran, 2005). States implement export regulations through taxation policies. It also permits the exportation of only a set