Chapter 4: The Role of Government in International Business!

Link to Article: 
http://www.managementstudyguide.com/role-of-governments-in-international-businesses.htm

 

The Role of Governments in Encouraging or Discouraging International Businesses!

      This article tell us that Often times the governments of many countries do not have a choice but to welcome international businesses as they need the “hard cash” or the Dollars, as they are also known. For instance, the difference between exports and imports is known as the Current Account Deficit or CAD. Since many emerging markets (except China which has a positive CAD) have deficits that need to be financed with Dollars. Apart from this, the domestic industry might not have the capabilities to succeed in a particular sector nor the expertise to develop that sector. Therefore, FDI becomes necessary for the growth of that sector. Moreover, opening up of the economy is needed for admission into the WTO or the World Trade Organization, which means that in order to export to other countries, emerging and developing market economies have to open up. The key aspect here is that many governments of the emerging economies often welcome the international businesses with open arms because of the reasons listed above. However, midway through the process, some of them develop cold feet because of policy paralysis. It needs to be understood that allowing international businesses to enter into the emerging economies must be bipartisan. Finally, On the other hand, the examples of India and Russia are the other way around as these countries opened up their economies due to compulsions and then with open arms but failed to keep up the momentum. This means that the integration into the global economy would happen only when the reforms process is done wholeheartedly and without pauses or U-turns.

Question: Do you think that based on this article that the government encourages or discourages business?