Direct Foreign Investment: Costs and Benefits

By Richard D. Robinson | Go to book overview

Chapter Nine
The Multinational Corporation and the Host Country Environment

John S. Schwendiman

It is interesting to me that the Chinese are concerned with understanding the futures of foreign business through the end of this century, but from a different vantage point in a different culture and country from my own. I am in a real sense a "futurist," trying to understand what the key factors or driving forces are in the unfolding of economic, social, political, and technological events and trends into the future.

The essence of long-range planning is not in making decisions in the future; it is making decisions today with a basis of the best possible facts and assumptions about the future. The question that I attempt to answer is: "As multinational corporations look at China or any country, how do they analyze the future of the country as a location for business activities, particularly in terms of direct investment, but also in terms of the many ways in which international business is conducted?"

At the outset I repeat and enlarge upon a point made by others. Foreign private companies exist to make a return for investors--a profit derived from the utilization of capital and human resources. Profits in this world are by no means guaranteed in free or open market societies or in commerce that crosses borders. In a real sense, profits must not only reflect a reasonable return to capital, but also a return to compensate for the risk that many times there will be no profit at all, only losses.

Companies do not exist to be charitable institutions. They do not "give away" that which is of greatest value to them--whether capital, technology, management know-how, or "competitive advantage." There is always a calculation of cost and benefit, with the emphasis being heavy on the benefit or profit side. As someone put it: "There is no such thing as a free lunch." Companies do not have to make a specific investment in a specific country. They can and do say "no."

Negotiations between a multinational corporation and its host country are always complicated. There are interests, "sticking points," on both sides. I believe that a clear understanding on the part of both host country officials and foreign business representatives of the concerns, criteria, and priorities of potential private foreign investors can greatly help the negotiation

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