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Privatization – is the conversation of state – owned property to privately owned property. Although not strictly an issue of host country control, privatization is the opposite of nationalization and creates opportunities for international businesses. Most – state enterprises sold to the private sector are unprofitable, undercapitalized, and overstaffed. Nevertheless, they are often attractive to international businesses seeking to expand their operations into new markets located in key sectors of a national economy, such as telecommunications, transportation, and manufacturing. Privatization, which gained momentum in the 1980s, stems from two primary forces: political ideology and economic pressure. Political ideology prompted Margaret Thatcher, the prime minister of the United Kingdom from 1979 to 1990, to call diminishing the role of the state in the economy. Privatization has also resulted from competitive pressures that firms face in global markets. The telecommunication industry provides a perfect example of this phenomenon. That industry has benefited from rapid technological change, yet many national governments, facing enormous budgetary pressures and deficits, have found it difficult to raise the capital required to upgrade and expand state – owned telecommunications systems. As a result, countries such as Argentina, Mexico, Chile, and the United Kingdom have privatized telecommunications services.
Constraints on foreign ownership. Many governments limit foreign ownership of domestic firms to avoid having their economies or key industries controlled by foreigners. For example, Mexico restricts foreign ownership in its energy industry, believing that the benefits of its oil reserves, which it views as part of its „national patrimony“, should accrue only to its citizens. Foreign firms are often excluded from the radio and television broadcasting industries. The United States limits foreigners to 25 percent ownership of U.S. television and radio stations. Similar rules exist in Europe. Countries can also constrain foreign MNCs by imposing restrictions on their ability to repatriate the profits earned in the host country. Such restrictions were common in the 1980s, but many countries, such Botswana and Ethiopia, abolished their repatriation controls during the 1990s as they adopted more free – market – oriented policies.
Questions for Discussion

1. 
   In what way does the new political environmnet around the world create challenges for MNCs?
   
2. 
   How do the following legal princeples impact on MNC operations: the principle of sovereignty, the nationality principle, the teritoriality principle, the protective principle, and the principle of comity?
   

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Internet Resources:

IIRA.2010. [online]. Available from internet: http://www.iira.org/pubs/publications/IIRA_Reports_647.pdf UNESCA/.2010. [online]. Available from internet: http://www.unescap.org/tid/publication/chap5_indpub2259.pdf

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