Title

Multilateral Institutions and Market-orientated Reform: Have They Changed the Nature of MNC-Government Relations?

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Abstract

Over the last few decades, multilateral banks and related agencies have sought to change the governance of developing economies by extending the scope of market forces. Deregulation and private ownership could significantly improve the business environment for MNCs. This paper constitutes an initial evaluation of the impact of these reforms for MNCs through the experience of infrastructure services. Too much emphasis was placed on investment by MNCs, which opened the door to nationalist and populist accusations against the reforms and the MNCs. The reforms were applied too rigidly, foreclosing adaptations to local conditions that would have enhanced their net benefits. Lastly, lack of open debate and participation of all major stakeholders further diminished the legitimacy of the reforms and the companies. The legitimacy deficit was particularly harmful because democratization processes simultaneous to the reforms created new opportunities for civil society activism. Voter dissatisfaction with the reforms and weak institutional safeguards are resulting in the indirect expropriation of MNC investment in some countries. If the opportunities for MNCs arising from pro-market reforms are to be fulfilled, MNCs must be readier to seek local partners, adapt p local conditions, and invest in legitimizing the reforms by engaging other stakeholders.

Disciplines

Banking and Finance Law | Business | Business Administration, Management, and Operations

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