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PRIVATIZATION TRENDS AND THEIR IMPACT ON MNCS
1.0 Privatization: Definition and Historical Context
1.1 Shift from state-owned to private enterprises
One of the most prominent shifts in the global economy over the past few decades is the move from state
ownership of enterprises to private ones, observable especially in the economic policies of China. In China
specifically, privatization has also contributed to improvement of firm performance and economic growth
through provoking efficiency and profitability due to competition as well as good corporate governance (Sun
et al. , 2017). This shift eliminates a lot of demerits that come with state control such as bureaucratic
decision making, and little accountability as highlighted by Wei and Varela (2019). The decrease in state
ownership is linked to improvements in business outcomes and increased prioritization of market orientated
activities. This applies to not just China as many nations rely on privatization to get advantages such as
better resource use and higher market competition (Xu & Wang, 2018). Of every entity, it extends
competition by evolving into the marketplace from the state branch, thus creating favorable business
conditions and a higher level of product quality and customer satisfaction. Moreover, privatization enables
governments to shed the administrative costs related to running SOEs, meaning that resources might be
better channeled to developmental needs on infrastructure, health and education among others. Currently,
there is a general global shift towards privatization motivated by attempts at establishing proper conditions
for facilitating private sector undertakings through bureaucratic and organizational changes, which would
have even more positive impacts on firm performance. The foregoing transition is incredibly important for
initiating economic reforms and improvement in the efficiency and growth of the economy. Some countries
including examples of China provide evidence that privatization results to creation of competition that leads
to improved market and economic growth. Thus, as more countries turn to privatization, international
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economy stakes are high to get better, more competitive and innovative market places By shifting from
state owned organization to private owned organization.
1.2 Neoliberal economic policies driving privatization globally
The main reason behind globalization and the call for the privatization process is mainly driven by the neo-
liberal economic reforms. These policies call for a decrease in the role of government within a country’s
economy with the use of free markets, eliminating or reducing bureaucracy, and privatisation being the
most-used tools for boosting the economy. Vickers and Yarrow (2018) seek to understand the economic
implications of privatization with specific focus on how neoliberalism has informed the process of
deregulation through which governments across the globe have sold state owned enterprises as well as
other assets to private entities. This change stems from the faith in the efficiency of private sector to both
anticipate market indicators and run its operations better than state-owned companies. Further building on
this evidence, Szkudlarek and Megginson (2019) explore the performance of firms after privatization in
developed countries and underline that privatization results in financial and operational improvements. The
implementation of neoliberalism has thus been central in the rearrangement of the international
environment for economic growth through promotion of privatization as a means to leading to advancement
in knowledge and efficiency (Yeyati & Panizza, 2016). In addition, these policies claim that restrictions of
the government interference in business matter help to eliminate the over-burdening bureaucracy and
corruption which in its turn promotes a suitable climate for the private enterprises and venture. This type of
chnage from public to private also fits well into the overall tenets of neoliberalism, especially on fiscal
discipline that seeks to offload the government debts and deficits through divestiture. This implies that with
their increased adoption of neoliberal economic policies, the pace with which countries are likely to privatize
will remain high and this will also bring about changes in the global economic structure by moving toward
more competitive markets. Therefore, privatization that has gained momentum with the collapse of
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communism and is in sync with the neoliberal thought process, is not only meant to improve economic
efficiency but also reshapes the role of the state in the economy from a participant to a referee.
1.3 Varying degrees of privatization across countries
Nonetheless, the level of experience as well as the magnitude of success and failure in implementing
privatization policies and reforms also differs from one country to another due to political, economical and
institutional factors. There are cultures where extensive privatization policies have been adopted alongside
those cultures in which gradual privatization has been emphasized. According to Xu and Wang (2018), the
management of privatization in typically in the Telecommunications sectors of different countries differs
considerably depending on the regulatory systems of different places as well as market conditions. The
government in developed economies usually adopts well defined policies and competitive environment to
carry out the privatization process and this lead to enhancement in the performances of the firms that have
been privatized. On the other hand, the developed countries rarely experience such issues like ; Weak
enforceable frameworks, resistance from the enlarged interest groups and poor regulatory instruments
within a society makes the bouts of privatization reform to be checkered (Sun et al. , 2017). Such problems
can result in varied experiences with particle, where some privatized corporations do not realize the
expected efficiency increase and the enhancement of service provision. Furthermore, the establishment of
political factors, such as the political will as well the perception towards policy of privatization has a strong
correlation to the results of such processes. However, in countries where privatization is viewed as a
process of globalisation where the country aims at joining the global economy then one is likely to find more
support and well defined tracks to actualisation of privatization. On the other hand, privatization when faced
with disbelief or resistance, the rate at which progresses are achieved or outcomes realized may not be
pleasant. Hence, it is strategic to design privatization policies according to the prospects of each country in
question, which include regulatory capacity, maturity of the market, and general socio-political environment
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because privatization if not well-managed would not have positive economical impacts coupled with
delivery of better services to the people.
1.4 Motives: Efficiency, fiscal considerations, ideological leanings
The business rationale for privatization initiatives can be of varied nature: productivity considerations, fiscal
roles, and orientation. In Decoding the Federal Budget by Morris (2007), one of the main reasons is the
desire to optimize the practical utilization of the resources. The phenomenon of privatization itself has been
discussed as a means to positively transform the firms’ productivity by infusing them with market signals
and fostering managerial responsibility, as Wei and Varela (2019) substantiate. In fiscal factor, it is found
that government tries to cut budgetary and public debt by shifting financially poor state owned enterprises
(SOEs). In turn, Vickers and Yarrow (2018) argue how privatization can bring direct short-term financial
gains in the form of proceeds from the sale of state-owned assets and possible long-term positive effects
that stem from the creation of active markets structures. Partisan preferences with postures favoring free
market have major impact on privatization policies. Advocates say that private is grounded on competition
and innovation, which are against the split of capitalist economy according to Szkudlarek and Megginson
(2019). These mixed motivations have fuelled a worldwide phenomenon of privatization that can be
explained in a more general context of neoliberalisation – a loss of stake of the government in the
economy. However, while recognizing privatization as a general potential tool of reform, it is also important
to note that its detailed goals and results may significantly differ from country to country as well as depend
on the chosen strategies. On the one hand, privatization has opened opportunities for efficiency
improvement and effective delivery of service as well as service enhancement while on the other hand it
has created monopolies within market; thus declined the public welfare. It may be argued, although
privatization is generally considered to have positive impacts, it depends on the existence of appropriate
regulatory policies and competitive structures that differ from country to country (Yeyati & Panizza, 2016).
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Hence, global experience clearly indicates that while privatization has enormous potential for substantial
positive impacts, it requires much more than sound theoretical constructs and an imperative orientation: it
requires detailed attention to peculiarities of country circumstances and preconditions for marketization and
competition and the actualization of supporting strategies that do not subordinate public interest to private
gain.
2.0 Privatization Trends in Developed Economies
2.1 Privatization of public utilities and services
Privatization of the public utilities and services has been one of the areas for the larger privatization
initiatives elsewhere in the world. It has been more apparent in areas like electricity, water, and
telecommunication industry because it is expected that privatization causes an enhancement of efficiency
and service provision. According to Parker and Saal (2016), outsourcing public utility services might
improve the effectiveness and effectiveness of services provided by certain organizations and the cost of
these services that would be provided to the customers. But over the last few years, the results of such
privatizations depend on the specific features of the country: the presence or absence of a solid legislative
base in the field of privatization and the existence of conditions favorable for privatization. For example, an
adequate federalism involves effective regulation for avoiding the formation of private entities’ monopoly,
which might limit the advantage of sale directly to the public (Nellis, 2018). When it comes to emerging
markets, Moshirian and Wu (2016) establish that privatization can enhance the working of stock markets,
which in turns helps to execute additional investments within these important areas. This enhancement in
liquidity is necessary as it opens up opportunities to access capital for the purposes of growth and
development of improved standards of maintenance and structure. But it can also be problematic and often
requires protection against such dangers as one or the other step of privatization that make access to the
service more expensive or the services are less available. Thus, despite the fact that there are optimistic
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trends for privatization of public utilities, it is necessary to realize this process effectively and adjust it with
strong regulation standards that will positively affect the consumers and the entire economical
environment. Consequently, while there are many benefits to be derived from the privatization of public
utilities and services, the process must be managed in a way that also recognises the need for; a
consequent tightening as well as the enhancement of the associated regulatory framework; the creation of
the right market infrastructure to nurture competition; and the development of adequate safeguards to
defend the interests of consumers.
2.2 Deregulation and opening up of markets
The logical pattern of these reforms is a continuation of the strategies of privatization, with deregulation and
opening up addressing market contestability and promoting economic growth. In their 2017 paper, Shleifer
& Vishny posit that while liberalization could be complemented by weak governance systems, it could bring
about enhanced efficiency in markets and sound corporate governance structures when properly regulated.
For this purpose, privatization has been accompanied by deregulation in transition economies to open
competition bodies to encourage innovations and enhance quality of service delivery (Nellis, 2018). For
example, many advocates of deregulation find it rewarding especially concerning in the telecommunications
sector as new players press the incumbents and put pressure on them to lower prices and improve the
quality of services they offer (Parker & Saal, 2016). Further, deregulation is efficient for market stabilization
because it breaks barriers to entry and offers incentives for investment in sectors belong to SOEs (Shleifer
& Vishny, 2017). Also, vigorous liberalization by policy makers triggers innovation in technologies and
products given that firms have to capture the market when industries are opened up (Poryshenko & Yusem,
2020). However, this is always subject to the premise that deregulation relies on proper regulation,
institutions that will address the negative externality of anti-competition and maintain and or erect proper
standard for a fair market. If deregulation allows firms to create private monopolies or oligopolies, then the
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policy, in fact, can decrease the consumer welfare and lead to the market failure, according to some
criticism (Shleifer and Vishny, 2017). There is evidence that suggests that to some extent legal changes
can lead to reforms in the sectors where natural monopolies are likely to form, yet the policy makers must
remember that over deregulation can lead to over liberalization and this counterproductive to the creation of
competition (Shleifer & Vishny, 2017). A fine-tuned regulation of demand and supply structures is all the
more necessary to promote transparent and fair operation of deregulated markets in protection of
consumers’ interest that would eventually lead to maximum benefits of privatization and opening of markets
for development of economy and welfare of a country.
2.3 Divestment of state-owned enterprises (SOEs)
Removing social control through the sale of state ownership stakes in enterprises is a phenomenon that
has received considerable attention in both the developed and an emerging economy. This has happened
over the years as a result of various economic, political and ideological factors. For the economic benefit,
the process of privatization meant to introduce the effectiveness, productivity, and competitive advantage in
the sphere of the former state-owned enterprises being spearheaded by the upcoming forces of markets
and private sectors. In order to develop new opportunities, applied innovations that seem to be mastered by
the state sector, governments delegate ownership and control in private business circles (Sheshinski &
López-Calva, 2016). Political factors also play a crucial roles in the decisions made towards privatization,
with the proponents of privatization supporting it as a way of downsizing the role of the state in the
economy, opening up markets to the free market principle, and encouraging the private sector as the
engine for development (Kikeri et al. , 2018). Privatization conforms with the market-oriented rationality of
the political and economic system as a way of rejecting state interference in the economy. This standpoint
based on ‘neo-classical’ economic doctrines, strongly supports limited market intervention and maximum
decentralization of the state (Rodrik, 2018). Furthermore, privatization is usually implemented together with
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other measures in the course of carrying out economic liberalization to achieve competitiveness, trade
liberalization, and fiscal position restoration to ensure macroeconomic stability and growth (Sakuragawa et
al. , 2019). As powerful as the theory of privatization may seem to be, it is not without flaws and
controversies. Critics claim that privatization can result in unemployment, restricted utilisation of basic
public services and higher levels of income disparity, especially when regulation systems are unfavourable
or indeed where the privatisation exercises themselves are opaque (Parker & Saal, 2016). This, in a way,
means that privatization efforts can only be effective done if well planned, well regulated and with
consideration of other social and economic goals that may extend beyond just fiscal performance.
2.4 Public-private partnerships (PPPs) and outsourcing
The privatization process in today’s world has increasingly lead to the adoption of the PPP and outsourcing
strategies which use both private and public sector management methodologies. Similar to collaborations
between the government and business firms, PPPs have been widely implemented in nan infrastructure
development projects including transport rails and healthcare sector. To sum this up, PPPs enable both the
public and private sector to develop their specific competencies, which leads to the more efficient
implementation of projects and, therefore, a higher level of service quality (Parker & Saal, 2016). This
happens under the framework of a traditional PPP, where the private partner undertakes the role of
financing, building, owning, managing and maintaining the infrastructure asset and in return, the public
sector retains policy and regulatory authority as well as either providing revenue or offering assurance
(World Bank, 2019). Thus, through the delegation of some aspects of a project which are potentially risky
for the government such as project construction delays or increased cost, PPPs aim at creating value
through efficiency and innovation hence wasing value for money for the taxpayer (Estache & Fay, 2018).
On the other hand, outsourcing entails contracting out certain activities or tasks to companies or
organizations in an effort to cut on costs and come up with better means of delivering services. This has not
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only gained popularity in many industries but also in information technology services, facility maintenance
services as well as administrative support services (Nellis, 2018). Outsourcing relationships can typically
have elements of competition and contract bidding, whereby the private sector organizations offer bids to
deliver outsourcing services with agreed service benchmarks and costs. The concept here is that while
governors themselves may not be equipped to engage in these activities, they can outsource such
functions, relying on areas where private industries have superior expertise and efficiency (Kettl, 2019).
Similarly, outsourcing can introduce competition into service provision, which invariable fosters efficiency
enhancement and innovation (Baskerville & Thompson, 2018). Contracting also presents problems,
including the need to create accountability mechanisms as well as trying to sustain service standards and
avoiding perceived by the public. The challenges depicted can only be met and solved by having proper
regulation and the PPPs together with the outsourcing and contracts should be clearly outlined to retain the
intended benefits.
3.0 Privatization Trends in Emerging Markets
3.1 Structural adjustment programs and privatization requirements
SAPs have significantly influenced the policy reforms in numerous developing and transition economies by
the dictates of IFLs such as the IMF and the World Bank requiring compliance with SAP as a precondition
to access lending or debt relief facilities. These normally include policies that involve fiscal and/or monetary
policies that seek to stabilize the macroeconomic environments, trade liberalization measures, and policies
that seek to improve the structure of the economy among others. Privatization is one of the broad areas of
SAPs which contemplates the process of converting SOEs into private entities. This aspect of SAPs is
anchored on the supposition that globalization will increase efficiency, increase production and attract
foreign investors (Kikeri & Nellis, 2018). This is usually done to check fiscal deficits and public debt, to open
out competitive structures in sectors which were monopoly with state, and to introduce competition.
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Moreover, when it came to the implementation of privatization under SAPs, it has come under criticism for
several reasons. A number of scholars opine that the stringency that SAPs have brought may result in a
fixing of fiscal sights ahead of developmental vistas, social dislocation and increased inequality level
(Amsden, 2017). Some argue that the goods provided through such a process can be captured by elites or
corrupted through the process thereby reducing the intended advantages and eroding the public trust in
institutions of governance (Olson, 2016). On the same note, privatization outcomes are contingent on the
formulation and execution of enabling legal frameworks and institutional structures, further enhanced by
market factors. Lack of proper governance and accountability can lead to market distortions or failures, rent
seeking and private capture of assets that may worsen income distribution and reduce the prospects for
inclusive growth (Bennet, 2019). Hence, even as privatization continues to be a key component of SAPs,
the impact of such measures both in the short and long runs has significant socio-economic consequences
and has the potential of being inequitable and misleading depending on how policy makers implement the
reforms, what rationale they base it on and how it provides answers to the broad development questions.
3.2 Privatization as a path to economic growth
As one of the most significant economic policies, the concept of privatization as a strategic policy of change
and management of state-owned enterprises (SOEs) involves the adoption of a pluralistic approach. This
transition is based on the assumption that property rights promote competition, innovation, productivity and
economic growth, prosperity therefore should be adopted by all. Research findings back this claim, a study
analysis by Knyazeva, Knyazeva, and Stiglitz (2018) shows that the privatization policies in transition
economies are more often than not beneficial, boosting productivity and profitability. Privatisation remains a
notable policy measure that depends on legal frameworks in determining its economic consequences. La
Porta et al. , (2017) defined legal institutions as having a big influence to the effect of privatization pointing
out the fact that nations that have well developed legal systems are likely to gain more from the exercise of
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privatization. However, privatization is the process of selling off government-owned enterprises and has
been found to depend on different factors such as; the market forces, governance structures, and
regulation factors. Li & Zhou (2016) has highlighted that though political connections and privatized sector
have both positive and negative impacts in China then the issues regarding governance need to be tackled
effectively and efficiently. In many cases, the privatization process may not be very smooth or a smooth
sailing affair due to the reasons that may range from issues to do with valuative of the assets to those that
may be to do with stakeholders and matters of regulation. These challenges have to be addressed by
having robust strategies in place, engaging the relevant stakeholders as well as being responsive in the
decision making process.
3.3 Challenges: Corruption, cronyism, and regulatory issues
Empirical evidence for efficiency improvement through the sale of state-owned enterprises, overseas, has
attracted significant interest across the globe on the back of the argument that private ownership stimulates
competition, efficiency and innovation. In a similar vein, Knyazeva, Knyazeva, and Stiglitz (2018), using
detailed firm-level data, find that transitional economies privatized, which in turn has a net positive effect on
productivity and profitability across firms. Lussier and Hallock (2010) seem to agree with La Porta, López-
de-Silanes, and Shleifer (2017), pointing to how privatization has different effects, depending on the legal
origins of the country in question, since legal frameworks were seen as having a powerful impact on the
positive economic effects of the policy in the various countries. It is also viewed as efficiency and the
decentralization of government responsibilities arguing that governments should concentrate on prioritized
tasks like regulation and formation of policies besides offering public services. In this instance, privatization
is not complementary to economic growth but its impact depends with the nature of market structure,
governance structure and the business environment. Li and Zhou (2016) reveal that political connection
affects the performance of firms in industries that has gone through privatization, this strengthen the
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argument put forward by many scholars that privatization coupled with political connection may lead to
governance issues. However, it is notable that privatization is not always problem-free and faces varied
obstacles. A number of challenges have been observed to be quite rampant and these include corruption,
cronyism and issues to do with regulations. Kikeri and Nellis (2018) note that corruption poses a big risk in
the privatization strategy revealing self-interests, biasing the sales of assets, distorting competition, and
possibly negating public support. Regulatory capture means that private interests may also influence
regulatory decisions, can also pose a problem to privatization by protecting current companies from
competition through the manipulation of the rules of the game. However, poor quality regulation , and its
implementation simply amplifies some of these challenges resulting to markets failures and inefficiency.
According to Kim (2017), the dangers of privatisation imply that governance vulnerabilities need to be
addressed to provide sufficient protection against potential risk factors and to enhance governance
structures through the use of public participation, accountability and transparency.
3.4 Impact on socio-economic development and inequality
While the ADA holds strong belief towards proponents asserting that privatization provides positive effects
to the economic growth and efficiency by the involvement of competition and innovation from the private
sector, critics also resist to privatization due to its impacts on inequality distribution of income and social
well-being. The authors of the study laid down the risks associated with privatization whereby jobs may be
lost and income distribution skewed lower; especially if there is no necessary social protection structures
and practices for the unemployed and underpaid workers (Knyazeva, Knyazeva, & Stiglitz, 2018). However,
privatization can have different effects on the distribution of income depending on contextual factors as
well, and how it has been executed. For instance, La Porta, López-de-Silanes, and Shleifer (2017) explain
that there is an essential relationship between legal origin and institutional quality and the effects of
privatization policies where the countries which have improved legal institutions receive the positive effects
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of privatization policies which improves the distributional impacts in their respective countries. The process
of privatisation is not immune to frauds, manipulation, and capture, which in turn will maintain and deepen
social injustices. As hence, the anti-social effects of privatization require specific attention from the policy
makers, whereby the Government must take measures into account for utilising the free flow socio-
economic impacts of privatization. This may be achieved through shallowing of government regulation,
improvement of monitoring tools, and guaranteeing that privatization processes will be implemented hand
in hand with ways to support the needy sections of population and create favorable conditions for increased
equitable growth. Moreover, it should be noted that reduction of socio-economic disparities through
dismantling of structural obstacles to individuals’ upward social mobility, including restrictions in education,
health, and social services access, is crucial in order to prevent social exclusion and ensure that positive
effect of privatization is distributed evenly throughout the population. Since privatization affects both the
economic and social environment while at the same time exhibiting the potential for generating
improvements in both these areas, it is important for policy-makers to assess its effects on inequality and
social welfare as part of a global evaluation of privatization.
4.0 Impact of Privatization on MNCs
4.1 Opportunities for market entry and expansion
The opportunity of entering and expanding into new markets, especially those in developing countries are
one of the biggest factors needed by multinationals. FDI is one of the most common forms of entry into
foreign markets and this form of entry offers firms access to other markets and resources and can obtain
lower costs of production than it could otherwise. Girma and Gong (2016) explain how FDI can have
positive effects for China SOEs via several indicators such as linkages and technology transfer. There are
not only accurate to say that these benefits apply to operational improvements, but also to innovation
capabilities as implementation of TT from MNCs entails state-of-the-art know-how, practices, processes.
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Also, companies that are international must find ways and means to partner since they can gain a grasp of
the market as well as consumers. This type of partnership is useful due to the fact that emerging markets
are most frequently more of an exception than rule, both in terms of the market culture, and market
economy. Market Entry decisions are mainly determined by the regulation systems according to Gupta,
Kleinfeld and Salinas (2017) with comparison of regulations emphasizing on the significance of clear and
stable regulations for the foreign investment. Predictability ensures that MNCS can set long-term
investment on anticipated polices that would not change in future thus affecting theireconomic
undertakings. Moreover, as the growth in emerging markets expands, the possibility of emerging markets’
growth strengthens itself in considering the potential to expand, especially in certain sectors, such as
technology and consumer goods and infrastructure, which have become more developed, modernized
(Hussain, Sun, 2019). Some of the reasons for its growth include sustained increases in disposable
incomes, the growing trend in urbanized populations, and greater internet accessibility, thus opening a
unique market for MNCs to bring in new products and services that will suit the locals’ needs. Indeed,
emergent economies are not just a market opportunity for business expansion but an important necessity to
maintain sustainable competitivenes (Nguyen Rugman, 2018).
4.2 Acquisition of state-owned assets and enterprises
Earnings by acquisition of state-owned assets and enterprises (SOEs) is another important way that has
been applied by corporations which are interested in entering into new markets with well developed
facilities and clients base. The envisaged sale of stakes in SOEs can upgrade their efficiency and
competitive advantage according to various studies. This generally entails a great deal of pro-bation and
must be carried out with consideration of political forces. Jones and Megginson (2016) also indicate that
privatization of SOEs is also likely to increase stock market liquidity of such companies, thus making the
firms more attractive. This is because restructuring that is normally required when there is change of the
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ownership status from state to private control normally involves changes in the internal organization that
seeks to enhance efficiency in the operations and this normally creates employment and fosters growth in
the host nation’s economy. There is always the ability to spur competition among the different firms within
the market; this forces other firms to come up with necessary reforms and increased efficiency in a bid to
remain relevant in the market. A great deal of such acquisitions’ success depends on the regulation and the
government’s efforts to promote competing policies. Under some circumstances, the governments place
restrictions on the sale with an aim of guarding the interests of the nation, this may include such conditions
as employment level that must be maintained after the acquisition as well as provision of certain services.
Similarly, according to Girma and Gong (2016), FDI also contribute enhance operating productivity of
former SOE by adopting higher management experience and introduction of new technology. Such
improvements as these are normally made through the adoption of international policies, standards and
regulations, which make the firm’s operations more transparent and accountable. Also, the flow of FDI can
ensure the accumulation of funds for the replacement of rather outdated infrastructure combined with the
provision of funds for the introduction of modern technologies which can help increase the productivity of
the respective economy. Nevertheless, vendor’s supervision of SOEs may be a problematic area since
there exists opposition from employees and existing managers as they consider the risks of losing their
precious jobs and the change in organizational culture.
4.3 Challenges: Regulatory barriers, public resistance, competition
Exporting and venturing into new foreign markets and particularly through the acquisitions of state owned
enterprises bring or have several issues. Market entry can be made difficult by these barriers once a firm is
faced with a number of legal hurdles, whereby regulations may var proved. Porstituti according to Gupta,
Kleinfeld, and Salinas (2017) argue that there is a need to develop its regulatory bodies and systems that
should avoid policy and regulatory unpredictability since this may act as a push factor for foreign investors.
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Another problem is public opposition to the privatisation as people usually consider sell outs of domestic
resources for foreigners as a threat. This can be by political opposition and social issues that prevent the
acquiring of assets and hence slows down the process (Huang & Wang, 2018). However, there are also
some threats such as increased competition from both local and global competitors that could cause the
pressures of lowering premium and hence undermine company’s profit as well as market share. According
to Hussain and Sun (2019), these challenges can be alleviated through strategic positioning and the
attainment of competitive advantage through innovations and adaption of new strategies that fit the local
market. It contributes to the utilization of local cultural peculiarities for the implementation and functioning of
the new market. The challenges of operating the former SOEs involve rise of some inefficiencies and
culture change in regard to operation within the manufacturer private sector. Thus, Girma and Gong (2016)
also stress that FDI is capable to facilitate this change through the effusing of improved management
techniques and technology upgrades. Another form of integration that is significant not only streamlines
operation but also contributes to a competitive advantage through advancing technologies. However, the
extent of the success of these occurrences greatly depends on the government’s willingness and action of
establishing appropriate environment for investors from other countries. The policy maker has to ensure
that there is political stability politically and policy consistency on the general support for fair competition so
as to be in a position to be able to do away with the risks associated with acquisitions of SOE. When well-
managed, these diverse tasks are crucial to the sustainable growth of MNCs and to their development of
solid foundations in EMCs.
4.4 Corporate strategies: Joint ventures, mergers, acquisitions
The research conducted here introduce and discuss the strategies which are used in foreign markets,
including joint ventures, mergers, and acquisitions. This is especially so, where risks relating to market
entry can be adequately addressed through the use of the local partners’ knowledge and connections,
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which are the primary benefits of a joint venture. In fact, according to Girma and Gong (2016), joint
ventures can help in the transfer of knowledge and technology, and can overall improve the efficiency of
the operation processes. M&As are also commonly used, since they give firms the opportunity to rapidly
gaining market share and new technological platforms. According to Jones and Megginson (2016), Mak
have the potential of increasing liquidity and operations adroitness, so that the financial joint can become
more competitive. However, since most of these strategies entail having clear restriction of local rules and
structures to adapt to, they have to be well planned for and executed properly. Gupta, Kleinfeld, and
Salinas (2017) elaborate on the theme of firm structure, risk management and compliance as critical factors
that lead to integration and sustainable growth in foreign locations. As explained above. there is always the
possibility of achieving a successful result when generating brand strategies and identifying consumer
interest. Working together in joint ventures to provide goods and services may give useful information about
the local market as well as culture of the country into which companies are venturing to export their
products. On the other hand, it can generate synergies which originate from M&As and lead to the mutually
beneficial leveraging of large scale resources with the aim of increasing innovation and operational
efficiency. Nevertheless, the process of integrating M&A is never without some problems encountered in
the areas of cultural differences, redundancy problems, and regulation. Thus it is strategic for companies to
analyze the integration thoroughly, embrace strategic plans to facilitate integration processes, and ensure
clear communication to resolve the conflict. Constant evaluation of the market circumstances and changes
in project approaches are vital due to existing environments and shifting customer patterns. Aspects
including joint ventures, mergers, acquisitions are key strategies adopted by corporations, in order to
extend their international operations, generate growth and gain competitive advantages in an array of
markets.
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5.0 Ethical and Social Considerations
5.1 Debate on privatization's impact on equity
Discussions on privatization and equity have primarily revolved on how privatization either worsens or
reduces differential income distribution, arising from change in ownership from public to private domain.
According to Addison and Heshmati (2018), privatization of organizations presents implications on the
improvement of income distribution and inequality since it is usually uncomplimented with adequate
regulatory frameworks. According to them privatization is a process that significantly augments the income
differential since it fosters efficiency in organizations for the benefit of a particular class of individuals with
capital to invest. Similarly, Bach and Saltiel (2017) present cross-sectional data from HIICs to the effect that
privatization raises income disparities since public privatized firms are major employers thatadeliver job
cuts and wage erosions in the newly privatized firms. However, Andrews and Bianchi (2018) argue that
privatization, if accompanied by institutional changes, has a positive impact on economic growth, and
through the strengthening of public revenues and the reduction of costs within the public sector, this can
then translate to a better quality of live for even more people in society. They postulate that working to
privatize can mean improvements on the efficiency and productivity of the previously state-controlled
enterprises leading to cheaper prices of goods and services, which can be of benefit to low incomeIncome
houses. Also, liberalization also encourages growth through the injection of private capital into the
previously state-controlled sectors, increases the number, qualifiord and productivity of people employed,
and makes the economic system more competitive. Andrews and Bianchi claim that equal access to
business opportunities and non-allowance of monopolistic actions might have certain disadvantageous
impacts on income distribution and hence should be followed through certain regulative interventions. It is
noteworthy, however, that the effects of privatization on equity may not be entirely negative or positive due
to certain conditions such as the level of regulatory measures, the structure of the privatization offers,
among other factors that surround privatization. Same kinds of consequences which are depicted through
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theoretical analysis are also supported by some empirical works where negative effects like skewed income
distribution and rising social inequalities are likely to be the outcomes of privatization measures; however,
what is also possible to find in the case studies is positive impact which entails comprehensive economic
reforms designed to improve the roles of privatization for the targeted objectives of the growth.
5.2 Quality of services and consumer protection
The role that privatization plays in the vocabulary of economic reforms is significant, and the issues of
service quality and consumer protection are no less important. Auriol and Blanc (2016) described the
problems related to the effects of privatization of utilities in sub-Saharan Africa especially in the services
such as water and electricity where capture and corruption negates the improved services. This is
especially so where institutions are still in their developmental stages and there is low capability to monitor
and enforce compliance with the laws. On the other hand, Alonso and Garcimartín (2016) note that the
factors that influence the institutional quality are applicable when providing the evidence that privatization
enhances service delivery. In the case that institutional foundations are strong and the likelihood of
corruption is negligible, outsourcing can improve the quality of services and the conditions for consumers.
This is why other governance reforms beyond just these privatization efforts should always be undertaken
in order to tackle core systemic problems. In addition, Aguilera and Vaaler (2019) assert that, while
privatization opens several emerging markets to MNCs, the latter introduce efficiency in management and
technology to improve service delivery. This has a clear premise assuming that governance of adequate
consumer protection laws and regulatory mechanisms are in place for consumers. The measures
implemented through effective competition policies and transparent regulatory structures are crucial in
preventing monopolistic practices that manipulate price and service delivery to sectors within the society.
Moreover, the part played by civil societies and consumer organizations cannot be overemphasized
especially when it comes to exercising oversight on organizations that have been privatized as well as
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demanding the protection of consumer rights. It is evident that their participation in the act of service
monitoring, complaining, and demanding service accountability from the privatized service delivery
organization can to a large extent guard/potentially offset the negative privatization effects on consumers.
5.3 Environmental and social responsibility of MNCs
The economic and social costs of MNCs in environmental and social aspects through privatization policies
remains one of the most sensitive topics in many countries around the world. In their view of the
hypothetical diminished corporate social responsibility standard, Aguilera and Vaaler (2019) opine that in
their bid to reap profits, MNCs may overlook environmental requirements unless they are compelled to do
otherwise. They stress that in emerging markets, commodity bonanzas result in the overexploitation of
natural resources and violation of the labor rights. This exploitation in most cases is worsened by excessive
cutting or trimming of the profits which in turn bring in policies that are adverse to the natural setting and the
people. For more profundity on the nature of environmental degradation in aspects concerning privatization,
Auriol and Blanc (2016) expound on sub sectors of privatization such as water and electricity in sub
Saharan Africa; whereby privatized companies tend to embrace monetary gain rather than stewardship
conservation over natural endowments resulting to pollution and depletion. When the laws are lenient, such
regulatory standards can be easily circumvented by MNCs to the detriment of the host communities and
environments. For instance, less stringent requirements concerning the exhaust arrangement of emissions
or proper disposal of wastes can result to negative effects on the surroundings and possible adverse
effects on health of persons close by. Furthermore, cost disciplines that will be driven by the privatized
operation often end up with improper labour policies and remunerations, which may fall below international
standards in some cases. Such concerns call for proper policies and legal measures that seek to compel
the MNCs to demonstrate sustainable stewardship over the environment and the sociopolitical life during
privatization. However, Andrews and Bianchi (2018) also argue that, MNCs can have a positive impact but
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only if their entry to privatized sectors is encouraged with a package of institutional changes aimed at
enforcing environmental and social standards. Some have suggested that the international rules and
standards, and/or the CSR initiatives, may effectively help minimize the adverse effects and enhance the
positive effects.
5.4 Governance and transparency in privatization processes
The level of governance and disclosure can play a critical role in dictating the effectiveness and equity of
the privatization procedures. According to Alonso and Garcimartín (2016), regardless of the type of
privatization reforms implemented, the quality of institutions influences their impact. This paper will argue
that, in countries where governance capability is weak then, privatization process and hence dynamics are
easily hijacked by the unscrupulous elements who engage in corruption and wasteful practices that erode
the public confidence thereby in average welfare loss. Sub-Saharan African has been one of the regions
that embraced privatization policies; however, due to poor governance and lack of transparency as noted
by Auriol and Blanc (2016), privatization has created avenues for corruption with private interests capturing
public utilities. They also understand that decisions made through opaque processes may lead to the result
of group thinking and therefore yield results that might be beneficial to one or two end-users only but
detrimental to others. As known from the work done by Addison & Heshmati (2018), higher efficiency and
equity can be achieved if privatization is conducted basically, and if this process is backed by institutions.
They content that transparency will ensure account ability and public scrutiny in the privatization process
hence might help in averting some of the social/ economic cost such as rise in inequality and decline in
quality of service delivery . Similarly, Aguilera and Vaaler (2019) also emphasise the fact that MNCs are
rather choosy about the type of markets in which they invest, and this mostly based on the governance
structures – higher transparency of markets preferred by them. This can also contributes to the boost of
investors, creation of competitive advantage and efficiency improvement to offer the best to consumers and
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the whole economy. In that respect, one might conclude that while the publishing of the issues of
governance and transparency is an important component in the theory of privatization since it touches on
the equity and efficiency of privatization, as well as the viability of privatization reform.
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