Question

International Business short essay Question 11: There are 3 types of Government seizure of the assets of a corporation – what are they, explain each one and why might a government use one of the 3 types. What are the disadvantages of seizure of assets.

Answer 1

Sometimes assets of companies or personal's are seized by government within its territory by confiscation, expropriation and nationalisation.

Confiscation:- When the government seize assets of a company forcefully without any compensation, it is called confiscation of assets. Assets belonging to persons or corporations suspected of involving with crimes or illegal activities are confiscated by the government. In order to get back the assets, one needs to proof himself his non involvement in the crime.

Expropriation:- The forced transfer of a company's assets by the government with compensation leaving the company behind for any option for legal appeal is called as expropriation. When there is any need of private property for public purpose, government have the right to take over the property from its owners by paying little compensation. In this case, government decides the value of compensation but it goes far below the market value. Foe eg, when there is the need to widen the highways, government takes over the possession of lands located on these roads from the owners by paying a meagre amount.

Nationalisation:- While nationalisation refers to the bringing of private assets under the public ownership by the government of a country which assets have higher potentiality of earning greater revenue for the country. Nationalisation of assets can occur with or without compensation to its owners. Mainly companies dealing with banks, transport, oil and natural gas, electricity etc are nationalised and brought under government purview in order to safeguard the supply of these services and make it affordable to the general people.

Though government does seize private properties for various purposes for the greater welfare of the society, there are many negative aspects of seizing private properties by the government also. Countries having stringent law for seizing private assets compel companies and corporations to build their base in foreign countries. On the other hand, foreign companies also prefer to avoid establishing any companies or investments in these countries. Governments loss huge revenues due to non investments from domestic and foreign based companies. Many economic problems like unemployment, higher cost of living due to large number of imported items in the absence of domestic production etc come up.