est and security are more important than international considerations. POLITICAL RISKS OF GLOBAL BUSINESS CONFISCATION, EXPROPRIATION AND DOMESTICATION The most severe political risk is confiscation, which is seizing of company's assets without payment. Less severe is however, expropriation, which requires reimbursement, for the government seized investment. A third type of risk is domestication, which occurs when host country takes steps to transfer foreign investments to national control and ownership through series of government decrees. A change in the government's attitudes, policies, economic plans and philosophies toward the role of foreign investment is the reason behind the decision to confiscate, expropriate or domesticate existing foreign assets. ECONOMIC RISKS International companies are often faced with many economic risks most of which arise without any prior warning. Economic risks are an important and a recurring part of political environment that a few companies can avoid. Exchange controls stems from shortage of foreign exchange held by the country. When this happens, controls may be placed upon all movements of capital or selectively against most politically vulnerable companies. Exchange controls are extended to cover products by applying a system of multiple exchange rates to regulate trade. Local-content laws- companies often require a portion of any product sold in a country to have a local content. Import restrictions- selective restrictions on import of certain raw materials, machines and spare parts are common strategies used to force foreign companies to purchase more materials within host country creating markets for local products. Tax controls- taxes are a classified risk when used as a means of controlling' foreign investments. They are often raised without warning and in violation of formal agreements. Price controls- essential products that command considerable public interest are often subject to p...
