Bargaining between local governments and multinational corporations in a decentralised system of governance: the cases of Ogan Komering Ilir and Banyuwangi districts in Indonesia

Abstract

Studies of the relationships between local governments and multinational corporations (MNCs) regarding foreign direct investment (FDI) remain few, despite many countries having implemented policies of decentralisation. In response, by employing ideas about decentralisation, FDI and political bargaining, this article addresses the relationships using two districts in Indonesia as case studies, from which some significant interrelated insights are acquired. One is that the local governments concerned are open to FDI, with their relationships with MNCs being cooperative rather than conflictual. Another is that their bargaining positions vis-à-vis MNCs are inevitably influenced by varying alignments of goals, stakes, resources and constraints. A third is that alternative bargaining arrangements are possible in the form of direct and indirect negotiations, with corresponding involvement by other levels of government. These and associated insights confirm the importance of the relationships and the bargaining process involved, with an ongoing focus on how the relationships and the results thereof can be enhanced in the interests of sound socio-economic development at the local level.