6:58 AM Mar 29, 1996
INDIA: APEX TRADE BODY ATTACKS TNCS
New Delhi (TWN/Mahesh Prasad) -- Transnational Corporations (TNCs) and their behaviour and activities in India have come under attack from an unexpected quarter -- from an apex organisation of trade and industry, which so far has been a vocal supporter of TNCs. The TNCs and their activities have all along been subject to hostile public campaigns from political parties, social organisations and environmental groups. But this is the first time that they been berated by the trade and industry. Last year, the TNCs and the incentives provided to them came under criticism, obliquely though, from a group of industrialists, who later said they were not attacking the transnationals but were seeking level a playing field for Indian business and industry from the government. But the critical comments on TNC performance has now come from the Director-General of the Confederation of Indian Industry (CII), Mr. Tarun Das. Tarun Das's remarks are significant in that the CII has been known to be an organisation dominated by enterprises which are joint ventures with Transnationals. In an interview, Tarun Das lambasted the transnationals for their "cowboy approach" of landing in India, hastily choosing a partner, making a mistake and then breaking off the relationship. The TNCs, Tarun Das said, leveraged an Indian partner to get in, and then moved quickly to secure a 51% equity. He also attacked the TNCs for their short-term focus on quick profits and sales approach as distinct from manufacturing. Perhaps the most pointed attack from Mr. Tarun Das, and which received support from his President, Mr. Rajiv Kaul, came when he attacked the TNCs for supplying second-hand plant and machinery, declared obsolete in their home country, and using expatriate Chief Executive Officers (CEOs) rather then competent Indian management. The views of Mr. Tarun Das were in a paper debated upon at a brainstorming session of the CII last week. In his paper, Mr. Tarun Das said though the domestic industry wanted the TNCs to contribute to India's development, there is discomfort with their dominance and control. "There is discomfort with their one-way-street approach and there is clear discomfort with the outdated and obsolete technology and products they bring in," Mr Tarun Das said in the paper. He added: "A new dimension is that a single TNC ties with different Indian companies for different product lines. "Interestingly," the paper said, "in the telecom sector, where bids were opened for tenders for cellular phones, and where foreign investors have to form joint ventures with local partners, almost all the foreign partners have parted company already." Referring to the sales approach towards India, Mr. Das said "This is an issue which reflects reluctance to invest in India and an effort to get access to the market through minimum production." The focus of TNC investors was on short-, rather than long-term. The strategy, he observed, seemed to be to generate profits "rather than go for the long haul, be patient, stay in India and build credibility as a steady process." The Tarun Das paper, and media reports on it, created quite a storm. And, although on the very next day of the brain-storming session, CII president, Mr. Kaul, came out with a statement, clarifying that the controversial paper of Mr. Das on TNC Strategy "essentially puts forward suggestions to strengthen the flow of foreign investment and joint venture between TNCs and Indian partners in the long run," the sting of the attack has not been removed. On the very next day that Mr. Das had unfolded his views, analysts put forward the view that the open expression of views by a senior official of an apex chamber was intended to initiate a debate on the eve of the elections. Some went so far as to suggest that it was intended to strengthen the hands of the Bharatiya Janata party (BJP). The right wing BJP, which constitutes the main opposition party in the Lok Sabha, the lower house of Indian Parliament, has been putting forward the "Swadeshi" (self-reliance and indigenisation) slogan. The party has been opposing the presence of TNCs in the consumer goods sector. A BJP organ, "Swadeshi Jagaran Manch" (Forum for Enlightenment of Self-Reliance), has led popular agitation against the entry into India of Kentucky Fried Chicken fast food shops across the country, and Pepsi Foods muscling into the manufacture and sale of a snackfood item, "Bikaneri Bhujia", which is produced by small cottage industries and households and provides employment to hundreds of women in the desert prone districts of Rajasthan in Central India. Mr. Das' criticism of TNCs using expatriate managers and CEOs rather than competent Indian management is relevant taking into account the recent incident of the British transnational BAT attempting, though unsuccessfully, to ease out two senior and highly professional Indian managers from ITC, a joint venture in which BAT has substantial but a minority share. BAT openly canvassed against the highly professional Indian managers, but failed to oust them owing to the stand of the Indian financial institutions, which too had high stakes in the equity. Whether or not, Mr. Das' paper and the CII brain-storming session represent a move against the transnationals, it definitely brings into the open the simmering feeling among Indian industrialists of tnansnationals taking undue advantage of the liberalisation policy and seeking to edge out the locals from their own ground, or of making a fast buck and moving out.