Suggestions
so that MNC work in favour of domestic country
Usually
it has been found that MNCs comes in domestic market and try to exploit it
instead adding value to the domestic market. They become monopolistic in nature
since domestic companies are usually small compared to them and are unable to
compete with them.
In
UPSC what you need is fewer points but precise answer.
Ask
this question to yourself
What
steps can be taken so that MNCs help domestic country in growing instead of
exploiting it ?
Many
thoughts may come in your mind like
- Make Corporate Social
Responsibility mandatory under which they will be bound to spend some
amount of profit on domestic country and thus they will be helpful to
domestic country
- Often MNCs are accused of bringing
only low quality technology to domestic country hence there must be some
regulations which set the benchmark for production under which MNC are
mandatorily required to bring high quality technology to the
domestic country.
- Put local sourcing norms say
30 percent of raw material to be domesticity sourced and some percentage
of labour force must be domestic.
- Better taxation regime under which
an MNC is not allowed to offshore profits for example you can set a limit
say that a MNC entering domestic market is not allowed to transfer
more than 60 percent of profit to its parent company.
Well all of these points are relevant but are theoretical in nature.
Ground reality is different. A common theme running across all these points is
that we somehow putting obstacles in the way of MNCs be it compulsory
CSR or restriction on nature of technology trasnfer or conditons on local
sourcing . Problem here is if you put restrictions on working of MNC they
will not come to your country since they are looking for places where they can
produce at low cost and without much restrictions.
Solution
If
government of India wants that MNCs works in favour of our country it should
promote those policies that make the domestic company more competitive . If
Sony a MNC is allowed in country it with its superior technology will easily
able to outdo Indian companies and establish itself as dominant market player
as it has no competition from local inefficient companies . Imagine an
alternate world in which domestic companies are already competitive and when
Sony enters they are ready to put competition to Sony and both domestic and
international companies will compete and better product will emerge and
everyone will benefit.
8
suggestions to improve performance of MNCs
1. Improve operational
efficiency of domestic companies
In Last Olympic China won
the maximum medals while India was not in even top ten countries . Why so ?
Chinese athletics are very competitive how they became competitive while we its
neighboring nations remain uncompetitive.
The story will best
illustrate the point during Olympic when some media person asked an Chine
swimmer the secret of his success he replied ask this questions from my coach .
The coach explained that if an athlete comes out of water before 18 hours
during a day he is slapped. Such is the rigor of training. Imagine slapping
some student in India . Immediately 11 committee will be set up to investigate
the matter and political leaders like Rahul Ghandhi will visit to console !
There is a small country Nicoro Guja ninety
percent of its population is poor yet it is able to bring 9 to 8 medals in each
Olympic and in our case our Grand total of Olympic medals till date is not 8.
So bottom line is these
countries are able to do so because they are providing competitive environment
to their athletes
2. Allow access to technology at affordable rate
India needs advanced and modern technology to
grow. And we need to purchase that technology from other foreign nations or
companies. Usually what happen is we buy a new technology and began using them
in our products and break any economic relationship with producer of original technology.
The final product may be a success or a failure original technology creator has
no stake in its market performance. Instead of using one time purchase of
technology route we must adopt equity route such that original technology
producer has some stake in the success or failure of product and in this case
you will be able to get technology much cheaper.
3. Proper taxation of profit
Companies
both domestic and MNC should be taxed in
such manner that only a portion of
profit is taxed and other portion which is will be reinvested for future growth
should be exempted from tax. This will improve future competitiveness of India.
4. Strategic Alliance be
allowed
Rules for merger and acquisition be clear.
Rules should be such that allow strategic merger where merger led to greater synergy
and efficiency while restricting merger that led to market dominance like
monopoly.
5. Improve domestic export competitiveness
To illustrate this point I will like give you
example of Bajaj Scooter. Nowdays nobody uses scooter but Bajaj was one of the
best brand known for high quality scooter in India. Once Bajaj participated in
an Japan Trade Fair with its trademark scooter. But it mailed miserably. Why?
The Japanse customers especially are ladies lean compared to Indian people and
they want scooter that are light weight and small in size while Bajaj scooter
was heavy . Therefore not suited for Japanese customer.
Point here is Indian companies must understand
customer demand better before producing good and not first producing goods and
then looking for customers.
Produce things in which you have competitive advantage.
If domestic companies are going to produce smart phones they have to compete
with giants like Apple who has developed great specialization in development of
smart phones. Instead we must export
things that we have some domestic advantages like flowers in Kashmir or technology
which are developed here and is new. In that way we will be more competitive in
nature.
6. Promote new area of
investment
