Ans. ISSUES AND CONTROVERSIES
Currently there has been a broad consensus
that TNCs are efficient allocators of resources in the world economy. Further,
they are also technological giants and innovators. Yet there are a large number
of issues on which the controversies exist. They are :
a) The TNCs interest and the interest of host
countries specially developing ones conflict with each other. TNCs produce
products which are not very essential
for a host developing countries and thus they divert scarce resources
away from production of necessary items.
b) The TNCs dominate high profit oriented
consumer sectors. They monopolize profits of these sectors without providing
any scope for local enterprises. This they do through their market power which
includes promotion of brand name, trade mark etc.
c) While the TNCs possess technology, they
are extremely reluctant to transfer technology to the host country. Therefore,
they make developing countries depend on TNCs for their technology. TNCs
preserve all their important R & D in home countries.
d) In order to protect their market share
they take recourse to restrictive business practices. These restrictive
business practices include tying imports to specific sources of interests of
TNCs, conditions of technology transfer, price fixation, exports restrictions,
and restrictive use of brand names and trade mark.
e) Through the transfer pricing, the TNCs
avoid paying taxes to government of host countries and thus transfer resources
away from them. The TNCs also deprive the partners from host countries of their
legitimate profits.
f) The TNCs do not appoint host countries
personnel at higher positions.
g) The TNCs create balance of payments
problems for the host developing countries through large imports and
repatriation of huge dividends, royalty, technical and management fees.
h) The TNCs do not create necessary backward
and forward linkages. This failure very often leads to non-industrialization of
host countries.
i) The
TNCs are not necessarily very efficient institutions. Lately, many of the giant
TNCs have met with huge losses.
j) The TNCs increase their dominant power
through mergers and acquisitions thus preventing the needed competition.
k) The TNCs have a tremendous capacity to
influence their home governments and international organizations. This capacity
enables them to promote national and international legal frameworks consistent
with their needs at the cost of interest of many countries specially the
developing ones.
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