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TNCs Role In Third World:WILL INDIA FOLLOW LATIN AMERICA?, by Shivaji Sarkar,19 September 2009 Print E-mail

Economic Highlights

New Delhi, 19 September 2009

TNCs Role In Third World

WILL INDIA FOLLOW LATIN AMERICA?

By Shivaji Sarkar

The world’s worst fears have come true. There is no food shortage. Transnational corporations through manipulations and speculative activities are jacking up the prices world-over and affecting food security and safety. This is the finding of two successive reports of the United Nations Conference on Trade and Development (UNCTAD) – Trade and Development and World Investment Report -TNCs, Agricultural Production and Development 2009.

The US had been debating the role of the transnational corporations (TNC) since the 60s.  These are large corporates working across the world and unflinchingly flout sovereign norms of any country. Their argument being that as they work across the globe, transcending national boundaries they cannot be subjected to national laws. This is somewhat still sober. But they have steadily become smarter, bolder and aggressive. They decide the fate of nations controlling and coercing political parties and luring bureaucracy. Surveillance on them suffers. It is the TNCs which decide national policies or change them to suit their profit goals.

The financial shockwave of 2008, submerged equity (stock) and bond markets in many countries, exchange rates of some emerging market currencies and primary commodity market all at the same time. Worse, the financial and agriculture sectors are being subjected to continuous new games being played by them. Many discerning citizens have been warning governments that the growth of the financial sector was fraught with risk.

Now the United Nations confirms it, saying when the financial sector is allowed to grow too much, a country lands in trouble. Many financial institutions have no social utility. The UN wants strong regulations to prevent damage to economies. It wants new capital management techniques.

Developing countries now have become the TNCs favourite destinations. And, they were extremely active in Latin American countries. Many governments were overthrown. It led to legislation of strong anti-trust (anti-monopoly) laws in the US to protect their own system. One such company AT&T was forced to split into at least three companies to restrict its malevolent powers.

The TNCs through their votaries have been campaigning that foreign direct investment (FDI) in agriculture would lead to greater productivity and price stability. Even some Indian economists had lobbied for this view through the 90s liberalization process.

The UN Secretary-General, Ban Ki-moon, in the preface to WIR writes that greater involvement of TNCs will not automatically lead to greater productivity in agriculture, rural development or the alleviation of poverty and hunger. Clearly, he is giving a grim warning to the world and virtually calls for curbing their powers. He means, though he does not say, that the TNCs are not acting for the benefit of the world population, which would rise to nine billion by 2050.

These corporations have been investing in agriculture through direct and indirect methods and the FDI in agriculture is on the rise, tripling to $ 3 billion annually between 1989 and 2007, when it touched $ 32 billion. This participation in agriculture “can have negative impacts. It can result in job losses, in restrictive business practices or in excessive dependence among farmers on TNCs to supply inputs or buy produce. There are concerns about “land grabbing”, UN reports warn. It is a tendency that has separately been described as building up of corporate zamindars (land lords) in this country.

A devious method of intervention is to skirt the laws. Many countries, including India, do not allow direct investment in all sectors of agriculture by these corporations. They resort to contract farming through agents or exhibit FDI in some other areas such as consumer products. But it has the same deleterious effect, say the UN experts and admit it is a difficult area to contain.

A major cause of concern is the involvement of the TNCs in the production of cash crops. Their participation in staple food crops – whose harvests are vital for feeding developing country populations – is also significant. They control the commodity market and farm practices.  “This implies that there is no simple equation between food security and TNC participation in a host country’s agriculture”, the UN warns. India has seen it in many ways leading to mass suicides by farmers.

In reality, the TNCs and supermarket chains work against the basic food safety concerns. This is an anathema, as they would need to compromise with profit as welfare is clearly not their aim. The national governments need to take a serious note of the UN’s concern and curb pursuit of FDI in agriculture and free financial sector operations.

Countries such as India need to be extremely cautious as the TNCs are now eyeing them because western destinations have become less lucrative. India must be concerned as the FDI inflow has more than doubled in two years. It rose from $ 20336 in 2006 to $ 41554 in 2008. Being a favourable economic destination might sound politically fashionable but opening doors ajar without regulation has its inherent dangers. Leaders across the political spectrum must debate and discuss. Any inflow is not benign they have to understand.

The Union Government has involved the TNCs in agriculture--seed imports, and foreign ownership of seed companies since 1991. The UN is concerned at the lack of guard by New Delhi. A number of seed companies in the name of R&D have entered the country and the UN indirectly indicts India for the plight of farmers raising cash crop like Bt cotton and other seedless crops.

The corporations are more active in food processing sectors and names four of these specifically engaged in it. The TNCs are also active in floriculture, horticulture, animal husbandry, pisciculture and cultivation of vegetables. In many cases they are also involved in food crops. The UN confirms the fears of some experts. The recent commodity price rise is thanks to the TNCs involvement.

The Government must look into the branding of food products by the TNCs and the supermarket chains. Branding increases their profits and raises the prices of commodities. The so-called value addition only adds to the price but also causes problems for the small farmers and small trade, who are being edged out. All this increases the number of people living below the poverty line.

Indeed, eliminating TNCs is not going to be easy but if the Government does not rise to the occasion, it might be disastrous for this “great” nation. Instead of being a new power, India might eclipse like many Latin American nations, which were hyped, exploited and impoverished by the corporations. Time we be on our guard. ---INFA

(Copyright, India News and Feature Alliance)

 

 

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