The Hindu Business Line : Seeking local allegiances in global times

THE Prime Minister, Dr Manmohan Singh, returned from his recent trip to the US pleased that he had got Washington's commitment to help with the civilian use of nuclear technology, especially in the area of power generation. It would help bridge the approximately 11 per cent gap between demand and supply of power in India that is putting a damper on growth.

The US ban on helping India in the area of nuclear technology was said to be a punishment for India developing its nuclear weapons capabilities. But a report in the Wall Street Journal says that one of the reasons for the change in US policy was to help revive the US nuclear industry.

All is not well with the nuclear industry in the US. No new plants have been proposed since 1979 when there was an accident at the Three Mile Island nuclear plant. For American companies in the nuclear field, the going has not been smooth for several years. The American company, Westinghouse, was acquired by British Nuclear Fuels Ltd. (a British government company) in 1999. Westinghouse has had a business relationship with Mitsubishi Heavy Industries Ltd of Japan for many years now and, just recently, Mitsubishi has decided that it wants to acquire Westinghouse.

Multinational corporations (MNCs) got a bad name in many parts of the developing world during the 1970s as they flexed their muscle in search of new markets and new sources of materials. They made shady deals with repressive regimes and it did not help that even reputed companies were sued for poor advertising practices in Africa that had a drastic effect on the health of infants.

But the arrival of globalisation in the 1990s created a different environment for MNCs. Rather than wait in the outer offices of politicians, they found that politicians from developing countries were waiting in the lobbies of their headquarters with requests for investment. Restrictions were being loosened, and even sovereign guarantees being given to attract the MNCs.

All this has given protestors of globalisation the image of a world where stateless MNCs indiscriminately moved plants and jobs around the world in the rush to make a few extra bucks. But anti-globalisation protestors need lose no more sleep over this now that countries are increasingly seeking local, rather than global, allegiances of their enterprises. Interestingly, this desire for national identity is seen more in developed countries as they recognise powerful MNCs with deep pockets emerging locally.

So, the media went into overdrive when two Chinese companies decided to acquire American companies.

One was an offer from China National Offshore Oil Corporation Ltd. (Cnooc) to buy Unocal Corp, the US oil company. The other was the offer from Qingdao Haier Co to acquire US white goods maker Maytag Corp. There was a hue and cry all the way from US Congress to local radio stations about local `assets' being taken over by foreigners.

CNOOC's offer drew more flak as it was a majority government-owned company. So its ambitions provided the perfect excuse for complaints of how closed the Chinese were when it came to US companies wanting to acquire Chinese firms, how they did not want to revise their exchange rates (which they did marginally by about 2 per cent since) and thereby reduce the US trade deficit, and so on.

The huffing and puffing was relived all over again when China bought the personal computer business from IBM just a few months ago. In the debate, there was barely a mention of how the Chinese were helping sustain the US economy by buying US Treasury bills.

All this is reminiscent of the furore in the 1980s when Japan wanted to buy US entertainment companies and other high-profile properties. That was seen as the forerunner of a Japanese takeover of the US.

It is not just the US that is getting paranoid. In the wake of news that PepsiCo is interested in the takeover of Danone SA, a French company, the French government began working overtime with thundering speeches about how Danone was a crown jewel and they would work actively to keep it in French hands.

The sabre-rattling worked when Swiss pharmaceuticals company, Novartis, was recently trying to acquire France-based Aventis. The government was quite happy, though, when French company, Pernod, recently acquired Britain's Allied Domecq. It fit in with the French policy of building its companies to be big enough to compete with the others in the world.

The EU commission was not too happy with all this narrow parochialism within the EU but who cares. Governments seem to fight by proxy now. The new energy Bill working its way through US Congress contains subsidies to promote new generation nuclear technology plants plus government commitments that these companies would be able to raise the funds from the market.

China, with its desire to promote home-grown multinationals, has granted companies such as Huawei, the Chinese telecom equipment maker, cheap loans and other lines of credit.

Now what is one to make of all this? Countries do not give up their national interest even in an era of globalisation.

While companies go global, their governments want to make sure that it is their MNCs that dominate the world.

While free market and competition is good, if one can give an extra tid-bit to the home-grown corporate, why not?

There has been nothing wrong with double standards, especially if they're tied in with national interests. And there is no need to be embarrassed about the widening gap between what we preach and what we practice.

Meanwhile, the Mitsubishi bid to take over Westinghouse, while getting a nod from the British government is also being challenged by the Areva Group, a French builder of nuclear plants.

Both Mitsubishi and Areva are competing for four nuclear plants in China. With India now a `responsible customer' for nuclear power plants, the phones in the South Block in New Delhi will be ringing off the hook with calls from the governments of Japan, France and, of course, the US trying to promote their own interests in this so-called era of laissez-faire globalisation. In the meantime, among the US companies in the nuclear field, GE had already scented victory when its CEO was invited to the high table where Dr Manmohan Singh and the US President, Mr George Bush, celebrated their progress on the nuclear front.

(The author is professor of international business and strategic management at Suffolk University, Boston, US. His Internet address is cgopinat@suffolk.edu)

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