MNCs of developing world, do they follow the same road?

Do they change their way?
WHEN Ford Motor Company bought Jaguar in 1989 and Land Rover 11 years later, it marked a low point for Britain's ailing industrial heritage. Last year Ford concluded that it could not make money from the illustrious British marques—equally a sign of its waning fortunes. The two firms shortlisted to take the prize come from India. Their ambition and confidence is a sign of something new in global business: the arrival in force of emerging-market multinationals.

Tata Motors, the carmaking bit of Tata Group, India's biggest industrial conglomerate, has edged ahead of Mahindra & Mahindra, a sprawling group that makes tractors and off-road vehicles, to become the preferred bidder. Ford told Jaguar workers this month that it was “in substantive discussions” with Tata. The future of these two grand old badges will be shaped not in Coventry, cradle of the British motor industry, but in Pune, home of Tata Motors.

Another indication of this newcomer's growing strength was the unveiling this week of the revolutionary, cheap “one lakh” car, which will sell in India and South-East Asia for the equivalent of $2,500. Thus the Indian company, which launched its first saloon car barely ten years ago, is beating the industry's established giants in a new market segment in which sales will surely grow fast.

Tata is certainly not the only company from an emerging economy striding onto the global stage. A study by Boston Consulting Group (BCG) found 100 companies from emerging markets with total assets in 2006 of $520 billion, more than the world's top 20 car companies. By 2004 the UN Conference on Trade and Development (UNCTAD) even noted that five companies from emerging Asia had made it into the list of the world's 100 biggest multinationals measured by overseas assets; ten more emerging-economy firms made it into the top 200.

By 2006 foreign direct investment (including mergers and acquisitions) from developing economies had reached $174 billion, 14% of the world's total, giving such countries a 13% share (worth $1.6 trillion) of the stock of global FDI. In 1990 emerging economies accounted for just 5% of the flow (see chart 1) and 8% of the stock. Their slice of global cross-border M&A has been climbing. It reached 14% in value terms in 2006 (chart 2). That year they spent $123 billion in more than 1,000 cross-border deals.

Since UNCTAD's first analysis in the early 1970s there has been concern about the power wielded by companies from rich countries in poorer ones. Developed countries have had their bouts of anxiety too. In the 1960s the French fretted about le défi américain, as IBM, Ford, General Motors, Dow Chemical and ITT spread their tentacles across Europe; in the 1980s it was America's turn to squirm as Japanese firms bought up Hollywood and Manhattan.

The latest trend reflects a new, fundamental shift. In a more open world, emerging economies are spawning their own giants. UNCTAD is turning its attention to the new shape of global business: investment now flows increasingly from south to north and south to south, as emerging economies invest both in the rich world and in less developed countries.
Meet the new boys(The Economist)

BABU GENU: a Swadeshi martyr

BABU GENU: A TRIBUTE TO A MARTYR

He was a congress party worker in the pre-independence era. Yet not many congressmen today may know him. Very few even within that party (or for that matter in any other political party in India) today may realise the profound significance of the message contained in his life. Fewer still would be in a position to recall the same. Even old timers within the Congress would be unaware that he was a four-anna member of the party – his registration number being 81941. None from his family benefited by his “joining” politics or the congress party, nor did he did not leave behind a “rich” legacy.

Though he was sad on hearing the news of the death of his mother, he confessed that he was in a way relieved at her death as it gave him the necessary leeway in life to fully devote himself for the cause of the nation. Being a fully dedicated volunteer to the cause of India’s independence; he did not have enough time and leisure to attend his brother’s wedding. Contrast this to the vulgar display of wealth in the marriages of those who are in power in modern times in India!

He was Babu Genu. On this day seventy-seven years ago (12^th December 1930) Babu Genu was killed in the most gruesome manner while attempting to stop a speeding truck in Mumbai from carrying imported materials from Britain. Babu Genu lay on the ground before the speeding truck in the New Hanuman Road at Kalba Devi at around 11 AM on that fateful day in an attempt to prevent foreign goods from entering the Indian soil.

Even as the police were physically preventing him and his colleagues from participating in this non-violent protest, Babu Genu never gave up his resolve to stop the trucks. The truck driver - Balbir Singh – an Indian would come close to the protestors and stop for he would not and could not drive over fellow Indians. Seeing this, the police once again intervened and physically removed the protestors from the road to enable the truck pass through.

Freeing himself from the policemen gathered there, Babu Genu once again lay on the road in another attempt to prevent the passing trucks. Seeing the procrastination of the Indian driver the British sergeant lost his temper and took on himself to drive the truck at full speed over Banu Genu crushing his head and leaving behind a pool of blood and mass of flesh. Babu Genu was seriously injured and within hours passed away. He was in his early twenties when he died. Yet his life is a message to every Indian.

A brief life history

Babu Genu was born in 1908 in a poor family in Pune district of Maharasthra – a family that was steeped in abject poverty. The only prized possession of the family was a bullock that was used for farming. His father was a farmer and the other members of his family were his mother, two elder brothers and a sister. His father passed away in 1910 when he was a mere two year old child.

And when the bullock died too – a terrible tragedy for the family given their economic background - his mother unable to continue living in her village migrated to Mumbai to earn her livelihood as a domestic help. She left her sons back in the village in the care of some neighbours

All this meant that Babu was deprived of formal education in his formative years. Yet that did not mean that he was neither ignorant nor unaware of the issues confronting the country. After a spending a few years in the native village Babu Genu joined his mother in Mumbai. As his mother could not support his stay in Mumbai Babu Genu was compelled to seek employment as a casual labourer in the mills of Mumbai.

On many days he would not get employed. This did not deter him and he did not feel left down. Quite the contrary that gave him enough time and space to interact with the leading lights of independence movement in Mumbai and in the process understand it in different perspective.

Babu Genu was highly influenced by the sacrifices of Lala Lajpath Rai and the trio of Bhagath Singh, Rajguru and Sukh Dev. Yet he was wedded to the cause of non-violence and satyagraha as enunciated by Mahatma Gandhi.

The message of his life

As briefly mentioned above Babu Genu was not formally educated. Yet he understood the symbiotic link between geo-politics and geo-economics. He understood that the geo-strategic interests of the British Rule in India. He knew that economics was the driving force of British rule; establishment of the British Raj was merely a ruse to perpetuate the economic dominance of the British over India.

It is in this context Babu Genu understood the socio-economic-politic arguments propounded by Gandhiji and its significance. That meant that should the British rule were to be economically unsustainable it would collapse as there would be hardly any incentive for the British to continue their rule in India.

He knew economic independence of India was interlinked, intertwined and integrated to the political independence – a fact that escapes the attention of our political and the debating class today. He was fully aware that the no price could be less by any yardstick for the economic independence of the country. For there lay the key to political independence of the nation. No wonder he did not hesitate to make the supreme sacrifice of his life for the cause he so dearly believed.

Decades later as the nation is in search of the economic model that is suited for its development (and crucially what that development means) one may be tempted to dismiss Babu Genu’s economic thoughts as primordial, xenophobic or simply anachronistic. Yet one cannot and should not dismiss the message contained in the life of these great men, who literally and physically in broad daylight, gave their life for upholding their beliefs.

Why? Firstly, that is so because the fact of the matter is that we the present generation live in independent India only because of the noble thoughts, selfless actions and supreme sacrifices of these great men. That is the least a nation may do to express its gratitude to such great men.

Secondly, and the far more important reason is that the context of the life and history of Babu Genu may seemingly differ significantly from what it is prevalent in India today.

Yet, the text does not. Global powers clearly have a well-designed agenda – read global order - in imposing their will, thoughts, ideas and beliefs on others. If it was political domination through religion in the first millennia after Christ, it was done through the army in the second millennia. What is feared is that it could possibly be through economic intervention in the third.

Unfortunately, this brief history of mankind and a grim reminder of how the world looks at others and the manner in which it seeks to engage others – as one of that has to subjugate and ones that need to be subjugated. Surely, it is not how we look at the world or presume as to how the others look at the world – as one of near equals.

As the ideas and ideals of the likes of Babu Genu fade from our collective memory, one is tempted to only quote the oft-repeated cliché: if you forget history you are condemned to repeat it. Obviously, to assume that global economic interests are completely independent of geo-political intentions or devoid of conspiratorial motives in these modern times would be childish to say the least.

Yet this is what we seem to have done for the past several years. And the spectacular growth of our economy in the past few years seems to have made us oblivious to this risk. And that would mean necessarily understanding, redefining and recalibrating our concept of growth and development. Lop sided growth in recent years of our economy, rising disparity of income and crucially lack of genuine economic opportunities point out to a serious systemic imbalance, especially in the manner in which we have engaged the world – politically or otherwise.

And to correct the same we need to get our priorities right. It would be a fitting tribute to the life of Babu Genu if we could get our priorities right in our economic policies and begin afresh the debate on our development and growth and the terms by which we should engage the world, both in global politics and economics. And that in my opinion would be a fitting tribute to Babu Genu on his martyr’s day.

M.R.Venkatesh

The author is a Chennai based Chartered Accountant. He can be contacted at mrv1000@rediffmail.com