Transnational Corporation Trends in Asia

by Noel Villalba
Documentation for Action Groups in Asia (DAGA)

 

The Casualties of TNCs and Challenges for the Asian People

After presenting data on the amount, direction, sources and receivers of foreign direct investment and about the operations and strategies of transnational corporations (TNCs) and their role in world trade, technology transfer and financial flows, we now come to assess their impact on people’s lives. On a macro level, what are the implications of the trends?

A. The Marginalization of the Third World In Investments and Trade

The world is becoming polarized into the "Technological Convergence Club" of about 500 global TNCs and governments facilitating their interests vs. the majority of impoverished Third World peoples. In broad strokes, we can paint a world picture that, on one hand, portrays a minority of industrial countries in the North suffocating in their over-consumption and gloating over the success of the free market system and, on the other hand, a majority of countries who are drowning in a flood of Third World problems - pollution, deforestation, poverty and authoritarianism. This reality is even truer today than during the rhetorical days of the Cold War.

Many parts of the picture are blurred, however. While capital concentrates in an unprecedented way in the North, there is also a growing South within the North. In the United States, 2,200 workers are laid off every day;1 and at the rate companies are closing in England, three million employees or 10% of the labor force will be unemployed by 1992.2 In Eastern Europe, the integration of countries into the "free market" system has created massive unemployment and the loss of social welfare benefits for the majority of people. Brokerage and finance scandals in the United States (for example, Salomon Brothers) and Japan (Nomura Securities) and growing economic and social decay accompany victorious pronouncements about the free market.

In the South, however, there is a growing North. The Newly Industrializing Countries (NICs), seeming even to surpass the growth rate of the Organization for Economic Cooperation and Development (OECD) countries, have become net exporters of capital and join Northern TNCs in pillaging the labor and economic resources of the South. In some instances, the oppression of workers by TNCs from NIC countries is even more brutal than larger TNCs, as in the case of the MPG Factory and Tae Hwa, Ltd./Nike Shoes - south Korean TNCs - in Indonesia.

Blinded by the "successes" of the NICs, many governments, such as Thailand and Malaysia, in the South have caught the fever and aspire to join NJC status as they sing paeans to the market economy. They do not seem to realize the enormous social, political and environmental costs of NIC status. Predictably, they have tended to rely on force to quell any form of dissent.

Today the world is integrating at an unprecedented rate that makes polarization more pronounced everywhere. There is a lot of illusion and illusion-making accompanying this integration. We find that the new technological information revolution reveals as many myths as it does wonders, such as the belief that people’s living standards and freedoms in NICs have improved or that economic growth has democratized wealth.

The decrease of capital flows to the South that are occurring can mean higher balance-of-trade and balance-of-payment deficits and more vulnerability. Prostrate and exhausted, the developing countries are forced to accept more and more onerous conditions for financial flows arranged by the World Bank (WB) and International Monetary Fund (IMIF). Today even the sectors that were considered too sensitive to be handled by the private sector in the past - like energy, communications, transport and social services - have been opened, not only to domestic private corporations, but to foreign TNCs; privatization is growing in both North and South.

The decrease of capital flows to the South is also accompanied by growing protectionism in the North. While the world economy is integrating, Third World countries are being excluded and deprived of their means to earn revenue through markets that are closed or whose access is restricted through Northern trade barriers. This can only mean the growth of even more destructive competition between the poorer countries (for example, outbidding each other for investments, the suppression of workers, etc.) and the strangulation of the poorest countries.

B. The Regionalization of Labor and Production

Growing trade protectionism and the struggle for "insider status" in the large regional markets (the European Community [ECJ and the North American Free Trade Area [NAFTA]) has forced the regionalization of production as illustrated by the regional core network strategies of a growing number of TNCs.

In the immediate term, this could mean lower earnings for some INC affiliates in Asia as the other Triad regions (Japan, the EC and the United States) integrate their production and become less dependent on imports from the Asian region. The redrawing of export and import partnerships could be potentially disruptive, especially for smaller firms in Asia, who rely on a supplier role to larger firms.

The growth of NICs heightens the contradictions among countries in the East and Southeast Asian regions. The transfer of labor- intensive segments of production to poorer countries pits Asian workers’ interests against each other. At the same time, the regionalization of TNC operations could facilitate more regional solidarity actions and could strengthen cross-border worker-to- worker relationships.

C. The "Super States" Grow In Power: WB-IMF, TNCs, OECD and GATT

The OECD and the General Agreement on Tariffs and Trade (GATT), the two most important fora for crafting and implementing multilateral policies relating to foreign direct investment, are attempting to mediate the conflicts among competing TNCs, but they cannot grow away from the bias of their framework. The OECD recently took measures to harmonize the treatment of TNCs and to strengthen the OECD Codes of Liberalization and Guidelines on Multinational Enterprises, which are simply measures designed to more systematically exploit the Third World.

These rules profoundly affect national and local policies and impinge on the sovereignty and the traditional rights of countries. By having the power to dictate investment policies on the national level, by integrating regional production and by imposing various conditions on national monetary policies, TNCs and their instruments (WB-IMF, GATT) have become "Super States." These "Super States," operating regionally and internationally, are beyond the control of individual countries. It will require, therefore, new regional policy frameworks by governments to address problems caused by the regional operations of TNCs. For example, without a regional wage framework, workers demanding higher wages in one country will have no defense against the movement of factories to cheap labor countries elsewhere. Workers will thus be competing for jobs among themselves.

GATT, a body that sets a framework to govern international transactions in services and establishes rules governing the application of trade-related investment measures (TRIMs) by member states, continues to find itself in a deadlock in the Uruguay phase of negotiations in which there seems to be no prospect of resolving agricultural and services issues.

The World Bank and IMJF have contributed to the present global context by becoming more strident in their calls for privatization, deregulation and debt-equity swaps, which enable TNCs to impose their will in the Third World.

D. Policy Implications on the National Level

The impact of TNCs and their role in investment, technology and trade are forcing more and more countries to integrate and to join global competition. Most countries, however, do not have the ability to participate in this race. They are too poor to buy technology, and they have enormous foreign debts and balance-of- payment deficits. Most of the primary commodities they produce are also no longer marketable, partly because of technological developments which have produced substitutes for their products. In addition, most Third World countries have overmined their minerals, overfished their seas, overlogged their forests and overfertilized their farms, so much so, that the question is not how to be competitive, but how to survive.

The notion of economic independence is fast becoming a myth. The world currencies are increasingly being interlinked; and although the position of the U.S. dollar has declined, the yen, deutschemark and Euro currencies are gaining strength.

On the national level, Third World governments are being forced to lift restrictions on currency exchange, on the movement of capital, on the repatriation of INC profits, etc., which have enabled TNCs to penetrate deeper into national economies.

The liberalization of investment laws also has been pushed more aggressively by TNCs and with great success. The liberalization of investment laws is as rampant in the erstwhile socialist bloc countries, which now allow 100% foreign equity in a number of industries. Other large countries, like India, China and Indonesia, have seen the erosion of national (and sometimes public) industries through privatization and the entry of foreign capital.

The competition for technology, for which TNCs are primarily responsible, has also contributed to the general liberalization of economies that leads toward their integration into the world economy.

While all of these liberalization policies in finance and technology are occurring, there is not an equal amount of liberalization being initiated in the labor sector. Most Asian countries, even the so-called NICs, still exercise a tight rein on labor unions. For instance, in countries such as Malaysia and Indonesia, only government-sponsored trade unions are allowed.

E. Model of Development

The model of development that investments and TNCs pursue, a model based on growth measured in terms of cash flows, profits, technological development and quantity of goods, is benefiting only a few people in both the North and South.

The vast majority of the world’s people, however, are left in poverty and powerlessness. The Earth’s limited resources are ravaged in this process as well; and because of rampant destruction of this limited resource, there is growing uncertainty that human life can be sustained in the next century.

I would like to quote from the declaration of the People’s Forum in Bangkok, Thailand, that was held just a few days ago and its condemnation of this model of development.

"The model of development of the World Bank, International Monetary Fund, the General Agreement on Tariffs and Trade [and I would add, the OECD, the G-7, TNCs and U.S. President George Bush’s ‘New World Order’] has failed. And failed miserably.

"The increasing emphasis of this model on export-led growth, foreign investment and loans, trade liberalization and privatization has destroyed or significantly degraded the diversity and integrity of local economies, social organizations and knowledge systems which have sustained the majority of people in developing countries [for centuries].

"This so-called development transfers resources from the control and use of these people to feed the continuous growth of industrial countries through the activities of TNCs. These TNCs have emerged as the motive force behind national and international policies, and yet they are not accountable to the public. This new "Super State" denies people access to their resources and control over the fate of their communities..."

TNCs are, therefore, more able today to control Third World resources - natural and human - than ever before, and they are doing so with increasing temerity and with the use of the media for justification. The explosion of information technology has enabled large U.S., Japanese and British firms to dominate the international exchange of information. For example, Cable News Network (CNN) and CBS in the United States, NHK in Japan and the BBC in the United Kingdom have all established plans to expand their broadcasting reach. CNN’s coverage of the Gulf War shows how events can be reinterpreted from an American point of view, thereby, displaying the power of global media organizations to influence world opinion on large and small issues.

F. Implications on Worker’s and People’s Movements

i. GREATER POVERTY: Except in a few countries, economic growth has not resulted in the eradication of poverty. On the contrary, the United Nations admits that "poverty is growing more widespread and severe as the developing nations struggle with mounting domestic problems."3 Economic growth has been impressive, a U.N. report states, and more food is currently produced worldwide than ever before, and yet more people remain hungry than at any other time in history. In other words, even as foreign investments and technology are able to increase production in many countries, this does not mean that poverty has been solved. WB-IMF structural adjustment policies may be able to solve monetary imbalances in poor countries, but it also means that the poor receive less in real wages and in social services.

ii. PRODUCERS’ RIGHTS: In most of the recent developments in the international economic order, it seems that one sector has been totally left out - the producers! Not only do they not have a voice in any discussion about investment, technology and trade developments, but workers are more and more divided among themselves within national contexts. There is growing ideological confusion and lack of a common perspective about TNCs. There are scant resources for developing workers’ exchanges and an inadequate concern for workers. Information is severely wanting. Without these, producers’ rights can only be defended inadequately.

iii. ALTERNATIVE VISION AND STRATEGIES: It is clear from the perspective of TNCs who advise that "it is the primary responsibility of the least developed countries to make their investment climate congenial to transnational corporations"4 that poor countries, especially workers in those countries, cannot expect any concessions. The failures of the East European economic models and the propaganda favoring foreign investment and the free market have cast a shadow over the notion that workers can one day manage their societies equitably and democratically.

It is important that the myths of the free market are exploded and that the workers attain a clear political and economic perspective that will enable them to learn from past mistakes, to protect themselves in a more collective way (within and across national borders) and to eventually eliminate the oppression inherent in a class-based society. The question now is how do the workers get together, given all of the developments in technology, investment and trade, to build bridges of solidarity between each other?

Notes

  1. South China Morning Post, Hong Kong, Sept. 26, 1991.

  2. South China Morning Post, Hong Kong, Aug. 30, 1991.

  3. The World Economy: A Global Challenge, United Nations, 1990, p. 58.

  4. World Investment Report 1991: The Triad in Foreign Direct Investment, United Nations Center on Transnational Corporations (UNCTC), New York, 1991, p. 90.


(This  article is an edited version of the paper that was presented at the Trade Union Study Meeting on TNCs, October and November 1991, Ho Chi Minh City, Vietnam, and Bangkok, Thailand.)