The information of the negotiators at Regional Comprehensive Economic Partnership agreement accepting the suggestions of other countries regarding rules on investments; is disturbing for us in the Swadeshi Jagran Manch. The details coming in public domain suggest that these provisions are not only detrimental to the interests of the economy, but are also contrary to the stated position of National Democratic Alliance regime.
These provisions are meek surrender of the sovereign rights of any country to seek the transfer of technology from the investing companies, training to their domestic partners, and removing the cap on the quantum of royalties which domestic companies can pay to their foreign partners. The conglomerates from South Korea, Japan and even China will gain, and India is bound to lose in this. This is ante to the spirit of NDA regime’s ambitious Make in India plan, and for integration of domestic industry with the global supply chains.
We can’t afford foreign investments in our economy, without any real benefit for the domestic players. If MNCs are not helping their partners to improve their know how and want to repatriate a large part of their revenue to their global coffers; the FDI will become more detrimental for the society.
The issues were flagged by the commerce ministry (during first regime of PM Shri Narendra Modi). Swadeshi Jagran Manch has learnt that last year, the commerce and industries ministry prepared a cabinet note, seeking provisions to curb the outflow of the transfer of royalty and other technical fees by multinational conglomerates. The 2009 annual outflow of nearly $5 billion swelled to $20 billion in the last fiscal.
Capping the outflow is actually needed. The provisions, negotiators agreed —if they did— will accelerate the outflow of foreign exchange and would also exert pressure on the balance sheets of the Indian entities of these MNCs as well; along with robbing the shareholders of their fair share of the dividends. Obviously, this will widen the current account deficit and create more pressure on the forex exchange rates. And the history tells us, this will never accelerate the investments in the country.
If the information coming in the public has some truth, this will be a meek surrender to country’s legal provisions of pushing the investing companies to adhere to these requirements. The experience with the other bilateral investment agreements is; the foreign investors pushed Indian government to litigation in the name of non fulfillment of the conditions of these investment agreements and sought hefty compensation. As the investment grew, so did the litigation.
To curb this, the first regime of PM Narendra Modi either invoked sunset clause in nearly 90 existing investment agreements or renegotiated them. The provisions of safeguarding domestic interest were invoked. There is a need to not only do national debate before agreeing to such provisions; but the present establishment must take stakeholders in confidence about the safeguard mechanism. The present structure and provisions are very difficult to accept; would do more damage then resolving any existing challenge.
The forthcoming blogs will also examine the other hazardous provisions agreed or negotiated at RCEP rounds. The next in line will be; on the fallacy of the argument on safeguards, including Auto Trigger Safeguard Mechanism.