MNCs Bane or boon: Multinational companies (MNCs) are believed to play a major role in the economies of developing countries.

Ideally MNCs have contributed substantially towards the growth of developing countries. MNC is most simply defined as a corporation or enterprise that conducts and controls productive activities in more than one country with the head office being established in a developed country. Big companies mostly from America, Europe and Japan but also increasingly from newly industrializing countries like South Korea, Taiwan and Brazil, create development opportunities. The issues created by these companies are serious ones that must be considered. It is believed among many economists that MNCs fill various gaps within a host country's economy. The first and most often cited one is that, when domestic investment and savings doesn't meet the required rate of growth in the economy, the gap in investment is filled by the MNCs' investment. Secondly when the targeted foreign exchange is not met by the net foreign exchange derived from imports and exports together with net public debt, the gap is constituted by MNCs' net exports and capital inflow. These giant companies also fill the gap between targeted government tax revenues and locally raised taxes. Lastly the gap of management skills, entrepreneurship and technological skills are believed to be filled by the MNCs. Despite what the majority believes, MNCs are not the panacea for development for developing countries. This has been proved for many years. - WHY? Even though it is said that MNCs provide capital and savings, they charge a higher interest on capital borrowed by the government in the host country. Apart from that, MNCs repatriate the profits to their home country apparently hindering the re-investment possibility of those profits in the host country. Further MNCs import the required intermediate goods without purchasing from domestic producers, thereby reducing the opportunity to grow for the domestic producers. In the long run the recipient country's current account balance may worsen because of the substantial importation of intermediate goods. Furthermore the capital account's balance may worsen because of repatriation of the profits to overseas companies. The expected contribution from the tax may be less than it should be as a result of liberal tax policies vested upon MNCs. The salary structure of MNCs increases the unequal income distribution in developing countries. The cultural problems arise in the industrial zones where the MNCs are being set up. Apart from that MNCs produce inappropriate products that are mostly targeted towards a niche market - affluent class. At the same time the technology that is being used to produce these products may not be compatible with the developing countries' systems. Those products are advertised in such a manner that the consumer is forced to purchase the product no matter what economic conditions they are facedwith. This will lead to an undesirable allocation of local resources creating undesirable consumption patterns. MNCs use their economic power over the host country's government when formulating fiscal policies. MNCs demand tax holidays, investment allowances, cheap provision of factory sites etc. As a result the MNCs private profits may be higher than the social benefits.

The "Transfer Pricing" phenomenon is used to avoid high rates of taxes in some host countries by transferring the inter company sales (inter company sales among subsidiaries) from high tax countries to low tax countries at artificially high prices. MNCs use their economic power, advertising effect, superior technological knowledge, worldwide contacts and competition to wipe out the host country's small-scale entrepreneurs from their business. During elections in host countries, MNCs fund a particular political party which is likely to come to power. After that party is elected, their policies are influenced by the MNCs. Taking into account all these negative contributions, those who argue against the activities of MNCs suggest that the governments of host countries must have stringent regulations over the activities of MNCs. It is also suggested that governments should bargain for better deals and demand that MNCs adhere to certain criteria set by the government. Examples of MNC

Wipro What started off as a hydrogenated cooking fat company, Wipro is today is a $5 billion revenue generating IT, BPO and R&D services organisation with presence in over 50 countries. Premji started Wipro with the 'idea of building an organisation which was deeply committed to values, in the firm belief that success in business would be its inevitable, eventual outcome'. The company has over 72,000 employees.

Wipro's revenues grew by 33 per cent to Rs 19,957 crore (Rs 200 billion) for the year ended March 31, 2008. The net profit grew by 12 per cent to Rs. 3,283 crore (Rs. 32.83 billion). The revenues of the combined IT businesses was $4.3 billion with 43 per cent YoY growth.

Wipro was the only Indian company to be ranked among the top 10 global outsourcing providers in IAOP's 2006 Global Outsourcing 100 listing. Wipro has also won the International Institute for Software Testing's Software Testing Best Practice Award.

3. Infosys Infosys Technologies Ltd was started in 1981 by seven people with $250. Today, the company boasts of revenues of over $ 4 billion and 94,379 employees. Under the leadership of N R Narayana Murthy, the company has become a global brand. The company is now headed by Kris Gopalakrishnan. The income for the quarter ended June 30 2008 was Rs 4,854 crore (Rs 48.54 billion). The net profit stood at Rs 1,302 crore (Rs 13.02 billion).

Forbes magazine named Infosys in its list of Global High Performers. Waters magazine rated Infosys as the Best Outsourcing Partner. The Banker magazine conferred two Banker Technology Awards on Infosys to acclaim its work in wholesale and capital markets in two categories - Payments and Treasury Services, and Offshoring and Outsourcing.

The International Association of Outsourcing Professionals (IAOP) ranked Infosys at No. 3 in its '2008 Global Outsourcing 100'.

4. Satyam Computer Services Established in 1987 by Ramalinga Raju, Satyam has a staff strength of 51,000 employees. In 2008, the company's revenues crossed the $ 2-billion mark. 'A simple, yet extensive management model to create value, which promotes entrepreneurship, a focus on the customer, and the constant pursuit of excellence,' is the company's mantra for success. In FY2008, its revenues saw a growth of 30.7 per cent to Rs 8,473.49 crore (Rs 84.73 billion) compared to fiscal 2007.

The net profit stood at Rs 1,687.89 crore (Rs 16.87 billion), a growth of 20.2 per cent over fiscal 2007. Satyam is among the youngest IT service companies to reach $1 billion in annual revenues. It is ranked No. 1 in the ASTD (American Society for Training and Development) BEST Award, 2007.

5. HCL Technologies HCL is a leading global technology player with annual revenues of $4.9 billion. The HCL Enterprise comprises two companies listed in India, HCL Technologies and HCL Infosystems. Founded in 1976, HCL is one of 'India's original IT garage start ups'. The HCL team comprises 53,000 professionals of diverse nationalities, operating across 18 countries. At a time when India had a total of 250 computers, Shiv Nadar led a young team which passionately believed in the growth of the IT industry.

Three decades later, he succeeded in creating a $ 4.9 billion global enterprise. The company has reported consolidated revenue of Rs 3017.5 crore (Rs 30.17 billion) during the quarter ended March 31, 2008. The profit after tax stood at Rs. 81.5 crore (Rs 815 million).

6. Tech Mahindra Tech Mahindra was incorporated as a joint venture between Mahindra & Mahindra and BT plc in 1986 under the name of 'Mahindra-British Telecom'.

Later, the name was changed to 'Tech Mahindra', in order to reflect the diversification and growth of the client base and service offerings. The company was incorporated in 1986. Tech Mahindra is a global systems integrator and business transformation consulting firm focused on the communications industry. At the helm of the fast expanding organisation is Vineet Nayyar.

In a career spanning over 40 years, he has worked with the government, international multilateral

agencies and the corporate sector. Tech Mahindra's net profit rose 8.57 per cent to Rs 196.4 crore (Rs 1.96 billion) on 6.09 per cent growth in net sale to Rs 911.6 crore (Rs 9.11 billion) in Q3 December 2007 over Q2 September 2007.

7. Patni Computer Systems Patni Computer Systems Ltd one of the leading global providers of information technology services and business solutions. The company has clients across the Americas, Europe and AsiaPacific locations.

The company has serviced more than 400 Fortune 1000 companies, for over two decades. Patni Computer Systems Limited was incorporated on 10 February 1978 under the Companies Act, 1956. On 18 September 2003, the Company converted itself from a private limited company into a public limited company.

The company headed founded by Narendra K Patni by has a staff strength of over 14,000 professionals. The revenues for the quarter ended March 2008 stood at $ 176.4 million (Rs. 7,061.2 million) up 13.1% YoY from $ 156.0 million (Rs. 6,724.1 million). The net income for the quarter at US$ 18.1 million (Rs. 724.6 million) down 35.0 per cent YoY from $ 27.8 million (Rs. 1,200.3 million).Frost & Sullivan ranked Patni 1st among 'Top 5 Engineering Service Providers'.

8. i-flex Solutions iflex started as a division of Citicorp (now Citigroup), wholly owned subsidiary called Citicorp Overseas Software Ltd. (COSL) in 1991. Later, a separate company Citicorp Information Technologies Industries Ltd. (CITIL) was formed and Rajesh Hukku was appointed as its head.

CITIL started off with the universal banking product, MicroBanker which became very successful. In the mid-90s, CITIL developed Flexcube at its Bangalore development centre. After the launch of Flexcube, all of CITIL's transactional banking products were brought under a common brand umbrella. CITIL changed its name to i-flex solutions to reflect its growing independence from Citicorp and to strengthen its Flexcube brand.

In 2006, i-flex became a majority-owned subsidiary of Oracle Corporation i-flex posted a top line growth of 8 per cent QoQ with revenue for the quarter ended March 31, 2008 at Rs 672 crore (Rs 6.72 billion) as compared to Rs 601 crore (Rs 6.01 billion) for the corresponding quarter during the previous year representing a 12 per cent YoY growth. The net income for quarter stood at Rs 185 crore (Rs 1.85 billion) representing 73 per cent growth QoQ. The revenue for the full year ended March 31, 2008 stood at Rs 2,380 crore (Rs 23.80 billion), up 15 per cent as compared to the previous year.

9. MphasiS MphasiS Limited was formed in June 2000 after the merger of the US-based IT consulting company MphasiS Corporation (founded in 199 and the Indian IT services company BFL Software Limited (founded in 1993).

Jeya Kumar is CEO of MphasiS, which has a staff strength of 27,000 people. For the year ended 31 March 2008, the MphasiS Group recorded revenues of Rs 2,423 crore (Rs 24.23 billion), a growth of Rs 662 crore, which is 38 per cent over the previous year. The net profit increased by 42 per cent from Rs 180 crore (Rs 1.8 billion) to Rs 255 crore (Rs 2.55 billion) during the year ended 31 March 2008. MphasiS was named among amongst the Top 100 Companies in Global Outsourcing.

10. L&T Infotech L&T Infotech is a global IT services and solutions provider. It is a subsidiary company of is Larsen & Toubro Ltd. (L&T), an engineering, manufacturing and construction conglomerate, with global operations.

A M Naik is the chairman of the company. Originally founded as L&T Information Technology Ltd (LTITL), a wholly-owned subsidiary of Larsen & Toubro Ltd (L&T), the company changed its name to L&T Infotech on 1st April, 1997. In 2004, it tied up with Fidelity Information Services, a division of Fidelity National Financial to provide banking solutions for the Indian banking industry. In 2007-08, L&T had recorded revenues of Rs 29,600 crore (Rs 296 billion).