Developing countries are often very vulnerable to exploitation by multinational corporations. They support industrialization but lack of infrastructure is a major limiting factor. Further, without suitable laws and regulations, developing nations are ill-prepared for such endeavours. In their efforts to attract business, these nations often overlook the health and safety violations by the corporations doing business within their borders. Drawn by low-cost labour, new markets, and lower operation costs, corporations have little incentive to address environmental and human risks once they are entrenched. In this situation, there is an imminent threat of disaster. Discuss some feasible strategies to balance economic development and safety and security of people at large in developing countries with special emphasis on India. (15 Marks)

Mentors Comments:

  • Discuss the character of MNCs first with specific examples showing their disregard for human welfare.
  • Then discuss various mechanisms at national and global level to address the deficiencies in policies and institutions.

Answer:

Developing countries are attracting a significant portion of global Foreign Direct Investments. Governments of such countries often compete fiercely for attracting Multinational Corporations (MNCs) in the expectation of the advantages they will bring to their economies, often prioritizing economic goals over fundamental human rights and environmental conservation. The fierce competition often leads to defective policies by these governments, which are the reason for disasters in many countries. The Bhopal Gas tragedy in 1984 was a consequence of defective policies of the government and exploitative character of the MNCs.

To prevent a “second Bhopal” from happening, developing countries need to rethink their strategy of economic development to balance the economic goals and its repercussions on the environment and human welfare. Strategies to control the exploitative character of MNCs can be classified under two broad categories namely at National and Global level.

National Measures:

National level measures require changes in the legislative, regulatory and administrative framework, which should ensure that not only adequate institutions are placed but have the necessary authority to balance the required of economic development and human welfare. Some of the measures required are:

  • Corporate Governance norms should be strengthened and strictly monitored. Adequate regulatory complex mechanisms should be put in place along with enforcing accountability for any lapses.
  • Regulatory institutions should be strengthened to address the concerns of people at large.
  • In India, we have mandated corporations to spend a specific amount of profit as a corporate social responsibility (CSR). Institutional changes are required in this area to ensure compliance.
  • Capacity building for environmental and social audit of the activities of the MNCs. Social Impact Assessment should be made mandatory of any major project. Further, adequate information about any project should be placed in the public domain and disseminated to the local population.
  • Through tax inducements and non-monetary incentives, MNCs can be forced to self-regulate their functions.
  • NGOs and community organizations can play an important role to ensure that MNC’s not only complied with the regulatory norms but also disseminate complete information to the local community about any danger.
  • Mock drills could be organized to ensure adequate response in case of any industrial disaster.
  • Government should ensure that any major project should undergo an Environmental and Social Impact Assessment and the report should be widely discussed with all stakeholders.

International:

On the global scene, the global industrial watchdog organization must be instituted, similar to an international environment protection act. The main objective for this organization would be to set standards for the operation and behaviour of multinational corporations. The Permanent People’s Tribunal has drafted a “Charter of Industrial Hazards and Human Rights.” The Charter draws together all of the lessons to be learned by the Bhopal disaster to emphasize the need to pay closer attention to industrial activity across the world. This charter should be put into action with the aforementioned regulatory body.

International best practices should be documented and widely disseminated. International bodies like WTO should draft adequate guidelines for the operationalization of MNC’s ensuring that the development dimension is adhered to in any major project balancing the interest of the MNC and the state.

The above measures though may help in creating a better world, but unless every citizen feels that he is a part of the global village and there is a global solidarity for creating a better world, there would always be questions pointing what is development and development for whom.

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Deepanshu Gulyani
7 months ago

MOJO9c30X00D35455509

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Deepanshu Gulyani
7 months ago
Reply to  Parth Verma


Hello sir,
I was bit irregular last month but this month i am trying my fullest to improve my answers but still answers are getting deteriorated. For some question i use to get 5-6 marks but on the other facet i am getting 2 also. How should i do that? please get me the way out of it

Deepanshu Gulyani
7 months ago

parth sir?

Deepanshu Gulyani
7 months ago
Reply to  Parth Verma

Sure sir, with your guidance this would be easier. Now i would work on your comments and everything would be improved shortly i guess.
Thank you

Vishal Agrawal
7 months ago

Payment Id- MOJO0101D00A20979010

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Abhi Shek
7 months ago
Chester
5 months ago