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India: FDI great, labor
greater
By Ranjit Devraj
NEW DELHI - Japanese investors in India
learned a few hard lessons about India's tough
labor laws when the automobile giant Honda Motors
tamely resumed production at its plant outside the
national capital this week, ending three months of
labor disputes, including pitched battles between
police and agitated workers.
"There are
labor laws in this country and all [hassles] could
have been avoided if the management [at Honda] had
taken care to study them carefully before setting
out on a confrontationist path," said D Raja,
national secretary of the Communist Party of India
(CPI). The showdown on July 25 in Gurgaon, a
glittering glass-and-chrome township that falls in
neighboring Haryana state but borders national
capital Delhi, also demonstrated the power of
India's TV channels, which broadcast the stiff
resistance put up by Honda workers as police tried
to beat them into submission for protesting
against the sacking of 57 employees and a
month-old lockout.
More than 200 workers
were hospitalized after the clashes, many of them
with broken heads and fractured limbs. Thereafter,
what was in essence a "small micro-management
problem" snowballed into a first-class
international row involving the Japanese
ambassador to India, Prime Minister Manmohan Singh
and even Sonia Gandhi, leader of the ruling
Congress party and the country's most powerful
politician.
In the process, it was brought
home to foreign investors in India's booming
economy that the country was not about to abandon
half a century of economic independence - some
would say stagnation - in the name of the
much-coveted foreign direct investment (FDI). When
Japanese Ambassador Yasukuni Enoki remarked that
the clashes would affect FDI flows into this
country, it brought on howls of protest from both
communists as well as supporters of the right-wing
Bharatiya Janata Party (BJP), which leads the
opposition in parliament.
Columnists from
across the political spectrum were soon falling
over each other to set the record straight for
Enoki. "Mumbling dark threats about FDI being
throttled is nonsense. FDI is not charity nor a
grant in aid," wrote syndicated columnist TVR
Shenoy, pointing out that India itself presented a
huge and growing market for goods and services
that foreign companies could not ignore. To be
fair to Enoki, while he did say that the incident
would be a "disadvantage for India's image as an
FDI destination", he also conceded that it had
placed a "negative image on Japanese management".
But Enoki himself seemed to betray a lack of
understanding of India's vibrant democratic
culture when he said that the dispute was getting
politicized. "Such ... interference should not be
made by political parties," he said, showing
surprise at a development that is commonplace in
India.
Reacting to Enoki's statements, a
spokesman for India's External Affairs Ministry
said somewhat stiffly: "The country's democratic
institutions and its legal system provide an
effective mechanism to deal with such incidents in
a transparent manner." Said Nilotpal Basu, a
member of parliament and leader of the Communist
Party of India - Marxist (CPI-M): "The fact is
that India's labor laws reflect international
covenants like those of the International Labor
Organization (ILO) and are accepted by most
countries. If the MNCs follow the labor laws in
their own countries, they should do it in India
too."
Yet, Congress party leaders -
certainly not the state-level leaders of Haryana
state, starting with Chief Minister Bhupinder
Singh Hooda - were taking Enoki's statements
lightly, knowing full well that more than half of
the 150 Japanese operating in the country are
located in Gurgaon. Retorted Kiyomichi Ito, chief
of the joint venture Toyota-Kirloskar Auto Parts,
"Indians should understand that the capital
investor has varied choices and China still
remains an attractive destination." But another
locally well-known Japanese businessman, Naohiko
Munakata, chairman of Mitsubishi Corporation, was
more pragmatic and said the incident provided a
"good lesson for Japanese management" and that
there is a real need to understand cultural
differences. "We have to be more careful about
local culture and sentiments and Mitsubishi is
determined to understand [the] work culture in
India better and also conduct more business here."
Currently, India is seeing a boom in FDI
unseen since the country became independent from
British rule in 1947. Last year, consultancy AT
Kearney placed India as third most attractive
country in its "FDI Confidence Index". This year
FDI worth close to US$7 billion has already been
channeled into India, with a third of this coming
from Japanese companies led by Mitsubishi, which
has just invested $500 million in communist-ruled
West Bengal state.
At the end of the
dispute in Gurgaon, the Honda subsidiary, which
employs 2,000 workers and churns out 2,000
motorcycles and scooters a day, had to eat humble
pie and reinstate all the 57 workers it had fired,
just as the trade union bosses had said all along.
In a statement, Honda said its management had
"agreed to resolve the current situation with
certain one-time measures that would help in
normalizing overall situation and promote goodwill
and harmony" not just for the company but also
"for the entire region as well". Honda also agreed
to increase salaries "subject to whole-hearted
cooperation, proper conduct and the meeting of
production targets".
Many believe the
incident could be a precursor to further
industrial disputes in Gurgaon and other
industrial centers across the country involving
foreign investors, whose activities were
restricted until India set on a path of
liberalization in 1991 following a balance of
payments crisis. "The reinstatement is only a
partial victory; we are now fighting to get our
comrades who were arrested released from jail,"
said Gurudas Dasgupta, the well known CPI trade
union leader and parliamentarian, who led the
strike.
Dasgupta said the CPI and other
communist parties were now gearing up for a
massive national strike to highlight "the
exploitation of workers by multinational
corporations in the name of liberalization and
globalization" on September 29. Communist parties
provide critical outside support for the minority
Congress-led United Progressive Alliance (UPA)
coalition that runs the national government. They
have warned that they will not countenance any
attempt to change or dilute existing labor laws
that the World Bank calls "restrictive".
A
World Bank study entitled "Doing Business"
released earlier this year rated India as among
the countries with the most rigid labor laws with
a score of 48, while China had only 30 and
Singapore 0. Said CPI's Raja: "Please do not
forget that this country offers no social security
or unemployment insurance to workers, and until
that happens we will not allow the kind of hire
and fire policies that the multinationals are
demanding in the name of labor reforms."
(Inter Press
Service) |
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