Transnational Corporations and Developing Countries: Some Issues in Industrial Policy

A variety of efforts are underway at the international level to strengthen the capability of developing countries in dealing with transnational corporations which are a global source of technology, capital, and management. It is argued in this paper that while international proposals such as the adoption of a code of conduct for TNCs are desirable, the crucial determinant of the effectiveness of host governments in dealing with TNCs will be their ability to formulate and implement deliberate and carefully worked out strategies in relation to TNCs, both at the policy and negotiating levels. The formulation of policies should be based on a careful orchestration of the national objectives relating to production, technology, and control, and take into account the indigenous strengths and resources of the country and the likely strategies TNCs might employ. Our analysis shows that policies towards TNCs which are based on uniform treatment for all or on conventional criteria such as import substitution and export promotion are inadequate and that there is a need to more consciously take into account the end uses of goods and the types of technology being imported.