Finnish companies accused of benefiting from unfair subsidies in India

Swedish investigator says environmental rules flouted, strikes banned

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Nokia and many other Finnish companies operating in India have been given considerable incentives for their operations, including significant tax breaks; in some cases, taxes have been waived completely.
      Workers at Finnish-owned plants have been deprived of the right to strike. The companies have also been offered valuable real estate and scarce electricity at discount prices, while environmental regulations are largely ignored.
     
These are some examples included in a report by Swedish researcher Patrik Oskarsson, which was published on Wednesday. It was produced by Finnwatch and the Service Centre for Development Cooperation (KEPA).
      Oskarsson sees such incentives to foreign investors as unethical, and urges Finnish companies taking advantage of the benefits to "take a look in the mirror".
      The perks are offered in special economic zones, which have been set up in different parts of India. The zones operate under different rules from those that are in force in other parts of the country.
      For instance, a new economic zone was set up in the southern state of Tamil Nadu in July for a Nokia factory which is to open next year.
     
According to the Finnwatch report, the Indian workers at the factory will not have the right to strike under any circumstances. The assembly of mobile telephones is seen as a key operation comparable to health care, where no stoppages are tolerated.
      Workers in Tamil Nadu have less decision-making power on overtime work than in other parts of India. Nokia also has the right to terminate employees without notice, Oskarsson says.
      The report also reveals that Nokia has been given a ten-year income tax exemption.
      In return, Nokia’s factory is to provide jobs for 2,000 people. Oskarsson concedes that the wages and benefits offered by Nokia are better than those for Indian companies.
     
Nokia’s decision to set up shop in Tamil Nadu was preceded by an intense competition, in which many different areas tried to attract the Finnish company with various business incentives.
      Nokia does not feel that the special considerations it enjoys in India are exceptional in any way. Similar free-trade zones exist in other parts of the world, such as Latin America.
      Nokia says that the lack of a right to strike in Tamil Nadu was not the deciding factor in the company’s decision to invest in the area.
      There is also a suggestion in the Finnwatch report that Nokia would have been granted more lenient environmental regulations than are generally in force in India. Nokia says that it is applying for an international environmental certificate for its plant, the standards of which are significantly more stringent than the local regulations.
     
Nokia’s subcontractor Elcoteq also operates in India under special regulations.
      The company, which runs a factory in leased premises in Bangalore, has been granted tax breaks for its first five years of operation. Elcoteq is also allowed to import equipment and raw materials without paying duty. The Elcoteq plant employs 1,000 people.
      Elevator manufacturer Kone also has factories in India. In 1987 the Finnish company bought an elevator factory in Chennai, and in 2004 it acquired another factory in Mumbai.
      Kone employs a total of about 1,300 people in India. The company says that its Indian subsidiaries do not operate in any special economic zones.


Links:
  Finnwatch

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