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The Technology Leasing Game

Summary

It is the state that has to make a massive intervention in the bargaining process or assume increasing ownership of the enterprises

Made In SriLanka
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The whites long ago decided to deny our countries the freedom to establish our own capital equipment (large-scale heavy industry) and intermediate equipment industry, to prevent technology transfer. Not only preventing but destroying nascent efforts. And massive investments are made in financing the import of such technology (see ee Finance).

We were then invaded by foreign labor-intensive manufacturing capital (garments and low-level electronic assembly, etc), with technology leasing arising out of the fear of nationalization. Charging high royalties, they imposed severe restrictions on uses of technology, which are designed to prolong the importation of technology. They thus hindered the assimilation, adaptation and diffusion of technology, and inhibited local technological efforts, by using international patent rights (IPR) and heavy bribes to the local import-crazy comprador bourgeoisie.

No organic links are engendered between the imported technology, indigenous resource development and the basic needs of the society. The imported technology also undermines balance of payments, price levels, growth and the distribution of income, and employment

There is a severe loss of foreign exchange due to payment of royalties, commissions and fees for the technology used. The leasing process is highly import intensive, with inputs of replacement parts, etc., restricted to foreign sources insisting on quality controls. Balance of payments deficits are worsened by multinationals’ penchant for over-invoicing. Exports are also adversely affected by volume restrictions, price stipulations, and inflated costs caused by high royalties and fees and over-invoiced inputs. Suppliers also reserve the right to fix the sale or resale price of the goods manufactured.

Further, MNCs prevent stimulating local manufacture of substitutes and appropriate linkage activities. Manufacturing ‘production’ is merely the assembling of imported inputs, and for tariff-hopping multinationals, this is also a way of ‘marketing by other means’.

The commodities being manufactured with imported technology usually displace local artisan activity. Newly imported tastes stifle potential indigenous activity and misdirect local financial and other resources. Technology is not effectively transferred, and can be withdrawn at any time, and is also not diffused throughout the economy. Any growth is never sustainable nor conducive to real development, which requires the systematic application of science and technology to local resources.

The leasing process also fails to distribute high income between classes, between persons, and between regions. Luxury consumer goods also encourage elitism. Any capital intensive foreign technology allows few people to be employed, and no redistribution of income takes place.

The high level of unemployment means that a mass market is not allowed to develop and the few employed, at relatively high wages, demand the usual luxury consumer goods, creating high incomes for their employers.

Local private sector users of imported technology do not conduct serious R&D effort when suppliers provide high technology with proven marketability. Users cannot substitute plentiful labour for scarce capital (and local components for foreign inputs) because usually there is only one technique for producing the commodity. In more brand-specific products, the technology is more process specific. There is also frequently no alternative (in terms of conditions of acquisition) international capitalist source. There is considerable similarity in the terms and conditions offered by suppliers, and very little variation between the USA, Europe and Japan.

Technological self-reliance requires ‘disaggregating’ complex technology used in projects, and making machinery here. It is the state that has to make a massive intervention in the bargaining process or assume increasing ownership of the enterprises. 

The technology has to be made more socially relevant and the system of leasing must be prevented from unequally distributing income, distorting tastes, inflating prices, aggravating foreign exchange crises and worsening unemployment. An effective national system of selecting, registering and monitoring technology agreements has to be introduced. Countries have to pool resources and markets for more effective bargaining and technological utilization. There is also a need for a legally binding international code of conduct to control relations between technology suppliers and technology recipients, that using ‘content laws’ eventually enables the transfer of the technological know-how and production process to Sri Lanka.

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