International -- Readers Report
IN PERU, TARIFFS SHORE UP THE MONOPOLIES (int'l edition)
Gary Becker asserted that companies in small nations are no longer bound by the small scale of their limited domestic market ("There's nothing natural about `natural' monopolies," Economic Viewpoint, Oct. 6). As an example, he cited the case of how Chilean power companies now operate in other Latin American countries.
If it's true that those countries are not interconnected, given the huge distances involved, the source of profits could not be the scale of their production. No doubt some administrative expenses are being reduced and spread over a larger market. But the significant factor is the regulation applied to determine the tariffs paid by consumers. In the case of Peru, those tariffs have been going up steadily.
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INDIA'S WOES WITH SUZUKI: AN ISOLATED CASE (int'l edition)
Amy Louise Kazmin's report on the tiff between Suzuki Motor Corp. and the Indian government gives the impression that India is deliberately stifling foreign investors ("India's self-destructive scrap with Suzuki," Asian Business, Oct. 13). Every dispute has two sides, and nowhere in the report does one find any mention of the reasons behind the government's stance. In fact, the report seems to justify all of Suzuki's actions and undermines all of the Indian government's actions.
Suzuki, it may be recalled, basked in the era of protectionism in India and has received perhaps the greatest benefits of any foreign investor. While sharing in the success of Maruti Udyog Ltd., Suzuki was practically handed the Indian car market on a platter. Until India liberalized its licensing regime in 1991, no one was licensed to manufacture cars with engine capacity of less than 1,000 cc--a rule that benefited only one company: Maruti (and, indirectly, Suzuki). Even Indian companies such as Premier Automobiles Ltd. and Hindustan Motors Ltd. could not obtain the necessary licenses and permissions to make such cars.
The benefits Suzuki derived will be clear when one compares its position with the Japanese light-commercial-vehicle manufacturers--Mazda, Toyota, Nissan, and Mitsubishi--which, in the early 1980s, made a hash of the opportunity provided to them.
I agree that the Indian government ought to have handled the matter with greater diplomacy and avoided the negative publicity that has been generated. But by no stretch of the imagination can this issue be considered a warning to other foreign investors. It should also be heartening to foreign investors that the matter has been referred to international arbitration in Paris--a legal protection foreign investors would not expect to find in some other countries.
The incident is nothing more than a dispute in an agreement between two partners, and it will be governed by the legal terms of the agreement. This need not attract any more attention just because the government happens to be one of the partners. As for mixing politics with business, the U.S. government itself has set poor standards in its approach to companies that have business dealings with Cuba and Iran.
Assistant General Manager
Bahrain Insurance Co.
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