This argument has not gone down well with the Foreign Investment Promotion Board, which requires a no-objection certificate from the existing joint venture's board. FIPB is right. Clearly, local investors in MNC joint ventures or subsidiaries will lose if the parents' best products are routed via a 100-per cent subsidiary. With time, the 100 per cent subsidiary will become the preferred vehicle for the introduction of all new products, making the existing company merely a low value-added entity. So local investors are perfectly justified in calling for a say in these decisions.

The MNCs' arguments have a lot of holes in them. Why, for instance, should not local investors decide whether they want to participate in the costs of brand-building, or in thecosts of research? If MNCs feel that they have a greater duty towards their overseas investors, even that can be taken care of by charging a royalty for products. In any case, many MNCs have courted controversy by hiking royalties for their products.

The trouble with the no-objection certificate approach is that subsidiaries already controlled by MNCs will have no problems getting the NOCs. In lieu of the NOC, therefore, the norms should call for a special resolution or only a vote by minority shareholders. Otherwise other measures such as a differential tax could be imposed on the 100 per cent subsidiaries, which could act as a disincentive. At the very least the existing listed companies should be taken private ie, delisted.