Reference no: EM131890967

Ringon Simpat JV is a joint venture headquartered in Kuala Lumpur between Ringon Pharma and Simpat Research, both US based companies. Each of the two companies own 50% shares in the company. Both the companies are global pharmaceutical companies selling drugs all over the world including Malaysia. Malaya pharma is a startup pharmaceutical company in Kuala Lampur. Given their small size Malaya does not have access to labs and testing facilities. The management of Ringon Simpat JV, all of whom are Malaysians, agree to provide research facilities for Malaya to develop and test new drugs. They also promise to provide any necessary technical know-how to Malaya, as and when needed, so that they can help their country develop and manufacture drugs locally at a lower cost. Assuming that Malaya is actually paying fair rent to JV for use of research facilities do you find any problem in this arrangement? Answer using appropriate financial terminology.