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India in Spotlight

                                                                                     GROW YOUR BUSINESS IN INDIA

 

GROW YOUR BUSINESS IN INDIA
What business leaders think about doing business in India
   


Carla Cico, CE0 Rivoli S.P. A. Italy

     India has steadily become one of the most appealing countries for foreign investments, even if it has to fight strong competition from some Asian countries, first of all China. The last five years have been quite good, but I think that depending on the attitude of the India government the investment could increase much more in the next five years. It is important to focus on the development of the infrastructure first.

One of the reasons why China has developed so fast is due to the fact that in the last 15 years a lot of investment has been poured into the upgrading of the infrastructure. India should follow this example. Good infrastructure is the key to fast development. Therefore, this should become the focus of the Indian government in the next five-10 years.

India is one of the largest countries in the world, with a good geographical position, with an understanding of both Asia and western culture. These are some of the factors that should push foreign companies to invest in India.

I think that India has not yet shown to the world its real potential and value: they should look to the Chinese to learn how to advertise themselves.

Ron Somers, President, U.S.-India Business Council, USA

The past five years for U.S. companies investing in India has been “game-changing”Under the Bush Administration a new sense of hope buffeting U.S.-India ties ushered in greater awareness by U.S. companies looking at India, and created within India a greater sense of trust in U.S. companies as ‘reliable suppliers’. The result: a doubling in two-way trade between the two countries to more than U.S.$40 billion. And a new advent has taken place: investments going both ways of about $11 billion each.

There is no question that India’s infrastructure shortages presents a major hurdle to attracting greater investment flows into India. But infrastructure development is happening – and to a mind-boggling -degree. The Hyderabad Airport is just one example. The Jamnagar refinery owned by Reliance is another. Hazira LNG built by Shell, the Noida Toll Bridge, the Delhi Metro, the Bangalore Airport – these are all examples of public/ private partnerships that have enabled infrastructure to come up in a relatively short time frame.

Carla Cico, Chief Executive Officer, Rivoli S.P.A., Italy - “the global
importance of the Indian economy increases.”
Ron Somers, President, U.S.-India Business Council, USA
                                                                                                             
>>One of the reasons why China has developed so fast is due to the fact that in the last 15 years a lot of investment has been poured into the upgrading of the infrastructure. India should follow this example. Good infrastructure is the key to fast development. Therefore, this should become the focus of the Indian government in the next five-10 years. I think that India has not yet shown to the world its real potential and value: they should look to the Chinese to learn how to advertise themselves.<<

 
Madhu Koneru, Executive Director, Trimex, UAE

        India has skilled, English-speaking labor at far cheaper rates than can be found anywhere else. Approximately 85 percent of its population is younger than 45, giving India vitality and forward momentum. To capitalize on this reality, particularly in high-tech and export zones, India must stay focused on increasing access to power and water. India’s strong legal system and low-cost, high-skill labor market offer investors further incentives.
India has seen heavy investment in sectors driven by consumer demand, which has primarily benefited large cities, as they already enjoy developed infrastructure. However, we need to look beyond India’s cities and target less-developed areas. To that end, industrial growth will require feasible infrastructure, power and water. The government has made building infrastructure a priority, meaning investment will flow into sectors like power and transportation, which are instrumental for developing growth.


Heinz Dollberg, Executive Vice President, Allianz, Germany
      
        China, in the past, has received significantly larger investments than India. While both China and India will continue to be preferred overseas investment destinations for multinationals, there is now a growing preference for India over China. An economic examination shows, that unlimited labour supply at low cost has been a major ingredient behind China’s economic success story in the past. However, perceptions are changing at the moment: social pressure is mounting in China to increase wages and to improve labour conditions in general. As a matter of fact, many Chinese companies have started to increase wages considerably, the same holds true for the state provinces. Without trying to quantify the impact of these measures, higher labour costs in China could make other countries with a similar export structure more competitive than China and lead to a shift in investors´ attention from China to other countries.

While both China and India are expected to maintain their high growth rates over the next decade, the sustainability of growth seems more certain in India. China now seems to have reached a stage where there has been substantial overinvestment in a number of sectors and huge excess capacity has been built up in the manufacturing sector. India, on the other hand, is still at the beginning of its investment cycle.

 

Tom Schick, Executive Vice President, American Express, USA

Tom Schick, Executive Vice President, American Express, USA - on
thenext big driver for India’s growth sto

Over the last five years, India has emerged to become one of the top recipients of foreign direct investment (FDI). Major initiatives like industrial decontrol, liberalization of trade policy, full commitment to safeguarding intellectual property rights, financial sector reforms, and liberalization of exchange regulations, have provided a liberal, attractive, and investor friendly investment climate.

These initiatives, combined with India’s robust domestic economic development, have helped make the country the world’s fourth largest economy in terms of Purchase Power Parity and the tenth most industrialized country in the world.

Moreover, as other countries emerge slowly from the shadow of the economic slowdown, India’s resilience over the last several years and its promise of continued high rates of growth will make it only more attractive in the near term. Ernst & Young’s European Attractiveness Survey ranks India as the world’s fourth most attractive FDI destination in 2010. And the World Investment Prospects Survey, by UNCTAD, places India in the top five best foreign direct investment destinations in 2010-11.

There may have been a time when China was perceived by foreign investors as a must-do, while India was looked upon as a nice-to-have, but that has changed; both are understood as musts by serious foreign investors.

The government of India realized more than a decade ago the crippling absence of a robust infrastructure backbone and has made rapid strides towards building one. According to industry leaders, India is likely to invest US$1.7 trillion in infrastructure projects in the next decade. Investments in the country’s infrastructure sector doubled from 4 to 8 percent of gross domestic product over the past five years, and the government now plans to take it to 9 percent by the year 2012. One huge, near-term impetus to serious focus on development will be the upcoming Commonwealth Games. The government has earmarked more than US$5.5 billion for expanding current infrastructure.            

Anusorn Muttaraid, Executive Director, Delta Electronics, Thailand

Delta Electronics (Thailand) was initially set up as a cost-effective production base for the Delta group of Taiwan, but in 1988 spun off as a separate entity. Its businesses are now mainly in power management solutions and manufacture of electronic components i.e.

cooling fans, electromagnetic interference filters (EMI) and solenoids. The company also operates plants in Germany and Slovakia. The company has more than 10,000 employees across the globe.

In an exclusive Asean Affairs interview, Executive Director Anusorn Muttaraid, describes Delta Electronics’ experience since entering India in 2005. The Thailand-based electronics manufacturer has invested US$100 million in India and has three operating plants with a fourth being built in Chennai.

Muttaraid said that that Delta’s revenue from India had risen from US$5 million during its first year (2005) of operation within the country to a current US$200 million.

The future Delta plan, relying heavily on the start of the Asean common market is to “buy parts from other Southeast Asian countries, assemble them in India and sell them in Europe,” he said.

“India is especially strong in producing metal parts, and Delta plans to use a lot of them”, he continued.

This assembly process mirrors a present Delta supply chain, described by Anusorn . Finished products are sold in Europe with parts made in Thailand by Delta that are assembled in Germany.

The Thailand-based electronics manufacturer

has invested US$100 million in India and has three
operating plants with a fourth being built in Chennai

Anusorn said he enjoyed doing business in India with its big domestic market and contrasted the business climate there as midway between the European Union’s (EU) and the United States, that’s why Delta is expanding its operations in India. He observed that the 36-hour work week was strictly enforced in the EU and if he arrived at a facility on a Friday afternoon, there might be no one available to meet, while in the U.S., he can always count on staff to work “9 to 5.”

In India he noted the workers put in a seven-day work week and there are many workers available. Currently, in Thailand, he is short 1,000 workers and will need 2,000 more workers soon after that. The availability of labor in India, was a major consideration in Delta’s move to India.

When Delta opened in Pondicherry, the unemployment rate was 16 percent for male workers, Anusorn discovered. Another factor in entering India that helped Delta secure a market position was India’s poor infrastructure, meaning, in this case, frequent electrical outages that still exist today. Delta began manufacturing UPS units to back up computers and other electrical devices during India’s frequent power outages and “sold a lot of them”, according to Anusorn.

The next product Delta starting making in India was LCD TVs. Delta staff in Thailand noticed that Indian tourists returning to India took home LCD television sets purchased in Thailand. When questioned about this, the tourists said that even after the duties they paid, the TVs were still cheaper than those sold in India.

>>In India, all the old and new regulations remain on the books, so the enforcement officer ‘can choose which regulations he wants to enforce.’ The central government has more power now, but change of every type, including the social and cultural, would come slowly. Our revenue in LCD production was up in India last year, but minus that, the company would have experienced negative growth.<<
Delta Electronics (Thailand) Public Co., Ltd. 909 Soi 9 Bangpoo Industrial Estate Moung Samutprakarn, Thailand
   
 
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However, India, does have its drawbacks and these began to surface in Anusorn’s interview during the LCD story. He noted that the Indian companies that supplied parts for the LCDs were taxed heavily on these parts, although the finished export product was not taxed. He met with Indian Commerce Minister Anand Sharma in 2009 and told him that “India would never be a major exporter, unless this indirect method of taxation,” was addressed.
The regulatory structure of India also is difficult, Anusorn said. In the United States and the EU, when new regulations are adopted, the old regulations are removed. But in India, all the old and new regulations remain on the books, so the enforcement officer “can choose which regulations he wants to enforce,” according to Anusorn.

Other issues that vexed the Delta executive are cultural issues such as corruption embodied as “tea money”, male versus female issues and unique Indian problems such as the theft of electricity from the grid and keeping cattle and other livestock off the roadways.

As a Thai, Anusorn is used to “tea money” bribes and said every step of the way in India was paved with these bribes. Similar patterns existed in Thailand, however, and it amused him more than bothered him when he encountered the same in India.

The cultural disparity in the way male and female workers were treated, however, seemed to disturb him. Male workers were paid more than female workers, although they did the same thing and Anusorn said that Delta actually preferred female workers. Delta now has a factory only for women and they are paid the male rate for working there. He also observed that India’s unemployment rate does not include unemployed women.

Looking to the future, Anusorn said the key to India’s growth will be the government. He said the central government has more power now, but change of every type, including the social and cultural, would come slowly.

Delta’s revenue in its LCD production was up in India last year, but minus that, the company would have experienced negative growth, he concluded.

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