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The Rediff Business Interview/ N Sankar

'South India is an excellent destination for investment'

The Indo-US Joint Business Council, a creation of the Federation of Indian Chambers of Commerce and Industry, the Associated Chambers of Commerce and the US-India Business Council (which is a division of the US Chamber of Commerce), is all geared up for the two-day Indo-US investment summit in Madras beginning January 20. JBC chairman N Sankar of the Sanmar Group spoke to Shobha Warrier on swadeshi, liberalisation, insurance, globalisation, protectionism, foreign investment and much more.

Last year, your theme was "the emerging east". This year the stress is on the south.

Yes. In the past, the JBC met in Delhi or at the most in Bombay. They never used to move around much. We took a decision last year that we would go around and present investment opportunities. Going all around in a large country like India is a bit difficult. So, we decided to take it regionally. We had our conference in the east last year, which was very successful. We had all the eastern states participating in the summit. We also had the participation of Nepal, Bhutan and Bangladesh. R P Goenka was the chairman then and I was the vice-chairman.

Now, this year we decided to come to the south. We have the four southern states and Pondicherry. All of them would make presentations. We definitely will have the four chief ministers from the southern states attending the summit. We hope this summit will be as successful as last year's.

Do you see the south as a dynamic region, as this year's theme suggests?

Let me put it this way. 'Dynamic' may be a jargon. But the south is an excellent destination for investment if you look at the track record of Andhra Pradesh, Tamil Nadu, Karnataka, Kerala and Pondicherry.

Companies like Ford and Hyundai won't choose Tamil Nadu as their destination unless they find it one of the best investment destinations. They might definitely have done an evaluation of all the places before choosing Tamil Nadu.

From all points of view, we feel the south is an excellent place to invest. The reasons are a combination of availability of manpower, space, etc. We have less infrastructure problems. When you consider all these things, it is good to invest here.

When you decided to choose the south as the theme for this year's summit, were the investors excited?

I wouldn't say they were more excited than before. But they are excited. They are coming to see what we are going to offer. Investors don't get excited. I think you have to excite them. Basically today things have changed.

You will see the four states marketing themselves to the investors, which you might not have seen a few years ago. All the big companies in oil, infrastructure, road engineering, insurance, etc, are coming here and all these states will have specific presentations by the chief ministers themselves on what their states can offer.

These offers are not in the way of incentives to these companies. They will tell the investors about what each state has done in various fields like power, road, etc, and also about the local restrictions and regulations They will also show the living conditions, the educational conditions, availability of manpower, etc, of the states.

Are you giving a thrust to any particular area?

No. It is just business. The states have to take decisions on their own. We have left that to the states. Knowing, for example, (Andhra Pradesh Chief Minister Nara) Chandrababu Naidu and his tremendous thrust on software and the way Tamil Nadu is picking up on software and of course, there is Karnataka which is already there in the software business, naturally IT may figure in the top list. I think telecom, IT, infrastructure and insurance will be the major thrust areas.

As an Indian industrialist, are you for globalisation? Do you need protection from the MNCs?

No, I am not for protection. I am all for opening up. Why do you need to protect any industry? Ultimately, the customer is the person to decide. I am in the industry, still I say this.

As long as you open up and allow the Indian industry to function like other international companies, nothing can stop us. Look at the number of Indian entrepreneurs making it good in Silicon Valley. We have the ability but we should be given the freedom to do it.

Yes, people do talk about Bombay Club and all that but we are all for opening up. I am for opening up. The problem is, you are throwing us into the ring after tying our hands at the back.

You have to change the laws, rules and regulations so that we can compete with the internationals on the same terms, whether it is in fund-raising, investment, or labour laws.

See, if I am starting a new business in India, I am pretty much on the same level as any international investor subject to funds availability. As an Indian, I start off with that disadvantage. The free access to foreign funds is difficult.

Another major problem for a person who has an existing business going on but it is being eroded very quickly is, he can restructure the business provided he can adjust his employment.

It is not possible for him to cut back employment, and he cannot close down the business too. What you have to do is, you have to untie our hands in these areas before throwing us into the ring, saying ''you are ready for global competition.''

The swadeshi lobby wants internal opening up first. Do you also feel that way?

I think it is too late to think of all that. It just is not possible and there is nothing to open up internally. I think, yes, you have to open up the rules and regulations.

For example, the urban land ceiling. When Ford and Hyundai come to India, the government goes and falls on their back and gives them acres of land. But if I want to buy a piece of land, I get tied up in rules and regulations like urban land approvals, etc.

Another area is labour. If I have an existing plant with 500 labourers and I want to start a new plant with 50 labourers, I can't. What am I supposed to do with the 500 labourers? Why are even Air-India and Indian Airlines fighting competition? They are not able to restructure the existing overhead that they have.

So, is this the kind of level playing field that the Indian industry wants?

Yes, when a US company can start a plant with five employees where everything is computerised, we can't. Our existing plant has 5,000 employees. Okay, you can start a new one with 50 employees but you are stuck with your old one. Where is the level playing field?

What do you say about the criticism about the big multinationals eating away small Indian companies?

It is a natural phenomenon all over the world. I don't think you can object to that. There are niches for everyone. Big companies have to be there in certain fields and small companies have to be there in some other areas. I don't think it is possible to say you shouldn't enter this field or that field. As long as it is a free market, you can't object to anything.

The example given by the swadeshi lobby is the consumer electronics industry. Few Indian companies were to able face the onslaught.

Is it not advantageous for the customers? Take for example, motor cars. All we had was Hindustan Motors. Why are you not complaining about it? Why are you not saying, please protect the Ambassador? Nobody has said a word for the Ambassador. Nobody says that, because they accept what is happening in the motor car industry.

The customer is the king in the market, not any lobby. If Indians cannot make cars, it has to go to the international player. In any free market, there are closures and bankruptcy. You have to accept that.

If the whole world is one market, will not the whole world sink if one area sinks? For example, the southeast Asian crisis affected the economy of so many countries.

We have a huge market, you know. Even the opened up economy of the Western world protects them against unusual and unexpected perturbations. That is required. You have to protect against short-term disturbances, which can upset your economy.

We should not allow others to dump things here to protect their market. There are mechanisms to curb all that and we have to implement whatever is necessary. But general opening up is unavoidable.

Are you for opening up the insurance sector to foreigners?

Absolutely. See, infrastructure needs investment funds. First, free investments are only with LIC and GIC. You will not get investments unless you allow big insurance companies to come in.

Second, as a consumer, today you are getting absolutely lousy life insurance policies. You are giving life insurance money at 6 per cent and 5 per cent interest to get it back after 20 years. It is foolish. That is why life insurance is not popular.

The Swadeshi lobby does not like the presence of FIIs playing in the stock market.

If you have a stock market, people will play in it. Otherwise, you shouldn't have a stock market. I don't think there is anything wrong in the presence of FIIs in the stock market. It is their money that is coming into the country.

There is a general feeling that global capitalism is failing. Do you agree?

I don't feel that way. But then, I think there has to be a limit to capitalism. There have to be some laws by which you can operate. You cannot go back to a situation where somebody becomes very, very powerful.

When one person becomes so strong and if he does not allow anyone to enter the field, it is dangerous. You need to have an enabling legislation so that there is a level playing field for everyone.

Are you happy with the pace at which we are opening up now?

I think you should open up a little faster. Take for example sectors like telecom. The quicker you take a decision and move forward, money will start coming in. Okay, earlier somebody made a mistake in the rules and regulations but at least now you have to rectify them.

Are you optimistic about more investments coming to India?

If you have a little more political stability, you will see a lot more progress in the investment side. Today it is not economics but politics that is preventing investment.

What are your expectations from the Budget?

I haven't thought about the Budget at all. See, the Budget is only an exercise in accounting. I think you need to see a lot before that.

Photographs: Sanjay Ghosh

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