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UK trade official sees in India 'a model of stability', says foreign investments will flow in

A K Diwanji in New Delhi

India is appearing a bright attraction to foreign investors, thanks to the plunging economies of Southeast Asia. So feels Sir Martin Laing, chairman of the British Overseas Trade Board, who is on a week-long visit to India.

After addressing a meeting of the Indo-British Partnership in New Delhi, Sir Martin told Rediff On The NeT, "India is clubbed as part of Southeast Asia by people in the West, and we tend to compare India with other Southeast Asian economies. Today, after the chaos in Indonesia, the closing of Malaysia and the general turmoil in that part, India is seen as a model of stability, and this will pull foreign investment in the coming months."

Sir Martin also pointed out that the rupee had remained extremely stable while the rupiah and the ringgit had plunged, which could only further reassure foreign companies seeking new opportunities and markets. "And if India has a growth rate of 5 to 6 per cent, as is being predicted in some quarters, at a time when Southeast Asia is talking of negative or extremely low growth of 2 per cent, the comparison is even more stark," he added.

Sir Martin agreed that political uncertainty did not help boost investor sentiments, but quickly added that if policies remained stable, then businessman were not too bothered by political change.

Yet, quick political turnover did slow down reforms, he said, and pointed to the British example. "When Margaret Thatcher embarked on her privatisation programme, she was around for two-and-a-half terms, and that helped her complete her own project. India has not had that political continuity, but it has policy continuity, with minor changes of course, and that is reassuring though things do get slowed down," added Sir Martin.

He was rather dismissive of the Tata airline pullout. "Perhaps they found out that the project was not feasible," he retorted when asked if that had affected investor sentiment. And he did not seem unduly perturbed by the effect of the nuclear blasts and economic sanctions against India. "Private businessman are not affected by the sanctions, though it can have some effect on the economy," he said.

On the contrary, Sir Martin seemed somewhat more upbeat about investment picking up soon. "This morning, we met officials of the National Highway Authority of India," he said, "and they were most keen to have foreign investments, joint ventures and even 100 per cent foreign participation in building expressways. If their attitude is anything to go by, then there is every reason to be optimistic."

He asked the media to play a big role in bringing in privatisation to the public sector, pointing out that change was always resisted. "People who are likely to be affected by change will not welcome it and therefore it is for the media to tell the people the benefits of privatisation. The government too should go to the people to explain its reasons for doing so," he said.

He compared the present situation to Britain in the 1980s. "Then, under Thatcher, the UK was in business that had no place in the 21st century. We had overcapacity in steel, we still had huge investments in shipping and coal, all of which were dying. So we had to cut, and it was quite painful. But today, we have emerged successful, and I am sure that India too can do the same," he stated.

The Briton reiterated the cliché that India is not for those seeking to make a quick buck. "Things do take time in India, and especially when it comes to major policy decision that will affect people in a big way," he stated, "but it remains an attractive and stable economic environment. For instance, infrastructure, which the Indian government is promoting in a big way, has long gestation periods and no one who comes here should expect to make money overnight."

Comparing ''today's India'' to his last visit in 1996, he felt the bureaucracy was far more receptive to private sector participation in the economy. "Red-tapism certainly seems less than my previous visit," he said, but added, "however, in comparison to other countries, India is still seen as being very bureaucratic."

However, Sir Martin was quick to add that right now, India did need to put in place certain measures to make foreign investors feel safe. "Policies must be clear, there must be transparency in awarding or rejecting projects. That is the need of the hour," he said, adding that it was the lack of clarity after the government changed that had hurt investor sentiment.

And he put to rest all worries about fear of swadeshi (economic nationalism). "I have spoken to your foreign minister who has assured me that swadeshi does not mean shirking from foreign competition," he said.

He insisted that Britain would take up India's case against the European Union on the issue of imposing non-tariff barriers. "These disputes have to be resolved through the World Trade Organisation, but Britain is a friend of India, it is part of the EU, and it is committed to free trade, and for these reasons it has spoken on behalf of New Delhi," said the Briton.

Earlier, in his speech, Sir Martin pointed out that Britain remained India's largest cumulative investor, and that new British investments were second only to the United States. He said the United Kingdom remained bullish about investing in India, notwithstanding political changes.

"I am glad to see the government realise the importance of infrastructure, because without world class infrastructure, there is no way that India can hope to achieve high economic growth. The thrust has to be on roads, ports, airports, telecommunications, and the water sector," he declared.

Sir Martin shared the experience of Britain under Thatcher when it privatised in a big way, and pointed out any public sector divestment or privatisation would initially result in job losses and high unemployment. "It is this crucial period that one has to be careful about, because if you can ride it out, then the situation improves and in the long run, employment increases all around," he said.

He was insistent that privatisation was a must to create competitive industries and to benefit the consumers. "In the UK, after we privatised, the costs to consumers came down. Electricity dropped by 15 per cent, gas by 25 per cent, and telecommunications by 40 per cent. The same will happen here too," he added.

Sir Martin also pointed out that today, governments simply lacked the resources to invest in massive infrastructure projects to create competitive projects. He added that India had the world's third longest roadways, yet it was absolutely inadequate to meet today's requirements, let alone tomorrow's burgeoning demand. "Lack of good roads is an impediment to industrial growth in the country," he said.

Others who spoke included Indo-British Partnership co-chairman and Tata Steel chairman Jamshed Irani, who said that while India was currently going through trying times, he had reason to believe that there was light at the end of the tunnel.

"Do not let the depressed stock market get you down," he told the British businessmen present, "but use this moment to steal the limelight and invest in infrastructure which will benefit both countries."

Present among the visitors was Anthony K Allum, development director of the Halcrow Group which works on highways, ports and water resources. When asked whether he was confident about India, he replied that if he was not, he would not be present.

And long delays did not put him off. "The United Kingdom took eight years to privatise the water sector," he pointed out, "and while India may not take so long, one must still give it four years or so. And this would apply to any privatisation venture, or infrastructure project. So we are here for the long run."

Allum, now in his 60s, was born in India, as were his parents. Was that not sufficient attachment to invest in India? He agreed. "Yes, Britain and India do share a lot in common, which might explain why British investment in India is so high."

But if nostalgia brought the British investor, what would lure the other westerners? "Well, at the end of the day, we are all businessmen," he replied, "and that is what will bring businessmen facing restricted markets in the west to India. Business opportunities are the foremost reasons for my presence here."