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Invest in India, Chidambaram tells the Americans

Finance Minister Palaniappan Chidambaram has sought investment from the United States for the development of India's infrastructure. India needs about $150 billion over the next five years to sustain the country's present higher growth path.

Speaking at a conference on 'Opportunities in Financial Services and Infrastructure Financing in India', sponsored by The Washington Post Company in Washington DC on Tuesday, he listed four ''compelling reasons'' for Americans to invest in India.

These are:
* existence of an ''unprecedented opportunities'' for American business and industry;
* availability of intellectual infrastructure of a developed country;
* prospects of partnership with mushrooming local small- and medium-sized companies started and managed by professionals; and, * a market economy founded on a system of honouring contracts, enforcing property rights and respecting legal obligations.

United States Commerce Secretary William Daley said Chidambaram had quoted a ''staggering'' figure of 150 billion dollars but admitted the capital was there.

''What the Indian officials are trying to do," he said, "is to strengthen further India-US trade relations which, in turn, will help New Delhi attract the much-needed foreign capital.''

Daley said he would lead a delegation of US small- and medium-sized industry to New Delhi soon to promote the trade between the two countries, which had already crossed an annual record mark of 10 billion dollars.

World Bank Managing Director Gautam Kaji said the Indian economy was facing ''severe'' capacity constraints in infrastructure. ''Unless these constraints are addressed, the major gains of the last six years of reform will be at risk,'' he warned.

Kaji said the private sector showed strong interest in number of infrastructure areas, notably power and telecommunications. However, institutional and legislative constraints -- on pricing, on labour costs and access to land -- were powerful deterrents, which must be addressed, he pointed out.

The senior World Bank official favoured deepening India's financial markets to mobilise substantial volumes of debt finance. ''Finally, state finances need to be reformed -- so that they key infrastructure investments that will legitimately remain in the public sector can be financed,'' he added.

Others who spoke were Reserve Bank of India Governor Dr C Rangarajan, Indian ambassador to the US Naresh Chandra, Washington Post Company Vice President (Corporate) Patrick Butler, Confederation of Indian Industry President N Kumar and representatives of various US firms.

In his speech, Chidambaram said the US remained the largest new investor in India since 1991. Total investment approval for the US had been about $10 billion though the actual flows to date were only about $1.5 billion. If investments flowing in through tax haven Mauritius was added, inflows from American companies would add up to about $3 billion.

''Infrastructure development is all about private-public partnerships,'' said Chidambaram, adding this was evident in the way the new Infrastructure Development Finance Company, with an authorised capital of about $1.5 billion.'

The finance minister said the reforms of the public sector enterprises had begun in India, but said he would readily admit that these were still tentative by the standards of Chinese President Jiang Zemin, who recently announced sweeping reforms of China's state-owned enterprises.

Chidambaram was confident that the government would be able to bring insurance reforms back on track in the next two months. After consultations with political parties, a bill to this effect would be introduced, he added.

The finance minister disagreed with those who criticised India's intellectual property protection regime. He said the only problem was the patent protection in the case of pharmaceuticals, where it did not cover products. The World Trade Organisation had allowed India 10 years to amend the relevant laws. Moreover, he said India had accepted the WTO's suggestion for the provision of 'mail box.'

He said India was not opposed to the proposed international agreement on investment. However, it wanted that concerns of the developing countries should be appreciated in any such accord.

The agreement must accept the right of each country to decide the area in which it wanted foreign investment and in what quantum. There could be no unregulated entry of foreign capital, he added.

After the conference, the finance minister discussed the recent convulsions in the stock market with US Treasury Secretary Robert Rubin. They also discussed the on-going WTO negotiations on financial services. The finance minister said India's offer was better than many Southeast Asian countries.

He said India was prepared to make further improvements once offers of other countries are also on the negotiating table. India and the US hoped that the ongoing disputes on quantitative restrictions and intellectual property rights would be resolved quickly. Chidambaram said an expert group has been constituted to hammer out a national consensus on intellectual property rights protection.

The finance minister also had a meeting with Ambassador Chariene Barshessky, the US trade representative. Barshessky and Chidambaram discussed the ongoing WTO negotiations in Geneva over the phasing out of quantitative restrictions.

Chidambaram expressed appreciation of the change in the US position in agreeing to a phase out of quantitative restrictions over a period of six years. He informed Barshessky that negotiations with other countries were coming to a close and mutually acceptable solutions have been worked out. Barshessky expressed hope that Washington and New Delhi would be able to resolve their differences without going to the dispute settlement panel.

Chidambaram pointed out that going to the settlement panel would neither help the US nor India. He assured Barshessky that New Delhi was negotiating in good faith within the WTO framework and hoped the US will show understanding of India's concern.

Both of them agreed that the negotiations had entered a crucial phase and should be clinched over the next few weeks.

Chidambaram also met Gene Sperling, President Clinton's assistant for economic policy. Sperling assured Chidambaram that after the meeting between Prime Minister I K Gujral and President Bill Clinton, the message has gone out that outstanding trade disputes between India and the US should be resolved amicably.

He also requested India's assistance to work out a climate change treaty that will be acceptable to all countries. The climate change treaty will be discussed and negotiated in Kyoto, Japan, in early December.

Daley will be visiting India in the first fortnight of December. He will be leading a delegation of about 40 top US businessmen and will also be bringing with him for the first time representative of US media.

The media team has been included in order to enable the US media to see for themselves India's reforms and to provide an opportunity for New Delhi's reform programmes to be widely projected and disseminated in the United States.

UNI