India, China, or Vietnam

According to a revised estimate announced by commerce and industry minister, Kamalnath, one of the most visible ministers of UPA government, the fiscal year will be the best with FDI (Foreign Direct Investment) touching a figure of $15 billion, nearly the double of $7.72 billion of the last year. The achievement is creditable, as India could manage only $38.90 billion between 1991and march 2006. But even with $15 billion FDI, India’s share is less than one-fourth of what China ($63Billion) attracted in 2006. But all this is happening because of only one reason; India is the second largest market after China. Thee government has not done any thing significant to attract more and a respectable figure in comparison with China.

Michael Dell, the founder chairman of world’s second largest PC maker Dell Inc. was recently in India. It is interesting to appreciate what he said. ” Dell’s 86 suppliers are planning to invest $19 billion in next two years, but not a single dollar is coming to India. Reason is the high tariff structure. One of the suppliers is investing $5 billion, but it has chosen Vietnam over India to invest. Dell sources around $19 billion worth of components from China and Taiwan but nothing from India. India levies 20-25% tariff on PC production visa-a-vis many other countries with very low or nil tax rates. Of a $500 PC, the duty element in India is around $100. However, because of the sheer size of the Indian market Dell is putting up an assembly plant in Sriperumbudur SEZ near Chennai at an investment of $ 30 million to manufacture 400,000 units annually.

Why can’t the government decide the priority high tech sector where it intends to have FDI inflows? Why can’t it be reducing the tariff in line with even a poorer country such as Vietnam? Why should it go on collecting these high taxes and doling out in so-called programmers for social equity once they know through different studies of the experts that it hardly reach the beneficiaries and gets diverted to the relatives and known of the politicians, bureaucrats, and only those who manage the vote banks or accounts in Swiss banks? Why should it go on talking of globalisation, if it can’t master the rules and tricks of competition?

The second story is of South Korean steel giant Posco that signed the MOU in June 2005 for setting up a 12-million ton steel plant in Orissa at an investment of Rs 52,000 crore. Even after almost two years, the issues related to the land and mining lease are not cleared. When the media reported Posco’s intention to shift the project to Vietnam, both the Orissa and central government has woken up to the realities. The Orissa government today said it would within the next 3 months, remove all hurdles to South Korean steel giant Posco. Even PM is making promises to resolve disputes over land acquisition that threaten to delay projects including steel ventures by Arcelor Mittal and South Korea’s Posco. And what is the guarantee that it would happen, when, as reported, the villagers opposed to the Posco steel project had formed “self-sacrifice squads” to protect their lands from being acquired?

Is the government doing sufficient selling of the necessity and advantages of these development projects among the people of the region? And can the so-called activists such as Medha Patkar and her peers present an alternative plans for the growth of the regions and the country? Why can’t they be given a district’s administration and all resources to prove their models of inclusive growth? Why can’t the government go for a countrywide debate on the issues of acquisitions and making the bills on SEZs and acquisition robust enough to be vulnerable to get exploited by the business tycoons?

How can any foreign investor get attracted to India with this sort of trouble in starting a business, as with each passing day the project cost increases that is critical to any Greenfield project? If the country aims to attract FDIs comparable to China, it will have to make all the necessary changes in its working culture. There is no shortcut to grow with all sorts of inefficiency in the systems and every imaginable types of indiscipline in the people of the country brought in through the shrewd politicians and their so-called leaders in the name of democracy and human rights.

All foreign investors may talk nice about India in public but when it comes to investment, the SWOT study of the country where they intend to invest must satisfy them fully for its long-term commercial viability providing sufficient returns. And that is the reason that Intel decided to build its $2.5 billion first Asian chip manufacturing plant in the northeastern city of Dalian in China, reflecting China’s growing importance as a market for high-tech goods. The great economist Prime Minister and his able lieutenants know why Intel couldn’t be attracted to India that fails to come out with a competitive policy for chip manufacturing sector as a strategy for the nation that wishes to be a superpower in IT sector. Many a times, a question crops up. Are they really serious enough?
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