The coming wave of anti foreign investment sentiment in India and China
Balaji Reddy, Special Correspondent
January 15, 2005
Though India and China have welcomed Foreign Direct Investment (FDI) until now, a growing movement calling for its stop broils in both the countries.
In both the countries communists strongly believe that FDI is welcome only if it does not take advantage of the domestic market, creates jobs in big numbers and resultant output is mainly for exports.
The slogan in both the countries is the Foreign Companies should not be making potato chips here but should make computer chips for exports to other countries. In addition growing nationalism in both the countries are asking for indigenous development and export instead of sharing profits with the Foreign companies.
Here is an example : China has banned foreign investment in the tobacco market, closing a deal on British American Tobacco's hopes to move into the world's largest cigarette market.
But this is just the start. Sources tell us, both in India and China those who are influential for the Governments to operate are slowly voicing their opposition to any more Foreign companies entering the economies. In both India and China, Communists are influencing the Government operations. While China is under Communist rule, India's anti-communist Government survives on the basis of support from the Communists.
In India for example the Communists who hold a crucial 12% of the Parliament Seats, needed for Manmohan Singh Government to operate are dead against the Product patent law implementation, privatization of nationalized units and creating an atmosphere where foreign companies can easily compete with local companies.
In China for example, lots of FDI has flown in with the hope of using cheap labor but those funds are looking at the dragon jump but does not see much action on the profit scenario. China is a little different than India. In China , the Government works as one company with one CEO. As a result it can have cohesive effort of attracting the FDI making sure the FDI do not earn excessive returns and does not tend to exploit the Chinese domestic economy and population.
In India, a democratically elected Government with many factions and ideologies in the form of a coalition operates less efficiently against Foreign Companies. While the Prime Minister is all in favor of open economy, the Communists are not.
The biggest problem in India is that the FDI has only helped 10% of the elite. The rest 90% are enjoying some ripple effect but are not happy with the same. That was the main reason the Vajpayee Government was thrown out and Congress led UPA Government assumed power. But the new Government has followed the foot steps of BJP, the previous Government. In the next election, unless Congress changes its perception among voters, the ruling coalition will face stiff competition from the communists and other regional parties.
China and India have a home grown grass-root level anti- FDI movement. The rich and oligarchs in both the countries are enjoying the current boom but the paries may not survive for long.
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