On wooing the NRIs.
JPR:
Here is an interesting article I found very enlightening.
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Quotable quotes.
''Why should government bureaucrats in India have the power to make or break new business ideas? he asked. ''It's my money at stake..''
(Source:The Economic Times)
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Sops to win back NRI funds fail to enthuse investors
Mark Drajem
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NEW DELHI 20 november
KISHORE KAUL left India seven years ago to move to California. There he started a real estate company ''from nothing'', which is now worth $25m. An American dream? Yes. But the Indian government hopes it will become an Indian one, too.
Last week government officials wooed 120 rich non-resident Indians (NRIs) invited here for a conference by the Federation of Indian Chambers of Commerce and Industry (Ficci). They were told that the country needs their investments in roads, telecommunications, power and manufacturing. And the government is using a mixture of perks and patriotism in an attempt to lure them.
But the listeners, also given a chance to discuss their concerns about India's investment climate with the government officials, said the government's rhetoric about seeking new investment is not matched by reality. Just like other foreign investors, the NRIs, too, said the country needs to reform its Byzantine bureaucracy and speed up business approval processes.
''You have gathered here at a time of change and challenge, hope and opportunities for your motherland,'' Prime Minister Atal Behari Vajpayee said at the beginning of his patriotic appeal. But Amit Sarkar, a native of India who runs an investment bank in New York, countered, ''patriotism only goes so far.''
In addition to the lure of the motherland, the government offers a host of special incentives to NRIs. It allows them to invest more than other foreigners in everything from domestic airlines to power plants to the secondary market. In the government's plan for opening up the insurance sector to private companies next year, for example, foreign equity is capped at 26 per cent, but ethnic Indians are allowed to invest an additional 14 per cent.
NRIs are an attractive target for the government. With an estimated $1.4tn in wealth, the 15 million NRIs are worth four times the annual gross domestic product (GDP) of India, say figures released at the conference.
The government wants NRIs to invest some of that money in existing projects, state-owned companies and their own businesses. But having left India's convoluted governmental procedures behind, the potential investors said they are less inclined to take the time and hassle to do the necessary legwork to establish a business here.
''If I want to open a business in New York, it requires zero government approvals,'' said Mr Sarkar. While that may be an overstatement, Sarkar's comment hits at the heart of the problem as its perceived by potential investors - obtaining approvals in India is overly cumbersome and may prevent people from even starting projects.
''Why should government bureaucrats in India have the power to make or break new business ideas? he asked. ''It's my money at stake..''
If the Indian government becomes transparent, accountable and speedy, foreign investment will rush in, said S P Hinduja of the UK-based Hinduja Brothers. ''NRI-owned businesses thrive in key centres such as the US and UK. Ease government regulations, and they'll do the same at home,'' said Lakshmi Niwas Mittal, chairman of the UK-based steel company Ispat. ''In all the countries (in which) I work, I have never had to go to a minister or a secretary for approval,'' Mr Mittal told a chuckling audience. ''For everything here you have to go meet the bureaucrats and politicians. It shows the policies aren't working.''
For the ruling Bharatiya Janata Party-led Union government, trying to balance the need for heaps of infrastructure investment with its own anti-foreign rhetoric, NRIs are the perfect group to target for investments.
Since coming to power, though, finance minister Yashwant Sinha and other leaders have executed a delicate dance, trying to placate both foreign investors and domestic projectionists and maintain its swadeshi rhetoric. Appealing to NRIs allows them to appeal to both camps, and avoid political backlash from parties in the coalition government.
India has looked longingly at investments made in China by foreign-dwelling Chinese. About three-quarters of the more than $34bn China received in foreign direct investment in 1996 came from ethnic Chinese, says a recent Wall Street Journal report. That one-year total is more than double all the foreign investment made in India since its liberalisation began in 1991, according to a recent UN report.
Government officials at the conference also pointed to the success of Resurgent India Bonds floated by the State Bank of India. But it was the high interest rate, though - not patriotism - that made those bonds a hit, conference attendees said. And buying a $2,000 bond is different than making the long-term commitment to a road or power project, they added.
''Now the government needs to keep chanting the mantra 'Implementation, implementation, implementation,''' sums up Hinduja.
economictimes.com
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