asean affairs - horasischief executive officer, mahindra satyam building a stronger india the growth...

1July - August 2010 • Magazine

Jul - Aug 2010 | Vol.4 No.4 | ASEANAFFAIRS.COM

The Voice of Southeast AsiaASEANAFFAIRS

BRAVENEWPHILIPPINESBenigno “Noynoy” S. Aquino IIIPresident of the Philippines

Display Until 20 September

30 Pages SpecialINDIA IN SPOTLIGHT Thailand is Reconciling?Spheres of Influence in LaosThe Malady of Nations

The Voice of Southeast Asia2 Magazine • July - August 2010 3July - August 2010 • Magazine

July - August 2010 Vol. 4 No. 4July - August 2010 I Vol. 4 No.4CONTENTS

The German Ambassador to Thailand, Dr. Hanns Schumacher, offers his forthright views on recent developments in the Land of Smiles.

14 ASEAN AND THAILAND: A GERMAN VIEWAsean Talk

Brunei Goes Green, What’s Up with Laos?, Bullet Train Goes Nowhere in Vietnam.

16 THAILAND IS RECONCILING?Inside Out

Paul Ebeling Jnr. derides the practice of scapegoating the Chinese yuan and gives an analysis of the 2010 gold market.

20 SCAPEGOATING THE CHINESE YUAN AND THE GOLD MARKET

Asean Money

Thai Airport Is Now Tenth In the World, Malaysia Airlines Looks to Expand.66

Asian Aviation

Asean-Japan Centre Builds Economic, Cultural, Tourism Ties.70

Beyond Asean

Proton Optimistic About Increasing Market ShareGroup Managing Director, Proton Holdings Berhad, describes the challenges facing the Malaysian automaker.

74Asean Auto

Try Your Luck!- New Hotels and Resorts In Cambodia78

Asean Traveller

Merchants of Madness: The Methamphetamine Explosion in the Golden Triangle77

Asean Traveller Book Review

The Anonymous American reaches the end of his five-part series on why he believes America is wilting on the vine.

80 The Malady of NationsOpinion

Corporate Websites and Social Media-New Ways of Digital Marketing. Bring a company website current by tapping into social websites.

82Asean Tech

84 Asean in Figures

8 Your Views

10 Editorial

12 Subscription form / Index of advertisers

85 Asean Events

86 Asean Bazaar

India in Spotlight : Pages 33-65

Helmholtzstr. 2-9 D-10587 Berlin

Germany •

UOA Centre 19-9-6 19 Jalan Pinang

50450 Kuala Lumpur Malaysia

Curriculum Vitae Volker U. Friedrich (born 13th March 1963 in Germany) Volker U. Friedrich has more than 25 years of experience in international industry and trade. GBP (formerly known as German Business Pool) was founded by Volker in 1997 and is now established as a leading management and business consulting firm in Europe and across Asia Pacific. GBP mainly serves European clients which require support in their business operations in Asia and coaches Asian companies on their way to Europe. In the last 5 years India became the focus of GBP´s activities (inbound and outbound investments). Volker travels frequently between India/Asia and Europe since 1997 and has a high level network of industry experts and corporate leaders. Volker worked 10 years for German industrial giant Kloeckner Group in the industrial contracting business (today RWE and MAN Group respectively – both being DAX 30 companies in Germany). Already in 1987 Volker spend a full year in Mumbai as part of his traineeship and was involved in building the Nhava Sheva Harbour in Mumbai. Volker was also a senior consultant with Roland Berger Strategy Consultants, a leading European consulting firm for three years. The academic credentials of Volker are in the field of international economics. He received his MSc in Economics in 1991 and worked as Assistant Professor in International Economics at the University of Duisburg from 1991-1993. Volker is married and has two children – Vincent (born 2000 in Kuala Lumpur) and Franca (born 2005 in Berlin). See more details and press coverage at: www.gbp-international.com

Indiain Spotlight

In this issue, Asean Affairs looks at the economy of India and her relationship with Asean. India is the world’s 11th ranking economy in terms of gross domestic product in

2009, but is expected to crack the top 10 this year. Her close proximity to Asean countries through already established cultural and commercial ties seems to be a “natural fit” with Asean. Exclusive Asean Affairs interviews with business leaders and economic observers of the Indian scene and foreign companies doing business in India offer

readers an in-depth look at one of the world’s fastest developing economies.

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24Cover Story

An exclusive interview with Philippines President Benigno “Noynoy”Aquino III

BRAVE NEW PHILIPPINESNew Philippines President Benigno “Noynoy” Aquino wins in a landslide election and promises to end poverty and fight corruption.


INDIA IN SPOTLIGHT

In the following pagesSynopsis of the 2010 Horasis Global India Business Meeting

ASEAN TAKES OFF WITH INDIADavid SwartzentruberManaging Editor, Asean Affairs

BRAND INDIA & MADE IN INDIARemains Just a PromiseSwarup RoyFounder & Chairman, Asean Affairs

INDIA PLAYS ASEAN CATCH-UP WITH CHINAIndia In AseanAjit Venkataraman, CEO, Tata Motors (Thailand) LtdMr O.P. MODI, Vice President (Corporate Affairs), Aditya Birla Group Operation in Thailand

GROW YOUR BUSINESS IN INDIACarla Cico, Chief Executive Officer, Rivoli S.P.A., ItalyMadhu Koneru, Executive Director, Trimex, UAERon Somers, President, U.S.-India Business Council, USA

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Heinz Dollberg, Executive Vice President, Allianz, GermanyTom Schick, Executive Vice President, American Express, USAAnusorn Muttaraid, Executive Director, Delta Electronics-Thailand

THE DRIVERS OF INDIA INCGlobal Indian CompaniesRajan Bharti Mittal, Vice Chairman and MD Bharti Enterprises andPresident, Federation of Indian Chambers of Commerce and IndustryRana Kapoor, Chief Executive Officer, Yes Bank, IndiaCP Gurnani, Chief Executive Officer, Mahindra Satyam

BUILDING A STRONGER INDIAThe Growth of SMEsSudip Banerjee, Chief Executive Officer, L&T Infotech, IndiaNiraj Sharan, Chairman & CEO, Aura Inc, India

BUSINESS TITANS LOOK TO THE FUTURE

Leading Industries In IndiaG V Krishna Reddy,Chairman, GVK Power and Infrastructure, IndiaSunil Godhwani,Chairman and Managing Director, Religare Enterprises LimitedPrakash Hinduja,Chairman, Hinduja Group-Switzerland

MEDICAL TOURISM RISING IN INDIATourism: The Next Growth AreaDinesh Dhamija,Founder and chairman, Copper Beech Group, United KingdomAnupam Sibal,Group Medical Director, Apollo Hospitals Group, India

HOW INDIA STACKS UP IN BRICIndia And Its Competitive StrengthsRavi Chaudhry,Chairman, CeNext Group, IndiaValentin Romanov,Executive Director, Sun Group, RussiaVolker U. Friedrich,CEO and Managing Partner, GBP INTERNATIONAL, GermanyJesús Sanz,Director General, Casa Asia, Spain

INDIAin Spotlight

5July - August 2010 • Magazine

In this issue, Asean Affairs looks at the economy of India and her relationship with Asean. India is the world’s 11th ranking economy in terms of gross domestic product in 2009, but is expected to crack the top 10 this year. Her close proximity to Asean countries through already established cultural and commercial ties seems to be a “natural fit” with Asean. Exclusive Asean Affairs interviews with business leaders and economic observers of the Indian scene and foreign companies doing business in India offer readers an

in-depth look at one of the world’s fastest developing economies.


June 21-22, 2010, Madrid, Spain , Hotel Westin Palace, Plaza de las Cortes 7, Madrid, SpainGLOBAL INDIA BUSINESS MEETING

Synopsis of the 2010 Horasis Global India Business Meeting

The Global Visions Community

The Spanish Crown Prince arriving at the Global India Business Meeting

Anand Sharma - Connecting India with the World

Benita Ferrero-Waldner, EU Commissioner (ret); Member of the Board, Gamesa, asking a question

Indian CEOs are finding themselves wooed by European firms seeking new avenues of growth

Media Partner:

H.R.H. The Prince of Asturias, with participants

S. Roy, Chairman of Asean Affairs (centre), Yatindra Sharma, Chairman, CII Gujarat State Council (left) and

Harsh Purohit Executive Director, Cognito (Right).

Plenary on New Frontiers for Corporate India’s Global Engagement

Rana Kapoor, Chief Executive Officer, Yes Bank, India.

In the same vein, Mike Singh, Chairman and Chief Executive Of-ficer, Telkom Caribe, USA/Barbados, observed that,”Companies from India and abroad will need to work together with all stake-holders to apply sustainability principles to the ecosystem they are operating in.”

Horasis has created the Global India Business Meeting to bring together business leaders from India and the world. For two years now this international event has attracted delegates from India and countries all over the world.

Dr. Frank-Jürgen RichterPresidentHorasis: The Global Visions Community

The second Horasis Global India Business Meeting took place 21-23 June 2010 in Madrid. A large number of CEOs from India joined with global leaders to discuss India’s and the world’s cur-rent economic state under the heading “Overcoming the Crisis – Opportunities for India”. The general sentiment was that India is emerging stronger from the current global crisis. Will India and its companies play a more pronounced role in this new emerging global order? And will this open up new opportunities for foreign players to shape and define economic development and hence to reposition themselves on a world stage with India at the core?

• Participants reached a consensus that the Indian economy is expected to perform strongly in the future. Investments in infrastructure, agriculture, healthcare and education will be the key drivers to ensure long-term and inclusive growth. India’s influence as an international investor and reliable partner of the G20 is growing.

Union Minister of Commerce and Industry Anand Sharma

opened the meeting and painted a vision for the future of the In-dian economy. He said, “India will become one of the three biggest economies of the world by 2030,” he said and forecast a growth rate of more than 8 percent in the current fiscal year.

At the same session, Miguel Sebastian, Minister of Industry, Spain, reviewed Spain’s economic relations with India. “Economic and commercial relations between India and Spain have been growing steadily. The last few years have seen substantial growth in trade between the two countries. India will continue to be one of the most important investment locations and trading partners for the Spanish economy,” he said.

H.R.H. The Prince of Asturias, the Spanish Crown Prince, called for a new global partnership. The economic partnership between India, Spain and the world has extensive synergies - es-pecially during the current global economic turmoil.

“We will get brands from all over the world competing against brands from all over the world,”said Subodh Bhargava, Chair-

man, Tata Communications, India. “Indian companies are emerg-ing as global corporations, reaching a level playing field with the established multinationals of the west,” he continued.

The expansion of Indian companies into Europe and North America is yet another facet of the globalized economy. As these companies get bigger, they need to start thinking about global po-sitioning, and more and more, they are seeing Europe and North America as more than just places to trade their products and serv-ices.

“Good products are borderless. And made-in-India is increasingly perceived as guarantee for reliability and advanced intellectual property,’” Dinesh Dhamija, Founder and Chairman, Copper Beech Group, United Kingdom, maintains.

The co-chairs called for fundamental shifts in business models and government policies to address the striking imbalances ex-posed by the global economic upheaval. “Inherited business mod-els must change for economic recovery to be sustainable,” said

INDIAin Spotlight

Co-hosts:Federation of Indian Chambers of Commerce and Industry (FICCI), Casa Asia, ICEX-INVEST IN SPAIN,

Municipality of Madrid, Regional Government of Madrid


ASEAN TAKES OFF WITH INDIA

BRAND INDIA & MADE IN INDIA

By Swarup Roy Founder & ChairmanAsean Affairs

By David Swartzentruber Managing EditorAsean Affairs

As the dust settles following the near collapse of the world’s economic system, new parameters are developing within that system.

Countries that suffered the greatest setbacks, the United States, Spain, Greece, to name only a few, are re-entrenching under austerity rules that cut social programs and new financial rules limiting some of the financial practices that triggered the crisis.

Emerging from the post-crisis dust are those countries that came through the economic storm in better shape than the more advanced economies -India and China.

This issue of Asean Affairs focuses on India because of its geographical proximity to Asean countries and the growing India-Asean trade and investment linkages. With the start of the Asean Economic Community in 2015, these linkages surely will increase in number and scope. There are early indications this is already happening.

As early as November 2002 during the Eighth Asean Summit in Cambodia, Singapore’s Prime Minister Goh Chok Tong portrayed India as one wing of Asean’s jumbo jet, with the People’s Republic of China and Japan as the other wings.

The Malaysian Industrial Development Authority is currently in talks with two Indian companies involved in pharmaceuticals and biotechnology to establish plants that will be their hub for Southeast Asia. Completion of the agreements could be finalized before Indian Prime Minister Manmohan Singh’s visit to Malaysia at the year-end.

To date, there are 95 manufacturing projects with a total investment of US$1.11 billion with Indian participation, creating 13,032 jobs in Malaysia, according to the Malaysian government.

India’s trade deficit with Asean countries has increased substantially in recent years and its trade pact signed in 2009 with Asean is in many ways a reaction to China’s aggressive advance into the region. Another disadvantage is that a services agreement between India and Asean has not yet been concluded, leaving India at a disadvantage as it is strong in that sector.

As India Inc plans to move into Asean, there are also Asean companies that may wish to open facilities within India due to its large and youthful labor force and large market. Delta Electronics-Thailand is one Asean firm that is ahead of the curve with facilities in existence there for several years. Executive director Anusorn Muttaraid provides a first-hand report on Delta’s experience in locating its facilities within the subcontinent.

Other experienced India hands contribute with their experiences as telecoms executive Carla Cico says, “I think that India has not yet shown to the world its real potential and value: they should look to the Chinese to learn how to advertise themselves.”

As foreign companies seek to gain a foothold in India’s economy, global Indian companies are the real drivers of the Indian economy.

These companies will continue to seek expansion abroad, as Rana Kapoor says, “Indian companies in search of size will continue to seek targets overseas.”

With many western companies still feeling the pangs of misfortune from the near-global meltdown, Indian companies might be blessed with a wider than normal range of takeover possibilities.

Beneath the global Indian giants, India’s small and medium enterprises (SMEs) are fixing their sights on entering the Asean as the possibility of exponential growth in the large Asean market is a great attraction.

These SMEs can draw on the experience of such giants as Tata, as it recently began producing trucks in Thailand. However, adopting global management practices and making cultural adjustments may be part of the necessary learning curve in these companies going global.

A roundtable featuring three of India’s top industry leaders display a decisive split on expanding beyond the domestic market.

India has always had an exotic appeal for many but its tourism industry remains small in comparison to Asean’s Thailand, which expects to attract 16 million visitors a year, four times India’s current tourist total.

A growing sector of that industry, however, is the medical tourism industry.

The rise of the four BRIC countries, Brazil, Russia, India and China, has been a popular new grouping in the field of international acronyms and the final section of our spotlight on India role.

In June 2009, the foreign ministers of the four countries met for the first time in Yekaterinburg, Russia, to transform a catchy acronym into an international political force.

After the recent financial crisis, Goldman Sachs upped the ante and projected that the combined GDP of the BRICs might exceed that of the G-7 countries by 2027, about 10 years sooner than initially believed.

However, commentator Joseph S. Nye, says, “When one looks closely at the numbers, the heart of the BRIC acronym is the rise in China’s resources.”

How does India measure up in comparison to the other BRIC countries, especially with China? If China is the “heart of BRIC,” then where does that leave India?

Four commentators offer their input and their analyses provide an insight into this 21st century configuration of growing economies and a fitting conclusion to Spotlight on India.

I begin with a story, variations of which have been heard before. An Indian businessman from Calcutta was visiting his client in the U.S. and he was presented with a beautiful painting depicting the life of the red Indians (Native Americans) in the Wild West. He asked his host where in the United States such paintings were now being made since the red Indians had dwindled in numbers and it was difficult to find such authentic works. His host turned the painting around and on the back of the frame at the bottom were the words “Made in China”.

There is something about the tag “Made in….” I wonder when the ‘Made in India” tag will be seen on products across the globe. When that happens, we can all proudly claim that “Brand India” or “Global India” has arrived. Now is not the time to celebrate based on the facts that we escaped the global crisis because we were smart, or that we are the hired hands (cyber-coolies) of the American outsourcing industry. We escaped all these crises because we are insular, not connected to the global economy as a global brand. CEO after CEO kept up the rhetoric at the recently concluded Global India Business Meeting (21-23 June, 2010 in Madrid) how India stands on a solid base of fundamentals and that we are on the track for great growth and even double-digit growth.

These sound great because of the abysmal growth rate figures in the first 40 years of our independence, the so called “Hindu rate of growth”. For real prosperity to trickle down to the bottom of the pyramid, as any economist knows, we have to not only double but treble our gross domestic product (GDP) in a short span of time. “We have crossed the $1 trillion mark of GDP”. A devastated, war- torn, divided Germany rose from the ashes like a phoenix to achieve an export figure of $1 trillion plus to become the world’s leading exporter. Just the exports, mind you, the GDP of a country with a mere population of 80 million is much higher at US$3.673 trillion (2008).

“Ours is a domestic led growth model”, declares the policy makers and businessmen of India. Does that mean we will produce products of “Indian” quality or “Global Quality” meant to be sold to Indians only? With a mere population of 5 million, Finland has a global brand name such as Nokia. Microsoft, Apple, Nike, IBM, DELL and the list goes on, they set their benchmarks against a global standard for the domestic consumers of America first and because of the great quality they produced, their products found ready markets overseas and became gold standards in their industry. So the debate is not of a domestic versus export model, but to set our sights sky high, to create and produce products of the highest standard and not lean on a “Cheap” or “Low cost” model only.

A country like India with 700 million at the bottom of the pyramid cannot afford products of a high quality may be the argument. If so then no global brands can succeed in India is my counterargument. Therefore, we cannot and should not aspire to be a global economy. As Prof. (Marketing) Jorge Gonzalez of IESE (The Spanish Business School) showed us in his presentation, a brand is created by reaching out and touching the lives of people. Chinese products are doing just that, they are reaching out across the globe through all kinds of

products (from high tech to the most mundane) with the “Made in China” tag. As a result, the China name is getting imprinted on the minds of people all over the world and telling us all that China has arrived on the global stage as a global power.

One of the greatest missed opportunities for India Inc was during the outsourcing boom. The Indian IT industry had the whole field to themselves when wave after wave of American companies outsourced their business processes to Indian IT firms. We had the resources, the revenues and the attention of the world. We could have used this opportunity to spur a Silicon Valley in Bangalore and possibly (at least we could have tried) given birth to world-class startups who could dream to be a Google, a Microsoft or an Apple. Instead, we basked in our limited glory and each of these companies hired hundred of thousands of hands to be faithful cyber –coolies to America.

In 2001 Jim O’Neill, global economist at the Wall Street firm of Goldman Sachs coined the term “BRIC” for four countries, Brazil, Russia, India and China. In the style of a forced marriage these four countries were joined together, due to their perceived economic potential in the 21st century.

The four countries account for more than 25 percent of the world’s land mass and 40 percent of the world’s population and have a combined gross domestic product of US$ 15.5 trillion. Yet, there are significant differences between each of them and as the spotlight of this issue of Asean Affairs is India, it will be differentiated most vividly from Brazil, Russia and China., although as a group, BRIC is anticipated to overtake the G7 nations (Canada, France, Germany, Italy, Japan, United Kingdom, and United States).

However, in a recent World Bank report, “India and the Knowledge Economy”, authors Carl Dahlman and Anuja Utz cited a number of obstacles to India’s continued development.

These were: speeding trade reform by reducing tariff protection and phasing out tariff exemptions, encouragement of increased foreign direct investment, stimulating the growth of manufactured and service exports, strengthening intellectual property rights, simplifying procedures for the entry and exit of firms, easing the restrictions on employing and discharging employees, improving access to credit for small and medium enterprises, dealing with problems in the use and transfer of land, improving transport services, improving the efficiency of government and using ICTs for delivering social services, especially in health and education.

This is a substantial laundry list that flies headlong into the hidebound ways of doing things in India, particularly at the provincial and local levels.

If most of these obstacles are surmounted, then India could return to its glory days around 1770, when it was the world’s second largest economy.

But first we have to put our nose to the wheel and immerse ourselves into building the India of our dreams. It is a long and arduous task and the day will come when we are ready to pop the bottle of bubbly and celebrate the arrival of “BRAND INDIA” on the global stage.

Remains Just a Promise

INDIAin Spotlight


The Voice of Southeast Asia10 Magazine • July - August 2010 11July - August 2010 • Magazine The Voice of Southeast Asia10 Magazine • July - August 2010

INDIA IN ASEAN

INDIA PLAYS ASEAN CATCH-UP WITH CHINAIdentifying Prospects and Challenges for Indian Businesses Looking Asean

O.P. Modi is a Thai national of Indian origin residing in Bangkok and an executive of India’s Aditya Birla Group. He has resided in Thailand since 1978 and devotes some of his time to philanthropic activities.

O.P. MODI Vice President (Corporate Affairs)

Aditya Birla Group

VENKATARAMAN, AJIT CEO

Tata Motors (Thailand) Ltd

Ajit Venkataraman is the CEO of Tata Motors, Thailand. Earlier, he was the Strategic Planning Director – Commercial Vehicle Business Unit of Tata Motors, India. Prior to joining Tata Motors Ltd. in 2004, he was a consultant, at A. T. Kearney.

In this issue, Asean Affairs looks at the economy of India and her relationship with Asean. India is the world’s 11th ranking economy in terms of gross domestic product in 2009, but is expected to crack the top 10 this year. Her close proximity to

Asean countries through already established cultural and commercial ties seems to be a “natural fit” with Asean. Exclusive Asean Affairs interviews with business leaders and economic observers of the Indian scene and foreign companies doing

business in India offer readers an in-depth look at one of the world’s fastest developing economies.

Interviews with two of India’s leading companies who have successfully set up operations in Thailand and Asean.

When the India-Asean Free Trade Agreement (FTA) was signed on Aug. 12, 2009 , it was widely recognized in the world business press that this was India’s last-ditch effort to counter China’s growing dominance in the region.

China’s original trade agreement with Asean was signed in November 2002 and came into full effect in January 2010.A glance at these two charts shows the disparity between China and Indian trade with Asean.

India had fallen behind China, which began talks with Asean along with India in 2003. China signed a goods agreement in 2004 and signed an investment agreement with Asean on the same day that Delhi signed the trade of goods agreement. This puts India at a disadvantage in reducing its Asean trade imbalance because it is the world’s 10th largest exporter of services, while Asean is a net importer of services, although there is an agreement to fast-track an India –Asean services treaty.The laggard performance of India is not unexpected.

India heads the list of about 100 developing countries that stalled the stalled Doha round of talks of the World Trade Organization India has often viewed foreign trade as an import onslaught against its poor, agrarian rural population.After strong lobbying by India’s farm sector, the terms of the FTA let India exclude 489 products, mostly commodities including rubber, from tariff cuts. Tariffs on a much smaller list of ‘’highly sensitive’’ products, including palm oil and coffee, would be reduced over about 10 years, but only modestly.

The FTA also does not include software and information technology in which India is a world leader. A services trade agreement, which is of enormous interest to India and its export-oriented software and information technology sector, has been postponed, but Industry Minister Anand Sharma is pushing for an agreement soon.

Will this FTA benefit India?While India-ASEAN trade has boomed from $7 billion in 2000-01 to $39 billion in 2007-08 with a compounded annual growth rate of 28 percent, India’s trade deficit with Asean members has risen from a level of $3.5 billion to $14.5 billion in 2007.And it is unlikely that India will overtake China’s huge lead in trade in the foreseeable future as Chinese exports to Asean are more than six times the volume of India’s.Nevertheless, when Asean Affairs interviewed Indian business leaders they saw opportunities in the Asean market as well as down-sides.

China as ASEAN Trade Partner

Value - Yr. 2008: in US$ millionExports 106,976.6Imports 85,556.5

Share to Total ASEAN Trade - Yr. 2008:

Share in percent

Exports 12.2Imports 10.3

Source: ASEAN Free Trade Area (AFTA), ASEAN Merchandise Trade Statistics Database Table: www.Business-in-Asia.com

India as ASEAN Trade Partner

Value - Yr. 2008: in US$ millionExports 17,329.1Imports 30,082.8

Share to Total ASEAN Trade - Yr. 2008:

Share in percent

Exports 2.0Imports 3.6

Source: ASEAN Free Trade Area (AFTA), ASEAN Merchandise Trade Statistics Database Table: www.Business-in-Asia.com

INDIAin Spotlight


Doing business with Asean countries challenges Indian companies to be swift and steadfast in their movements. While India’s trade with Asean nations consists of roughly 10 percent of its global trade, the Asean-Indian bilateral trade is expected to reach US$ 50bil-lion this year.

The gross domestic product of the Asean countries is equivalent to that of India. An integrated market offers large op-portunities for companies in the region and Indian companies.


INDIA IN ASEAN

How does the closer relationship between India and Asean – in trade and investment – readjust the way Indian companies doing business in the region?

Ajit Venkataraman: Culturally, people in India and ASEAN share a lot in common. Increase in trade relations normally acts as a catalyst to further improve the relationship between people in the region. This can clearly be seen in the number of tourists that arrive from India into the region. O.P. Modi: The fact that Asean is India’s fourth-largest trading partner after the EU, U.S. and China poses tremendous opportunities as well as challenges to Indian companies. Doing business with Asean countries challenges Indian companies to be swift and steadfast in their movements. While India’s trade with Asean nations consists of roughly 10 percent of its global trade, the Asean-Indian bilateral trade is expected to reach US$ 50billion this year. Under the Asean-India goods Free Trade Agreement (FTA), Asean member countries and India will lift import tariffs on more than 80 percent of traded products between 2013 and 2016 as well as a tariff reduction of 5 percent on certain goods by 2016. The change in government and its fiscal policies towards tariff liberalization as well as the lifting of caps on foreign direct investment opens up tremendous opportunities for Indian exporters to gain additional market access into Asean markets. Indian manufacturers will be able to source intermediate prod-ucts at competitive prices from the Asean markets for further reprocessing and export. In short, doing business with Asean countries has opened lot of doors that were earlier closed.

Asean is about to launch an inte-grated market in 2015. Does that mean better prospects for Indian companies – both those already there in Asean and those consider-ing entering Asean, why?

Ajit Venkataraman: The GDP of the ASEAN countries is equivalent to that of India. An integrated market offers large opportunities for companies in the region and Indian companies. Most of the economies in the region are in the rapid growth phase similar to India. The needs and the aspirations of the people will be a lot similar.O.P. Modi: Yes. For example, the energy sector companies from Asean and India could cooperate with each other in oil and gas exploration and in downstream processing activities. As an example, India’s national oil company is already involved in a joint venture to explore oil and natural gas in Vietnam. More specifically, India faces persistent shortages of cooking oil, while Malaysia and Indonesia are major palm oil producers, creating opportunities for mutually beneficial cooperation. In-dia is a major importer of forest products, while Indonesia and Myanmar are major exporters of these products. This indicates another potential area of expansion of bilateral trade. Similarly, Thailand’s expertise in food processing industry, particularly in deep-sea fishing and other marine related activities represents another area wherein cooperation is likely to be fruitful. In addition, Most of the Asean countries are heavily dependent on imported drugs and health care equipment. Indian pharma-ceutical companies are internationally competitive in certain areas, particularly in generic drugs that are much cheaper than branded drugs.

Aditya Birla Group is a US$28 billion corporation active in 25 countries pro-ducing aluminum, copper, fiber, cement and fertilizer. More than 50 percent of its revenues come from operations outside India. In India it is strong in fiber production, telecommunications, insur-ance and operates a supermarket chain.

Tata Motors (Thailand) Limited com-menced operations in Thailand in early 2008 with the introduction of the Xenon 2.2L VTT DICOR common-rail diesel pickup followed by the Tata Xenon Super CNG ,Thailand’s first pickup truck with a factory-installed 100 percent CNG system.

The Voice of Southeast Asia12 Magazine • July - August 2010

Birla Group Operation in Thailand Tata Motors - Thonburi Automotive Assembly Plant (TAAP) Co.Ltd. (Thailand)

TUESDAY, AUGUST 3, 2010 The Mandarin Oriental, Kuala Lumpur, Malaysia.

Save Our Planet is a series of forums focusing on meeting the challenges of global warming and reducing man’s carbon footprints. The next Save Our Planet will be in Kuala Lumpur, August 3. The first Save Our Planet was held in Bangkok in March. Future events are planned for India and a Save Our Planet megaconference in New

York City. The Save Our Planet forums are organized by the Asean Affairs Business Council.

Your chance to Save Our Planet www.ASEANAFFAIRS.com

REGISTER AT:http://www.aseanaffairs.com/events/save_our_planet_malaysia

Participation By Invitation Only

SESSION 1 – ‘GOVERNMENTS AS CHANGE AGENTS – AN UPHILL TASK’Speakers:YB Dato’ Sri Peter ChinMinister of Energy, Green Technology & Water, Malaysia(Keynote Address)YB Tan Sri Rafidah Aziz, MPAdvisor & Patron, the Malaysia-Europe Forum (MEF) & formerMinister of International Trade & Industry, MalaysiaH.E. Vincent PiketAmbassador & Head of Delegation,The Delegation of the European Union to MalaysiaModerator:H.E. Dr Guenter Georg GruberAmbassador, Federal Republic of Germany to Malaysia

SESSION 2 – ‘COMPANIES AS CHANGE AGENTS: LEADING THE WAY’

Speakers:Mr Bernhard RackSenior VP OperationsQ-CELLS MalaysiaMr Thomas BrandtHead of the Environment Energy and Green Tech CommitteeEU-Malaysia Chamber of Commerce & Industry, EUMCCI

Energy and Climate ChangeMr Tony NovakCountry General ManagerEmerson (Thailand) LtdMr Niraj SharanChairman, Aura Inc. & Aura Energy

Moderator:To be confirmed

SESSION 3 – ‘THE SUSTAINABLE CORPORATION’Speakers:

Mr Prakash ChandranChief Executive OfficerSiemens MalaysiaMr M.R. ChandranAdvisor to the Executive BoardRoundtable on Sustainable Palm Oil (RSPO)Ms Julie Anne McLaughlinRegional Director South East AsiaE.ON Climate & Renewable Carbon SourcingDato’ Haji Syed Zainal Abidin Syed Mohamed TahirGroup Managing DirectorProton Holdings BerhadMr Nor Azlan ZulkifliCountry ManagerCCM Siam LimitedMr Pierre J BarthesGeneral ManagerMandarin Oriental Hotel Kuala LumpurMr Hans Guttman

Coordinator The Wetlands AllianceAIT Asian Institute of technology (Thailand)Mr Herbert DittmarManaging DirectorBayer Co. (Malaysia) Sdn BhdModerator:Mr Puvan SelvanathanGroup Chief Sustainability OfficerSime Darby

SESSION 4 – ‘FINANCING THE FIGHT AGAINST CLIMATE CHANGE’Speakers:Mr Shayne HeffernanFounderHeffernan Group & Ebeling Heffernan

Speaker from Malaysia (ADB/ RHB)To be confirmed

Moderator:To be confirmed

&BUSINESS COUNCIL


INDIA IN ASEAN

What are the key factors an Indian company should take into account before deciding on making an invest-ment in Asean?

Ajit Venkataraman: It is critical for Indian companies to understand the people of the region and their culture. Although, the countries in the region share a long history, fundamentally, the nature of people is very different. Without understanding this, it will be very dif-ficult to operate. Companies should have a long term view for the region. This is one of the fundamental ways to win the confidence of the people.Most of the Indian brands are unknown in the region. Brand building takes time and investment and should not be ignored.O.P. Modi: Political and economic structure, banking and finance, foreign investment incentives and restrictions, free trade agreements, taxes, labour environment, government policy and transfer pric-ing.

What do think are the pros and cons of doing business in Asean consider-ing the members’ different levels of development?

Ajit Venkataraman: The different levels of development in various countries is an opportunity. The more advanced countries offer us an opportu-nity to accelerate our learning and the less advanced countries offer us an opportunity to improve the quality of life in those countries faster.

O.P. Modi: Pros: a) Benefits from increased exports and imports, b) Wider access to more markets.Cons: a) more countries must reach agreement in each sub-sequent round of negotiations b) prolonged decision making/agreements.

Assuming that you have decided to open a business in Asean, where would you set up your headquarters, why?

Ajit Venkataraman: We are currently evaluating our options.O.P. Modi: Singapore. First and foremost, there are no language barriers. It has traditionally had a dynamic economy, with strong service and manufacturing sectors, and one of the highest per capita gross domestic products (GDP) in the world. Its airport, port and road systems are among the best in the world. Singapore’s economy has always depended on international trade and on the sale of services. Its major industries include electronics, financial services, oil drilling equipment, petroleum refining, pharmaceutical manufacturing, processed food and beverages, rubber products and ship repair. In recent years, the govern-ment has moved to reduce reliance on the manufacture and export of electronics by developing its services sector, as well as its biotechnology, chemical and petrochemical industries. Singapore’s small population and dependence on external markets and suppliers has pushed it towards economic open-ness, free trade and free markets. This, as well as government policies that foster economic development, have been key fac-tors in Singapore’s historically strong economic performance. The government has continued to pursue an outward-looking, export-oriented economic policy that encourages two-way flows of trade and investment which makes Singapore one of the most attractive places to do business.

The decade-long partnership between India and the Associa-tion of South East Asian Nations (Asean) is now developing with new momentum. India became a full dialogue partner at the fifth Asean summit in Bangkok in 1995 and joined the Asean Regional Forum in 1996. India and Asean have been holding summit-level meet-ings on an annual basis since 2002. Since 2009 this relation-ship has become one of the most important trade dynamics in the region, China and Japan have been fast to embrace Asean and Asean Free Trade Agreement opportunities but the real business relationship between India and Asean is just beginning. Although China dominates Asean discussion after the sign-ing of the China-AFTA Free Trade Agreement (CAFTA) that created the third largest Free Trade Zone in the world, India has an existing Free Trade Agreement (FTA) with the ASEAN members signed in Thailand in 2009.ASEAN and India are set to lift import tariffs on more than 80 percent of trade prod-ucts between 2013 and 2016, delivering huge opportunities for trade development. Asean is now India’s fourth-largest trading partner after the EU, U.S. and China. In 2008-09 India’s exports to Asean to-taled US$ 19.14 billion, an increase of 16.62 per cent. During April-June 2009, India exported goods worth US$ 4.41 billion to Asean.

India imported goods worth US$26.20 billion in 2008-09 from Asean. During the period April-June 2009, India’s imports totaled US$ 6.24 billion. Breaking these numbers down to a per country level it is clear how important India-ASEAN Trade is set to become. Singapore is the most active investor in India from the Asean region. Foreign Direct Investment (FDI) inflows from Singapore between April-December 2009 reached US$ 1.70 billion. The total bilateral trade during 2008-09 was US$ 16.1 billion, an increase of 3.86 per cent over US$ 15.5 billion in 2007-08.

Thailand - India trade touched US$ 4.64 billion in 2008-09, as compared to US$ 4.11 billion in 2007-08, a growth of 12.9 percent. Thai investment in India is in telecommunications, hotel and tourism, food processing, trading and chemicals. Thailand is targeting US$ 10 billion bilateral trade in 2010. Indonesia - During the period 2008-09, India exported goods worth almost US$ 2.55 billion to Indonesia. Total bilateral trade during 2008-09 was US$ 9.22 billion-an increase of 32.08 per cent over the trade figure of US$ 6.98 billion in 2007-08. Malaysia - India trade amounted to US$ 10.5 billion during 2008-09. During this time, US$38.7 million worth of Malay-sian investments in India were made primarily in sectors like construction, real estate and business services. India is the ninth-biggest investor in Malaysia. Myanmar - During 2008-09, India exported goods worth US$ 221.64 million to Myanmar. These items included iron and steel and pharmaceuticals. Bilateral trade stood at US$ 1.15 billion during 2008-09, an increase of 15.70 percent over US$ 994.45 million in 2007-08. Vietnam - Indian trade grew to US$ 2.14 billion in 2008-09 from US$ 1.78 billion in 2007-08, registering a growth of 20.38 percent. Trade between India and Philippines was worth US$ 998.54 million in 2008-09 as compared to US$ 824.87 million in 2007-08, an increase of 21.05 percent. Cambodia - During 2008-09, bilateral trade between the two countries stood at US$ 49.61 million. India exported goods worth US$ 46.90 million to Cambodia in 2008-09, comprising pharmaceuticals, coffee, tea, spices and cotton. Companies and governments need to take a strong look at how fast ASEAN-Indian can become a major part of their future business, India will bring to ASEAN an amount of trade and opportunity equal to if not greater than China has delivered to the region.

India-Asean trade: “just beginning”

By Shayne Heffernan

Shayne Heffernan brings more than 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over US$500m and 1 that reach a peak market cap of US$15billion. He has managed and overseen start-ups in Mining, Shipping, Technology and Financial Services.

INDIAin Spotlight


Thonburi Automotive Assembly Plant (TAAP) Co.Ltd. (Thailand)


Carla Cico, presently CEO of Rivoli Group S.p.A., a leading Italian Company in Civil Infrastructure, present in South America, Africa and Eastern Europe. Born in Verona, Italy, she earned her MBA at London Business School.Former CEO of Brasil Telecom, S.A., the third largest Brazilian fixed-line operator and of Ambrosetti ( Beijing), China, part of the Ambrosetti Group, an international strategic consultancy company, whose headquarters is in Milan, Italy. She was the first South American female CEO in the telecom sector.


GROW YOUR BUSINESS IN INDIA

GROW YOUR BUSINESS IN INDIAWhat business leaders think about doing business in India

CARLA CICO CE0

Rivoli S.P. A. Italy

MADHU KONERU Executive Director

Trimex, UAE

RON SOMERS President

U.S.-India Business Council, USA

HEINZ DOLLBERGExecutive Vice President

Allianz, Germany

TOM SCHICKExecutive Vice PresidentAmerican Express, USA

ANUSORN MUTTARAIDExecutive Director

Delta Electronics-Thailand

India has steadily become one of the most appealing coun-tries for foreign investments, even if it has to fight strong compe-tition from some Asian countries, first of all China. The last five years have been quite good, but I think that depending on the at-titude of the India government the investment could increase much more in the next five years. It is important to focus on the develop-ment of the infrastructure first.

One of the reasons why China has developed so fast is due to the fact that in the last 15 years a lot of investment has been poured into the upgrading of the infrastructure. India should fol-low this example. Good infrastructure is the key to fast develop-ment. Therefore, this should become the focus of the Indian gov-ernment in the next five-10 years.

India is one of the largest countries in the world, with a good geographical position, with an understanding of both Asia and western culture. These are some of the factors that should push foreign companies to invest in India.

I think that India has not yet shown to the world its real po-tential and value: they should look to the Chinese to learn how to advertise themselves.

The past five years for U.S. companies investing in India has been “game-changing”. Under the Bush Administration a new sense of hope buffeting U.S.-India ties ushered in greater awareness by U.S. companies looking at India, and created within India a greater sense of trust in U.S. companies as ‘reli-able suppliers’. The result: a doubling in two-way trade between the two countries to more than U.S.$40 billion. And a new ad-vent has taken place: investments going both ways of about $11 billion each.

There is no question that India’s infrastructure shortages presents a major hurdle to attracting greater investment flows into India. But infrastructure development is happening – and to a mind-boggling -degree. The Hyderabad Airport is just one example. The Jamnagar refinery owned by Reliance is another. Hazira LNG built by Shell, the Noida Toll Bridge, the Delhi Metro, the Bangalore Airport – these are all examples of public/private partnerships that have enabled infrastructure to come up in a relatively short time frame.

Carla Cico, CE0 Rivoli S.P. A. Italy Ron Somers, President, U.S.-India Business Council, USA

Carla Cico, Chief Executive Officer, Rivoli S.P.A., Italy - “the global importance of the Indian economy increases.”

Ron Somers, President, U.S.-India Business Council, USA

Ron Somers is president of the U.S.-India Business Council (USIBC), the premier business advocacy organization committed to strengthening U.S.-India commercial ties and deepening two-way trade between these two dynamic economies.Somers holds a master’s degree from the Bread Loaf School of English, where he studied at Lincoln College, Oxford University. He graduated with a bachelor’s degree from Middlebury College in Vermont. Somers and his wife, Rebecca, live in Washington D.C.

INDIAin Spotlight



GROW YOUR BUSINESS IN INDIAGROW YOUR BUSINESS IN INDIA

Over the last five years, India has emerged to become one of the top recipients of foreign direct investment (FDI). Ma-jor initiatives like industrial decontrol, liberalization of trade policy, full commitment to safeguarding intellectual property rights, financial sector reforms, and liberalization of exchange regulations, have provided a liberal, attractive, and investor friendly investment climate. These initiatives, combined with India’s robust domestic economic development, have helped make the country the world’s fourth largest economy in terms of Purchase Power Parity and the tenth most industrialized country in the world.

Moreover, as other countries emerge slowly from the shadow of the economic slowdown, India’s resilience over the last several years and its promise of continued high rates of growth will make it only more attractive in the near term. Ernst & Young’s European Attractiveness Survey ranks India as the world’s fourth most attractive FDI destination in 2010. And the World Investment Prospects Survey, by UNCTAD, places India in the top five best foreign direct investment desti-nations in 2010-11.

There may have been a time when China was perceived by foreign investors as a must-do, while India was looked upon as a nice-to-have, but that has changed; both are understood as musts by serious foreign investors.

The government of India realized more than a decade ago the crippling absence of a robust infrastructure backbone and has made rapid strides towards building one. According to industry leaders, India is likely to invest US$1.7 trillion in infrastructure projects in the next decade. Investments in the country’s infrastructure sector doubled from 4 to 8 percent

of gross domestic product over the past five years, and the government now plans to take it to 9 percent by the year 2012. One huge, near-term impetus to serious focus on development will be the upcoming Commonwealth Games. The government has earmarked more than US$5.5 billion for expanding current infrastructure.

Tom Schick, Executive Vice President, American Express, USA

Swarup Roy, Chairman of Asean Affairs (center) chairing the session on “Sustainable Corporations” at the Global India Business Meeting, 22nd June 2010, Madrid, Spain.

China, in the past, has received significantly larger invest-ments than India. While both China and India will continue to be preferred overseas investment destinations for multination-als, there is now a growing preference for India over China.

An economic examination shows, that unlimited labour supply at low cost has been a major ingredient behind China’s economic success story in the past. However, perceptions are changing at the moment: social pressure is mounting in China to increase wages and to improve labour conditions in general. As a matter of fact, many Chinese companies have started to increase wages considerably, the same holds true for the state provinces. Without trying to quantify the impact of these mea-

sures, higher labour costs in China could make other countries with a similar export structure more competitive than China and lead to a shift in investors´ attention from China to other countries.

While both China and India are expected to maintain their high growth rates over the next decade, the sustainability of growth seems more certain in India. China now seems to have reached a stage where there has been substantial overin-vestment in a number of sectors and huge excess capacity has been built up in the manufacturing sector. India, on the other hand, is still at the beginning of its investment cycle.

Heinz Dollberg, Executive Vice President, Allianz, Germany

India has skilled, English-speaking labor at far cheaper rates than can be found anywhere else. Approximately 85 per-cent of its population is younger than 45, giving India vitality and forward momentum. To capitalize on this reality, particu-larly in high-tech and export zones, India must stay focused on increasing access to power and water. India’s strong legal system and low-cost, high-skill labor market offer investors further incentives.

India has seen heavy investment in sectors driven by

consumer demand, which has primarily benefited large cities, as they already enjoy developed infrastructure. However, we need to look beyond India’s cities and target less-developed areas. To that end, industrial growth will require feasible infra-structure, power and water. The government has made build-ing infrastructure a priority, meaning investment will flow into sectors like power and transportation, which are instrumental for developing growth.

Madhu Koneru, Executive Director, Trimex, UAE

Tom Schick, Executive Vice President, American Express, USA - on the next big driver for India’s growth story.

Heinz Dollberg heads up the Asia Pacific Division of Allianz SE since 1998. In his current capacity he is responsible for managing operations in Asia, Middle East, North Africa, in collaboration with Allianz offices across the region. He travels between Allianz headquarters in Munich and the subsidiaries frequently to oversee operations.He was appointed Honorary Professor by two universities: the Southwestern University of Chengdu, in China and the Tongji University of Shanghai. He is married and has two children.

Madhu Koneru, Executive Director, Trimex, established Minerals, Energy & Commodities, a subsidiary of Trimex, a US$ 5 billion development of integrated industrial facilities, including building Indonesia’s first private railway, 130 kilometres, and developing one of the largest green field coal mines in Asia in East Kalimantan Province of Indonesia.

Mr. Schick has served in his current position and as a member of the company’s Operating Committee since 1993. In addition to his corporate responsibilities, he serves as Co-Chairman of the Board of the International Rescue Committee, a Director of US-India Business Council, and a member of the Asia Society Business Council and of the Council on Foreign Relations.

One of the reasons why China has de-veloped so fast is due to the fact that in the last 15 years a lot of investment has been poured into the upgrading of the infrastruc-ture. India should follow this example. Good infrastructure is the key to fast develop-ment. Therefore, this should become the focus of the Indian government in the next five-10 years. I think that India has not yet shown to the world its real potential and value: they should look to the Chinese to learn how to advertise themselves.

INDIAin Spotlight



Anusorn Muttaraid, Executive Director, Delta Electronics, Thailand

The Thailand-based electronics manufac-turer has invested US$100 million in India and has three operating plants with a fourth being built in Chennai.

Delta Electronics (Thailand) was initially set up as a cost-effective production base for the Delta group of Taiwan, but in 1988 spun off as a separate entity. Its businesses are now mainly in power management solu-tions and manufacture of electronic components i.e. cooling fans, electromagnetic interference filters (EMI) and solenoids. The company also operates plants in Ger-many and Slovakia. The company has more than 10,000 employees across the globe.

In an exclusive Asean Affairs interview, Executive Direc-tor Anusorn Muttaraid, describes Delta Electronics’ experi-ence since entering India in 2005. The Thailand-based electron-ics manufacturer has invested US$100 million in India and has three operating plants with a fourth being built in Chennai.

Muttaraid said that that Delta’s revenue from India had risen from US$5 million during its first year (2005) of operation within the country to a current US$200 million.

The future Delta plan, relying heavily on the start of the Asean common market is to “buy parts from other Southeast Asian countries, assemble them in India and sell them in Eu-rope,” he said.

“India is especially strong in producing metal parts, and Delta plans to use a lot of them”, he continued.

This assembly process mirrors a present Delta supply chain, described by Anusorn . Finished products are sold in

Europe with parts made in Thailand by Delta that are assem-bled in Germany.

Anusorn said he enjoyed doing business in India with its big domestic market and contrasted the business climate there as midway between the European Union’s (EU) and the United States, that’s why Delta is expanding its operations in India.

He observed that the 36-hour work week was strictly en-forced in the EU and if he arrived at a facility on a Friday af-ternoon, there might be no one available to meet, while in the U.S., he can always count on staff to work “9 to 5.”

In India he noted the workers put in a seven-day work week and there are many workers available. Currently, in Thailand, he is short 1,000 workers and will need 2,000 more workers soon after that. The availability of labor in India, was a major consideration in Delta’s move to India.

When Delta opened in Pondicherry, the unemployment rate was 16 percent for male workers, Anusorn discovered.

Another factor in entering India that helped Delta secure a market position was India’s poor infrastructure, meaning, in this case, frequent electrical outages that still exist today. Del-ta began manufacturing UPS units to back up computers and other electrical devices during India’s frequent power outages and “sold a lot of them”, according to Anusorn.

The next product Delta starting making in India was LCD TVs. Delta staff in Thailand noticed that Indian tourists

INDIAin Spotlight



CHINA INDIA ASEANWhich is the leading destination for US investments?

The Answer

l $ 16 billion : India

l $ 45 billion : China

l $ 173 billion : Asean (2008 figures)

JOIN ASEAN AFFAIRS PREMIUM

www.aseanaffairs.com/premiumGet the answer and more…

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returning to India took home LCD television sets purchased in Thailand. When questioned about this, the tourists said that even after the duties they paid, the TVs were still cheaper than those sold in India.

However, India, does have its drawbacks and these began to surface in Anusorn’s interview during the LCD story.

He noted that the Indian companies that supplied parts for the LCDs were taxed heavily on these parts, although the finished export product was not taxed. He met with Indian Commerce Minister Anand Sharma in 2009 and told him that “India would never be a major exporter, unless this indirect method of taxation,” was addressed.

The regulatory structure of India also is difficult, Anusorn said. In the United States and the EU, when new regulations are adopted, the old regulations are removed. But in India, all the old and new regulations remain on the books, so the en-forcement officer “can choose which regulations he wants to enforce,” according to Anusorn.

Other issues that vexed the Delta executive are cultural issues such as corruption embodied as “tea money”, male versus female issues and unique Indian problems such as the theft of electricity from the grid and keeping cattle and other

livestock off the roadways.As a Thai, Anusorn is used to “tea money” bribes and said

every step of the way in India was paved with these bribes. Similar patterns existed in Thailand, however, and it amused him more than bothered him when he encountered the same in India.

The cultural disparity in the way male and female work-ers were treated, however, seemed to disturb him. Male work-ers were paid more than female workers, although they did the same thing and Anusorn said that Delta actually preferred female workers. Delta now has a factory only for women and they are paid the male rate for working there. He also ob-served that India’s unemployment rate does not include unem-ployed women.

Looking to the future, Anusorn said the key to India’s growth will be the government. He said the central govern-ment has more power now, but change of every type, including the social and cultural, would come slowly.

Delta’s revenue in its LCD production was up in India last year, but minus that, the company would have experienced negative growth, he concluded.

In India, all the old and new regulations remain on the books, so the enforcement officer ‘can choose which regulations he wants to enforce.’ The central government has more power now, but change of every type, including the social and cultural, would come slowly. Our revenue in LCD production was up in India last year, but minus that, the company would have experienced negative growth.

Anusorn Muttaraid is Managing Director of Delta Electronics-Thailand and previously held a number of executive positions in Thai industry and also worked for the Food and Agriculture Organization of the United Nations. He earned his Ph.D. from Iowa State University, USA.

INDIAin Spotlight

22 Magazine • July - August 2010

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THE DRIVERS OF INDIA INC

GLOBAL INDIAN COMPANIES

C.P. GURNANICEO

Mahindra Satyam

RAJAN BHARTI MITTAL Vice Chairman and MDBharti Enterprises and

President of the Federation of Indian Chambers of Commerce and Industry

RANA KAPOOR CEO

YES Bank

Gurnani, known as C.P. to his colleagues, is the CEO of Mahindra Satyam. Prior to moving to Mahindra Satyam, CP headed Tech Mahindra’s Global Operations, Sales and Marketing functions, and led the devel-opment of Tech Mahindra’s Competency & Solution units. He has extensive experi-ence in building international business, start-ups, turnarounds, joint ventures and mergers & acquisitions. He takes a keen interest in community work and was nomi-nated by Ernst & Young for the Entrepre-neur of the Year Award in 2007.

Rana Kapoor is the founder and manag-ing director and CEO of YES BANK. As a professional entrepreneur, since 2003, he is progressively establishing a high quality, state-of-the-art private Indian Bank with a vision of “Building the Best Quality Bank of the world in India” by 2015. He has re-cently become a member of India’s Board of Trade.

Rajan Bharti Mittal is the vice chairman and managing director of Bharti Enterprises - one of India’s leading business groups with interests in telecom, agri business, financial services and retail. Mr. Mittal joined Bharti Enterprises after graduating from Punjab University. An alumnus of Harvard Business School, he is actively involved in overseeing the activities of the group at the corporate level and has rich experience in marketing activities. He is also involved in many new business ventures of the group.

CP Gurnani speaking at the debate ‘Building Global Brands’ at IESE (The Spanish Business School) Madrid campus on June 23, 2010. (Left)Swarup Roy, Chairman Asean Affairs, (Right) Mike Singh, Chairman Telekom Caribe.

I am sure our efforts will lead to increased trade en-gagements with China where the two-way trade is already close to US$50 billion and also the Asean countries.-Rajan Bharti Mittal

How would you describe the contribution by global Indian companies toward the Indian economy?

Gurnani: Global Indian companies are the flag bearers of the Indian economy. They are testimony to the success of global-ization and the ability of Indian companies to compete with the best from across the world.Kapoor: Indian multinationals have been able to attract strong capital flows to India on the back of marketing India as an under-penetrated market with a rich reservoir of human capi-tal, ability to develop and adopt technology with strong gover-nance processes supported by sound financial and regulatory

structure. Mittal: Not only have these companies consolidated their position in the Indian market by introducing the right products and adhering to the right strategies, they have also made their mark globally by investing large amounts in all continents across the world. Expanding their presence in the Indian mar-ket has led to increased contributions from them in terms of tax revenues, employment, and the development of backward areas.

Global trade and investment is perceived to be shifting eastward. What does this mean for Indian multinationals?

Gurnani: This is good news for Indian multinationals, as one can expect these to be future markets for the products and ser-vices that they offer, as local demand starts moving up the val-ue chain. Moreover, with Indian markets likely to be opened up further for international players, there will be greater emphasis on quality, service and localization which is a positive.Kapoor: PE multiples of markets in India and China in the range of 16-17 percent are higher than US 14.2 percent and UK / Europe in 12X range. Indian corporations are able to attract capital at attractive rates on the back of higher growth pros-pects.

Mittal: In terms of trade, the U.S. and Europe have always been important regions but our trade with the Middle East, South East Asia, China was also substantial. Post-2008, there has been a renewed effort to enhance our trade with the non-U.S., non-European countries and we are in search of new mar-kets to achieve our trade targets. I am sure our efforts will lead to increased trade engagements with China where the two-way trade is already close to US$50 billion and also the Asean coun-tries.

Signing an agreement between Federation of Indian Chambers of Commerce and Industry and the Spain-India Council Foundation.

In this Asean Affairs interview, C.P. Gurnani, CEO, Mahindra Satayam; Rana Kapoor, CEO, YES Bank and Rajan Bharti Mittal, Vice Chairman and Managing Director, Bharti Enterprises trace

the development of Indian multinational companies and their importance in the Indian economy.

INDIAin Spotlight



Closing Plenary - Building Global Firms of Indian Origin

Gurnani: On the CSR front, there is so much that can be done for the larger society, that we are part of, that there is no dearth of opportunities to contribute. At Mahindra Satyam we pioneered the concept of Emergency and Healthcare Management such as emergency ambulance service. On sustainability, India Inc is seized of its respon-sibilities.Kapoor: India Inc is far behind most in the current waves of CSR and sustainability. As a nation we have a long history of generous corporations using philanthropy to work with the communities where we operate. Moving to

Please comment on India Inc and its standing among global corporations on the corporate social responsibility (CSR) and

sustainable development fronts.a more strategic, mainstream engagement has been slow – but is the key to India’s development, both to seize op-portunities as well as mitigate risks. Mittal: We are addressing a massive opportunity of in-cluding millions in this growth story as new and untapped markets unfold. However, we have challenges - developing human capital in general and quality talent for employ-ment as well as infrastructure to support these exciting changes and opportunities. This we are doing fully con-scious of social and environmental imperatives and look for environment friendly technology transfer.

Gurnani: Indian multinationals would definitely be very keen on focusing on the home market where opportuni-ties exist. If the market exists for their products/services, one would unlikely not tap the home advantage. I think it’s only a question of time that we become consumers of things that we now produce/deliver to other parts of the world. Kapoor: Global Indian companies must also focus on the home markets and improve their product, services and approach or else face irrelevance and being overwhelmed,

The recent summit in Bangalore, where both Indian and foreign multinationals pledged billions of dollars in investment,

reflects India’s growing strength as a competitive investment destination. Why should (or why should not) global Indian

companies be focusing more on the market at home?e.g., the white goods sector from being Indian company dominated 7-8 years ago has completely transformed as the local companies did not grow technologically.Mittal: With income levels rising, discretionary spend-ing will also increase and India is expected to be the fifth largest consumer market in the world by 2025. Our de-mographic dividend is unmatched and our manufacturing and service sector is robust. When these factors attract foreign companies to India, why would global Indian com-panies ignore their domestic market?

GLOBAL INDIAN COMPANIES

Gurnani: It is inevitable that we will see consolidation in many sectors and I expect Indian companies will be much more active in executing cross-border transactions as they reach out to cater to new markets. We have already seen this happening with several old economy heavyweights picking up assets across the globe in areas such as auto-motive, energy and metals.Kapoor: Indian companies in search of size will continue to seek targets overseas. Sectors like minerals, metals, chemicals etc will be active in this regard. Overall, we will

Where do you see the merging and acquisition (M&A) drive among Indian companies going in the next five years?

see an increased merger and acquisition activity among In-dian companies with a bias towards small domestic deals and large cross border deals.Mittal: I feel that there is no question of a slowdown in the M&A activities in the next five years. It is difficult to pinpoint a particular region or country as a preferred des-tination and say that most M&As will be directed there. Indian companies will always be on the lookout for oppor-tunities that they feel will be worth pursuing.

CP Gurnani, Chief Executive Officer, Mahindra Satyam, India, summarizing the results of the

Global India Business Meeting.

Rana Kapoor, Chief Executive Officer, Yes Bank, India, on what is needed to build global firms of

Indian origin.

Rajan Bharti Mittal, Vice Chairman & Managing Director, Bharti Enterprises - ‘when the world was

melting, India still stood its ground’.

INDIAin Spotlight



SUDIP BANERJEE Chief Executive Officer

L&T Infotech, India

NIRAJ SHARAN Chairman & CEO

Aura Inc, India

Sudip Banerjee is Chief Executive Officer of L&T Infotech, India, is a 30-year veteran of the software industry in India. He received a management degree from the All India Management Association and graduated with a bachelor’s degree in economics from Shri Ram College of Commerce.

Mr. Niraj Sharan is the Founder, Chairman and CEO of Aura Inc & Aura Energy that has operations in the U.S., India and Italy. Aura provides Manufacturing, System Integration and Technology, consulting to oil gas and power firms and the petrochemical industry.

BUILDING A STRONGER INDIA

With the launch of the Asean Common Market in 2015, what are the prospects for Indian SMEs to penetrate that market ?

Banerjee: Essentially the Asean Common Market creates a market of around 4 billion consumers, making it the largest single area of economic activity in the globe. With two of the BRIC nations in this common market, it creates tremendous opportunities for SMEs not just Indian but also Chinese, Thai, Malay, Indonesian, Philipino, Singaporean and others to cater to a wider audience. For the Indian SMEs in particular, itcreates opportunities to improve the quality of their product and servicing offerings and compete on a global scale. With technology giants like IBM making noises to use their war chest to acquire firms in India to actively participate in the SME market segment, the opportunities for atleast Indian ISVs catering to the SME segment are very high. But, this is not sim-

ply restricted to technology.Global companies will be using the acquisition route to ac-tively participate and play in the Asean market.Sharan: Customs duty barriers historically in Asean have been significantly higher than rest of the world with duties touching 50 percent plus in some cases. This has been one of the major bottlenecks in this “collaborative” environment where value addition with price performance drives the market fiercely. With the “zero” duty regime signed recently and a common market, this relatively under leveraged market will see major trade boom – both between each other as well as globally as a value added Made in “Asean” brand.

What are the major factors that an Indian SME would look at before entering the ASEAN market ?

Banerjee: Indian SMEs are usually very conservative by na-ture and are loath to invest ahead of the curve, except those in the high tech areas, the SME’s would look at support from the member countries in terms of an ‘ecosystem’. Taking the carpet weaver from Saharanpur’s story forward, he/she would look for introductions to ‘carpet buying groups’ within the ASEAN member nations and would look to some short cutson understanding policies around ‘approved vendors’. In many countries, it may mean creating limited liability companies with local equity participation. In such cases, they would look at assistance from either the Big 5 (KPMG, E&Y etc) on tax,labor and repatriation issues. Largely, SMEs are good cor-porate citizens, so, they would not cut corners, but definitely look for fast track assistance in the form of a single window

clearance, transparent tax and labor laws etc . Indian SMEs orIndian firms serving the SME segment will also be looking for active global partnerships to play in the ASEAN market, there-by minimizing some risks.Sharan: SME will do well to start from the fact that trade and markets will increase almost exponentially in this regime. Hav-ing said that, sustained availability of soft and hard infrastruc-ture, a safe and just environment, banking support, labor laws and work visa , would be essential for any SME to evaluate. Availability of lower cost capital should be evaluated carefully by an Indian SME as they have been bogged down with this impediment in India for decades. I say this because, Capital in India is available more freely to the large Industry and SME’s have still a hard time getting funded.

What are the advantages and disadvantages for Indian SMEs doing business in ASEAN ?

Banerjee: There are no disadvantages as such, the opportu-nity cost for not participating in a global market is enormous. I am assuming that this is not lost on our SMEs. Some of the more enlightened ones have already taken a leadership posi-tion in this. There is a feeling that this common market cre-ation will separate the men from the boys.Sharan: Advantages – this is the first step for Indian SMEs to

go “global” in a controlled environment with minimal risks. It also allows a more fair play as many Indian bottlenecks of la-bor laws, capital scarcity and challenging infrastructure would not be there, allowing for full potential initiatives.Disadvantage- lack of global management practice, inability to work in teams with almost disdain for compliance.

What would be the preferred headquarter location in Asean for an SME to do business? What would be the important factors to be

considered in making that selection? Are there any countries that are especially appealing at this time and why?

Banerjee: There is no one answer for this, because it is going to be industry and geography specific, some folks in manufac-turing would prefer to go to either Malaysia or around Shang-hai, some in semiconductor design may want to go to Taiwan or Korea, whilst some in retail may want to go to Singapore or Philippines’, others in oil and gas may prefer Indonesia, folks from agri industry may prefer Vietnam.Singapore is increasing by becoming a gateway to India.

Sharan: For many Indians, Thailand would be the preferred location within the Asean region. Indians share social, cultural and spiritual beliefs with Thailand and there is an innate sense of bonding and comfort and to me this is a strong point infavor of Thailand. On top, Thailand offers a large God fearing, edu-cated and disciplined work force. Indian SME’s have struggled with these inadequacies and such support will catapult opera-tions to the next level.

What can Indian SMEs bring to Asean, that Asean does not already have ?

Banerjee: Straight off the bat, I can say that Indian software product companies have already been working here for eons and they have done reasonably well, however, their perfor-mance in Europe, Africa and the Middle East has been a lot better, the banks and telecom companies there have readily acknowledged that enterprises who used Indian products survived and weathered the storm better than products from other vendors.

Sharan: Indian entrepreneurship, the never say die attitude, strong multitasking, survival instincts, backed with strong technical and professional legacy is what Indian SME’s bring pretty fresh and strong on the table. Ability to fire fight and work against all odds using street smart innovation ( jugaad) is another thing pretty unique that Indian SME’s will bring to Asean region.

For Indian SMEs in particular, it (Asean common market) creates op-portunities to improve the quality of their product and servicing offerings and compete on a global scale. With technology giants like IBM making noises to use their war chest to acquire firms in India to actively partici-pate in the SME market segment, the opportunities for at least Indian independent software vendors catering to the SME segment are very high.

THE GROWTH OF SMEs

Indian small and medium enterprises (SMEs)

have traditionally been conservative. The Asean

market is huge and there are a large number

of SMEs that could be takeover targets. How would the new Indian

owners adapt to the local culture given their limited experience outside India. These and other issues will be discussed in the following conversation that Asean Affairs had

with two SME specialists.

INDIAin Spotlight



BUSINESS TITANS LOOK TO THE FUTURE

LEADING INDUSTRIES IN INDIA

G V KRISHNA REDDY Chairman

GVK Power and Infrastructure, India

PRAKASH HINDUJA Chairman

Hinduja Group-Switzerland

SUNIL GODHWANI Chairman and Managing Director,

Religare Enterprises Limited

Sunil Godhwani has been Managing Director of Religare Enterprise Limited, the holding company of Religare Insurance Broking Ltd. and Religare Commodities Limited since April 9, 2007. He is a graduate in chemical engineering and has a master’s in industrial engineering and finance from Polytechnic Institute, New York.

Ramkrishan Prakash Hinduja has been Chairman of the Board of Hinduaja Global Solutions Ltd since October 2007. He also serves as Vice Chairman of Gulf Oil Corp. Ltd. and has been its Non Executive Director since Aug. 19, 2002. He graduated in science and economics from University of Pennsylvania, Philadelphia, USA.

G V Krishna Reddy is the founder and chairman of GVK, a diversified business enterprise with interests in a wide range of businesses including power generation, airports, roads, urban infrastructure, bio-science, hospitality services and manufacturing sectors. In recent years, GVK has increasingly focused on the Infrastructure sector which has been identified as its core business area for future growth.

Leaders of three leading companies that drive the Indian

economy discuss the current position of their companies, their views on Asean, possible policy changes in government policy and the role of globalization.

What factors account for your company becoming acknowledged as a leader in its field?

Sunil Godhwani: Staying committed to the overall vision of Religare of becoming a global financial services player despite the volatility of the markets either in India or globally. Putting in place an aggressive and passionate team taken from among the best talent in the industry, who breathe and live the brand, backed by state of the art systems, processes and infrastruc-ture.Prakash Hinduja: Hinduja Group has been in operation for the past 96 years and we are present in 35 countries employing

more than 50,000 personnel in Group companies in many dif-ferent industries. Our Group principles are very well defined: Work to give, Word is a bond , Act local, Think global, Partner-ship for growth, Advance Fearlessly.G. V. Krishna Reddy: Doing value accruing projects, complet-ing projects on time, not compromising on quality, emphasiz-ing health, safety and the environment, managing cash and debt effectively, business performance and company reputa-tion.

Over the next five years what new government policy changes would you wish to see initiated?

Sunil Godhwani: India already has a fairly robust regula-tory system which will need regular upgrade as we con-tinue to move ahead and introduce new, innovative and sophisticated financial instruments. The biggest challenge for Indian regulators and policymakers would lie in keep-ing the market insulated despite the high level of integra-tion that we are set to achieve during the coming decade. Prakash Hinduja: The general economic direction in India is toward liberalization and globalization. But the process is slow. Before jumping into the market, it is

necessary to discover whether government policies exist relating to the particular area of business and if there are political concerns which should be taken into account. Although the Indian government is well aware of the need for reform and is pushing ahead in this area, business still has to deal with an inefficient and sometimes still slow-moving bureaucracy. G. V. Krishna Reddy: Extension of tax benefits for infra-structure projects and a set of dividend distribution tax on dividends distributed under a subsidiary-holding company.

Please comment on how globalization may affect your company and what research needs to be done.

Sunil Godhwani: Globalization makes the world our oyster and no doubt has a positive impact on Religare towards becoming a global financial services player. With globalization, our playing field intensifies and keeping our vision and goals at the forefront, everything is within reach. Because of globalization, the financial services in-dustry is constantly in a period of transition with market shifts, competition, and technological developments ush-ering in unprecedented changes.Prakash Hinduja: Globalization is going to become a natural phenomenon in the coming years. As costs go up, new and alternate methods of cost efficient process and products will be the need of the hour. Therefore, any re-

search done will be on these lines.As far as we are concerned, we are ready for this. India to-day is one of the markets with the cheapest cost of labor. As mentioned earlier, with increasing costs the businesses will start shifting to markets with cheap labor but with good expertise and productivity.In short, globalization will lead to development of new markets and products that are cost- efficient and high on quality.G. V. Krishna Reddy: A reduction in corporate taxes, power to be made a central subject rather than a state subject and globalisation brings in competition and I be-lieve that competition is healthy for any business.

Would you specifically comment on how you intend remaining at the top and what the opportunities and challenges are?

Sunil Godhwani: For Religare, rankings and positions do not matter as much as staying focused on achieving our goals and objectives. For us, it is key to keep our eye on the bigger pic-ture, our vision for the company, our consistency in meeting and raising benchmarks that we set ourselves and most impor-tantly continue to empower our people to drive the company to new heights.Prakash Hinduja: Our expertise combined with low manu-

facturing and production processes. In short, cost efficiency without compromising on quality. Also we constantly strive to innovate and create products that are the needs of today’s growing economy. A good example of this is Nissan Motors to produce vehicles for global consumption.G. V. Krishna Reddy: If we continue to achieve what has been listed above, we should be in a position to maintain our leadership position.

How important are Asean countries to your expansion /development plans?

Sunil Godhwani: In Asia, apart from India, we do have a significant presence in Hong Kong, Singapore and Malay-sia. It would be safe to say that at Religare, we feel that Asean countries together with BRIC (Brazil, Russia, India, China) countries will be instrumental in the growth of the merger and acquisition markets.

G. V. Krishna Reddy: The opportunities available in In-dia for infrastructure development are so huge that there would not be a need for a player like us to look for oppor-tunities outside India. But if a great opportunity comes our way then we are prepared to look at it.

Although the Indian gov-ernment is well aware of the need for reform and is push-ing ahead in this area, busi-ness still has to deal with an inefficient and sometimes still slow-moving bureaucracy.

INDIAin Spotlight



MEDICAL TOURISM RISING IN INDIA

DINESH DHAMIJAFounder and chairman

Copper Beech Group, United Kingdom

ANUPAM SIBAL Group Medical Director

Apollo Hospitals Group, India

Professor Sibal is Group Medical Director of the Apollo Hospitals Group, Adjunct Professor of Paediatrics at the School of Medicine, University of Queensland, Australia and a Senior Pediatric Gastroenterologist and Hepatologist at Apollo Hospital Delhi.

was born in Australia the son of an Indian diplomat, was awarded Entrepreneur of the Year in 2003 – UK. He established own business in the travel sector 25 years ago and realised the critical role the Internet would play in the travel industry. He established the first interactive website for travel agents in the UK, flightbookers.net, in 1996. Ebookers.com was formed in 1999. NASDAQ, NEUER, and LSE listings soon followed and ebookers.com rolled out across Europe becoming the leading online travel agency in Europe.

What are the present statistics of tourists visiting India? How long is the average stay, how much do they spend on average, where do

they come from and where do they go?Sibal: Around 450,000 medical tourists visited India from South Asia, Middle East, Africa, Europe, and North America in 2007.According to the Ministry of Tourism, the average medical tourist in India spends more than US$ 7,000 per visit.

The average length of stay is around 5.9 days (taken from the ALOS for Indian hospitals, as separate data is not available for medical tourists).Dhamija: I think 4 million visitors, of which 1 million are non-resident Indians.

What do you project will the above picture look like in five years time?

Sibal: India expects to receive 1 million medical tourists in 2012. The medical tourism sector is expected to experience

an annual growth rate of 30 percent.Dhamija: Six million in five years time.

If you had a ‘Wish List’ for tourism in India, what would be on that list?

Sibal: The “Wish List” for medical tourism in India would be:

a. Tax exemption for the construction of hospitals and the expansion or refurbishing of existing ones.b. Incentives under the Income Tax Act for expenses incurred by private hospitals to obtain domestic or in-ternationally recognized accreditation.

c. Governmental support for international advertise-ments and participation in road shows.d. Facilitation of medical visas.e. Medical visas on arrival.

Dhamija: Improve infrastucture to western standards, al-low casinos, improve infrastructure to Western standards and the concept of Southeast Asian service.

Would you please comment on the growth of medical tourism and the factors that have contributed to that growth?

Sibal: The measures that are helping medical tourism to grow are:

i. Growing trend of international accreditation by the International Joint Commission and adherence to qual-ity norms.ii. Expanding private health infrastructure with world-

class doctors and facilities.iii. Growing international awareness about the high quality-low cost value proposition that India offers.

Dhamija: India has the best research and development because of its substantial population.

How are you promoting tourism to the world. What more needs to be done?

Sibal: The Apollo Hospitals Group has seven JCI ac-credited hospitals, the largest number by any corporate hospital group. Through ACE@25 our clinical scorecard, we have been able to consistently show outcomes compa-rable to the best in the west. Our experienced clinicians,

latest technology, the tender loving care that we provide to all our patients and our low cost model with costs 1/10 of that of the U.S., helps us promote our services overseas. Dhamija: Copy some of the things being done by Dubai and Singapore on the back of their world-class airlines.

TOURISM: THE NEXT GROWTH AREA

Mumbai Skyline

India expects to receive 1 million medical tourists in 2012. The medical tourism sector is expected to experience an annual growth rate of 30 percent.

INDIAin Spotlight



HOW INDIA STACKS UP IN BRICComparing India with the other members of BRIC

INDIA AND ITS COMPETITIVE STRENGTHS

Recently, the BRIC (Brazil, Russia, India and Chile) countries have come to the attention of economic observers because all four countries survived the recent economic crisis better than the Europe-an and United States economies. In the cases of India and China, their failsafe mechanism was the growing internal domestic consumption in each country that sustained them through the crisis.

The Goldman Sachs thesis behind BRIC is that the economic po-tential of Brazil, Russia, India and China could be realised by 2050 and they could become the world’s four dominant economies as all four countries have adopted a global capitalism model.

In the years following the creation of BRIC, India has attained a growth rate that projects to have a greater impact on the global econ-omy than has been anticipated.

One distinct difference between India and the other BRICs is lan-guage. Much to their chagrin, the Chinese have discovered that Eng-lish is not only the language of aviation but of the business world and Russian and Portuguese, are historical afterthoughts in terms of inter-nationally accepted conversation. India does speak English. Language and communication cannot be shortchanged in the business world.

On a more intrinsic plane, India now has 10 of the 30 fastest growing urban centers as the migration from rural to urban settings continues in India, following a worldwide pattern in industrialized nations.

In other areas of comparison, this is how India stacks up with its BRIC counterparts:

JESUS SANZ Director GeneralCasa Asia, Spain

RAVI CHAUDHRY Chairman

CeNext Group, India

Ravi Chaudhry – Chairman - CeNext Consulting and Investment Ltd, New Delhi Ravi Chaudhry advises Corporate Boards (Fortune 1000 corporations) and Sovereign States (Switzerland, Turkey, Brazil, Canada and Uganda) on Global Competitiveness and Success Strategies for India. Focus on creating “India Advantage” in future growth. Earlier, he was CEO/Chairman of five companies in the Tata Group.

VALENTIN ROMANOVExecutive Director,Sun Group, Russia

Valentin Romanov, Executive Director of the Sun Group, has been with SUN Group since 1995. He was a Senior Vice President and a Director in SUN’s private equity fund for Russia and the FSU. Today, his primary focus is new business development and investments in the Energy sector.

VOLKER U. FRIEDRICH CEO and Managing Partner

GBP INTERNATIONALGermany

Volker U. Friedrich has more than 25 years of experience in international industry and trade. GBP (formerly known as German Business Pool) was founded by Volker in 1997 and is now established as a leading management and business consulting firm in Europe and across Asia Pacific. Volker is married and has two children – Vincent (born 2000 in Kuala Lumpur) and Franca (born 2005 in Berlin).

JESÚS SANZ is currently Director General of Casa Asia. He has previously served in a number of positions in the diplomatic corps for the Spanish government, including coordinating aid for the Boxing Day tsunami that hit Thailand and other parts of Southeast Asia in 2005.

Category 1 2 3 4

Land Area Russia China Brazil India

Population growth rate India Brazil China Russia

Gross domestic product China Brazil India Russia

Gross domestic product, real growth

China India Russia Brazil

Exports China Russia Brazil India

Imports China Russia India Brazil

Current account balance China Russia Brazil India

FDI received China Brazil Russia India

External debt Brazil India Russia China

Public debt Russia China Brazil India

Number of Internet users China India Brazil Russia

Motor vehicle production China Brazil India Russia

However, these gross ranking’s do not truly reflect India’s progress in the 21st century. Since 2003, India has been one of the fastest growing economies, with rapid increases in per capita income, and demand and integration with the global economy, according to a 2007 Goldman Sachs report authored by Tushar Pod-dar and Eva Yi.

Poddar and Yi suggest that “there has been a structural increase in India’s growth rate since 2003 on the back of high productivity growth.”

They suggest that,”India will overtake the G6 economies faster than envisaged in our earlier BRICs research. Indeed, India’s GDP (in US dollar terms) will surpass that of the U.S. before 2050, making it the world’s second largest economy.”

They underline services and industry as the driv-ers of the Indian economy and cite the improved ef-ficiency of private sector firms since2003 in line with liberalization of the Indian economy as a substantial growth factor.

Another factor in India’s potential that surpasses other negative aspects is the population growth rate. India will have a larger number of younger workers than any other country as the century progresses.

Poddar and Yi suggest that “there has been a structural increase in India’s growth rate since 2003 on the back of high productivity growth.”

Source: The Economist, 2008

JESUS SANZ, Director General, Casa Asia, Spain, right, welcoming The Spanish Crown Prince at the Global India Business Meeting.

INDIAin Spotlight


JESUS SANZ, Director General, Casa Asia, Spain with Rajan Bharti Mittal, Vice Chairman & Managing Director, Bharti Enterprises


What still needs to be addressed? By whom, how and within what time span?

Chaudhry: The government needs to force the pace of infrastructure development – which thankfully is now a national priority. Social infrastructure improvement is also the crying need, encompassing improved primary educa-tion, improved healthcare and growth with equity, not the growth that is based on exploitation of the poor majori-ties. Skilling the population so that they are ready to take up the jobs that will come up in future, is a top priority. Romanov: Modern forms of education. The talents and skills of the young people in India demonstrate the poten-tial for India to become one of the world’s major “brain centers”, if one can describe it that way. And time is of essence – not because other countries may “outperform” in this sphere, but because millions (not to say - hundreds of millions!) of young Indians are entering this world and

will need to find their way in life.Friederich: Bureaucracy, infrastructure, social aspects of the poor, education at basic and medium level. No one party can solve the mega tasks alone. It requires joint and cooperative efforts from all sides. The government needs to balance legislative control and economic freedom.Sanz: I believe that India is doing things very well, but in order to improve the situation I would suggest the fol-lowing: facilitate the processes of implantation of foreign companies by eliminating the excess of bureaucracy, unify even more the legal and tax system in the whole terri-tory and improve the productivity in the agricultural and industrial sector by means of the incorporation of new technologies.

What challenges do you think may arise over the next decade?

Chaudhry: Failure to successfully deal with the key is-sues above could lead to new challenges of internal social discontentment. I do not expect people in India to accept that “poverty is destiny”. Apart from that, we have also to deal with internal strife that is the result of inequitable development in various parts of the country.On the economic front, the major challenge is to further strengthen the independent regulators in the telecom and insurance sectors, financial sector and stock markets, so that they all function in relative transparency. The intel-lectual property rights regime rapidly needs to approach global standards.Romanov: The challenges may prove to be more in the sphere of culture, traditions, religion, and rapid erosion of what one can call the “social texture” – as the young India dashes into the modern world – the challenges of maintaining its unique identity are growing. A challenge of a different nature – the overwhelming growth of Indian

cities, pollution, poor infrastructure – basically the same maladies that many countries have faced in the 60s and 70s, but at a different scaleFriederich: In a way the problems are all known and they will not go away overnight.Thus, I believe we will discuss more or less the same agenda in 10 years from now - as we did 10 years ago. Most pressing are the fight against pov-erty, access to clean water/air and education.Sanz: It is not an easy problem, since infrastructure projects are expensive and, as we are experiencing dur-ing the current economic crisis, it is necessary to have a good control of public finances to avoid to fall down in debt problems. The public - private partnerships (PPP) are probably a good solution, but the investment has to be attractive for the foreign company, the criteria of se-lection must be transparent and the projects have to be announced with sufficient anticipation. Many companies in Spain are telling us that the period for presentation of documents in biddings is too short

If you had a message for the world that could make a positive difference regarding competitiveness,

what would that message be?Chaudhry: Global corporations can tangibly see several examples of their peers who have so successfully created the “India Advantage” in their business models. For those still sitting on the fence and wondering what to do with the enigma called India, the message is crisp.India is surging and developed economies are slipping. The right question to ask is not ‘what is the size of market that India offers for my global strategy’, but, rather, ‘what should be my unique strategy for the Indian market’. Look at India not just as another market, but as a source of new ideas, to improve competitiveness.Romanov: After we’ve recently witnessed what greed and unscrupulous policies and lack of governance can do to the world economy and to the well-being of mil-lions of individuals, I think the “role” of competitiveness should be redefined. I would like to see competitiveness

as something that brings us together, helps us cooperate, integrate, that makes us help each other to improve and to excel in what we do as individuals, as companies, and eventually – as nations.Friedrich: At the end of the day success/competiveness is not about a superb product/service but about dedicated, motivated and people you wish to meet again (and not only do business). Be friendly! You may meet again.Sanz: We should not consider competitiveness only as a race, but as a set of factors that makes employees and the society feel proud of the company. It is necessary, there-fore, to stimulate the talent and the commitment of the employees in various ways and also consider all aspects related to Corporate Social Responsibility, a key issue and a necessity in our world.

What infrastructural changes would you wish to see undertaken that would make India even stronger?

Romanov: Let me address only a few aspects of infra-structure – mostly related to transport. Over the past years, India has become more and more “accessible” by air – today you can reach most parts of the country by international flights, and save time and money on connect-ing to domestic flights. The domestic air travel has also dramatically improved. While on the ground…roads are finally becoming highways, but there’s still a great deal of work to be done. A major and fundamental modernization and revamping of the railways system should be made a

priority. Overall – modern and safe means of travel – with the entire related infrastructure – that’s what still needs to be adequately addressed.Friederich: Clean water, rivers, seas and a lake.Sanz: I think the main problem for India and actually for any country is sustainability. India has a young and dy-namic population, but economic growth means also more energy and raw material consumption. Therefore, it is nec-essary develop alternative sources of energy and improve efficiency in all sectors.

Please outline what you believe are the competitive strengths of India.

Chaudhry: Four ingredients are working in India’s favour. India’s manpower is younger and more productive than in the past. Since 1980, nearly 60 percent of India’s growth has come from the rise in what is called “total factor pro-ductivity” - the highest in the world over this period. There is a perception that India and Indians are likely to rank among the smartest countries. Money - to fund investment as well as consumption.Indian households save more than the Chinese, which en-sures availability of vast investment resources. India’s sav-ings rate at 37.9 percent in 2007-2008, continues to show robust signs of increasing – even as both investment and consumption rise.Growth in India is neither a product of government spending, nor a factor of export boom. Indian growth is triggered by Investment and Indian consumer spending. Other factors are: confidence and entrepeneur-ship, ferocious competition in the domestic market.Romanov: As a foreigner, for the last three decades I have had the privilege of observing India’s steady rise to become a global economic and political player …Yes, it has definitely become much stronger in many ways. And just like before – India’s people, or rather its population growth is both a phenomenal strength and a danger-ous weakness, all at the same time. Surprisingly, India’s shortage of energy resources in certain ways can also

be viewed as a certain “competitive advantage” – for the simple reason that India doesn’t carry the “curse” (like Russia, for example) of having it’s economic strength heavily dependent on revenues from it’s vast resources of oil and gas.Friederich: I think a country has no competitive strength, but their companies do. As such we see a few strong (mostly family owned and politically well connected players which have found their niche market. They acted boldly and sometimes shrewdly in their expansion strate-gy (i.e Mittal, Tata etc). But we have an increasing number of medium sized players, which flourish on the basis of a strong and huge domestic market.Sanz: The main factor of competitiveness in India is the quality of its human resources. Technically Indians are very good, and the proof is that Indian companies in sec-tors like IT or biotechnology are competing around the globe with great success. I believe that India is developing its industrial potential. India has many millions of people working on agriculture. If we take a look at other Asian countries, they all have grown thanks to the development of industry. Manufacturing companies can create many jobs, and this is what India, like many other countries, needs in the near future.

INDIA AND ITS COMPETITIVE STRENGTHS

Four India watchers weigh in

Volker U. Friedrich, Chief Executive Officer, GBP International, Germany, makes a point at the breakfast session on The New World Order.

INDIAin Spotlight


asean affairs - horasischief executive officer, mahindra satyam building a stronger india the growth...

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