india business frontier december 20081

Upload: arindam-datta

Post on 30-May-2018

219 views

Category:

Documents


0 download

TRANSCRIPT

  • 8/14/2019 India Business Frontier December 20081

    1/10

    In Conversation with Indian Consul General,Navdeep Suri

    Abdullah Verachia, Head: India Frontier Advisory

    India Business Frontier

    December 2008

    India has received signicant media attention in the last four weeks. The terror

    attacks in Mumbai, that took place from the 26th to the 29th November, the strong

    and vocal position taken by Indian Prime Minister Manamohann Singh at the G20

    Summit in the US, as well as the impact of the nancial crisis on the worlds largest

    democracy have all been at the forefront of global media coverage.

    In a wide-ranging interview, Head of India Frontier Advisory, Abdullah Verachia, spoke

    to the Indian Consul General in South Africa, Mr Navdeep Suri. Verachia and Consul

    General Suri touched on the attacks and the concomitant implications, the impact of

    the nancial crisis and the growth outlook for 2009 as well as the impact on India-

    Africa relations.

    1

    Contents:

    In Conversation with Indian

    Consul General, Navdeep Suri

    ..................................................................1-8

    India Inc in Africa........................................9

    Frontier Advisory Prole..........................10

    2008 Copyright Frontier Advisory (Pty) Ltd. All Rights Reserved

  • 8/14/2019 India Business Frontier December 20081

    2/10

    Research & Strategy in and beyond emerging markets

    India Frontier Advisory

    2008 Copyright Frontier Advisory (Pty) Ltd. All Rights Reserved2

    India Business Frontier

    December 2008

    VERACHIA The recent terror attacks in Mumbai that killed almost 180 people and

    left more than 300 injured, has taken the world by storm. What are

    your views on the attacks?

    CG SURI It is a ghastly act; mindless, senseless violence targeting civilians,not just Indians but individuals from different countries, different

    nationalities and different religious faiths. It has stunned the world

    into taking a closer look into the dynamics of terrorism. As for India it

    causes two major challenges:

    Firstly on the domestic front which is to tighten up and revamp

    our own system, to put in better preventative mechanisms that will

    hopefully stave off future occurrences of this nature. Secondly there

    is the external dimension. The evidence thats now blindingly clear is

    that the terror attacks originated from Pakistan. They were probablyplanned on Pakistani territory whether it was non-state actors being

    described, whether they had or did not have support of any ofcial

    elements, are matters that are still being discussed. But it certainly

    makes it imperative for the government of Pakistan to take very

    strong measures against groups like Lashkar -e Taibar which have

    hithereto operated with impunity out of Pakistani territory. So those

    are two dimensions that are of immediate importance to us.

    VERACHIA On the second issue, the issue of Pakistan, do you think that recent

    events will have an impact on the relationship between India and

    Pakistan and more importantly stability in the region?

    CG SURI Well, I think India-Pakistan relations go through ups and downs and

    theres no denying the fact that when an attack of this magnitude

    happens, originating out of Pakistan, aimed directly at India, you

    cannot let it be business as usual and so the Indian public, the Indian

    political system, the nation wants answers. We are watching very

    closely what actions are taken by the government of Pakistan against

    the groups that have been operating. It must not be forgotten that

    attacks of this nature have not just been directed at India, starting

    from back in 9/11 to the London bombings and to a number of the

    other terrorist events. There has been a connection that has been

    well established. This last one was so brazen that it is really a wake-

    up call for the global community to say that this menace must be

    addressed.

    VERACHIA Speaking of the attacks in New York in September 2001 and the

    London attacks, there has been criticism from many quarters that the

    Indian attack received a signicant amount of media attention to the

    effect that it might have an impact on tourism in the country?

    CG SURI When you have some very high prole establishments like two of the

    best hotels in Indias nancial capital targeted, and when you have a

  • 8/14/2019 India Business Frontier December 20081

    3/10

    Research & Strategy in and beyond emerging markets

    India Frontier Advisory

    2008 Copyright Frontier Advisory (Pty) Ltd. All Rights Reserved3

    India Business Frontier

    December 2008

    range of Western tourists who have been targeted along with Indian

    nationals, the story automatically receives an international prole.

    If it were local Indians getting killed in a smaller town I do not think

    that the international media would have paid as much attention to it.And that is the reality of the world we live in. As citizens from different

    countries were involved, the international networks became very

    involved with this story.

    As far as the fallout is concerned, yes there would be an immediate

    short-term impact on tourism and we already see reports of some

    cancelations but I should emphasise that we expect the impact to

    be short term. It is very encouraging to see some business people

    who have come out and said that we will stick to our plans to come

    to Mumbai next week, or next fortnight, or next month, whatever thecase may be, because to not do so would be to give victory to the

    terrorists and to the objectives which they had in mind.

    VERACHIA You spoke about the targets being places frequented by foreign

    tourists and business people. I usually stay at the Taj or at the Trident

    Oberoi and I always have a meal at Leopolds Cafe. Given the fact

    that some of these terrorists have realised that these are soft targets

    and that one gets signicant media attention when attacking such

    places, do you think there is a possibility that other similar tourist

    attractions around India would be possible targets and are there

    mechanisms in place to secure them?

    CG SURI Well I do not think anyone has a crystal ball that can predict where

    the next attack is going to be. Is it going to be Bali or Barcelona,

    or anywhere else? The important thing is to try and put in place

    preventative systems and to improve intelligence gatherings systems.

    The reality of the world that we live in is that there are those who

    are bent on killing as many people with no fear for their own lives.

    There is no place in the world that is safe. We are products of open

    and liberal societies and in open and liberal societies to what extent

    can we really afford to curb the liberties of our own people and

    subject them to inordinate harassment. So, I think the challenge for

    governments around the world today be it London, Madrid, Morocco,

    Egypt, India or anyone else is to strengthen our own internal systems

    but not to a point that we become paranoid and allow the terrorists

    the victory that they seek.

    VERACHIA India has a sizeable Muslim population of around 140 million. Do you

    think there is a possibility this attack could affect relations between

    Muslims and other religious groupings in the country?

    CG SURI The response from all communities in the aftermath of the Mumbai

    attacks has been remarkably mature and restrained. Any anger that

  • 8/14/2019 India Business Frontier December 20081

    4/10

    Research & Strategy in and beyond emerging markets

    India Frontier Advisory

    2008 Copyright Frontier Advisory (Pty) Ltd. All Rights Reserved4

    India Business Frontier

    December 2008

    you have seen has been directed primarily against Pakistan because

    it is now clear that the attackers originated from Pakistan. However

    you have not seen any manifestation of violence or revenge attacks

    or anything like that in the wake of the Mumbai carnage. Remember

    that some 55 or 60 of the victims at the train station attacks wereMuslims and I thought it was quite remarkable that the leaders of the

    Muslim community in Mumbai and especially the clergy came out

    intensely in outright condemnation of the attacks and even went to

    the extent to say they take no responsibility for burying the bodies of

    the 9 terrorists that were killed saying that their actions were patently

    un-Islamic.

    VERACHIA India has attracted the second largest amount of foreign direct

    investment (FDI) globally for the last ve years. Do you think

    the attack will have a medium to long-term impact on the Indianeconomy, especially in terms of FDI inows to the country and

    business relations between India and other countries?

    CG SURI Not at all. To my mind the attacks will have a very short-term impact.

    I think the more serious issue for everyone, when you talk about the

    economy, is the global economic crisis the liquidity concerns and

    the recessionary conditions in some of the biggest economies in

    the world as well as the aversion to risk as a result of the sub-prime

    crisis. That is what is going to have a much greater impact in reduced

    investment ows, not just to India but I think around the globe. The

    combination of a global recession, low liquidity or tight liquidity and

    the general risk averse attitude of the big investment funds who have

    taken big hits on their portfolios will have an impact on emerging

    markets

    When they take big hits, even though the hits emanated

    predominantly from developed countries, the risk aversion is towards

    the emerging markets. So I think that is probably of a far greater

    medium to long term consequence than the Mumbai attack which I

    am sure is going to be short lived. I am also sure that international

    investors already take note that the Mumbai Stock Exchange opened

    a day after the attacks and was in fact in a green and certainly

    Santax has not shown any impact over the last 10 days.

    VERACHIA Do you think the economic crisis will have a major impact on India in

    2009/10?

    CG SURI I think it will have some impact but considering the growth path that

    we were on of 9.5% and we are estimating this years growth to come

    down to about 7%, which in relation to the negative growth rates

    of major economies is quite respectable. The government is really

    going out of its way with a slew of measures. There has been the

    announcement of a stimulus package on the 9th of December 2008.

  • 8/14/2019 India Business Frontier December 20081

    5/10

    Research & Strategy in and beyond emerging markets

    India Frontier Advisory

    2008 Copyright Frontier Advisory (Pty) Ltd. All Rights Reserved5

    India Business Frontier

    December 2008

    There is a 4% across the board cut in ad valorem VAT on all products

    and even manufacturers are already announcing that they will pass

    on the benet of lower prices to consumers to spur spending.

    Interest rates have been dropped down successively and may comedown even further in the future. The government has just last week

    cleared 21 major highway projects, and is fast-tracking spending

    programmes. They (government) are going to parliament for an

    additional funding request for 200 000 million rupees. There is a US$

    60 billion spending programme over the next four months which is

    being accelerated so when you look at the combination of physical

    measures, tax reduction, monitory policy measures, the effort as one

    of our leaders said that this is not just a physical stimulus it is also

    a psychological stimulus and it is important for people to get their

    condence back.

    It is impossible at this stage to predict what next years growth

    situation will be primarily because at this stage no one can predict

    how severe, how deep, how long the global recession will be and

    we cannot be completely insulated from it. Yet we are expecting 7%

    growth this year and will try to maintain that for next year.

    VERACHIA Whilst on the nancial crisis, at the recent G20 Summit Indian Prime

    Minister Manmohann Singh played quite an instrumental role in terms

    of the position of developing nations in the new global construct. Do

    you think India will play a more proactive role in the reorganisation of

    international nancial institutions in 2009?

    CG SURI There is no question that the global nancial architecture is overdue

    for a shake up and it started with very small and hesitant steps of a

    G8+G5. As recently as last year countries like India, Brazil and South

    Africa were expressing their concerns that the current global nancial

    system was almost like a rich boys club and a second club where

    you could attend coffee meetings or the like, but you could not stay

    for supper. I think the nancial crisis has really woken people up to a

    new reality.

    Firstly, the fact that the crisis has originated in the West means that

    the very countries that were lecturing India or South Africa or others

    on being too slow in opening up nancial markets to innovative

    products are today commending the prudence of the very same

    regulatory authorities. So that to start with is a sign to how much

    things have shifted.

    Secondly, the current architecture came into force in 1944/45 as the

    Bretton Woods system in the aftermath of the Second World War.

    Virtually all of the developing world, all of Africa, all of Asia or large

    chunks thereof including India and China were not independent

  • 8/14/2019 India Business Frontier December 20081

    6/10

    Research & Strategy in and beyond emerging markets

    India Frontier Advisory

    2008 Copyright Frontier Advisory (Pty) Ltd. All Rights Reserved6

    India Business Frontier

    December 2008

    countries at that point of time. So, if you look at it that way, three

    quarters of what constitutes the United Nations today had no say in

    the architecture that was put forth in 1945 and to say that the same

    architecture should continue into the 21st Century is an anachronism.

    There is thus merit in not only putting in place a new architecturein the nancial sectors but also in the UN Security Council where

    ve countries as permanent members and entire continents

    underrepresented is a huge anomaly. So yes, for us it is not a

    challenge that is just for 2009. It is something that we have been

    battling with for the last 10 years. Creating a more equitable global

    political and economical system is the ght that we will continue with.

    VERACHIA On this issue of positioning India internationally do you think the very

    close relationship between South Africa and India will continue given

    the fact that we have elections in both countries early next year?

    CG SURI Oh absolutely, without a question. I think we are both mature

    democracies and changes in governments should be seen as a

    normal cause of events. If you remember a few years back when we

    had this India campaign at the World Economic Forum at Davos, our

    slogan was 10 years, 6 prime ministers, 5 governments, 1 direction

    and the direction was at the time 7% GDP growth. So the point really

    being that there is a large measure of domestic consensus on some

    of these major foreign policy issues and you really do not expect

    that consensus to change just because a new Prime Minister or new

    president comes in. At least I can say that for India.

    VERACHIA On this issue of India-Africa and India-South Africa relations, given

    the nancial crisis do you think therell be a slowdown in terms of

    Indias investments in Africa? Secondly we have a target thats been

    set by both the South African and Indian heads of state in 2006 of

    total bilateral trade between South Africa and India of US$ 10 billion

    by 2010. Do you think that this is still achievable given the current

    economic climate?

    CG SURI Well as far as the target is concerned; the target was set in more

    buoyant and optimistic times and as the international nancial

    slowdown starts we are seeing projections that the South African

    economy has grown by only 0.2% in the last quarter. Next year is

    expected to be a fairly tough year. Now if the South African economy

    does not grow, that means its capacity to absorb investment and

    imports does not increase at similar rates as it has been growing in

    the last few years. Bilateral trade between India and South Africa

    for the year ending March 2008 was US$ 6.27 billion a signicant

    increase over the previous year which was around US$ 4.7 billion.

    Yet a slowdown in the bilateral trading relationship is expected.

    So I think the impact, as a consequence of slower trade and

  • 8/14/2019 India Business Frontier December 20081

    7/10

    Research & Strategy in and beyond emerging markets

    India Frontier Advisory

    2008 Copyright Frontier Advisory (Pty) Ltd. All Rights Reserved7

    India Business Frontier

    December 2008

    investment is almost inevitable and I would certainly not be surprised

    when the data emerges for 2008/09 that we see the impact of the

    slowdown. In global terms we already hear about it from major

    companies like Tata Motors and others that are feeling the slowdown

    in terms of exports to South Africa. So the evidence of this is there,even before the data has arrived and clearly because of that there

    has to be a reassessment of those targets because you cannot

    operate in a vacuum.

    As far as investment plans are concerned I think Indian companies

    take a long-term view of South Africa and even now we hear of new

    Indian companies that are coming into South Africa. If I can take a

    positive or rather optimistic view of it to the extent that the Indian

    economy has slowed down a little in the last six months, the same

    Indian companies who had order books lled months in advance inIndia would today probably be a little keener to venture overseas

    then they were six months back. Similarly, the IT companies are

    beginning to see that they were overly dependent on the US or

    European markets and are probably now taking a fresh look at other

    geographies like South Africa or Brazil partly to diversify their own

    risks.

    So I have not yet seen anyone talk about putting Indian projects or

    investments on hold in South Africa - these things have a certain

    momentum and once commitments have been made for specic

    projects these are pulled through. I think the liquidity crisis will impact

    some plans but that again is a global situation. Whereas companies

    are nding it harder to borrow the money needed for their investment

    plans but on the whole whilst I do see some impact on trade, I do

    not see any signicant impact on FDI ows at this point in time.

    The message that emerges out of this is that we have to double our

    promotional efforts and we have to continue with even greater vigour

    in terms of our efforts to strengthen bilateral economic exchanges,

    to bridge those information gaps that impede trade and investment

    ows. We will have to work harder basically to make sure that we

    stay on track.

  • 8/14/2019 India Business Frontier December 20081

    8/10

    Research & Strategy in and beyond emerging markets

    India Frontier Advisory

    2008 Copyright Frontier Advisory (Pty) Ltd. All Rights Reserved8

    India Business Frontier

    December 2008

    Brief Prole of Navdeep Suri

    Mr. Navdeep Suri is a member of the Indian Foreign Service since 1983. After heading

    the West Africa Division of the Ministry of External Affairs in New Delhi from December

    2004 August, 2006, he arrived in South Africa on August 21, 2006 to assume chargeas Consul General of India in Johannesburg.

    Mr. Suris rst diplomatic assignment was at the Indian Embassy in Cairo, where he

    also studied Arabic. This was followed by a three-year stint in Damascus before a

    return to headquarters in New Delhi in 1991 where he was closely associated with

    efforts to project India as an investment destination.

    He moved to the Indian Embassy in Washington DC in 1993 and worked as the political

    counsellor there till his transfer to the position of Deputy High Commissioner at the

    Indian mission in Dar es Salaam in 1997. He worked at the Indian High Commission in

    London from August 2000 to August 2004 as the spokesperson and head of the Pressand Information department.

    Mr. Suri speaks Arabic and French, has a Masters degree in Economics and is co-author

    of the study Development Strategy as a Determinant of Foreign Policy: A case study

    of India and Pakistan. Saintly Sinner, his English translation of a classic Punjabi novel

    was published in October 2003. His work on Indo-African relations has been published

    in Indias Foreign Policy, while his study titled Outsourcing and Development was

    presented at the Inter-Government Experts Meeting organized by UNCTAD at and has

    been published in a recent US book on the winners and losers of globalisation.

  • 8/14/2019 India Business Frontier December 20081

    9/10

    Research & Strategy in and beyond emerging markets

    India Frontier Advisory

    2008 Copyright Frontier Advisory (Pty) Ltd. All Rights Reserved9

    India Business Frontier

    December 2008

    LiberiaTatas get nod to re-bid forLiberian iron ore projectLiberia, which in Septemberdisqualied Tata Steel fromparticipating in a relaunchedbidding round for a US$1.5bniron ore project, has givenapproval to the Indian steelmaker to participate in theauction process. A Tata Steelspokesperson said the companyhas received an invitation fromthe Liberian government asking

    it to participate in the biddingprocess for the Western Clusteriron ore project .

    EgyptEgypt and India ink MoUThe Heads of State of Indiaand Egypt signed an MoU toincrease trade and investment.They also set a target of US$10bn in bilateral trade by 2010, upfrom the current level of US$3bn.

    BotswanaFTIL takes stake in BourseAfricaThe Financial Technologies India(FTIL) group has concluded adeal to acquire 60% stake inBotswana-based Bourse Africa.Bourse Africa has been licensed

    by the Botswana government toset-up a spot and/or derivativemulti-asset exchange for tradingin commodities, currencies,bonds and diamonds.Nigeria

    India to invest US$15 billion inNigeriaThe Indian government througha private sector initiative isplanning to invest over US$15bn into various sectors ofthe Nigerian economy withinthe next few years. Theannouncement was made byDeputy High Commissioner of

    India, Mr. Anil Trigunayat at abrieng in November 2008.

    Kenol partners withIndian rm on transformermanufacturing in NigeriaKenol Nigeria Limited has sealeda partnership deed with NuconSwitchgears Limited of India tofoster transformer distributionand manufacturing in Nigeria.The partnership is expectedto boost access to qualitytransformers and solar power,

    thus bringing about the desiredimprovement in the nationspower sector.

    South AfricaNeotel secures R7.5bn to fundinfrastructure roll-outNeotel, South Africas second biggestxed-line phone operator, has secureda total of R7.5 bn (US$733.7 mn) infunding after raising an extra R4.4bn in project nance. Neotel has

    secured the rights to control the use inSouth Africa of SEACOMs bre-opticundersea cable linking East Africato Europe and Asia, which would belaunched in June 2009.

    India Inc in Africa

    Frontier Advisory tracks Indias commercial movements in Africa. This section provides an overview of key investments in thelast few months.

  • 8/14/2019 India Business Frontier December 20081

    10/10

    India Business Frontier

    December 2008

    CONTACT US

    Frontier Advisory (Pty) Limited

    PO Box 1884Killarney2041South Africa

    Block C, 65 Central StreetHoughtonJohannesburg2198

    South Africa

    T +27 11 728 6339F +27 11 728 0373E [email protected] www.frontier-advisory.com

    ABOUT US

    Frontier Advisory (Pty) Ltd is a research and strategy company that assists clients to enter andoperate in emerging market economies. We have worked with an array of multinational rms,

    small & medium enterprises as well as public sector clients and have assisted them to analyse,

    formulate and execute their business strategies in these new markets.

    Frontier and emerging economies offer new investment opportunities for companies and are

    fast providing new markets for traditional market capital, technology and management expertise.These economies not only pose new challenges to business but also greater commercial potential.

    Our rms professional services serve to offset the risk that is inherent in these countries whether

    in the BRIC countries or second or third tier emerging markets.

    Within the rm, there are four dedicated business units that include China Frontier Advisory, IndiaFrontier Advisory, Africa Frontier Advisory and Latin America Frontier Advisory. Our diverse and

    international team is well positioned to serve clients needs based upon their knowledge and

    operational experience and emerging markets.