Saturday, January 28, 2006

India's massive charm offensive at Davos World Economic Forum

jan 28th

i'd be far more pleased about this if i felt that the UPA is not looking for more payola scams bofors style. anybody who wants to invest in india will be getting squeezed by the powers that be.

from the tireless indo-us ties booster ram narayan

---------- Forwarded message ----------
From: Ram
Date: Jan 27, 2006 11:08 PM
Subject: India's massive charm offensive at Davos World Economic Forum
To: rajeev.srinivasan@gmail.com

Dear Rajeev Srinivasan:

The two articles reproduced below, one from THE NEW YORK TIMES and the other from MARKET WATCH turn the spotlight on India's massive charm offensive to promote itself at the World Economic Forum at Davos as the next economic 
superstar -- as a democratic alternative to authoritarian China for the affections of foreign investors.

Cheers,

Ram Narayanan
US-India Friendship
 
http://www.nytimes.com/2006/01/26/business/worldbusiness/26india.html?emc=eta1

THE NEW YORK TIMES

'India Everywhere' in the Alps

By MARK LANDLER
Published: January 26, 2006 

DAVOS, Switzerland, Jan. 25 — Delhi swept into Davos on Wednesday, with an extravagant public relations campaign by India intended to promote the country as the world's next economic superstar, and as a democratic alternative to China for the affections of foreign investors.

There were few places one could go, on this first day of the World Economic Forum's annual meeting here, without seeing, hearing, drinking, or tasting something Indian. The organizers call the campaign "India Everywhere" and they appear to mean it literally.

"The last two years, we felt there was too much about China, and India wasn't being heard," said Ajay Khanna, the chief executive of the India Brand Equity Foundation, which is orchestrating the promotion. "This year, we decided to make a major effort to give India a voice."

There is little danger of India's being drowned out, with a 150-member delegation, including 3 cabinet ministers and 41 chief executives. Mr. Khanna estimated the total cost of the campaign and the travel expenses at $5 million. Never before, officials of the forum said, has a country mounted such an elaborate charm offensive at Davos.

"We're going to showcase the arrival of the global Indian entrepreneur," said Nandan M. Nilekani, the chief executive of Infosys Technologies, which grew to $2 billion in sales in 2005 from $120 million in 1999 and has come to symbolize India's vaulting ambitions.

The question is whether India's unspoken message — that it is another China — is credible. After all, China still grows faster than India, has attracted 10 times the foreign direct investment and has built a gleaming network of airports and highways that make India look ramshackle.

"There are a number of areas where people gloss over India's challenges," said Jim O'Neill, the head of global economic research at Goldman Sachs, citing India's inadequate education system and barriers to foreign ownership of Indian assets as significant weaknesses.

"It's starting to be tricky to find skilled workers there," Mr. O'Neill said. "India is also a very closed economy."

Goldman contributed to the euphoria about India, by projecting that its economy could be 50 times its current size by 2050, which would make it the world's third largest, after China and the United States.

But Mr. O'Neill said that when he ranked countries by the potential risks to their growth — everything from inflation to corruption — India ranked 97th in the world, behind Brazil and the Philippines.

Indian entrepreneurs concede their country has problems. Social tensions from mass migration and the fragility of the current government could disrupt development. Roads and airports remain woeful, and construction projects are often snarled in bureaucracy.

"If you want to make Barbie dolls, don't come to India," said Anand G. Mahindra, the head of one of India's largest conglomerates. "Because if you order one million of them, they'll probably be held up in traffic from Mumbai to the port," he said, using the post-colonial name for Bombay.

Still, India is beginning to enjoy China-like growth, expanding 8.1 percent from April to June 2005. Its gross domestic product will expand by an average of 6.1 percent a year from 2005 to 2010, according to Goldman.

Advertisements on buses here promote India as the world's "fastest-growing free-market democracy" — a not-so-subtle reference to China, which has done little to relax the grip of the Communist Party over society. India, by contrast, is a clamorous democracy, with 675 million eligible voters.

"Democracy is a big advantage for us," said Malvinder M. Singh, the president of Ranbaxy Laboratories, India's top drug company. "It is not the only advantage, but it is definitely one big advantage."

Mr. Singh, a 33-year-old with an M.B.A. from Duke University, said India's strength in chemistry had given its pharmaceutical industry an edge over that of China. While Chinese companies focus on raw materials, he said, Ranbaxy produces generic drugs and plans to expand its proprietary products.

Despite the constant comparisons to China, most Indians insist the two are not competing, and can both prosper. "I call it Chindia," joked Nikhil Meswani, the executive director of Reliance Industries.

With companies like Reliance, Ranbaxy and Infosys already global competitors, experts say India's further development will hinge largely on whether the government can loosen up the labor market, build decent roads and airports, and knock down hurdles to foreign investment.

India, for example, still prohibits Wal-Mart and Carrefour, Europe's largest retailer, from opening stores in the country. But this week, it announced that it would allow single-brand merchants, like Tommy Hilfiger, to open shops.

"I'm sure people in the government wanted it to be done in time for Davos," said Montek S. Ahluwalia, the deputy chairman of the Indian Planning Commission, "but it wasn't done for Davos."

India has left little else to chance in its courting of people here. It has organized daily news conferences and happy hours, as well as an art exhibit. For the gala ball, which will have an Indian theme, it is flying in chefs from 14 Taj luxury hotels to whip up Indian cuisine.

In their hotel rooms on Wednesday, participants found tiny iPods with Indian music recorded on them, and Pashmina stoles, described as a "gift from the Himalayas to keep you warm in the Alps."

Mr. Nilekani said he hoped the campaign would polish India's image and attract tourists, as well as some foreign investment. At a cost of $5 million, he noted, "we get a lot of bang for our buck."

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http://www.marketwatch.com/news/story.asp?guid=%7B07E34799%2D72CC%2D4648%2D848C%2D46BCA05D34FC%7D&siteid=aolpf&dist=

MARKET WATCH

India strives to rival China
Asian giant struggling for more status in global community 

By Aude Lagorce, MarketWatch
Last Update: 11:04 AM ET Jan. 26, 2006

DAVOS, Switzerland (MarketWatch) -- Nothing illustrates better India's desire to rival the rising international status of China than the massive charm offensive India is mounting at the annual meeting of the World Economic Forum.

A huge Indian delegation consisting of 150 members -- including three cabinet members and 41 chief executives -- is using every opportunity to tell the movers and shakers of the global community gathered in the Alpine resort that India can be a profitable market for foreign investment and not just a service-sector economy.

But for all its recent economic achievements, India still has a long way to go in attracting the same degree of interest in the global community.

"I don't think India is competing with China yet," said John Williamson of the Institute for International Economics.

China and India may have huge populations (1.3 billion and 1.1 billion respectively), cheap labor and buoyant growth in common, but their recent burst onto the global economy can't be tracked down to the same factors.

China grew at between 8% and 10% in the last three years on the strength of its export manufacturing sector and its ability to attract direct foreign investment. In the last 25 years, multinational companies have invested more than $400 billion in China; in 2003, foreign direct investment topped $53 billion.

"In contrast, India's growth has been much more heavily biased toward the service industry," said Williamson. "India has never set itself as an export platform of manufacturing goods."

The intention of the big Indian presence this year in Davos is to change that perception. "We want to tell a story of confidence and resurgence of the manufacturing sector," said N. Srinivasan, director general of the Confederation of India Industry.

Arnand Mahindra, managing director of automobile and farm equipment company Mahindra & Mahindra said it is a cliché that "China will do the hardware and India will do the software."

India will do both, he said, because technology alone will not provide the jobs the country needs.

"India needs more jobs in sectors such as manufacturing, construction, and agribusiness, where it isn't necessary to be a knowledge worker," said Rajat Gupta, managing director at McKinsey.

Some two-thirds of all Indians work in agriculture, where growth is slow and prospects are limited.

China needs to find new sources of growth

China's enormous demand for commodities is well known. It consumes 25% of the world's steel and 50% of the world's cement. It is also home to some of the largest companies on earth, four of which recently cracked the most recent Fortune Global 500 list.

The downside of China's extraordinary growth, however, is that too much investment has led to overcapacity in some industries. At a conference in Davos, Min Zhu, executive assistant president of the Bank of China, said he was relieved that foreign direct investment fell to 40% from 46% a year ago because concerns of overheating in the economy are still prevalent.

The country's overcapacity in steel and aluminum as well as the growing disparity between the east and the rest of the country are key concerns for the government, he added.

But above all, China needs to find new sources of growth, said Nicholas Lardy of the Institute for International Economics.

"They need to replace exports and investment with domestic demand for growth to continue at such levels," he said.

Stephen Roach, chief economist at Morgan Stanley agrees that China needs to redirect its growth model toward private consumption.

One of the ways the government is trying to encourage Chinese citizens to loosen their purse strings is through a reform of the welfare system, said Zhou Xiaochuan, governor of the People's Bank of China.

"China has undertaken several reforms related to the safety net, healthcare reform, pension reform, education reform in the hope to reduce precautionary savings," Zhou said.

Dominic Barton, head of the Asia practice of consultancy McKinsey explained that Chinese people save so much, about 40% of available income, because they don't trust the government to take care of them when they're old or get ill.

"The economic leg is much longer than the social leg in China. That's why the big new motto of the government is 'harmonious society'," he said.

How China copes with a weak banking system, the social problems engendered by the restructuring of its state-owned enterprises, an undeveloped pension and welfare systems, environmental degradation and the reliability of energy and food supplies will determine how well it fares on the global economic scene in the next ten years, said Barton.

India has democracy on its side

India, in contrast, is growing at a more reasonable rate of around 7% and its economy has more than doubled in real terms since reform began in 1991.

Although the country's infrastructure, and its power network in particular, don't compare to that of China, it boasts the enormous advantage of being a democracy.

"As people become richer, they also start wanting things like democracy. The fact that India already is a democracy is a huge advantage on China, which could be strongly disrupted down the line," said Williamson.

But democracy can sometimes play against India.

"It means that reforms take longer," said Srinivasan of the Indian industry group. "So people have the erroneous perception that nothing is happening."

The reforms are crucial if India is to start sharing its newfound wealth with the vast majority of its population, because while the rise of the biotech and IT sectors are a great story, they alone are not enough to create the kind of employment opportunities that will bring broader economic and social progress.

Top of the agenda, India must rein it its budget deficit and find the resolve to deregulate industries such as retailing, banking and defense.

Perhaps the last advantage of India over China is the youth of its population, 70% of which is under 36.

In the short-term, however, there can be no doubt that China is winning the investment game. Foreign direct investment in India has increased since the start of the reforms, but inflows are still anemic, especially compared with the amount China attracts. In the past fiscal year, India took in about $5.5 billion in foreign direct investment, about 8% of China's $64 billion.

Aude Lagorce is a reporter for MarketWatch in London.
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