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DESPITE its criticisms, the recent Indian Budget is a carefully crafted push for growth. There are promises of a number of reform measures that will enable development to accelerate. There is also emphasis on infrastructure spending, particularly on highway construction, and modernisation of airports and seaports, and improvements in urban infrastructure.
Against this backdrop, it is timely to explore possible opportunities for Singapore investments in India and to see where there would be scope for partnership with Indian firms for growth.
Singapore companies that have ventured into India have generally been frustrated at the slow pace at which things are done, as well as the bureaucratic obstacles to success. In fact, in the last few years, not many Singapore firms have established any significant presence in India. There was the expectation of investment in a major Special Economic Zone (SEZ) in South India which, unfortunately, could not materialise due to problems with the SEZ policy, in particular, the resettlement of land-holders.
Singapore investors expected the local authorities to resolve the land resettlement issues and to hand over the area for development. However, the Indian authorities expected the developers to deal directly with the land-owners, which proved very difficult for the Singapore companies. This initiative has not taken off.
Government involvement
There have been smaller investments by a few Singapore companies in information technology parks and real estate, and these are doing very well and providing good returns. However, most of these investments have been entrepreneur-driven, with the Singapore government a supporter and not necessarily an active participant in these efforts.
While the inroads made by Singapore companies have not been impressive, several other countries have enlarged their India investments considerably. The Japanese have invested significantly in the pharmaceutical, chemicals and automobile sectors. They have also provided substantial funding for infrastructure projects, such as the Delhi Metro, through soft loans tied to Japanese equipment supply.
South Korean manufacturers have done exceedingly well in the Indian market, with Samsung, Hyundai and LG recognised as market leaders in their segments.
An important element of these countries' success is the involvement of their governments. In 2003-2007, there were over 80 delegations from Japan, often accompanied by a senior minister. The Japanese government has pushed its overseas development assistance arms - Japan International Cooperation Agency and Japan Bank for International Cooperation - into greater interactions with the Indian government, and the Japanese development aid and loan assistance have increased substantially, along with closer interactions between the two governments.
These initiatives have paved the way for Japanese investments in (difficult) infrastructure sectors such as urban transportation (Delhi Metro). Now Japanese firms are aggressively bidding for and participating in other metro rail projects and power projects.
In a similar way, Chinese delegations invariably are made up of a combination of politics and commerce. Interestingly, the United States Embassy in Delhi constantly pushes for the agenda of its corporates. Most of the major participation agreements and contracts that involve the US are often steered by American government representatives in Washington and New Delhi.
Israel is yet another example where the government interactions have proved to be very useful for its commercial firms. This combination of governmental effort and private-sector follow-up appears to have been successful in many sectors.
It is possible to conceive of a similar approach for Singapore companies. At present, after the initial introductions by the Singapore government, the companies are often left to themselves to manage the intricacies of the rules and regulations in a non-transparent bureaucratic milieu, often leaving them feeling frustrated.
There is possibly an alternative approach that could be considered. For example, one of the strengths of Singapore is the creation and management of urban infrastructure. In the current budget, India's Finance Minister has talked about the creation of slum-free cities - a massive urban renewal programme that offers opportunities for Singapore enterprises. There is substantial government funding available for this purpose. However, it is unlikely that the planning, design and execution capabilities are available either in the government or the private sector in India. This is an opportunity for Singapore.
Among the Indian states, Hyderabad offers the best possibilities in this regard. There is a Congress government in the state of Andhra Pradesh and the Chief Minister, Rajasekhara Reddy, has just won a massive mandate for the second time. The Congress has increased its tally of Members of Parliament during the recent elections from this state. The Chief Minister is also a strong development-oriented administrator and several of his initiatives have been very successful. He also enjoys the confidence of the higher echelons of the party and is keen to ensure that five years down the road, he is able to go back to the electorate on the strong plank of development delivery.
There is an opportunity to partner this government and its administration to leverage on the unique skill sets available in Singapore and yet to deliver what is planned for at a national level.
If one were to think through the ways in which this could be done, the following steps could be suggested:
An important point to bear in mind would be that this project would span several years and that, being an infrastructure project, returns would start only after three to four years.
It is important that there is patience to see through the initial steps. However, it is certain that this is an area where India and Hyderabad would welcome Singapore's participation in terms of ideas, planning and execution.
The above is an example of what could be done. There are several other areas and sectors as well. If there is a lesson to be taken back, it is that private-sector companies alone may not be able to handle the processes and bureaucracy, and that the support of the local government in India as well as the active involvement of the Singapore government through one of its investment arms would be necessary to make these projects a success.
At the end, as all those who have ventured to invest in India will bear testimony to, the returns are far greater than investments in any other country in Asia, including China.
The writer is head of research and visiting senior research fellow at the Institute of South Asian Studies, an autonomous research institute within the National University of Singapore. He is the former economic adviser to the Prime Minister of India
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