India is closer from now on:
Internationalization is a reality
On the 2nd of July 2004, the Commission for International Affairs promoted, in the prestigious setting of the Conference Room of the Chamber of Deputies, a conference on the economic and business opportunities in India in which took part India's Ambassador to Italy, S.E. Himachal Som, the Deputy Ambassador of India to Italy, Minister Gurjit Singh, as well as some Italian entrepreneurs called to bring their testimony about their experience in the Asian country. Supported by the Ministry of Foreign Affairs and the Ministry of Productive Activities, the conference ended with the announcement that AEREC would soon organize a mission to India to check directly what was presented in the conference and to open the way for those interested, among the academicians, in seizing the extraordinary opportunities offered by the country. Only a year after the conference, in mid-November 2005, President Ernesto Carpintieri and the Vice President, Carmen Seidel, went to India, after having been officially invited to participate in some meetings, to speak at the "Third Commonwealth-India Small Business Competitiveness Development Programme" and to establish useful contacts for the Commission for International Affairs of the Academy. What follows is a travelogue of the Vice President, Carmen Seidel, who scrupulously took note of the various appointments and meetings for our newspaper.
Sunday, November 20
We came to New Delhi in the evening yesterday. At 10.30, the representative of one of the most important law firms in the capital, J. Sagar Associates, came to us at the hotel to welcome us. We exchanged credentials and began to present the profile of our work.
Later, we were invited to present each other with the other speakers of the "Third Commonwealth-India Small Business Competitiveness Development Programme” to be held in the course of five days and in different sections. We sat at the same table for working at 20th floor of a hotel with breathtaking views of New Delhi, along with representatives of many governments of the Commonwealth, such as Australia, South Africa, Great Britain, Canada, Pakistan, Uganda, Sri Lanka and New Zealand, and I mentioned only the larger countries.
With them, there were also representatives of the World Bank, the Canadian Bank and other bodies.
During the following days, we had several opportunities to establish personal contacts with some of these personalities, to exchange experiences and opinions, and to evaluate the possibility of cooperation. After a little lunch buffet, not having other appointments in the early afternoon and being Sunday, we decided to take a little tour around the city.
The historic district was filled with people and our driver had considerable difficulty in advancing in the traffic congested by the presence of so many stalls and vendors. The impression was that there were millions of people in the streets. We admired the works of art, ancient palaces and minuets from the car until we descended to take a short walk around the fort of Water Gate and India Gate to see the presidential palace and the government buildings.
At 18, the official inauguration ceremony of the Commonwealth-NSIC session began in a room of our hotel. In addition to the President and General Manager of NSIC, whom we met in the morning, there were: the President of the Export-Import Bank of India, representatives of the Commonwealth Secretariat, the Secretary and the Minister for Small Industries and Agro-rural Industries of India, Hon.
Mahabir Prasad, in addition to the participants of the various sessions. The Minister, in particular, noted that the key point of the conference programme is the sharing of experiences on increased competition. "To achieve this goal" - said among other things - "it is necessary to establish cooperation between small, medium and large enterprises. Small and medium businesses have a vital role in the accelerated growth of the economies of developing countries.
The technical expertise should be improved in order to improve quality and productivity, but we must also recognize the needs of SMEs to formulate policies and meet aspirations. My Ministry is a nodal agency in India for the development of SMEs.
Currently there are nearly 11.8 million small businesses in the organized and non-organized sector, producing more than 8000 products, ranging from traditional goods to hi-tech products and spare parts that will serve in various sectors. This sector recorded approximately 39% of added value in the manufacturing sector and contributes for almost 35% to national exports. 28.2 million people are directly employed. Small Indian companies are present in almost all sectors of the economy such as the transformation in agriculture, engineering, manufacturing industry, leather and leather products, ceramics and computers."
After having witnessed the signing of a Memorandum of Understanding between NSIC and PIFS FIJI, Exim Bank-SME Bank of Sri Lanka, we are invited to a dinner full of tasty local dishes but also international cuisine (there is even Italian pasta !), during which we get to know some personalities better.
Monday, November 21
At 9.30, the session "Small Enterprise and Economic Development” opened; a global perspective, which concerns us directly. After the introduction of the Secretary of the Ministry for small industries and agro-rural industries of the Government of India and a representative of the Ministry of Industry of the government of Bahrain and experiences shared by the Australian speakers, those from New Zealand and Mauritius, the moment arrives when our President Carpintieri explains the experiences of the Italian small and medium enterprises in the world. His speech also arouses great interest, although it was penalized, at times, by the translation from the Italian into the English. The audience was very impressed by the end of the speech, underlining with a long and persuaded applause the concluding words of President Carpintieri: "descending from the airplane, I saw a poster that said 'Incredible India', but I am convinced that India is 'Credible'!” In the afternoon, we are at "headquarters" of NSIC, where we set some individual and personalized appointments among Indian entrepreneurs that are active in a number of sectors and us, on behalf of Italian companies and operators. We must admit that NSIC has done a great job, identifying Indian counterparts carefully, choosing on the basis of corporate profiles that we sent in the preparation of the mission.
Tuesday, November 22
This morning we went to visit the “India International Trade Fair "and “Techmart."
The timely and constant assistance of the employees of NSIC allowed us to avoid the long queue at the entrance, due to stringent security measures. We were accompanied to a room booked for diplomats. We then waited for a bus that would lead us directly at the place of exhibitions. When we arrive in the Techmart pavilion, the fair organized directly by NSIC to present the products and services of its members, the General Manager himself had been waiting there with a big bouquet of flowers in his hands.
We were very impressed and pleased with the extreme kindness with which we were welcomed and treated everywhere: on this occasion, the General Manager wished to personally accompany us through the stands and to present the companies to us, and finally inviting us to lunch in his office.
Meanwhile, we had the time to take a quick look at the international trade fair that is a city composed of thousands of stands representing hundreds of industries. We understand that, at the earliest opportunity, we should include at least a couple of days only for visiting the great exhibition.
In the afternoon, we had some appointments on the agenda to consolidate the relationships established over the past two days. Of great importance to us is the meeting at the J. Sagar Associates and as I have already written one of the most famous law companies in the capitalof India, among its clients being companies such as Pepsi, Reebok, Gillette, Perfetti, Piaggio, Philip Morris, Kraft, Deutsche Bank, World Bank, TATA and many other important multinational companies and Indian companies as well. Since the preliminary work for the mission, J. Sagar Associates had placed itself at our disposal to give us all the necessary information concerning the legal conditions for trade and business to be conducted in India on their goodwill, on tax practices, and also to find and point out possible partners among our academicians.
The main mission of J. Sagar Associates is to accompany the company that wants to face the Indian market from early phases, starting from market research to the feasibility study, looking for competent and serious local partners, finding factories and offices, drafting documents and contracts, approving and registering companies, looking for possible financing and then ensuring the full assistance during the start-up and the day-to-day management, as well as, obviously, legal advice in the event of disputes.
The lawyers of J. Sagar Associates tell us, among other things, that the Indian government provides various special and tax incentives for the foreign investor. A few examples: who is investing in the telecommunications industry or mining is entitled to a tax exemption for the first 5 years for the production and distribution of electricity or road and highway sectors, the exemption covers even the first 10 years.
There are also total exemptions for expenditure on antipollution plants and ecological machinery. To encourage exports, the government offers special incentives to those who promote in India the production of goods for abroad, offering preferential equipped areas and the simplification of administrative aspects, as well as better prices for raw materials. In these cases, foreign investment can also be of 100%.
In the electronics sector, there are even areas that have the status of free zones. It is confirmed that in India, at the moment, there are opportunities for investment in many sectors, but to conquer the local market, it is necessary that the investor should have clear ideas. Knowing, for example, whether he intends to open plants for the production of goods for export, taking advantage of the low cost of labour force, taking advantage of tax facilities and free zones, or if he wishes to provide its know-how (for example in the field of engineering) to Indian companies.
In the latter case, the trader should open a representative study. We learnt that the Italian product has a growing market in India. Despite the high import tax, and the wines that products, such as pasta and food products are increasingly appreciated by the upper middle class. And now India is estimated at around 100 million consumers concentrated in 4 large cities! We are informed that for the basis for any cooperation, it is appropriate that there should be a written and signed agreement between the foreign contractor and the Indian one that averts any legal controversy.
Cases often occurred when relationships were initiated successfully and then these latter were foundered because of misunderstandings and disregarding of the commitments that were made only verbally. You almost need to know local laws in order not to face unanticipated difficulties, such as cases where the law does not stipulate the ability to repatriate profits or investment of a foreign investor.
Wednesday, November 23
The day was dedicated to institutional meetings. The first appointment was with the Director of the Institute for Foreign Trade, Dr. Giancarlo Lamio and with the Director of the Economic and Commercial Section within the Embassy of Italy, Dr. Raffaele Langella.
We learnt from them that the market in India, from 1991 onwards, has gradually undergone transition to more liberal economic models. India is today a country which is fully integrated into the multilateral trading system and offers the guarantee of a democratic political system and a stable and reliable legal framework. Indian agriculture is adopting, not without difficulty, more modern production methods to enable it to keep pace with the fierce international competition and there are opportunities for cooperation with consortia of producers and local authorities.
Today, 80% of the agricultural harvest in India is wasted away before reaching the final consumer because of the lack of processing systems and adequate conservation and the unreliability of transportation systems and distribution.
In short: for the general inefficiency of the system. Only 2% of the vegetable sector and 15% of the production of milk are processed, despite that the areas represent 6.3% of GDP, 13% of exports and 6% of the attracted industrial investments.
In addition to the field of agricultural machines, the areas of specialized equipment seem very interesting, technologies for organic farming, the irrigation systems and the "cold chain". Currently some industrial groups in India carryout projects for the construction of shopping malls with provision of banking services, sale of seeds, machines and the promotion of training courses. The Indian jewellery and crafts and the leather industry have a tradition and have adequately qualified labour force.
The creation of "special economic zones" makes possible forms of cooperation between Italian and Indian companies in the sector. The pharmaceutical chemistry in India has grown enormously. It is competitive in the production of generic medicines and the Government is developing research capacity and development of new molecules.
The cooperation with the Italian industry could represent a further opportunity for cooperation. Regarding infrastructure, the government has undertaken in recent years in adapting the internal lines of communication with the exterior. Huge investments are anticipated in the field, which include among others the financing of the "Bridge of Mumbai" (880 million dollars). The major ports in India are currently in full conversion to "container" traffic with a significant involvement of the private sector. In the coming years, massive investments in the production and distribution of electricity are expected as well. In the electricity sector, among others, it would be much appreciated the Italian technical competence that at present is not yet available on the Indian market.
It must be said that the most important Italian banks are present with representative offices but not operational with desks and that, on the operational plan, some issues should be considered, such as the extremely slow bureaucracy and a changing regulatory framework. Particular attention should be paid to the setting of the project. In this regard, we have been given a significant example: Coca Cola, the world market leader of soft drinks, a few years ago tried to conquer the Indian market.
To start, Coca Cola appointed an American manager but not knowing the market and the local mentality was unable to integrate the product on the Indian market.
Pepsi, on the other hand, took an Indian manager who in a very short time forced the product on the market, which today can be found even in the more decentralized villages.
The same goes for Perfetti, producer of candies and chewing gum, which from the beginning chose the distribution throughout the country and its products are now also on the stalls, demonstrating the number one position gained in the Indian market. India is a country with many opportunities and with a population having a potential purchasing power in large growth. This is a positive situation that must not delude us. The statistics, in fact, have shown that we need to invest and work for a minimum of 5 years to see concrete results and obtain a significant economic return.
This is to say that already compromised Italian companies and with a modest available capital that think of coming to India and improve the fortunes of his business have little chance of success. We need to invest, work hard, update continuously, be ready to face surprises and unexpected situations and not lose courage at the first obstacle.
It is also imperative to carefully identify their local partner. At lunch, we are guests of Dr. Juneja, President of Globalservice at a very popular club in the capital. Globalservice is a pool of consultants working for years in the field of internationalisation. In particular, it promotes investment, joint ventures and international cooperation, encourage the setting up of enterprises and the competitiveness of industries, assisting the modernization and improvement of technological industries, promotes training and technical updates of operators to increase productivity and the quality of products and services, promotes the exchange of experience and know-how at the international level, devises strategies for restructuring, improving business and action plans, supports the development of infrastructure, organizes seminars, exhibitions and workshops. Moreover, it offers the governments of developing countries the assistance of experts in the field of economy, policy analysis, institutional capacity building, and promotion of investment, acquisition and transfer of know-how, fighting unemployment.
AEREC was already in contact in the form of letters with Globalservice for several months and on this occasion we were very anxious to deepen the subjects that we were more interested in. We believe that we found in Dr. Juneja an ally and a perfect local contact person. We met again two months later in Rome, where he was invited to speak at several international conferences. On this occasion, he also presented us Mrs. Shashi Singh, an economic consultant and specialist in calls, as well as president of the consortium of entrepreneur women in India. With her, we are now presenting a draft to be submitted to the European Commission in response to the announcement Asia-Invest.
In the afternoon, we were received by S.E. Antonio Armellini, Ambassador of Italy to India along with the director of the trade sector, Dr. Raffaele Langella, whom we had already met at Ice in the morning. The Ambassador showed interest and appreciation for our efforts in the field of internationalisation of enterprises. His comments coincided with what we had already learned in the course of the morning in the meeting with Dr. Lamio and Dr. Langella. Before going, he offered us his whole willingness to assist us in the future for the accomplishment of our projects and for any diplomatic and bureaucratic need.
That concluded our mission in India that witnessed, during four days only, our busy agenda of meetings that allowed us to make a clear and comprehensive idea of the Indian market and its opportunities, as well as setting many precious local and international contacts.
The travel budget was positive and made us optimistic concerning the prospect of being able to develop, with the interested academicians, economic and commercial projects in this wonderful country of India. In this regard, we are waiting to be contacted for appropriate deepening of information. Finally, we cannot forget to thank our friend, Gurjit Singh, former Deputy Ambassador of India to Italy, now Ambassador of India in Ethiopia, whom many academicians have had the opportunity to meet, while he was a guest of some of our initiatives. While struggling with a new task, Singh wanted to honour the commitment made with us, setting appointments and dealing with receiving us before and during our stay in New Delhi.