Western firms heading for India, China

Florence, September 30 :

Indians are great learners, India is a democracy and also a safe place to invest

— this is the growing feeling among Western financial circles.

Aliza Knox, senior vice-president of Visa’s international commercial operations, says India is the other major source of interest at the moment. “Indians have a strong desire to learn and to progress and are more adaptable to new ideas,” she said, “Some of their bankers are even more sophisticated than their colleagues in Europe or the US.”

Knox was among the more than 1,000 ‘money managers’ from some of the world’s most important companies who attended a meeting in this Italian city this week. Now the world’s fifth-largest economy — as measured by purchasing power parity — after the EU, the US, China and Japan, India is attracting plenty of foreign direct investment (FDI). This is in part due to its strengths in IT and the ability of its workers to adapt to a changing world.

“Relations with China have become more stable and terrorism still has only a limited impact. Let’s hope it doesn’t escalate,” Harding said. Harding said one of India’s main attractions, setting aside its poor infrastructure, was represented by the fact that its leftwing parties were now beginning to embrace the market. “Of course there are backlashes, but India is a democracy and we are very optimistic. It is definitely a success story,” Harding said.

China, without doubt, also remains a key attraction in Asia. “Countries like China and India have enjoyed a huge amount of exposure and have attracted a lot of interest among participants,” said Martin Giles, managing director of The Economist, the international affairs publication.

The reasons are obvious enough. With a gross domestic product (GDP) growth rate of nine per cent over the past decade, China’s economy is expanding fast. Joining the World Trade Organisation (WTO) in 2001 and easing restrictions has reaped benefits, with a whopping $60 billion in FDI pouring into the country last year alone. The fact that it has a population in excess of one billion means China has a huge domestic market that needs satisfying. Manufacturing in China is cheap and exporting easy. But what are the main challenges and difficulties facing European and American companies that want to invest in China today?

According to Hong Kong-based Marlene Wittman, group managing director of Aquitaine Investment Advisors, an investment management firm that specialises in alternative investments in Asia, one of the main problems facing foreign companies is the fact that regulations in China keep changing. “If the Chinese government needs to attract foreign investment, it will ease regulations, if it wants to protect its industries it will make them more stringent. Some call it the weathervane approach,” Wittman said.

For instance, no less than six government ministers must now approve takeovers in China. “This makes things very difficult,” Wittman said. According to her, getting the support of a competent local partner is the key to doing business in China. “Spending lots of money on lawyers and accountants won’t help.” But though red tape is still a major issue in China, the future looks bright. “The business world is definitely pulling the government, and there is a new generation of civil servants who have studied in the West and will soon get into power.”