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Shri P. Chidambaram has called upon the German investors to invest in a wider variety of value added and high technology ventures in India. Inaugurating the 15th Session of the Indo-German Joint Commission on Industrial and Economic Cooperation here today, the Finance Minister said the complimentarities between India and Germany open up a vast range of possibilities of bilateral economic, commercial, industrial, scientific and technological cooperation. A fuller awareness of the mutual advantage of collaboration can play a crucial role in transforming relations between the two democracies into a vibrant strategic partnership, he added.
Shri Chidambaram urged that specific problems faced by the business and industry of both the countries should not impede bilateral broader economic, industrial, commercial and trade cooperation from moving rapidly forward. Terming the sharp decline in German investments in India as disappointing, Shri Chidambaram said that these investment have averaged $125 million annually in the last 10 years which is insignificant compared with either the overseas investments made by Germany or India’s opportunity to attract foreign investments. The confidence of other foreign investors in general have reflected in the increased inflow of foreign direct investment into India in recent times and we need to clearly identify the obstacles impending German investments in India, he added. Stating that India has set up an Investment Commission consisting of eminent and best required leaders of Indian business & industry, Shri Chidambaram hoped that interaction between them and German Business industry would help in identifying and removing those impediments. Due to the rapid growth of the Indian economy, considerable potential exists for cooperation in information technology, biotechnology, telecommunications, manufacturing, food processing, mining, hydrocarbon prospecting and production, transportation, urban development, energy and other areas of infrastructure development, hospitality, entertainment, tourism, healthcare and medical tourism and many other areas in the service sector.
Shri Chidambaram said that infrastructure development is a key priority area of the Government of India for investments. Infrastructure sectors in India can absorb FDI upto 150 billion US dollars in the next 10 years. Road sector is an area where huge investment potential exists. Major investment opportunities exist in leasing out assets of existing ports, construction and operation of terminals, berths and storage facilities and captive facilities for port based industries. India is in the process of restructuring and modernizing Delhi and Mumbai airports through joint venture route by inviting private investors. An in-principle decision has been taken to modernize Chennai airport through joint venture route. Two new airports of international standards are being constructed at Hyderabad and Bangalore through Public Private Participation. India has a liberal and progressive framework for it’s power sector. In India the Electricity Act 2003 aims to create 1,00,000 MW of additional generation capacity in the next ten years. Shri Chidambaram said that the Government has embarked on providing about 150 million new telephones by 2007 especially in rural areas. India is one of the most open telecom markets in the world. Opportunities exist in acquiring licenses issued to existing operators, as some of them are divesting equity stakes to foreign investors, he added. Rapid and sustained growth in the telecom market in the country also provides major investment opportunities for manufacturing and marketing of telecom equipment. Huge investments are available in providing water supply and sanitation facilities for the urban population. Housing is another major area with significant investment potential, he added.
Shri Chidambaram said that Germany is a leader in biotechnology products. India’s consumption market for these products is expected to increase in the coming years. Multinational corporations around the world have started sourcing their R&D requirement from Indian institutions. German small and medium enterprises will find this a competitive option, he added. On outsourcing, India can act as a consultancy and manufacturing base for German companies as the country has the potential to be a global hub for manufacturing. Many of Indian concerns can provide world-class products at competitive prices besides research and development centers focusing on design, engineering and completing an end-to-end service in India. Many German firms have yet to discover the range of opportunities provided by Indian manufacturers and capitalize on this, he added.
On the issue of bilateral trade, Shri Chidambaram mentioned that some Indian exports to Germany have faced EU anti-dumping and other punitive actions. The rise of protectionism in any form is a source of great worry to India. Stating that denial of market access needs to be discussed so that there is no unfair targeting, Shri Chidambaram urged to use this forum within the Indo-German consultative mechanism for regular discussions and contact among business and industry and government representatives so that such matters could be discussed at some length and concerns of both sides understood and matters resolved. Indeed, such a mechanism could look into a variety of other trade related issues, such as sanitary and phytosanitary measures, tariffs, quotas, etc because the basic objective would be to find solutions, he added. Even in regard to investment in Germany, he said our experience suggest that while setting up a firm is relatively smooth, once business is established the main difficulties faced by investors from India continue to be visa regulations and work permits, employment and labour laws, taxation regulations and some other special regulations. Shri Chidambaram said several Indian business persons have expressed concerns to us about the number of anti-dumping cases instituted against India by the European Union. He sought Germany’s support in ensuring that anti-dumping measures are not resorted to in this manner. Shri Chidambaram submitted that with the abolition of quotas for the textile and clothing sectors, no non tariff barriers should be imposed in the form of labour and environmental standards.
Shri Chidambaram said that we hope to see positive impact of the implementation of the new law aimed at attracting skilled workers to Germany as the number of Indian professionals working in Germany is increasing. Perhaps it is time to work out a bilateral arrangement with India with regard to “Social Security System” so that benefits accruing to Indian professionals working in Germany are not lost in the long run and short term employees are spared of making contributions whose returns they never get to enjoy, he added.
German small and medium enterprises (SMEs), which are strong in clean technologies, especially in the field of ceramics, leather, textiles, pharmaceuticals, chemicals and waste management, will find it cost effective to co-produce in India by transferring technical know-how and managerial knowledge, and by investing in Indian SMEs. They have a very good opportunity for collaboration with Indian industry for co-production in India and supply of machined items to Germany and Europe through joint ventures and technology tie-ups with Indian industry. Improved skill and technology levels in auto component sector provide strong opportunities to German companies. He said visits of SME delegations are of a great significance to bring the industry trade and business people nearer to each other. At present, opportunities in tourism abound for joint ventures with the opening up of foreign investment in tourism, hospitality industry, golf courses, adventure sports etc., he added.
Shri Chidambaram said that the high-level visits and interactions like this are pertinent to tapping the unrealized potential of our bilateral trade, investment and economic cooperation. Participation in international trade fairs in both the countries has increased, which is an instrument for greater awareness of the diverse and emerging areas in which Indo-German industrial, trade and economic relations can venture into and benefit from relative competitive advantage and expertise, he added.
Responding to Shri Chidambaram’s speech, German Minister of Economics and Labour Mr. Wolfgang Clement assured that Germany will play its part in India’s ongoing integration into the world economy. The German Minister said that Information and communications technology, chemicals and pharmaceuticals, bio-technology, environmental protection are the key sectors which can offer fresh possibilities for cooperation. Food processing, technical services and financial services are the other important areas for economic cooperation between the two countries, he said. Further expansion of economic relations will benefit both the sides, he asserted. Referring to the modernization and economic recovery taking place in Germany, he invited India to invest even more in Germany. He said that Germany wants to play its part as India upgrades its infrastructure in many areas and develops fresh fields of cooperation, thus becoming even more integrated into the world economy.
Mentioning the long tradition of Indo-German economic relations, the German Minister said that both sides have an increasing interest in making economic partnership even closer. For the first time, bilateral trade between Germany and India broke the 6 billion barrier – at 6.22 billion euros last year. This reflects an increase in the volume of trade by 1.14 billion euros, an expansion of 22.5 per cent, he said. The high level of industrial growth in India, gives hope for another sharp increase in Indo-German trade this year and beyond, he said.
Appreciating the Prime Minister, Shri Manmohan Singh for adopting the policy of liberalisation when he was Finance Minister in the early nineties, Mr. Wolfgang said that India is now harvesting the fruits of that forward looking policy and the country is coming closer to the world market. He said that further liberalization of other fields- like the banking sector or civil aviation-for foreign investors and streamlining of lengthy and complicated authorization procedures along the lines of a ‘one-stop shop’ are steps which could prove particularly effective for India. They are also key interests of the German companies working in India, he said.
He regretted that the positive development in Indo-German trade contrasts with the opposite trend in authorized investments as Germany only comes in seventh place in India’s statistics at present, with 37 million euros. He said that the current level of Indo-German trade relations and mutual investment is far from fulfilling the potential and emphasized the need to further strengthen the partnership on both sides.
Mr. Wolfgang said that with economic growth of 6.9 percent in 2004, India was actually a world leader. Germany, at the moment, can only dream of that, he said. He appreciated India for making a clear shift away from the primary and secondary sectors to the services industry, which now accounts for over 50 percent of GDP. This reflects India’s greater integration into the international division of labour, he said.
He said that the future of economic cooperation between the two countries looks rosy and desired that such meetings should take place more frequently again in future. He expressed the confidence that the Conference will achieve its objectives and help to deepen and expand Indo-German cooperation.
Mr. Wolfgang is leading a 100-member strong delegation comprising of CEOs of top German companies like Bar GmbH, ALSTOM Power, Imexa, TUV besides Members of the German Parliament ( Bundestag). The Indian delegation consists of top Indian officials from various ministries and CEOs of top corporates like Indo Rama, Atlas Cycles, NRB Bearings, ITC, Hero Honda etc. and also leading representatives of business chambers like FICCI, CII and IGCC.
BSC/BY/GN/CS-180/05
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