Examination of Witnesses (Questions 120-139)
UK TRADE & INVESTMENT
14 FEBRUARY 2006
Q120 Chairman: So you are happy you
have got the resources to deal with all those issues?
Mr Ahmad: We would be, obviously,
pitching for more, but on the basis of better results and effectiveness.
We are managing with what we have.
Q121 Chairman: One of the things
that has surprised me about the evidence that we have received
so far on this inquiry is how little we have heard from British
business, and we will be asking some questions later on about
the reasons for that. There are two particular areas you have
not mentioned which I thought were quite important. I do not think
they are in your priority areas (correct me if I am wrong). Infrastructure—generally
defined in India as ports, roads, railways, where there are huge
opportunities, and cold storage for agriculture products. Huge
levels of wastage of Indian food has occurred, and there are real
opportunities there to get the processing chain, the transport
chain and distribution up and running. Do you have a view on the
potential in those two areas and what restrictions are there in
terms of foreign ownership and so on, on the Indian side?
Mr Ahmad: Those two sectors that
you mention—infrastructure very broadly and what I might
describe as the agri-sector, including the food chain—are
very much part of the JETCO agenda. They are formally recognised
as issues that we need to engage on bilaterally. If I can start
with agriculture first, the issue in India is that 80% of agriculture
is still very much subsistence agriculture; very little of it
is what one might describe as market-related. The sad fact is
that some 30-40% of produce rots before it reaches the first market.
So there is a huge demand for agriculture to become industrial,
if I can put it that way. In some sectors in India there has been
relative success, in the areas of the international flower market,
for example, but in terms of grocery produce it is still very
much in its infancy. The case that we have made from the UK is
that if one broadens FDI into the retail sector, for example,
then there will be a very natural progression from that where
the large-scale operator would look downstream and invest downstream
in the cold chain and in contract production, but retail is still
a restricted sector. Where there have been some very good developments
are in crops that do not quite fit in that category. The one I
would cite where there is active British involvement is bio-diesel,
where a British company has now entered into a joint venture with
an Indian company called Nanda, and they have now planted a particular
species of seed that turns into bio-diesel. Within the next two
years there will be an active production of this within India.
It is a huge area that needs to be addressed, and we have an agricultural
working group now which has members both from India and from UK
business focused on this. They met for the very first time last
month. On infrastructure, the story depends on which sectors one
is addressing. On the issue of ports, P&O and others already
have some joint ventures there and they are running alongside
ports that are run by the state. We certainly see this as a growing
sector. We also see airports as an area for growth and, indeed,
a British company, Arup, is building Hyderabad Airport. There
is no British involvement currently in the lead bidders for Mumbai
and Delhi, but I am pretty sure that in the supply chain British
business will be involved. On the issue of roads, this is far
more complicated. At the moment it is the national highways agency
in India that has been masterminding this, and our discussions
with the Planning Commission in India suggests this is an area
where they would like FDI. It is quite tricky. The issues of land,
the issues of tariffs which are regulated by the Government are
still far from clear, and I do not think, in the immediate future,
this will be offered up as a package where UK businesses might
take an active interest. In the sectors of power and bridge building,
I would say that British industry is fairly well engaged.
Q122 Mrs Curtis-Thomas: Can I ask
a further question to the Chairman's: how many people work in
your department and what sort of budget are you prescribed annually?
Mr Ahmad: UK Trade & Investment
is, in a way, a virtual organisation, in the sense that we have
no direct employees, but if you add up the employees who are charged
with delivering UKTI objectives globally it is some 2,300 people
round the world who work for UK Trade & Investment. In the
case of resources, the overall package is a combination of the
budgets that we have from the DTI, from the Foreign Office and
what UK Trade & Investment gets directly from Parliament as
programme money. Last year the total value of all sources was
just under £300 million.
Q123 Mrs Curtis-Thomas: Can I ask
a further question? Is there a relationship between budget and
benefit? If you had more money could you get better results?
Mr Ahmad: That is the essence
of how government finance is currently distributed. The only basis
upon which we secure funding from the Treasury is to say that
these are the specific public service agreement targets we will
meet, these are the deliverables under each of them, and any case
we make for funding incrementally has to deliver additional output,
yes.
Q124 Mrs Curtis-Thomas: Is that why
they reduced your budget—because you were not very effective?
Mr Ahmad: I think we were engaged
in a public sector spending round where budgets were tighter overall
and there were other competing demands on the Foreign Office and
the DTI.
Q125 Mrs Curtis-Thomas: So it was
not a reflection on your performance?
Mr Ahmad: I would like to think
not. In fact, if anything, the focus of the Treasury and our parent
departments on our agenda has increased rather than decreased.
Q126 Mrs Curtis-Thomas: Was your
performance better or worse when you had a lower budget?
Mr Ahmad: That is a very good
question. The way I would describe it is that I think because
we have been forced to prioritise we are delivering better results
in those areas where we are prioritising. What we have, perhaps,
lost is the ability to provide a Rolls-Royce service regardless
of which market the customer wanted to access.
Q127 Chairman: And, of course, you
have resources diverted (and one of my colleagues will come in
on this) to the RDAs as well. Have you not?
Mr Ahmad: That is included in
the global figure. What we are essentially doing is not just simply
parking funds with the RDAs; what we are saying is that the decision
on funds which were previously allocated from London would be
done on a dual basis where there is local input as to how the
money is spent, but the budget really comes from UKTI. The plus
side of this is that the RDAs themselves are making a sizeable
contribution of funds to trade and investment work—
Q128 Chairman: That figure you gave
Claire Curtis-Thomas includes the money delegated to RDAs?
Mr Ahmad: It includes the money
that UKTI has, that is jointly spent with RDA involvement.
Q129 Mrs Curtis-Thomas: The question
I was intending to ask, before I was diverted by my own interests,
is about the Commonwealth Games in 2010. What is the British involvement
in those Commonwealth Games and what has your role been in promoting
and encouraging British business to participate in this very lucrative
event?
Mr Ahmad: There is a happy coincidence
on that issue in the sense that when I was last in the Foreign
Office I was responsible for the Foreign Office's contribution
to the Manchester Commonwealth Games. So, in a way, I have a fairly
direct understanding of what that entailed. As part of the JETCO
process, we actually discuss the Commonwealth Games quite directly,
and when we took a business delegation under Ian Pearson last
month we had a meeting with the Sports Minister specifically on
the Commonwealth Games, and the idea, perhaps, of using some of
the private public partnership schemes that could fund the requirements
of India. At this stage, the Indian side are still very much on
the planning stage of what this will entail.
Q130 Mrs Curtis-Thomas: They have
not let any major contracts for stadiums or the infrastructure?
Mr Ahmad: Not as yet, and the
belief in India is that they might focus initially on refurbishing
what they have. We are working very closely with the Indians on
offering what the learning points are from the Manchester experience.
Q131 Mrs Curtis-Thomas: Did you say
to the Sports Minister: "What other countries have been to
see you before we got here?"
Mr Ahmad: No, we did not. He was
a relatively new minister having just taken over from his predecessor
who had passed away. So the meeting had to be calibrated accordingly.
Q132 Mrs Curtis-Thomas: Do you know
if the Germans have been there? Which of our European colleagues
had been there? The Chinese?
Mr Ahmad: I cannot answer that
question. We have not any information as to who else is on the
beat, but I do know that we were very early.
Q133 Mrs Curtis-Thomas: Can you find
out? I would be very interested to know.
Mr Ahmad: Certainly we will do
that.
Q134 Chairman: I was in India in
October and I was told the Australians had already cleaned up,
virtually, at the Commonwealth Games. That is not your understanding?
Mr Ahmad: That is not an impression
that I have picked up, but, having said that, the Australians
were very actively involved in the Manchester Games and they have
their own coming up next month. It would be surprising if they
were not equally fast off the blocks as we were, but we have been
on the case for at least two years now.
Mrs Curtis-Thomas: Would it be possible
to have a specific note about that?
Q135 Mr Clapham: Just on the infrastructure,
I note that from the brief we see that the Netherlands are investing
more than what we are, and of course the Americans, and I think
we are fourth in the league of investors. Are they involved at
all—the Americans and the Netherlands—in infrastructural
projects in India? Is there anything that we can learn from what
they are doing? Or are we doing equally as well as they are?
Mr Ahmad: On a broader scale,
the UK is certainly one of the largest EU investors in India.
The US, for obvious reasons, has a significantly larger commitment,
particularly more recently. Investment in infrastructure I do
not think has been markedly European or US financed; it has been
largely domestic. Some investment has come from ASEAN countries
and the Chinese are looking at it, but it is not an area where
one sees a huge amount of what I might describe as Western interest
as yet, but it is certainly there and is coming. In the ports
sector, certainly the likes of Nedlloyd in their joint venture
with P&O have been involved, and the Germans have recently
been actively involved on the airport side.
Q136 Mr Clapham: But there are opportunities
there that you are going to ensure that British industry is able
to engage with?
Mr Ahmad: Infrastructure is one
of the top priorities and almost every one of our trade offices
has a sector specialist just dedicated to that sector alone.
Q137 Roger Berry: I would like to
ask you about your assessment of the work of the RDAs and the
devolved bodies and development agencies in relation to promoting
trade and investment. On the one hand, the RDAs are quite small
organisations and there is the whole world out there. Are they
really adding value to promoting investment and trade relations
with India?
Mr Whiteway: Perhaps I could answer
that, as far as inward investment is concerned. I think it is
important to understand that the UK's inward investment network
is precisely that—a network—of which UKTI forms part.
The part we have is the headquarters organisation here in London
and we have our overseas teams in, more or less, 33 priority markets.
We could not do our business, however, without the assistance
that we get from the RDAs because we have no resource on the inward
investment side actually in the English regions or, indeed, within
the devolved administrations. So the whole trick, as far as we
are concerned, is firstly identifying companies abroad which are
ripe for expansion and then working with those companies and working
with the RDAs to assist them to locate somewhere in the United
Kingdom. So it is a fundamental part of what we do and we could
not do our business without them.
Q138 Roger Berry: You mention that
three RDAs actually have representatives in India. Which are those
three and what are they doing?
Mr Whiteway: Scottish Development
International; WDA have their own offices, and the East Midlands
Development Agency and Advantage West Midlands have a joint office
which is classed as British Midlands. They are actually represented
by a consultant, so they have that presence all the time. Of course,
other RDAs and DAs will visit the market from time to time and
have meetings with clients.
Q139 Roger Berry: It is a standard
question about RDAs overseas: to what extent are they competing
against each other for the location of inward investment and to
what extent, therefore, is public money being wasted on duplication?
Mr Whiteway: There is an element
of competition between RDAs in respect of any given market, but
our task as the national inward investment agency is to try to
work with all the RDAs to try and guide them in such a way that
there are no wasteful overlaps and to try to minimise duplication
between them. For example, one of the issues which arose earlier
was this question of confusion over having so many different organisations.
That is something we are trying to address by means of a pilot
which we are running in China where the RDAs are able to use the
UKTI brand on their visiting cards to try to reduce that sense
that there is multiple representation in the market. So it is
a question of trying to co-ordinate the effort rather better.
The upside of having all those bodies in the market is that if
properly co-ordinated the sales force is expanded, if the transparency
arrangements work as we would like them to work between the RDAs
and ourselves we actually get more intelligence about what is
going on in the market, and the hope is that in a general way
the overall amount of inward investment going to the UK will be
greater, not less.
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