Examination of Witnesses (Questions 140-159)
UK TRADE & INVESTMENT
14 FEBRUARY 2006
Q140 Roger Berry: I can understand
the importance of links between UKTI people in India and RDAs
in the UK, but do you think, therefore, the money being spent
on RDA reps in India is far better spent on that purpose than
giving it to UKTI to get them a job?
Mr Whiteway: There is an argument
for saying that the priority should be spending money on marketing
your offer. We do not actually have a position on that. The position
is that the RDAs—
Q141 Roger Berry: Do you mean you
do not think it would be better if the money was given to UKTI
rather than having these RDA freelancers in India?
Mr Whiteway: It is a matter of
policy, which is a matter for Ministers rather than for officials.
We work with what we have got; we seek to make the best of what
we have got and we believe the way ahead is to work as closely
as possible with those overseas offices of the RDAs and try and
maximise their effectiveness.
Q142 Judy Mallaber: It is quite hard
to pin down exactly how these bodies work. I am interested with
you saying that the Midlands RDA has a consultant or, as Roger
put it, freelancers out there. Are you able to—for me as
a East Midlands MP—illustrate how it works, by giving any
examples of what they have done that has helped us within the
Midlands and how you would relate to them on that work?
Mr Whiteway: I cannot give you
a specific Midlands example, but what I can tell you is that the
transparency arrangements that we have with the RDAs involve,
for example, exchange of pursuit lists in both directions, so
that we know those targets which the Midlands are pursuing and
they know the ones that we are pursuing. That is generally helpful
in the process of trying to co-ordinate the national effort.
Q143 Judy Mallaber: Would you be
in a position to give us a note about those specific links and
what kind of opportunities are in issue, because that will give
me, certainly, an understanding of how it works?
Mr Whiteway: Yes, certainly.
Chairman: We have a quite a number of
East and West Midlands MPs on this Committee, and the subject
is of interest to them.
Q144 Mr Bone: I am also an East Midlands
MP—or allegedly East Midlands. I am trying to get my head
round the RDAs and their overseas involvement. I suppose the first
question is would you like to see the RDAs setting up and doing
a country for a promotion of trade and investment? That is the
first question.
Mr Whiteway: In the sense of leading?
Q145 Mr Bone: Yes.
Mr Whiteway: I think the answer
to that is, given that our responsibilities as the national agency
is to the UK as a whole, that would be difficult for us because
our task is to try and ensure a level playing field, which is
not to say that we overlook the strengths of a particular region
in a particular sector. We certainly do not do that. If you gave
one RDA the lead in a particular sector, that could lead to disadvantages
to other RDAs and other regions, and I think we would find that
rather difficult.
Q146 Mr Bone: This is where we have
problems with the RDAs. I think, on inward investment, Chairman,
the country has done very, very well and is very good at inward
investment. I can remember 20 years ago, when I was the lead for
an inward investment by American companies, the Government was
very good, particularly the Welsh Development Agency and the Welsh
Office. Of course, they do heavily promote themselves abroad,
so there is some disadvantage to English regions if they are not
doing that. So I think we would bear that in mind. However, where
I think we fall flat on our face is the other way round: for British
manufacturers to do business in India. I still do not see how
that is really being promoted at the moment and how actually RDAs
can help with that.
Mr Ahmad: Perhaps I can tackle
that because that, essentially, relates to the trade development
side of the house. Constitutionally, if I can put it that way,
the RDAs do engage on inward investment but on trade promotion
it has been left to UKTI to deliver on behalf of the English regions.
However, the RDAs are very much partners in the sense that their
whole effort in targeting SMEs, in terms of helping their competitiveness
and developing their regional strategy for which sectors they
want to promote as clusters, be it in biosciences or high-tech,
means that there is some continuity, if you like, of how they
engage with small businesses through their various activities
and support for Business Links and other agencies. We essentially
complement that offering by not duplicating the architecture that
they actually have. So it would be quite normal, as we had with
the India road shows round the English regions, where the host
is the regional authority with other trade associations as partners
and we come there to promote what UKTI has to offer. By having
that close proximity, essentially we are addressing that issue
of delivery head on because our staff and the locally recruited
trade advisers are very much part of the architecture of the RDA
and their agencies. So in some respects it is almost indistinguishable
when you look at it from that perspective. I think, if you like,
everything that we do, in terms of UKTI's engagement with businesses
in the UK, has a very strong link with the RDAs. It is quite clear.
Q147 Chairman: Did I hear you mention
an India road show?
Mr Ahmad: Yes.
Q148 Chairman: I do not think I am
aware of how that actually operates. It would be helpful, not
necessarily now, to have a note on what that actually is.
Mr Ahmad: I am happy to do so.
It is a series of outreach programmes where, with the help of
our High Commissioner and other senior staff and other experts
on India, we brief local businesses on the opportunities, the
pitfalls and how to do business in India.
Q149 Chairman: You distinguish between
seeking inward investment from India into the UK (in fact, this
Committee is going to go, on Monday the week after next, to see
Hindustan in Belfast on inward investment) and you talk about
trade promotion of British companies to India. What about encouraging
British companies to invest in India? Where does that responsibility
lie?
Mr Ahmad: That also falls under
the trade development side but I would express what we do in a
slightly different way, which is that our job is not to encourage
outward investment but to deal with customer requirements once
they have decided that is what they want to do. In terms of providing
them with advice, with chargeable services, with research, with
appointment arrangement and finding adequate suppliers in terms
of advice and services to them, that is something we will do but
we do not have a programme which actively asks a British company
to establish a presence abroad anywhere.
Q150 Chairman: If companies came
to you and said: "We think we would like to make an investment
in a certain sector in India", how would they be helped?
Mr Ahmad: In a number of ways.
They could be given an off-the-shelf sector report that our officers
already produce as a continuing process. They would certainly
help with their inquiries remotely if they chose not to actually
venture into the marketplace, but once they decided to go they
would be helped with our staff in any which way that we would
any British visitor.
Q151 Judy Mallaber: We have a recent
article here from The Financial Times which suggests that
UK leading companies are less adventurous than those in the US
and the rest of Europe. It quotes a number of figures. This specifically
related to acquisitions, and more broadly in relation to trading
opportunities. Do you think it is true that our companies are
less adventurous and if so why?
Mr Ahmad: In terms of engagement
with India, I think the facts would indicate otherwise. The UK
is still the largest exporter from the EU into India. We still
are very much high on the league of investors into India itself.
I think it is when you look at individual sectors that, perhaps,
the figures may tell a different story. Primarily, of course,
there are many sectors in India, particularly in the services
area, which are still restricted in terms of foreign investment
and those certainly act as a barrier, whether it is financial
services or telecommunications, for example. The other issue is
a matter of perception, and it is quite often the case that where
you do not have British-made cars on the road or UK shop carrier
bags, people have this impression that in the consumer goods industry,
which is very much visible, that the UK is less prominent than
others. Our investment tends to be at the heavy end or what I
might call the invisible end, which is the inner workings of a
port or petrochemical ventures—something that will not be
readily visible to a consumer.
Q152 Judy Mallaber: On acquisitions,
if I can quote a KPMG study, 79% of acquisitions by UK companies
were in Western Europe in the period up to the end of 2004, but
it has now grown to 90% compared to only 74% for other European
countries. This suggests that UK companies are stuck in the rut
of looking for targets in mature, low-risk, low-growth markets,
and do not seem to have the appetite for exposure to emerging
markets. Are you saying you do not recognise that picture?
Mr Ahmad: I can see where that
comes from but I do not recognise it from an India specific perspective,
because it is quite natural that the UK businesses would look
to the EU and North America as lucrative places to invest. However,
if you look at the investments the UK has made in Korea, in China,
it is not a lack of adventure; it is a question of good business
sense, where they can see returns. I think the appetite for Indian
investment would rise if there were fewer restrictions on certain
sectors in terms of foreign ownership and the regulatory environment.
Q153 Judy Mallaber: I think we are
coming on to that. While we are sticking on this, what does UKTI
do to make UK companies feel more comfortable about acquisitions
in India or trading with India? What is your role in trying to
soothe those fears and encouraging them into that investment?
Mr Ahmad: I think our role is
not necessarily to be promoting the opportunities in that way;
our job is to provide them with facts and advice on the basis
of informed research. It is up to businesses then to make up their
minds. I think our customers value the unbiased, warts-and-all
advice that we are able to give to a customer on a one-to-one
basis.
Q154 Chairman: You have done terribly
well as witnesses until now but I think your answers to Judy Mallaber
slightly disappointed me, because what I hear is that we are falling
down the league tables on trade and investment in India, we are
actually slipping down, and what should be one of the strongest
relationships in the world for this country, given our history,
we are actually going backwards. In FDI the Netherlands invest
more in India than we do, and in terms of trade Switzerland, Belgium
and Germany export more to Australia than we do, according to
statistics we have got from the FCO website, and it is getting
worse not better. What seems to me to be happening—and it
is one of the purposes of this inquiry—is that British business
is taking its sights off the expanding markets and concentrating
on safe, secure markets in Europe and North America. You seem
to be saying it is not a problem. If I am wrong, tell me I am
wrong, but I think we are losing ground.
Mr Ahmad: We are very aware of
the fact that there are issues that are of concern not just to
HMG but to UK plc, if I may call it that, which is why the Asia
Task Force itself was created. It was created because the Chancellor
felt that in an otherwise growing region we are less equipped,
perhaps, or less able, to address what those opportunities are.
There is no complacency, certainly on the UK Government side,
on the fact that our trade with India represents only 1% of our
total exports. We prefer to see that as an opportunity rather
than a threat in itself. I do not think we are failing as such,
I just think we can and should do more.
Q155 Rob Marris: My understanding
of the Asia Task Force is that its goal is to identify generic
barriers which can impede trade between the economies, whether
regulatory or cultural. If that is right, those generic barriers
apply to Switzerland, Belgium or wherever. So the Asia Task Force
is not dealing with exports because it is addressing generic barriers.
We are going to get on, in a minute, to barriers but I cannot
see where the Asia Task Force comes in.
Mr Ahmad: I think the Asia Task
Force is looking at both generic and specific issues. As I speak,
my team is out there researching with customers who are already
in India and other parts of Asia as to precisely what got in the
way and in what ways were they able to succeed. However, there
are generic issues like intellectual property rights and tariffs.
Q156 Rob Marris: Sure, but those
apply to Switzerland or Belgium or Mauritius or whoever. Or do
they not?
Mr Ahmad: They do, but we are
also in a situation where there is a bit of a turf war going on
with free trade agreements and the like between various regional
groupings, and India is certainly indicating its interest in entering
into some of those. We are also in the position of having more
to lose, perhaps, than the Swiss example. Mauritius is rather
a quirk in all this; there are very specific tax-based reasons
for why that flourishes.
Q157 Mrs Curtis-Thomas: I have been
reading this very interesting UK Trade & Investment departmental
report, and also looking at your submission. I would just like
to point to Annex B, which is your Barriers to Investment in
India consultation paper, and you state that there is an information
deficit in the UK about opportunities available in the Indian
markets. First of all, I want to know what you have done to encourage
SMEs rather than large organisations to invest in India. I also
want to point out and ask you to respond to a paragraph under
development and trade services here, where you say that you are
intending to rationalise some 50 schemes to focus on services
that add value to most customers. Fifty schemes, to me, sounds
like an awful lot, and producing a lot of information or, maybe,
generating an awful lot of information of advice, and here there
is a reference to "an information deficit" disorder.
So what are you doing? It seems to me you have got too much and
too little and what you should be trying to do is improve what
you have. Where are you with this?
Mr Ahmad: On that subject, if
I can address the two separately because in a way I alluded to
what we are doing vis-a"-vis India and information when I
talked about the road shows. Our role, if you like, in UKTI is
to address a market failure that would otherwise exist if we were
not there; to bring information on a marketplace to a customer
base. That we do through our website offering, through any international
trade adviser who meets a customer and, periodically, for countries
where we think it is worthwhile and there is a demand, we hold
surgeries or road shows (or however you want to describe it) where
those precise issues are raised and disseminated in terms of doing
business in India. We are also currently in the process of producing
a booklet which should also address specifically the challenges
and the rights and wrongs and dos and don'ts of doing business
in India, which will be a practical benefit to businesses dealing
with India. The service offering is something slightly different.
The 50 or so schemes were a number of products—
Q158 Mrs Curtis-Thomas: Before you
go on, I am intrigued by all this because we clearly have European
countries that are being a bit more adventurous in terms of promoting
India to indigenous countries. When we are developing our offerings,
are we actually going to their websites to see what advice they
are there providing on their domestic market? Have we learnt any
lessons from that? I am in favour of plagiarism, quite frankly,
if that helps this British business of ours, so what are we doing
about taking advantage of the intelligence being acquired by other
nations working in this market with comparable sorts of economic
and business structures to our own?
Mr Ahmad: Perhaps I can illustrate
that with one example—a concrete example? In the case of
Germany we were told in India and in other markets in Asia that
it was the leadership of the Chancellor and ministers that had
played a very important part in raising the profile of German
business in a place like India. That is something we took due
note of and as a result of that we now have quite a senior programme
of engagement, led by the Prime Minister, on India, followed up
by Alan Johnson, the Secretary of State, and Ian Pearson, the
Minister. We have a programme of activity that takes up the whole
year in terms of trade mission and high-level interaction with
Indians to give UK businesses that level of profile. That was
a direct learning from what the Germans have done. We also looked
very carefully at the EU Chamber network and how the Europeans
use that. We learnt a great deal while the UK had the Presidency
of the EU to see how that mechanism works, and we are certainly
taking some of the learning points from that. The IBPN, which
I referred to earlier, and its role was very much part of that
process of seeing what are the best parts of what some of these
competing agencies have to offer. I cannot say that we have got
it right as yet, and it is going to change as we go along, but
what we do have is a gathering of similar agencies that takes
place in Europe on an annual basis, and in that gathering the
UKTI does come across as one of the better agencies. Indeed, our
corporate benchmark is to be as good as, if not better than, anybody
else, so we are constantly looking at what rival agencies like
us are offering.
Q159 Mark Hunter: In the submission
that has been referred to, you say that India is now unquestionably
a strategic partner for the UK. Could you define what you mean
by "strategic partner" and how differently do you treat
a strategic partner from those countries that are not considered
to be so?
Mr Ahmad: Certainly. It leads
on from the point I was just making about senior level engagement.
The Prime Minister has picked out a number of countries, of which
India is certainly one, where he believes that all of government
needs to bring something to the table. That has been sealed by
a bilateral initiative that has been agreed between the Indian
Prime Minister and the British Prime Minister on areas where interaction
between the two governments should be developed and developed
further, and trade and investment is very much part of that architecture—very
predominantly so. Underneath that, servicing it, is the Cabinet
Office itself which periodically gathers Whitehall officials and
people charged with delivery of that initiative, and we constantly
go through a process of reviewing progress against that agenda.
The JETCO was created in answer to that requirement for having
a vehicle that treats India and the UK on a strategic basis. The
added value of what we do is where we actually then have what
I call cross-sectoral feeding. So if Defra are engaged on climate
change and environmental issues we can then see where UK business
can actually add value to that process. I can draw similar lines
to a number of issues that are addressed under that strategic
scheme. In my region, in Asia Pacific, we only have India and
China who get that sort of trade related strategic focus but there
are other countries in Asia where the HMG focus is slightly different
and trade would not be as high on the agenda as this case, but
I think the material difference between a non-strategic country
and India is that it brings the entire spread of what Whitehall
has to deliver on a shared agenda that is constantly monitored,
and we are answerable ultimately to the Prime Minister in terms
of the progress we are making.
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