Examination of Witnesses (Questions 260-279)
INDO BRITISH
PARTNERSHIP NETWORK
28 FEBRUARY 2006
Q260 Rob Marris: Apart from you,
it does look fairly service industry to me; there is nothing wrong
with the service industry but that is only one part of the equation,
is it not, with Marks & Spencer as retail, for example? That
is why I am probing you about what appears to be an imbalance.
Mr Bilimoria: There are other
manufacturers there as well on the list; of course, we have the
CBI represented at the table as well, who represent several British
manufacturers.
Q261 Mr Binley: I want to talk about
imbalance too, but I am interested particularly in what I see
as the imbalance in investment between the two countries and the
profitability of that investment and where it is reinvested. I
believe we have got a sizeable imbalance there, a net deficit,
from the UK's point of view, with quite a lot of profit made in
the UK going back to India and not being reinvested here. Can
you tell me how your organisation might help to rebalance that
imbalance?
Dr Vyakarnam: I think all businesses,
anywhere in the world, would want to take some part of its profit
back to its founding business, I would imagine. Presumably, that
is what you are referring to, the repatriation of profits.
Q262 Mr Binley: In terms of FDI,
there is a net imbalance, in terms of investment, in those terms,
because most of the profit made by Indian companies from investment
in the UK goes back to India. If you added SMEs to that, that
figure would be sizeably increased, actually. I just wonder what
you could do to ensure that there was further investment by Indian
companies in the UK to redress that balance?
Mr Bilimoria: My view is that
we have got to continue, in Britain, being a completely open economy,
and that means open to investment from anywhere, any country.
As long as they are bringing investment into Britain they are
creating employment over here, they are creating opportunities
over here and we have unrestricted money flows going out of Britain.
That free market is one of our greatest strengths, that is what
makes the City of London such a phenomenally successful place
and one of the best places in the world to have business headquarters.
If we can encourage Indian companies, which increasingly are going
global, at the moment there are no truly giant global Indian companies,
soon there will be, and Tata will be a giant global company soon,
I am sure, but in the scale of the giant global companies the
Indian companies are emerging and within the next 10 years there
will be giant global Indian companies. In the same way as, for
example, South African Breweries moved their global business headquarters
to London and took a London listing on the London Stock Exchange
and then, in five years, from being the biggest brewery in Africa
and South Africa, today they are the second-largest brewer in
the world, headquartered in London, listed on the London Stock
Exchange, I would hope that, in the future, there will be several
Indian companies which use London more and more as their global
base and that can be only a good thing for Britain.
Q263 Mr Binley: We are seeing already
an imbalance internationally, in terms of people investing in
this country and our investments abroad, and that is raising some
concern. I just wonder whether the area we are talking about would
not help in that respect and keep that concept of freedom alive
over the coming 40 or 50 years, because my concern is that there
could well be a move to protectionism in this respect and that
would be harmful to all that you wanted to do.
Dr Vyakarnam: I would like to
check the figures at some stage, but I believe that FDI from India
into the UK exceeds—
Q264 Mr Binley: I can tell you: it
is minus £18 million without SMEs, which is about 7% ingoing.
Dr Vyakarnam: The investment coming
in here presumably is creating jobs, paying taxes, and you see
that as part of investment. The repatriation of profits I think
is a normal matter for both countries.
Mr Binley: Reinvestment?
Q265 Chairman: The suggestion is
that the worry we have is that when Britons invest in India they
tend to reinvest their profits and grow the business, but the
figures suggest that Indian investment here is treated as a cash-cow
and the money is sent home, and there seems to be a different
approach; that is what the figures seem to indicate. Is that a
fair analysis?
Mr Bilimoria: For example, Tata
bought Tetley in 2000, and to my knowledge both profits and market
share have increased. To me, the priority is Britain being an
open market and welcoming in investment, and if there is repatriation
of profits, well, British companies would want to repatriate profits
when investing in India, should we wish to do so. Of course there
will be an element of reinvestment. If an Indian market is growing,
in my case we predict that if the beer market in India follows
China it will grow by between 25 to 30 times in the next 25 years,
in which case, we will be reinvesting all the time in a growing
market.
Q266 Mr Binley: Exactly the point
I am making, because if you are looking at China and India having
60% of global trade by 2050 then the problems that creates for
our home marketplace, with unemployment, and so forth, are sizeable
and considerable. That is why we need a little bit more understanding
and respect, would you not agree?
Mr Bilimoria: In terms of looking
ahead, the point that you have made, another advantage that we
have is that, as Chairman of the Indo British Partnership Network,
I am also a member of the Asia Task Force, also a member of the
UK-India Round Table, both of which are forward-looking and looking
at the challenges and the opportunities in both countries, looking
ahead, preparing reports, forecasts of where India and Britain
will be in 2020, for example. Also, we are linked into the London-Delhi
Round Table that meets over here and I am linked into the Asian
Business Association over here; so we are aware of this forward-looking
approach.
Q267 Mr Binley: You are a very high-profile
guy, with all those connections; you are going to take this on
board and see what you might be able to do about it?
Mr Bilimoria: Certainly we will
look at it.
Mr Binley: I am delighted. Thank you.
Q268 Mr Weir: We heard in evidence
that Tata Consultancy Services is to invest in a joint venture
with the Pearl Group in Peterborough. I just wonder, do you see
this type of model of cooperation in this joint venture as the
future for investment by Indian companies in the UK?
Dr Vyakarnam: I think, for the
larger companies, it is a way forward, yes, in particular sectors.
I would imagine that for ICT, hi-tech and the biotech industries
it would be a good model, where collaborations, joint ventures,
and so on, are pretty normal practice among large companies on
a global basis.
Mr Bilimoria: There are other
examples. Mahindra and Mahindra have bought Stokes. Tata, of course,
are hoping to set up a development centre near Coventry. Bharat
Forge, one of the largest in its sector in the world, has bought
a Scottish business. There is a lot of activity and there is a
lot of investment coming from India, a lot of it to date has been
in the IT sector but now it is in manufacturing as well, which
I think is good.
Q269 Mr Weir: Do those tend to set
up joint ventures when they go into manufacturing as well? What
I am getting at is, the investment is coming in, is the future
going to be joint ventures with UK-based companies or are Indian
companies going to set up their own, from scratch, if you like,
investment in the UK?
Mr Bilimoria: My experience is,
I have seen a variety, I have seen acquisitions, I have seen joint
ventures. I have seen one Indian company which is part-manufacturing
some of the product, some of which was imported from Europe into
India, sending it to the UK to be finished, so using the UK not
only to finish the product but also using the UK as a sales and
marketing centre for that product worldwide, particularly into
Europe. There is a variety of ways in which this can happen.
Q270 Mr Weir: What about the reverse,
for UK companies wanting to invest in India; is joint venture
the way forward for them, rather than trying to break the Indian
market, if you like, on their own?
Mr Bilimoria: I think one has
got to keep an open mind. There are ways of going in, of a greenfield
site, of licensing, of joint venturing, of acquiring, and I think
one has got to keep all of the opportunities open.
Q271 Mrs Curtis-Thomas: My question
relates to information deficit. We have already taken quite a
lot of evidence, particularly from the UKTI, about information
deficit in the UK, and would you identify this as a major or a
minor or significant factor in UK-India trade and what steps have
you taken to address this issue?
Dr Vyakarnam: I think there is
an information deficit and the issue of perceptions, therefore,
looms large, and sometimes is driven by the press's perception
of what they think are the realities, and so you get from lack
of information to misinformation on some occasions about the substantive
issues. There is information at a number of different levels that
is required. There is a sort of general awareness of the possibilities,
of the opportunities and the realities, and so forth, and then
there is the harder information that is required on the ground.
Sort of information provided by the staff at the BusinessLinks,
working with the small businesses, actually the hand-holding services,
taking advantage of UKTI's OMIS, to which Mr Bilimoria referred
earlier. At that level too, work needs to be done to scale up
the operation, to scale up the take-up of opportunity that exists.
There is an information deficit at a number of different levels,
for sure.
Q272 Mrs Curtis-Thomas: One of the
things I find immensely interesting is the number of different
websites that are available, providing different bits of information.
I logged on and said "Do business in India". I do not
know what sorts of word plans you put in which acknowledge the
fact that somebody literally can offer standing-start, but the
responses were very different and not what I was looking for.
Are you happy with the way that the web presents opportunities
in India and do you sense that you have a role, or rather a sort
of coordinating role, to bring to that, and, if it is not you,
who should be doing that?
Mr Bilimoria: I think that this
is one of the practical ways in which the Indo British Partnership
Network has found, already in its early days, that it is becoming
a first stop portal, gateway, to doing business with India. From
there we are linked into a variety of organisations, of course
UKTI but also to the Indian High Commission and to the Indian
Government departments and to the British High Commission in India
and to various other organisations and sector expertise. If there
is this one-stop shop from which you can be directed, that role
is starting to emerge already and we are getting huge numbers
of hits on our website, in the very early days, without having
millions of pounds worth of marketing budget to make people aware
of the Indo British Partnership Network.
Dr Vyakarnam: Personally I got
interested in that question and registered a website called `thinkindia.co.uk'
done on a bootstrapping basis and a couple of students, and so
forth, and we have got a portal for news and information which
is linked into the IBPN website and we are trying to promote that
and it is a long slog. I think there is a role to be played by
the Indian High Commission here as well, because it is not just
Britain's job to promote trade with India, I think, also, equally,
it is Indian Government's role to promote. I think, to some extent,
the communication gap is that sometimes Indian business, and sometimes
Indian Government, does not present its own PR effectively enough
to the British public.
Q273 Mrs Curtis-Thomas: My observation
is, you may be getting a significant number of hits, but whether
or not you have got an effective website is another matter entirely.
If you start afresh, you are presuming that the effectiveness
of each contact has a summation which leads the individual to
making investment in India and I do not see that happening, because
I think you will run into brick walls, actually. Website direction
is one thing; hyperlinking to sites, unless it is a fruitful event,
then it is not going to lead you to where you want to go, which
is investment.
Mr Bilimoria: Part of our plan,
in building the website, is to make it more and more proactive.
Because people join on a sector basis, when they join they declare
which sector their expertise is in or their business is in, then
every time there is a sector report produced or there is a delegation
which is of interest to that particular individual, or that sector,
we can notify them of it proactively. The more proactive we can
be and develop the site to be then we are going to be more and
more a catalyst to encourage this trade and business investment.
Q274 Rob Marris: One of the things
which will help UK companies investing in India, of course, is
local knowledge, and one of the ways to acquire that is through
partnership working. UK companies also have, or should have, a
corporate social responsibility agenda, and I would hope that
Cobra Beer does as well. A particular problem in India, which
by and large is not existing in the UK, except to a very small
extent, is casteism. What is the IBPN doing to educate its members
who are investing in India to take the issue of casteism, and
the issue of Dalit in particular, seriously so that the abhorrent
discrimination which exists currently in India, and in other countries,
on the basis of caste is not bought into by UK companies investing
in India? In fact, that they oppose it, in line with the Constitution
of India, written by Dr Ambedkar, with whom you will be familiar,
and there are now the Ambedkar Principles produced by the Dalit
Solidarity Network? What are you doing about that, in your own
company and in IBPN?
Dr Vyakarnam: It is an interesting
question about what the role of IBPN would be with injustices
in other parts of the world; this is quite a curious question,
actually. I will let Karan answer for Cobra Beer, but as far as
IBPN is concerned it has been in existence for about a year now,
the Board composition. I think you make an extremely useful contribution
and I think it should be raised at the next Board meeting as an
issue for companies, members of IBPN, to take to their own businesses,
but I do not know that, as a Board member of IBPN, I would wish
to dictate other companies' policies.
Q275 Rob Marris: What I am asking
is whether you are encouraging your members to comply with the
Constitution of India, which sadly is often overlooked within
India in this respect, whether you are actively encouraging them
to do so, as I think you should be?
Mr Bilimoria: I think the Indian
Government, for years now, has gone and is going to great, great
lengths to eradicate all discrimination, of any sort. If what
you are suggesting is that we should make our members even more
aware of this then certainly we will make them even more aware
of it. It is something that the Government has been very, very
active in promoting and is promoting strongly in the whole of
Indian society.
Q276 Rob Marris: You manufacture
in India, do you not, or have I misunderstood that, with Cobra
Beer?
Mr Bilimoria: Yes.
Q277 Rob Marris: Do you monitor the
proportion of your workforce which is Dalit?
Mr Bilimoria: We have a licensing
agreement with a brewery over there, and where corporate social
responsibility is concerned, where the environment is concerned,
we monitor that very carefully. I can give you one small example
where the brewery is located in an agricultural area, surrounded
by fields, and the brewery started buying the husk from the mustard
harvest to use to generate power for the brewery, so actually
using a natural source and providing extra income for the farmers.
The effluent from the brewery is treated and then is used by the
local farmers as extra water and irrigation; so we are very aware
of corporate social responsibility, and personally I always encourage
it at every opportunity I get.
Q278 Rob Marris: Could you let us
have a note perhaps on the proportion of Dalit that you employ,
or the brewery employs?
Mr Bilimoria: I could ask them.
Rob Marris: Thank you.
Q279 Chairman: The questions that
Rob has been asking do highlight one interesting question, which
is how different is India from the commercial environment of Europe
or the United States of America? We have heard conflicting evidence
on that. One said that actually it is not that different and,
viewed from India, doing business in the UK looks pretty difficult.
You only have to try putting up a garden shed in your back garden
to know how difficult it is to get anything done in the UK. How
different is India and how difficult is it? You have got experience
of doing business in both countries; is it more difficult, or
is it just different? Is it different or difficult?
Mr Bilimoria: In many ways, it
is very similar. For example, the basic business environment is
similar, the legal system is very similar, and actually India
has a very good rule of law. Yes, there are issues sometimes of
the time it takes for the legal process to take place, but the
basic law actually is very good, even when it comes to intellectual
property, which perception-wise seems to be a concern. There is
actually very good intellectual property law in India; yes, enforcement
and the time it takes can be an issue. There is a free press in
India, and a very vibrant press; there are more television news
channels in India, I think, than in any other country in the world,
and the most important thing is that it is a free press. In many
ways, the business environment is similar, the financial markets
are very similar, the stock exchanges. On the other hand, it does
help to have local knowledge, local expertise and that is where
it helps to have good advisers, and that is where UKTI, the British
High Commission in India, on the ground, with its locally-employed
staff, can be of great benefit to British businesses, particularly
when they are operating in India for the first time, to point
them in the right direction and guide them in the initial days.
Then I think very quickly companies find their feet and find it
a good country to operate in, from a business point of view.
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