Written evidence submitted by the City
of London
As you will be aware the City has very considerable
trade interests in this important and developing market and, with
the Lord Mayor having visited the region in March, it seemed appropriate
to send you a note and a copy of the report of the recent visit
which is attached. A number of points mentioned in this note have
also been raised in evidence to the Trade and Industry Committee's
recent inquiry into trade and investment opportunities with India.
Business interests in India are, as your Committee
will know, strongly influenced by developments elsewhere in Asia
and particularly in China, where there is already considerable
"western" engagement. There is, however, a growing desire
to engage with India, in recognition of its importance as an emerging
market and to build on the historic links which perhaps are not
being fully exploited.
An objective for the City Corporation in both
countries is to promote the services the City can offer to emerging
business. In India and China businesses of all kinds are seeking
to expand internationally, and the City can offer them the capital
to make this possible. The most obvious method is by listing firms
on the London Stock Exchange (who themselves have recently upgraded
their marketing effort in India), but, as your Committee will
know, London is also a global centre for the issue of bonds and
for all kinds of bank lending, and is indeed the world's centre
for the complex syndicated loans which are frequently used to
fund major projects.
The promotion of capital also provides an ideal
opportunity to highlight other services available in the City
that could be used to support these expanding firms. Such services
include, for example, insurance to underwrite the risks of overseas
investment, legal advice, consultancy, and training. This promotional
effort is separate from that for inward investment, because these
services are available to firms regardless of whether the body
seeking the service is based in London or in India. Inward investment
(and portfolio investment) may, of course, follow and the City
is happy to facilitate this when it happens, but it is a separate
exercise.
It should also perhaps be noted that internationally
expanding Indian firms may not necessarily choose to come to UK
or even to Europe. They are just as likely to be seeking to move
into the Middle East or South-East Asia, or even (recently) into
China. Nevertheless they may wish to call upon the City's services
in doing so.
This focus on emerging Indian business was reflected
in the Lord Mayor's programme for his visit in March, which included
stays in Delhi, Mumbai, Chennai and Hyderabad and further detail
of the visit is included in the attached extracts from the outturn
report. In all four centres the delegation sought to talk to Indian
investors and efforts in India mirror the aims of the Lord Mayor's
separate visits to China this year. The next Lord Mayoral visit
to India is scheduled for May 2007 and, given the increased commercial
focus on India, it seems likely that the Lord Mayor will visit
annually for the foreseeable future.
Although, there is a concentration on outreach
to Indian firms, acknowledgement needs also to be given to the
desire among some City firms to enter the expanding Indian market.
In the banking sector, HSBC and Standard Chartered are well established
and are seeking to expand their retail networks but have experienced
difficulties in obtaining the necessary licences, particularly
at state level. Furthermore, a number of insurance firms are seeking
to establish a foothold in what is potentially an extremely large
market for life insurance and pensions, in association with Indian
firms. There is concern, however, at undue restriction of the
extent to which foreign firms can buy into Indian insurers. On
the underwriting side, Lloyd's is probably the main player, but
offshore they are still considering how to enter the Indian market
locally. Some City law firms are also attempting to establish
a presence but as is so often the case in other jurisdictions,
there are difficulties of access with severe restrictions in place
in India preventing foreign lawyers from practising in the country.
Accountants, consultants, educators and trainers are also highly
active in India, though they are probably less prey to institutional
barriers.
The City also encourages worldwide the liberalisation
of financial markets, good governance and the establishment of
open fiscal, regulatory and commercial environments. This usually
means encouragement of a greater role for the private sector versus
the state, and in India it has meant increased efforts, typically
by supporting IFSL, to encourage the adoption of PPP schemes.
It is worth noting that the City decided to
add depth to its engagement with China by establishing City representation
in Beijing and Shanghai. A similar initiative is also taking shape
in Mumbai with the recent appointment of Alan Rosling, a Director
of Tata, as the City's senior adviser on India to chair a new
advisory board. The appointment of a City of London representative
there will follow later this year. When fully established, the
City's Mumbai Office's aim will be to promote the services for
the City as a world class financial centre to Indian public and
private sector customers, including the raising of capital, insurance,
asset management, infrastructure finance and consultancy and the
exchanges of London. It will, however, also have a role, in highlighting
the City as a centre for business education, training and professional
development.
You may also be interested to know that the
City Corporation has commissioned SAMI Consulting and Oxford Analytica
to explore the impact of China and India's long-term economic
development on the Square Mile. The project will investigate alternative
scenarios concerning the potential development paths of India
and China and assess the possible impacts (both positive and negative)
upon the City's financial services sector. The research, due for
publication in October, will assess what actions might be taken
to maximise potential opportunities and minimise threats. I will
certainly be happy to send you a copy of the research as soon
as it is available.
If you have any further queries in connection
with the City's interests in India, please do not hesitate to
contact Bruce Hunt in my Office (tel: 020 7332 1196; email: bruce.hunt@cityoflondon.gov.uk)
who was responsible for the preparation of this material for the
Committee.
P R E Double
City Remembrancer, Parliamentary Agent to the City
of London
29 August 2006
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