Select Committee on Business and Enterprise Fifth Report


Conclusions and recommendations


Response to the previous Report, and developments since

1.  The IBPN has now been transformed into the UK India Business Council (UKIBC). Its annual Government funding has been increased over thirteen-fold, from £75,000 to £1 million, an increase which we welcome unreservedly. (Paragraph 7)

2.  After the warnings in the Trade and Industry Committee's 2006 Report that the UK risked falling behind its competitors in India, we are pleased to see that UK plc appears to have 'woken up' to India. The Trade and Industry Committee's Report contributed both to a change in attitudes in the UK towards India, and increased UK engagement with India. (Paragraph 9)

3.  In particular, we are delighted that the Report has contributed significantly to a shift in the Government's approach to trade with India. This includes sustained high-level involvement through UK ministerial visits to India, and visits from Indian ministers to the UK, and a substantial increase in funding for bilateral trade initiatives. We hope the visit to India by the Prime Minister and Lord Jones in January 2008 will lead to a further enhancement of bilateral links. We are pleased that the Government seems to be taking the opportunity to deal with the trade and investment issues that these visits offer. (Paragraph 10)

4.  We note that the first bilateral UK-India Investment Summit held in 2006 has not, yet, been repeated. We encourage the Government to hold a follow-up summit and hope it will do so at an early date. (Paragraph 11)

Resources

5.  The Trade and Industry Committee warned that an under­resourced UKTI team risked the UK missing the 'last train' in India. We wholeheartedly welcome the increased resources available to UKTI in India. Their Report also identified a lack of familiarity with India and/or an inability to take advantage of the opportunities in India among UK businesses. We believe that these additional resources will help to address remaining issues in this area. We also warmly welcome UKTI's reassurances that its India activity will be protected from any cuts from the 2007 Comprehensive Spending Review settlement. (Paragraph 14)

Salaries

6.  We welcome the improvements in salaries following UKTI's review, and expect the situation to be closely monitored in future. Locally engaged staff account for over 80% of UKTI's human resource in India, and it is vital that UKTI is able to employ and retain the best. (Paragraph 15)

India's 'second cities'

7.  India's growth continues, making the previous Report's conclusions on India's 'second cities' increasingly pertinent. UKTI believes its resources to be appropriately distributed at present, but it must be capable of moving resources in India rapidly as and when regional markets develop. We look to UKTI to take the results of the UKIBC research project into 'second cities' into account in due course. (Paragraph 16)

8.  We welcome, as the Trade and Industry Committee previously welcomed, the strengthened focus on emerging markets adopted by UKTI under its new strategy. We also welcome the new resources from the High Growth Markets Programme, and look forward to India being given due weight in the Programme once the remaining specialists have been appointed. It is very important that UKTI carries out an assessment of their effectiveness in engaging the mid-sized corporate sector at the earliest appropriate moment. (Paragraph 18)

9.  We emphasise the importance of UKTI continuing to ensure that the SME sector is kept aware of appropriate opportunities in the Indian market, including any arising from supply chains supporting contracts secured by larger companies. We welcome the recent signing of a memorandum of understanding between the British Chambers of Commerce and its Indian counterpart, and hope that this will lead to a substantial increase in bilateral SME­to-SME contacts. (Paragraph 19)

RDA's and other institutions in India

10.  While we are pleased that UKTI has acted promptly on its review of regional inward investment and trade support arrangements, we have not yet studied in detail the substantial pieces of analytical work on which the review was based. It is very likely that the Committee will return to this issue in the future. (Paragraph 21)

11.  We support co-location of Regional Development Agency and devolved administration offices with posts, as appears to be happening in India, as this is likely to reduce confusion and duplication of effort. We also recommend that India be one of the three pilot markets suggested for trialling new inward investment arrangements. (Paragraph 22)

12.   While the establishment of offices by different public and private sector organisations in India is a sign of genuine and committed UK interest, we are concerned that the influx of organisations, if not properly co-ordinated, will increase confusion, with too many bodies with overlapping objectives. We welcome the City of London's commitment to continue to liaise with UKTI and avoid duplication of effort. We believe all organisations should co-ordinate with UKTI to ensure their work complements UKTI's effort and does not duplicate or compete with it. We note the finding in the UKTI review that bodies involved in inward investment other than Regional Development Agencies and devolved administrations are not part of co­ordinated arrangements through the Committee on Overseas Promotion. UKTI should seek to bring these other bodies within the co-ordinating framework. (Paragraph 23)

The UK-India Business Council

13.  The Trade and Industry Committee's Report planted the seed for the new UK-India Business Council (UKIBC), and we warmly welcome its birth. We hope that it will continue to enhance bilateral trade and investment relations between UK and India. We thank all the members of the former Indo-British Partnership Network for their work, which has enabled its evolution into the more ambitious UKIBC. (Paragraph 25)

14.   We agree that the Government's increased financial commitment should be matched by a contribution from industry. We welcome the tiered cost approach to membership costs that has been adopted, but we urge the UKIBC to monitor the extent to which SMEs are effectively engaged in its activities. We expect the new UKIBC to build its membership across all sectors and sizes of UK and Indian businesses, and so truly become the de facto Indo­British Chamber of Commerce which the Trade and Industry Committee envisaged. (Paragraph 26)

15.  Although there are legitimate demands for financial accountability from government, these must be managed in a way which does not compromise the independence of the UKIBC. The new organisation is not an arm of government: if it is perceived as such it will not be able to raise the necessary match­funding from the private sector. The UKIBC should be a voice for business and enterprise in government—both in India and the UK—and not vice versa. Any perception that it is simply an adjunct to UKTI will undermine its effectiveness. We expect UKTI and BERR to recognise this in their work with the UKIBC and accept that, if it is to flourish and build its reputation in the commercial world its freedom must not be unduly constrained. (Paragraph 27)

16.  During evidence taking, we speculated that providing UKTI services through the China­Britain Business Council rather than through UKTI could be interpreted as quiet 'privatisation' of UKTI services. This was not fully rebutted. If such a process developed, it would represent a significant shift in UKTI policy, and one which, if successful, could raise major issues for the way in which the organisation delivers its services. This is a matter to which the Committee may return in the future. (Paragraph 29)

Visas

17.   The Business Express Programme is welcome, and we expect that delays in obtaining visas will not be seen again in the future. The requirement for staff to have worked for a company for six months to be eligible for the Business Express Programme is a limitation which does not take into account the way in which companies in rapidly expanding sectors work and is, therefore, likely to damage UK-India trade. We welcome the Trade and Investment Minister's statement that this "is being looked at", and hope a mutually acceptable solution can be found. (Paragraph 31)

18.  We urge the Government to keep under review the possible improvements in visa and other related arrangements that could be made to the mutual benefit of the British and Indian economies. The UKIBC should be well positioned to give advice on this important issue. (Paragraph 32)

19.  We urge the Government to explore with Schengen countries how the visa regime for Indians resident in the UK and needing to travel to other EU countries could be eased, or periods of EU visa validity extended considerably. (Paragraph 33)

Education, research and qualifications

20.  Despite the Trade and Industry Committee's earlier recommendations for change, it remains the case that after graduation, Indians who have studied in the UK can remain in Scotland for two years, while only being able to remain in England and Wales for one year. We call on the Government not only to end this anomaly by extending the period in England and Wales. It should also to extend the period students may remain in the UK for qualifications in those professions that require specific periods of work experience. (Paragraph 36)

21.  We welcome the fact that the Government is "assessing the viability" of five-year research visas for research scientists visiting the UK frequently and look forward to hearing about the progress of this assessment. (Paragraph 37)

22.  We welcome evidence of the growing interest by UK institutions in India but believe there is no room for complacency; the USA and Australia remain more attractive locations for Indian students and the UK Government must work closely with the Higher Education sector to ensure opportunities to build the kind of links being developed by Cambridge University are maximised. (Paragraph 41)

23.  Education and research links are a vital part of the bilateral UK-India relationship. We welcome the new Education Forum that is being established to work towards a bilateral Education Partnership Agreement, and look forward to the Government providing further details in its response to this Report. We repeat the Trade and Industry Committee's recommendation that the Government reassesses its level of commitment to the UK-India Education and Research Initiative with a view to increasing funding. (Paragraph 42)

24.  We are concerned that, although more Indian students are coming to the UK in absolute terms, the UK's share is declining relative to its competitors, notably Australia. We call on the Government to undertake a comprehensive examination of the ways of making the UK a more attractive place to study for Indian students, including overcoming visa issues and increasing the length of time Indian students can remain in the UK after graduation. (Paragraph 44)

JETCO: progress since the Report

25.  Aside from the success on tariffs on whisky imports, recent progress through JETCO in key areas for UK businesses—financial, legal, accountancy, and retail services—appears to have been slow. While we recognise the political challenges involved in addressing these issues in India, particularly in the run-up to a general election there, due by 2009, we believe that further liberalisation in these areas will bring real benefit to India itself. We therefore seek assurances from the British government that the JETCO ministerial meeting in December 2007 and the Prime Minister's January 2008 visit have given fresh momentum to the process. The JETCO system requires strong and sustained commitment on both sides if it is to deliver its potential benefits to both India and the UK. (Paragraph 50)

26.  We are surprised at the lack of working groups on education and trade facilitation. The Education Forum (noted in para 38 above) agreed earlier this year may bring progress, but we urge the Government to consider whether there are sufficient issues for an education working group within JETCO, especially if the Forum does not make speedy progress. (Paragraph 51)

27.  We support initiatives to bring the chairs of the various JETCO working groups together, and if this works well we propose that this arrangement be formalised. We also strongly support the establishment of JETCO pages on the UKIBC website, and look forward to additional information on the various working groups' progress and activities being added in future. However, this web presence can only help improve consistency across the various working groups if the information it provides is accessed and used by all involved. (Paragraph 53)

New EU trade talks and the world trade system

28.  We give a guarded welcome to the EU-India trade talks that have begun since the previous Report. There are clearly benefits to both sides from a successful deal, but we would be concerned if these talks diverted the attention of two of the biggest players at the WTO at a crucial time for the struggling Doha Round. We call on the Government to assess on a continuing basis the impact of the bilateral negotiations on the critically important WTO talks, and to perform a more detailed analysis of the potential benefits to the UK and India from an EU-India RTA deal. (Paragraph 62)

29.  Our welcome is guarded because we see a potential danger that the EU's new bilateral trade talks in Asia could provoke other trade partners into similar talks. This would accelerate the growth of bilateral deals and could cut across, confuse and ultimately undermine the multilateral trade system, not least by reducing the time negotiators have available to spend on the multilateral negotiations. (Paragraph 63)

Possible content of an EU-India RTA

30.   It is still hoped that the Doha Round and EU-India trade negotiations are progressing simultaneously towards an end-2008 finish. We recommend that any EU-India RTA deal reached before the completion of the Doha Round should be reappraised in the light of the any multilateral liberalisation through a Doha deal. The Government should therefore press the European Commission to commit to a review of any RTA that is agreed before the Doha Round is finalised, and once that agreement has been fully fleshed out. (Paragraph 66)

Transparency and information-sharing

31.  We welcome the Government's commitment to keep business informed about progress in the EU-India talks. We expect the Government to keep the Committee similarly well informed of developments in the EU-India talks, and the other bilateral negotiations underway. In the interests of transparency, we urge the Government to make public as much information as possible, subject to the restrictions imposed by the sensitive nature of trade negotiations. The Government should consider issuing position papers similar to that on the EU's Economic Partnership Agreement negotiations in March 2005 on the EU-India RTA, the other bilateral talks, and the EU's broader RTA strategy. (Paragraph 67)

Conclusion

32.  The UK has woken up to India, but progress must not now be slowed in response to global concerns or expressions of doubt about India's future. Engagement will benefit both partners. Whether or not India grows as fast as other emerging markets, it is a country of over a billion people, and the opportunities are huge. As Government and business engagement continues to grow, the United Kingdom is uniquely well placed to take advantage of those opportunities. (Paragraph 71)



 
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