Examination of Witnesses (Questions 40-59)
MR ASIF
AHMAD AND
MR PAUL
WHITEWAY
30 OCTOBER 2007
Q40 Roger Berry: Does that mean the
PM will be accompanied by business people from the UK?
Mr Ahmad: The expectation is that
there will be a business delegation in India at the time, yes.
Q41 Chairman: One of the barriers
which you have alluded to in the last answer to greater British
involvement in the Indian market is that some of the sectors have
strong or particularly protected markets in India. You have given
a very helpful note of the status as it was in June. It might
be helpful to have an update on that in writing, but is there
one sector where you think particular progress is being made and
one sector where you would particularly like more progress to
be made?
Mr Ahmad: If one looks at the
accountancy sector, I think we are making some good progress there.
The Indian Government has now put through legislation which will
allow Indian firms and foreign investment firms to have more than
25 partners, which is a severe limitation. There is also an issue
on advertising and brands where accountancy firms and legal firms
are not entitled to promote their brand and that is being looked
at. There has also been a removal of the cap in terms of the number
of trainees one can have for accountancy firms, so that represents
good progress. On the legal services side, the signals we are
getting from the Minister in Law are that before this year is
out he would like to at least put forward indicative draft legislation
to set the course, if you like, for the sector to be liberalised
and we take that as a very positive sign. If you look at other
sectors, retail if anything has gone backwards. Indian retailers
are now facing political and public opposition and there have
been cases where Reliance and others have stopped trading or have
been made to stop trading in places like Uttar Pradesh, so for
the retail sector this is going to be a long and hard slog. However,
if one looks at the overall agenda that we have, progress is being
made and we hope that the EU/India free trade agreement, when
that comes to fruition, will further liberalise areas of UK interest.
Q42 Mr Binley: When I visited India
some two years ago there were real concerns about business ownership
by non-Indian citizens. Has that been liberalised because it did
seem to be a block for businesses from this country to become
involved in the subcontinent?
Mr Ahmad: The issue varies from
sector to sector. In certain sectors, as I said, such as retail,
it is impossible for the likes of multi-branded retailers to have
any kind of majority owner presence in India whatsoever. At the
other extreme, if you look at infrastructure projects and airports,
for example, 100% non-Indian participation is possible, so there
is a range rather than a blanket difficulty that business in India
faces. The Indian Government is well disposed towards foreign
direct investment and is very conscious of the fact that it is
a competitive arena and that many changes will have to be made
in its practices and rules to attract the investment that it needs
in critical sectors.
Q43 Mark Hunter: Can I ask you now
about how UKTI is helping businesses in the UK to take advantage
of the opportunities? Investment in infrastructure is looking
like one of the biggest opportunities, I think we would agree,
for UK companies in India in the next few years. The evidence
that you have submitted to us already says that a strategy to
maximise UK involvement in this future investment emerged at the
investment summit of 2006. Could you tell us a little bit more
about it and specifically what UKTI is doing on the ground to
maximise the opportunities for UK businesses?
Mr Ahmad: If I could use infrastructure
as an example that speaks for most sectors. As you rightly say,
it was at the investment summit that ministers agreed that this
should be a higher priority area. Our first expectation from the
Indian side, both at federal level and state level, was to go
through the big picture of $300 billion worth of potential projects
and break them down into areas that were realistic and approved.
Work on that has progressed and we have had indications from the
Minister of Commerce and from states like Maharashtra as to where
their priority projects are. We have also looked at private/public
partnership as a mechanism which has been promoted heavily by
the City in India, so there is growing awareness of this as a
possibility. Two months ago the Indian Government announced that
11 advisers were to be appointed to help the Indian Government
in providing advice on how infrastructure should be developed
and financed, and UK companies feature very strongly amongst that
group, names that people will recognise fairly easily—Deloittes,
Ernst & Young are amongst them, and PriceWaterhouse. The institution
3i has a dedicated fund of half a billion US dollars solely focused
on Indian infrastructure and they hope to double that, so there
is money behind some of the initiatives from the City. From the
UK what we are doing throughout the English regions and in partnership
with the devolved administrations is running a continuing programme
of road shows, sectorally based in the main, so that businesses
can be informed of the very real opportunities in India. That
then translates into trade missions into the country which are
handled by UKTI on the ground. There is a huge amount of effort
going on in this sector, and as part of the Prime Minister's visit
in 2008 this will be one of the priority sectors that will feature
in discussions.
Q44 Mark Hunter: What about specific
links, such as the Commonwealth Games happening in Delhi in 2010
and the Olympics happening here in London in 2012? There have
to be opportunities there in the construction industry, to name
but one example. Is that the kind of thing where you are seizing
an opportunity? Do you think you could persuade us in a couple
of minutes that you are on top of that kind of opportunity?
Mr Ahmad: The short answer is
yes, we are engaged and we have been engaging with the Indians,
particularly with the Sports Ministry and others, on this subject.
The reality on the ground is that in India they are treating the
arrangements for the Commonwealth Games not as we intend to do
in London or in the case of the Beijing Olympics. These are not
major urban renewal or regeneration projects. The Indian side
will refurbish and make do with some of the existing infrastructure
that they have. They will work around some of the bottlenecks
that exist and which will not be ready in time for the 2010 Games.
Hotels are going up at a furious pace in Delhi and in the region
but even that might be quite a challenge. Universities and other
localities are being looked at to provide accommodation for athletes.
It is not really in the same league as the preparation for the
Beijing Olympics or London. However, the capabilities of the UK
are being promoted very heavily and the Mayor of London, in his
visit to India this month, is taking a business delegation of
UK companies focused solely on the Commonwealth Games.
Q45 Mark Hunter: Given the shortage
of time I am going to pass on to a different matter we have not
touched on yet and that is JETCO. Your evidence submission to
us suggests that JETCO is "striding forward", which
is one of the more positive descriptions we have had about its
progress. Could you tell us a little bit more about the JETCO
process and how it is working from your own perspective? For example,
have all the different JETCO working groups borne fruit and for
those that perhaps have not as yet do you expect them to in the
foreseeable future?
Mr Ahmad: The JETCO process has
been going on for a number of years. When I started this job some
four years ago the regularity of ministerial meetings was not
as good as it should have been and the working groups were very
much in their infancy. What we now have is a much more structured
engagement on the Indian side. I led on behalf of the UK last
August to review progress on how the various elements of JETCO
were working. You are quite right to say that there are mixed
reports. If you look at the financial services working group or
the accountancy group or the focus on legal services, as I alluded
to earlier, those have been working well and have been bearing
fruit. If we look at others, particularly where there are areas
of Indian interest, I think there is more work to be done on the
UK side, and I cite agriculture and health as two examples where
I think we need to work harder to find the right partners for
India's interest. The basic theme behind what we are trying to
do with the JETCO process is two-fold. One is to ensure that areas
of policy interest for government, whether it is sectoral based
in terms of market access and liberalisation or whether it is
issues where things like the duty on wines and spirits (which
was resolved earlier this year, in fact on the very day of the
official review) are put on the agenda and stay on the agenda
until they are resolved. That is one aspect of it. The other is
to act as a networking institution and I think the best example
of that is the way the hi-tech working group works because that
is the one sector in India which is not heavily regulated and
where business opportunities are large. It is a question there
of finding subject matters like nano-technology where UK and Indian
businesses can come together. If I take a litmus test of where
we are and do a before and after, we are a significant way ahead
in terms of making this process work compared to where we were
four years ago.
Q46 Mr Binley: Can I just give you
another example of a specific discriminatory procedure, and tax
rates were the one I was thinking of, such as those on foreign
banks compared with domestic ones, do you feel that JETCO is helping
to achieve any progress in that instance? Also, if I were to challenge
you about specific concrete successes to have come out of JETCO
as yet, would you be able to point to an individual example that
you think has happened as a consequence of JETCO itself?
Mr Ahmad: The UKTI financial services
strategy really addresses the discriminatory issues that you have
talked about in terms of taxation, the control on the number of
branches, the sectors which are less open than others, like insurance
and pensions, and that is very much part of the JETCO process.
We believe that successive interventions on JETCO have highlighted
these very areas of opportunity and we have asked at the highest
levels, whether it is the Reserve Bank of India or the Finance
Minister of India or the Minister of Commerce, so the process
enables UK business to directly make their case to Indian decision
makers. In that sense I think the process is working very well.
I have talked about the EU/India free trade agreement. The services
sector, and financial services in particular, is one area which
the UK has certainly put on the agenda and we expect some movement
on that over the next 12-18 months as negotiations proceed. If
you ask for successes, I have already talked about the Scotch
Whisky Association issue of high tariffs on spirits. Ahead of
the WTO ruling on this dispute the Indian Government did what
it said it would do under the JETCO process to us, which was find
an alternative way of raising revenue and that problem has now
been resolved. If you look at the film industry, I talked about
Bollywood coming to the UK. Under the whole film co-production
treaty that was negotiated a lot of work is being done in the
UK on Indian films and it has become the partner of choice, if
you like, for the Indian film industry, a big area of success.
The real test of whether it is working or not is not to look at
the process itself but to look at the level of engagement between
UK business and Indian businesses, and there has been a significant
rise in the numbers of UK businesses we have taken into India
and vice versa.
Q47 Mr Weir: I have a few specific
questions about JETCO and its associated processes. The CBI said
there was under discussion a trade facilitation group. Has that
been set up as yet?
Mr Ahmad: There is not a specific
trade facilitation group as yet. The parallel group that has been
set up has been one on corporate governance which arose as a parallel
activity to the JETCO process, but work on trade facilitation
with India has been going on for a number of years and SITPRO
in particular has been very much engaged in this subject matter.
Part of the agenda again with the EU's negotiations with India
will address many of those concerns, but at the moment there is
not a particular group.
Q48 Mr Weir: You mentioned a corporate
governance one, which I understand is outside the JETCO process.
Is UKTI involved in that at all?
Mr Ahmad: Yes, it is. We effectively
act as a source for briefing on issues. Many of the members of
the Corporate Affairs Group are people that we have introduced
to the task. Also, at the end of the day it is still one of our
parent departments, the Department for Business. In many respects
it is integral to what we do.
Q49 Mr Weir: Much of the focus on
JETCO seems to have been on what the UK would like India to do.
Could you tell us a bit about what sort of issues India has raised
with the UK and what they are seeking through JETCO?
Mr Ahmad: One of the things that
the Indians are very keen on is mutual recognition of qualifications.
In the same way that we want access to their markets and professional
services, they believe that an Indian qualified lawyer or accountant
from a reputable and recognised institution should be able to
live, work and practise in the UK. Another area is agriculture
where there is huge concern in India that the element of waste
and the logistical challenge that they face there will need to
be addressed if the Indian wish list were to come true in terms
of direct investment in distribution networks and facilitating
exports. If you look at healthcare, the Indian Government is very
keen to promote India as a destination for hospital treatment
and they are also looking at the way in which alternative medicine,
or traditional medicine as the Indians would prefer to describe
it, is recognised in the UK. Those are just some examples of Indian
interest.
Q50 Mr Weir: What progress is being
made on these? Is India happy with the progress that is being
made or is any lack of progress holding up items that the UK may
be more interested in?
Mr Ahmad: I think the jury is
still out as to whether the Indians are satisfied with what is
going on, but if I can give you one example of progress on agriculture,
there was a real issue of the EU destroying goods that were judged
to be unfit for consumption. The Indian request was could we return
them to India so that they could examine each consignment and
remedy the difficulty. Just a couple of weeks there was agreement
reached, and the MOUs are being written up as to how this will
progress, that rejected agricultural produce will be sent back
to India for them to be able to ascertain where the difficulties
lie. We certainly need to do more work on agriculture, but as
a corollary to that it is our belief that this sector would be
automatically addressed if UK retailers were allowed to invest
in India so that the entire logistical chain became part and parcel
of what they do. On the issue of the movement of people, I think
this is a much bigger question with the entire migration policy
of the United Kingdom, the points-based system that will come
in next year and the modalities that are being discussed under
the WTO process and the EU free trade agreement. There is a lot
more work to be done.
Chairman: Thank you. That is very helpful.
I note your point about the retail sector in particular.
Q51 Judy Mallaber: At the beginning
of your evidence you mentioned that you thought the mid corporate
sector needed more work. We have now got the appointment of a
specialist responsible for India in the high growth markets programme.
Is that having an effect? Can you point to any examples of assistance
to mid corporates?
Mr Ahmad: A mid corporate project
is something that the Chairman might recall was one of my last
wish statements as to what we would like to achieve in UKTI, and
that has now been put into action. Of the 15 or so high growth
market advisers that we hope to recruit ten are now on board.
Two of them have a particular India focus and are in the early
process of engaging with the sector. There have been three projects
already that have benefited from the engagement of our high profile
advisers, mainly in the IT sector, and, as you would expect, they
incorporate all sorts of dimensions. One is a UK business trying
to find an India partner to co-develop their product. Another
is the typical one which one faces of trying to outsource some
of their deliveries in India, and the other one was attracting
an Indian business into the UK as a partner. It is early days
yet to evaluate the progress of this programme because recruitment
is still going on and we expect by the end of this calendar year
to finish with the remaining five positions. Once that is up and
running I think next year you will see the real fruit of this
beginning to come through.
Q52 Judy Mallaber: To help us understand
it, in your evidence you mentioned UKTI playing a role in the
Vodafone-Hutchison deal. Exactly what was it that was done to
help?
Mr Ahmad: I have to be careful
in how I answer that question because a lot of that obviously
is covered by commercial confidentiality, but what I can say in
general terms is that this acquisition created a real difficulty
for the Indian Government in the sense that it highlighted areas
of its corporate rules which were unclear, if not contradictory,
particularly in the area of nominee shareholdings and in what
way they were permitted or not permitted. The pledge that the
Indian Government made to the then Chancellor and the Secretary
of State for the DTI was that the government would not interfere
unduly in the process; it was going to be a purely commercial
one, and I think that paid off rather well when this particular
anomaly was discovered and the Indian Government chose to apply
a facilitating interpretation of the rule rather than one that
blocked it. There were also issues relating to the presence of
Vodafone in India and a lot of discussion took place in the High
Commission in terms of the overall political environment and areas
of economic activity where the company should focus. The company
was also very keen to develop its corporate social responsibility
programme and sought the advice of the High Commission in terms
of what areas would be of particular interest and the Chief Executive
of Vodafone has announced a programme in particular on skill development
and conversion of university graduates in India into what they
regard as employability in multinational corporations. An interesting
by-product of the investment, which again is something that the
CEO of Vodafone said, is that initially the model that they went
into India with was how they would, if you like, introduce the
Vodafone way of doing business. What they have learned is that
there is a lot to learn from the way in which the previous Hutch
organisation worked in terms of productivity and management of
a supply chain and other areas. Vodafone are in very regular contact
with UKTI. They were visiting our Chief Executive only this week,
again to review not only their India strategy but also their overall
strategy in emerging markets, and they see us as a very valuable
source of insight.
Q53 Judy Mallaber: Can I very briefly
ask you to comment on SMEs? We have concluded previously that
India is not an ideal market, but obviously we keep being asked
to agree that more should be done. Is there work going on to identify
opportunities for SMEs and can you perhaps tie that in with your
comments on the BCC saying to us that maybe chambers of commerce
deliver advice better than agencies like UKTI? Is that reasonable?
What is UKTI doing? Should you be involved in chambers more in
helping SMEs?
Mr Ahmad: On 3 December the British
Chamber of Commerce will establish an MOU and an agreement with
their Indian counterpart, the Federation of Indian Chambers of
Commerce and Industry, FICCI. This will be hosted at the Indian
High Commission. The idea really is to engage SMEs with SMEs and
to develop the advantage that the membership of such groupings
have. One should not get away from the fact that the core business
of UKTI has always been focused on SMEs and businesses that are
new to market or new to export, and that emphasis has not gone
away. It is part of our attention to the mid corporates or the
larger companies. It is true that the big ticket items will always
favour larger players but the outreach activities that we have,
the road shows we have all round the country, are well attended
by SMEs, so in a way it has been our bread and butter business.
If you look at the amount of commissioned research that we do
throughout posts in India, the majority of that work still emanates
from SMEs.
Chairman: That is very helpful, thank
you very much indeed. The British Chambers of Commerce will be
pleased too.
Q54 Mrs Curtis-Thomas: My question
really centres on education. Is there an indication that the visa
considerations are taking longer than previously and has anyone
else raised the time taken to get visas with posts in India?
Mr Ahmad: The visa operation in
India right now is going through a restructuring and, if there
have been any delays, they largely relate to that process rather
than a systemic underlying problem. If anything, the performance
figures in India are very good in terms of turnaround, rejection
rates and the like. Businesses in particular enjoy the Business
Express programme which basically means that an approved participant
has to wait no longer than 24 hours for a visa to be approved.
The real difficulty has been the introduction of new measures,
like biodata, biometrics. Firstly, there was a protocol agreement
that was required from the Indian Government which has been a
little bit late in coming and our only capability rested in Delhi,
so there has been a lot of physical movement of passports and
the like around the country to overcome this difficulty, but this
is a very temporary measure. The subject matter comes up very
regularly and it is of the utmost importance to us not just from
the trade perspective, but from the wider relations that we have
that the visa operation runs smoothly, and I do not really think
that there is an underlying problem.
Q55 Chairman: Can I just challenge
that quickly. We have a submission here from a small IT company
from our visit actually in 2006 and it says, "My team and
I are pulling our hair out over the fact that it now seems we
have to wait, on average, 18 days to get a visa in India for employees
travelling to the UK", and they said, "A business like
ours' ability to react quickly to a customer's demands is of paramount
importance", so there does seem to be an issue at least with
some companies.
Mr Ahmad: We are more than happy
to look at that individual case, if you refer that to us, but
the process is that if that company has registered with the Business
Express programme—
Q56 Chairman: Which they say they
have.
Mr Ahmad:— then it really
ought not to be a difficulty. If they have been very unlucky and
have fallen foul of this difficulty that I encountered when I
was on my last visit to Calcutta where some of the processes had
gone back to using couriers and others to actually get the visas
processed, then we should overcome that.
Q57 Judy Mallaber: Finally, could
you update us on the UK-India Education and Research Initiative.
What value has this initiative got now and what sort of prospects
do you see for it for growth in the future?
Mr Ahmad: The lead for the UK-India
Education Research Initiative falls to the Department for Innovation,
Universities and Skills rather than UKTI, but we keep in close
touch with what our colleagues in that government department are
actually doing. The scheme is very much on track and the UK Government
pledged £12 million to the programme which has been matched
by a further £4 million from the corporate sector. Most of
the work has been in the science and technology field in terms
of collaborative work, and projects, as we speak, are still being
evaluated, so it is very much a work in progress. We have had
discussions with our colleagues in the Department for Innovation
on the future of UKIERI and there is a huge appetite for expanding
that programme not only to cover the existing areas of success,
but to move it more widely into the field of business, education,
vocational training and skill development and I would describe
that as work in progress, but I think, as a scheme, it has been
highly successful and there is a lot of buy-in both from India
and the UK.
Q58 Chairman: Is there anything else
you would like to say which we have not covered in our questioning?
Mr Ahmad: The only area I would
highlight really is the process of changing perceptions which
is where I think you started with India. Certainly the work of
this Committee has been very helpful in raising awareness in India,
and the support that you gave to the idea of the UK-India Business
Council was very much welcome, but there is a huge amount of work
still to be done to take businesses in the UK that have not really
woken up to the challenge of globalisation and there is a lot
of effort still needed not just from UKTI, but from all interested
parties to raise the profile of what engagement in markets like
India would have to achieve. The other issue is India's own sense
of its competitiveness in Asia. When you go to China, very rarely
will you hear a Chinese businessperson or official make the comparison
between China and India, whereas if you go to India, it almost
becomes an automatic part of any conversation of what is happening
in India and China and what is not. There are some realities in
terms of the coalition Government and the pace at which it can
move things. One example is the legislation that was promised
to us in terms of liberalising the insurance market and dealing
with the Lloyd's case in particular, and that is now very much
stuck in politics as opposed to government policy and I think
that is a major constraint. The other, which is slightly removed
from our day-to-day job, but we are reminded of it very frequently,
is that of course the level of poverty in India remains a huge
problem and yes, there is a growing middle class, but there is
a huge danger of two Indias emerging, one which is prosperous
and which can take its place at the highest tables when it comes
to commercial engagement, and there is another where we are really
talking about very basic survival and not too far away from Mumbai
and other areas of prosperity.
Q59 Chairman: More people on a dollar
a day in India than in the whole of Africa, I think, is still
the case. We have got many things we would like to talk to you
about and I am grateful for that summation at the end, we appreciate
it very much indeed, but we now must draw things to a conclusion.
Gentlemen, thank you very much indeed; we appreciated your evidence
very much.
| 
