Examination of Witnesses (Questions 120-139)
MR GARETH
THOMAS AND
LORD JONES
OF BIRMINGHAM
8 JANUARY 2008
Q120 Chairman: Mr Thomas, there is
an irony here because we are talking about India as a vast promoter
of world economic growth, doing extremely well, with steep increases
in GDP and yet it still has more people living on below a dollar
a day than the whole of Africa. It is a country of immense poverty
and that poverty could yet, in some scenarios, derail India's
success. Do you think enough of India's growth gains are going
to the poor, and what are you doing in this respect? I know DFID
has programmes in India, of course.
Mr Thomas: I think there are a
number of levels to modern India. There is, as you describe, very,
very poor India. I think I remember seeing a figure of 300 million
people living on less than a dollar a day still, but there is
also a very wealthy India, an India that can compete on equal
terms in international markets and a series of Indias between
those two widely diverging situations. Through the Department
for International Development we can help tackle some of the issues
that are facing the poorest parts of India. For example, we have
substantial investment in primary education in India and have
succeeded in working with the Indian government to help get over
10 million children into primary school for the very first time
between 2003 and 2006. That is just one example of the things
that we can do directly as the Department for International Development
by working with the Indians to open up their markets as the Regional
Trade Agreement and negotiations will allow. We can help India
get access to the best expertise that the European Union has to
offer and particularly the best expertise that Britain has to
offer. As Digby alluded to, the legal services, financial services
and the expertise that we have to offer is second to none.
Q121 Chairman: Lord Jones gave us
a magnificent series of these characteristics and I agree with
his analysis on the impact of free trade on the world, but in
India are we sure the benefits of trade are actually going to
the poor?
Mr Thomas: I think many of the
benefits are going to the poor. India's rate of economic growth
is high. Equally, India faces, for example, huge infrastructure
constraints if it wants to increase its trade and increase the
opportunities for the very poorest people to trade. What we can
do is make sure, through our engagement with the World Bank, the
Asian Development Bank, et cetera, that India has access to some
of the international financial institutions' resources. We can
also, through the RTA discussions, help make sure that India has
access to the best that Britain can offer in terms of legal expertise,
financial services, et cetera.
Lord Jones of Birmingham: One
thing we should all be careful about and I make this mistake often
is we put the words "to India and China" and we tend
to lump them together when we talk about both the globalisation
effect on the UK and also on the world. They are two entirely
different bases for their effect on provision into the world of
goods and services. There are 800 million Indians who work on
the land out of a population of one billion. We are talking about
200 million who are what you and I would call "India".
The problem is that India has chosen, rightly in many ways, to
go to the value added end of what it can export and what it can
provide. Software is an excellent example. The problem with that
is how do you get 800 million getting up out of the agri-economy
and out of their under a dollar a day—not all 800 million
are on that—into the sectors which do not absorb a mass
of people? In China, because of their manufacturing side of it,
they absorb huge amounts of people to do everything, whereas in
India they are absorbing the mind more and to get 800 million
out of that is the most enormous challenge. I make this mistake
of always saying "to India and China" and we should
stop that because they are two entirely different countries and
there are different issues about how the effect of globalisation
on them and through them is going to happen in this country.
Q122 Mr Wright: When we had Mr Ahmad
before us just recently he mentioned, with regard to `Team India',
that the last remaining posts are being filled; I think it was
an increase from 70 to 91 staff. How is it developing at the moment,
and are we up to full complement now?
Lord Jones of Birmingham: We are.
We have increased by nearly 20%. We have put in place now, second
only to America, and if not second then certainly the top two
or three, the biggest complement we have got in the UKTI in one
country. The resources that we have put in to UKTI's presence
in India --- I am proud to have stood up in September and said
to them, "You matter this much," that is what we have
done and we have not just talked about it, we have matched it
with people.
Q123 Mr Wright: Are there any figures
proving that it is going to be a positive exercise in terms of
returns?
Lord Jones of Birmingham: There
are two things. It is already showing benefit. I am going round
doing this, but once I have gone out of town it is important we
then deliver and it is not just a case of saying that the minister
came in and talked about it and then went. The positive development
is we are able to stay in touch and get them in and moving. Secondly,
and something I feel quite strongly about, it is very important
that every so often we say, "How is it for you?". That
is not a question we put to these extra people we have put in,
this is to the people who are using the service. "Has it
improved? Is it better? Are you getting what you want?" That
is two-way. This is also about inward investment into here.
Q124 Mr Wright: One of the issues
that we have looked at when we visited India a couple of years
ago now was that there is stiff competition for talented staff
in the major cities which has driven up pay. UKTI had a review
of salaries and it was expected that salaries would be augmented,
the details of which were being worked on at that particular time.
Has this been put into effect, and can you give us any up-to-date
details?
Lord Jones of Birmingham: As an
aside, when I met Rata Tata in September in Mumbai I said to him,
"What's your biggest issue?" and he said, "I can't
get enough skilled people," and I was bowled over. Here was
this Indian company and it could not get enough skilled people.
The skills deficiency is not just a British or Western European
issue and that impacts on UKTI's recruitment and pay in India
as well. As you probably know, in Chennai at the moment you have
got Accenture and Standard Chartered and one or two others really
in competition for the best and every time they recruit somebody
up goes the price and skilled labour is becoming scarce and the
rates are going up. That impacts on us too. So in all our bases
in India, in our nine places, we have had a look and with the
exception of one they are having an increase in their pay now.
The one is Mumbai. In Mumbai they were doing very well. Were they
doing well enough? No, of course not. You do not, I do not, none
of us do, we all want more. We got it out of kilter with the others
rather than them. This year we are bringing others up, not all
of them uniformly. I do not believe in uniformity in pay and incentive
because they operate in different parts with different pressures
and different markets, but I do expect to see morale boost and
greater productivity out of extra effort brought about by incentivisation
in other markets in India, other cities and then next year Mumbai
can compete for and enjoy increases in pay as will the others.
It is not a case of, "We're going to discriminate against
one city now," it is trying, with the limited resource that
we have, to bring it up and then move forward with them all together.
Q125 Mr Wright: So it is more or
less a regional policy then depending on the part of India where
you work?
Lord Jones of Birmingham: For
this year.
Q126 Mr Wright: So the review that
was held by UKTI is over now, you have now got the policy put
forward and therefore you know the direction that you are going
to move in?
Lord Jones of Birmingham: Yes,
definitely and we have communicated it.
Q127 Mr Wright: Is it a short-term
review or is it going to be over a longer term?
Lord Jones of Birmingham: It is
a short-term review to get it sorted this year and then it applies
going forward in terms of the fact that this time next year I
am sure we are going to have some people in Mumbai saying, "I've
done really well. I've had a fabulous year. I've produced everything
you wanted. I understood last year how I had to wait because others
had to catch up, but now how about me?" I think that is a
perfectly legitimate thing to say and we will respond with them
being able to share in the pot.
Q128 Mr Wright: One of the other
reviews was the question of the RDAs and the effect that they
were having and it was another review that was due shortly. Have
they given their review and, if not, how is it progressing?
Lord Jones of Birmingham: The
factual answer is they have given their review. It is currently
with me. I have yet to decide how to act on that review. I am
not going to say today what is in that review, not because I am
hiding it for you, but I have not had a good look at it myself
either.
Q129 Mr Wright: What is the timescale
of that?
Lord Jones of Birmingham: I would
have said between three and six months.
Q130 Mr Wright: So you would be able
to give us a review by the summer?
Lord Jones of Birmingham: I would
sincerely hope so, yes. One thing I have been pleased about, and
maybe it is because I do not come from south of Watford and maybe
it is because in 1999 I was part of the engine to drive forward
the creation of RDAs, but I think the relationship between UKTI
and RDAs in UK and their application in places has improved in
the last six months quite a lot. I am rather pleased to see that.
Do I still see duplication that upsets me let alone all of you?
Yes. Does it still frustrate me when I turn up at places and I
have got UKTI and the Union Jack and then I have got the Saltaire
in Scotland sitting there? Yes. Even me with my view on that,
I can tell you one thing that I get in the feedback from everybody,
the inward investor does not seem to get a confused message, they
do not seem to say, "Well, we didn't understand". So
I have got to be fair and say it does not seem to have an impact
on the application of inward investment. Do I like to see, for
instance, the west and east Midlands merged together and them
saying we will market it as the Midlands? Do I like to see north-west
Yorkshire and the north-east coming together and doing things?
Yes, I do actually. I think it is a better way of maximising the
taxpayer's pound. Do I think we will have a greater degree of
issue on that with the devolved administrations? Yes, I do, but
you cannot have it both ways. You cannot devolve power to a country,
Wales, Scotland, Northern Ireland, and then say, "Oh, by
the way, it doesn't suit over here". I think the way to deal
with that is constant engagement and to try and get them sometimes
to work more closely with us. I am seeing a better engagement
in the regions of England where UKTI's people are more welcome,
where it seems to be working better and I am seeing it go in the
right direction. I went up to Scotland just before Christmas for
two days and I had a dinner with people where I asked "How
is it for you?". It was a private dinner where they could
open up their hearts and tell me how it was. They themselves—and
these are Scots people telling me and not just business people
but officials as well—were saying, "We can see why
in certain areas we ought to be working more closely with you".
I did not ask that; they gave it to me. I thought that was great
news. I am a bit more optimistic than I was six months ago. When
I started this I thought this was going to be a huge issue, it
still is, but it is going in the right direction.
Q131 Mr Wright: Which shows that
RDAs both at home and abroad are doing a good job but it needs
tweaking.
Lord Jones of Birmingham: Yes,
but it also needs a little bit more fusion of overhead abroad
so that we can do more with the same amount of money, which comes
back to that idea of do I want more money? No, I want to do more
--- Of course I do, but you know what I mean. I am not going to
get it. I can do more with the money we have got.
Q132 Chairman: The Committee is encouraged
by your answer to that question. In the interests of open government,
at what stage would you be prepared to share with us or the House
of Commons the information on which you will base your decisions?
Now?
Lord Jones of Birmingham: Now
in as much as when I have read it and understood it, yes, but
I have not read it and understood it yet. I gave an honest answer
in saying I have it. Have I yet got to a position where I have
taken it home and had a really good take of it and in a position
to work with my officials and produce? I am not there yet. Will
it be soon? Yes. Will you be the first to hear, Chairman? I hope
so.
Chairman: We may be launching our own
new inquiry into the role of RDAs in the very near future. It
will be of great interest to us.
Q133 Mr Bailey: In the previous evidence
session you mentioned the possible over-concentration on business
links with Beijing in Shanghai. Do you think the same applies
in the Indian context to Mumbai and Bangalore, and what efforts
are made by `Team India' to diversify?
Lord Jones of Birmingham: On a
business case?
Q134 Mr Bailey: Yes.
Lord Jones of Birmingham: Not
politically?
Q135 Mr Bailey: Yes.
Lord Jones of Birmingham: I probably
do. Yes, it was necessary to start. Mumbai is the driver and especially
there you will find so many of the non-software inward investors
into the United Kingdom. Secondly, Bangalore was the IT driver.
So there is a natural gravitation there with Genesis and Enysis
and the others and therefore you will find a lot of the smaller
businesses in Britain in that sector going round and feeding off
the big totems of the big software houses. Bangalore happens to
be a big university city. It is where AstraZeneca have gone and
based their R&D in India. Why? Because the university is there.
There is a natural gravitational push. That is never going to
change, nor should it. What we have got to do is say Mumbai industrially
and financially and commercially and Bangalore pharmaceuticals
and IT, they must carry on and we—because we excel in those
sectors as a nation—must carry on with that, but Chennai,
Kolkata—Kolkata (West Bengal) has got this Communist Chief
Minister and it is one of the most entrepreneurial cities I have
ever seen. The natural investment decision from especially a middle
size business in Britain will be "I will not got to Kolkata
(West Bengal) because they have got a Communist Chief Minister",
whereas if they knew a bit more about it, there is a region and
a city aching for more inward investment, especially from Britain.
Hyderabad is trying very hard to benefit from wage inflation in
Bangalore and Chennai and saying, "Come to Hyderabad with
your IT investment. Come to Hyderabad with your pharmaceutical
investment. We have still got a pool of skilled labour that is
not charging so much." So those cities should actually get
more of their time in the sun. Then we should not forget Delhi.
I try very hard, where I go—I do not go to Berlin, I go
to Düsseldorf; I do not go to Washington, I go to New York;
I do not want to go to Ankara, I want to go to Istanbul; I do
not really want to go to Delhi, I want to go to Mumbai or Bangalore
or Chennai. Why? Because that is where the business is done, not
where the politics is done. Delhi is, itself, a huge business
base as well, and many, many British companies are based there.
Next week—I fly on Sunday—I am going to speak at the
CII summit. Where is that? Delhi. I am going to the auto show,
Auto-Expo, the great Indian motor show, which is particularly
to the moment, given Tata, Jaguar and Ford, and where is that?
Delhi. So Delhi is important and it will continue to be on my
radar screen, but you are right, we should also get into Hyderabad
and Chennai, in the way we have done in Mumbai and Bangalore.
Q136 Mr Bailey: Just to follow up:
how satisfied are you that UKTI team India is doing it?
Lord Jones of Birmingham: Very.
In fact, probably more than I thought it would be. It has had
a big fillip because in November the UK-India Business Council
was launched and Sharon Bamford is full-time there as Chief Executive,
working extremely well. I saw this morning in The Daily Telegraph
(Miss Kirkbride's former paper) that Sharon Bamford, Chief Executive
of UK-India Business Council brokered the deal, by which one of
the dragons, Peter Jones from Dragons' Den, is going into Business
Angels in Mumbai and getting private sector investment into start-ups
in India. That is not an American doing that; that is not a Frenchman
or a German or a Japanese—it is a Brit. If we have got,
through UKTI, support for that (and I do not just mean Digby making
a speech at the opening, which I did; I do mean dosh—we
have put £1 million into that), what have we got in return?
Already, we have got the Chief Executive saying today—
Q137 Chairman: You are anticipating
future questions.
Lord Jones of Birmingham: So is
it working? Yes, it is working. You asked me, I am telling you.
Q138 Mr Bailey: Can I just ask, finally,
on UKTI strategy, how is it developing and how is the financial
services person in Mumbai getting on? Have we got any easy wins
out of it?
Lord Jones of Birmingham: I wish
I could say "yes" to that. The problem is that yes,
I have got some financial service wins out of it—insurers.
At last, as you know, Lloyds of London is finally there; we have
got Aviva in there and Prudential in there. I would love to see
more and more, but they are all joint ventures, remember; they
cannot earn 51%. Financial services in Mumbai: we want the London
Stock Exchange in there and this Business Angels thing is very
important; 3i are already in there but why are not the rest of
the private equity boys? So, is it going in the right direction?
Yes. Is our financial services expert there making a difference?
Yes. Is it really hard work? You bet it is. The problem is that
it is so important to the UK as a sector in which we excel. We
are now the capital of the world; it is no longer Wall Street;
it is actually Canary Wharf. That is fabulous, and that is an
exportable, transportable model into Mumbai, but I sat in front
of the Governor of the Reserve Bank of India, Mr Reddy, last September
and I said to him: "Last year you granted 12 licences to
operate for banks, in the whole of India, to the whole of the
overseas banking community—12. Please do not tell me you
are opening your market". To which he said: "It's very
difficult—vested interests". I said: "I know your
issues, I am merely telling you do not expect the banks to come
in here and bring competition, raise the bar, and get behind your
infrastructure investment spend if, actually, you are not granting
licences". They granted one to Standard Chartered and they
called a call centre a retail branch. That was one of the 12 licences.
So does my man in Mumbai sit there every day going: "I'm
doing my best, pal, but I've got this against me"? Yes, he
does. Against that, is it going in the right direction? Yes, it
is. Does that involve policy? Yes, it does.
Chairman: Well anticipated, Lord Jones!
Q139 Miss Kirkbride: I think it will
be Mike Weir's questions to ask more about how we get the camp
followers following behind, as Digby called them earlier—his
previous profession. However, I want to ask about the China-Britain
Business council as the model on which we now do things in China
in relation to UKTI services. Is this a future model for how we
do it in India as well?
Lord Jones of Birmingham: In part,
yes. Did it provide the impetus? Yes. Was it working well and
we thought: "Right, let's use it as a template"? Yes,
we did. However, now it is up and running, I think the UK-India
Business Council is going to have a completely different persona.
There are two or three reasons why, really: it is operating in
a democracy, for a start; it has a lobby ability that the China-Britain
Business Council does not have. Secondly, it can operate in a
different way on the ground; physically, on the street—it
can operate differently to how it can in Beijing. Thirdly, it
has a different make-up of members because you will always have
your (thank heavens we do) global brand businesses, which will
be in both—Rolls Royce is a good example, Vodafone is another
and JCB is another—fabulous stuff—and the banks, of
course, and the accountants and the lawyers—but there is
the software industry, for instance, in India and they are very
much part of Karan Billamoria's plans going forward. You do not
find that so much in China. There are environmental issues in
India but they are not the same, nor are they of the size, as
you are getting in China. So I am putting a big push in the Business
Council in China into environmental engineering, for all the reasons
we discussed, and there is probably not the same emphasis in India.
However, the template of how it is set up and working—was
the China example followed? Yes. Did it provide the impetus? Yes.
Are we glad we did? Yes, it is working. However, it will take
a different persona going forward.
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