India Loses Luster at Davos
The economic growth numbers and the rising stock markets during 2004-2007 persuaded many investors to buy into the Bollywood style "Shining India" hype made in Mumbai. However, now that the growth has slowed and the Mumbai stock market is returning back down to earth, the passive consumer of India's well-cultivated image as "peaceful, stable and prospering" investment destination is beginning to scrutinize the reality behind the hype.
Many are surprised to learn from the National Counter-terrorism Center (NCTC) in Washington that the death toll from terrorist attacks in India between January 2004 and March 2007 was 3,674, second only to that in Iraq. (In the same period, 1,000 died as a result of such attacks in Pakistan, the "most dangerous place on earth" according to the Economist, Newsweek and other vendors of geopolitical insight.) The recent Hong Kong-based Political & Economic Risk Consultancy Ltd. has rated India as the riskiest of 14 Asian countries, not including Pakistan and Afghanistan, it analyzed for 2009. Add to that the abject poverty, the continuing and multiple large-scale insurgencies and the lax corporate governance, and you have reasons to worry about the "emerging superpower" called India.
As part of its well orchestrated hype with the assistance of friendly western media, India has effectively used the annual World Economic Forum in Davos, Switzerland as a showcase for its new image as an exciting and dynamic place in the throes of change, a must destination for international investment. In Davos, the Indians have thrown the best parties, laid on the most stimulating discussions and, generally, they have been impossible to overlook. That has added to a flood of international publicity, most of it flattering.
But this year, the shine's off, according to Time magazine. The worldwide economic crisis has refocused the attention of the 2,000 plus delegates in Davos on critical issues of financial stability and governance, in which India is only a peripheral player. India's growth is still relatively strong, but no longer stellar. Exports are down, as is the rupee. Outsourcing and foreign direct investment are out of fashion. Security is suddenly a pressing issue after the Nov. terrorist attacks in Mumbai. And worst of all, the country is now plagued by a huge corporate scandal, at outsourcing firm Satyam, that has fairly or not put a dent in the reputation of India Inc.
According to various media reports, the lavish parties and the elaborate sessions put on by Indians have attracted sparse attendance. Here's an excerpt from Time magazine describing Indian presence at Davos 2009:
There are two obvious signs of this change in Davos. First is the social scene, which the Indians dominated ever since 2006, when several companies bandied together to launch a marketing assault that included handing out iPods to all delegates, flying in the country's best chefs and plastering "India Everywhere" posters around the Swiss mountain town. This year, the Indian parties so far have been conspicuously empty. I went to a Wipro cocktail at the Hotel Europe last night hosted by chairman Azim Premji that attracted no more than 20 people in the hour I spent there. Premji was a charming host, although he moved on quickly after I asked him whether the Satyam scandal was affecting Wipro. Another party thrown by the auto firm Bajaj didn't pull a big crowd either, I was told by a couple who dropped by.
More seriously, this morning, Deutsche Bank hosted a breakfast about India that featured an all-star cast of speakers, including Montek Singh Ahluwalia, a key government planning official, and industry titans Anand Mahindra, who runs an industrial empire and telecoms magnate Sunil Bharti Mittal. Instead of the self-confident message of the past three years -"We are the new global force to be reckoned with" - the tone was a lot more muted. India's still a great place with a great future, they said, but it has some important issues to work through in the short term. Anshu Jain, the London-based head of Deutsche Bank's global markets division who chaired the meeting, summed it up aptly when he said, "It felt like India was all the rage. The question now is whether the pendulum has now swung the other way."
As for India's neighbor Pakistan, there is even more focus on "terror" and continuing talk of doom and gloom. “I assure you and I assure the house that I will never ever allow my soil, Pakistani soil to be used for terror activities,” Pakistan’s Prime Minister Yousuf Raza Gilani said at the World Economic Forum. In spite of the negative attention, Mr. Gilani did try and court foreign businesses and investors to come to Pakistan.
“Investing in Pakistan is investing in future,” the Prime Minister said while addressing a lunch he hosted for the leading businessmen here on the sidelines of the World Economic Forum. Gilani said Pakistan’s sound fundamentals offered the investors an opportunity to explore the country’s economic potential in diverse fields. He emphasized the need for more foreign investment coming into Pakistan and benefit from its investor-friendly economic policies. He said Pakistan’s liberal economic regime with zero import duty on raw material provided equal opportunities for the local and foreign businessmen. He said Pakistan was though confronting with a number of challenges including economic crisis, however the democratic government was struggling to improve the situation.
“Despite all the challenges, economy continues to be buoyant and vibrant in Pakistan,” the Prime Minister said, adding the country’s mineral and work-force resources had the great potential to be fully tapped.
Gilani said the government had converged its focus upon the development of agriculture sector to utilize it particularly during the recession phase. “It will be just a matter of time that Pakistan will become a regional hub of economic activity,” the Prime Minister told his audience. He said the improved economic plan for civil aviation, customs and logistics would substantially enhance the country’s trade activities. The Prime Minister said Pakistan had the capacity to join hands with partners in food security, being a major food producer and the fourth largest milk producer in the world.
Gilani said the government was taking a number of strategic measures, and mentioned increased trade with Afghanistan and improved regional mechanism with the SAARC countries. He said a deep seaport at Gwadar had been established for greater economic activity among the Central Asian and Asian states.
He said the government was using the trade policy prudently by pursuing growth. “Our economic strategy rests on strengthening the trade dividends and ensuring a business-friendly environment in the country,” he said.
Prime Minister Gilani said in WTO context, Pakistan would support substantial reduction on tariffs in the developing countries.
There are reports that the Pakistani prime minister's lunch was not particularly well attended. Prime Minister's critics are of the view that Gilani's visit was an expensive public relations exercise during which he met very few international leaders or spoke to the international media that was willing to talk to him. It's not clear how much planning and preparation was made prior to the prime minister's arrival in Switzerland. The lack of Pakistan's private sector participation at the forum is also troubling.
Regardless of the results of this year's Davos forum, it is important for both India and Pakistan to continue to participate and project their nations in the best possible light. With their large populations and significant growth potential, the South Asian nations must not let up in their efforts to bring peace and prosperity to their impoverished people.
Here's a video of Prime Minister Gilani at the Davos 2009 Summit:
Here's a video of Montek Singh Ahluwalia at Davos 2009:
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