Unlike other countries, where positioning of your business tends to be much smoother, doing business in India requires “patience, patience and patience”, said Roger Mabey, Executive Director of Bovis International Ltd. Bovis is one of the oldest multinational players in India, and Mabey is spearheading the company´s globalisation strategy. Speaking from experience, he says, “There is a great need of diplomacy when dealing with India. One can hurt feelings of Indians, which may result in a loss of face. For this, we require flexibility and commitment. In India, we need to network as well. We have to be aware of the local politics. It is also important to have a [Indian] link in the UK. During last autumn, we had more meetings with our Indian associates in London then we had in India.”
Mabey was speaking at a seminar organised by The Economist in London recently, in which European executives got to speak of their hopes and expectations while doing business in India. It was an exclusive affair (obviously, with a registration fee of nearly GBP 600) attended by industrialists, investors, academics and Indophiles. There were several high-powered investors such as Daimler-Benz Transportation, Ciba Chemicals, Imperial Tobacco Group and Royal Mail International and the speakers were apparently selected for their experience in dealing with India.
(The Economist is organising its Tenth Roundtable with the new gov-ernmenl in New Delhi, in May 1998. For those who are interested, the registration fee for this one is USD 2500.)
Mabey had good news about India too. “We have no debts in India, we get paid in 60 days. I cannot say that for many other countries. India is the only country where we have been making profit from the day we set foot on its territory. In most other countries, it is in the second year of our business when we are able to break even.”
Dominic McClafferty (picture), a trade promoter representing the British Government´s Department of Trade and Industry emphasised the need for businessmen to understand the Indian economy´s slow but steady pace. “India has the third largest pool of labour in the world. It may not be a fast tiger but a huge elephant that is going forward. It is difficult to stop him in his stride.” Added McClafferty, “But one has to stick to one´s policies. English is used by people but one has to be careful that the Indian partner understands what you mean.”
India holds more attraction than any other country for Rhinhold Heus, Managing Director of the anz Investment Bank. “Things are slower but they can change overnight. Kentucky Fried Chicken had their licence revoked but they appealed successfully against it in the Supreme Court. This is something which one cannot imagine happening in China. In India, it is not about ´know how´ but ´know who´.”
The comparison between the business environments in China and India came up repeatedly during the seminar. Unlike China, India does not depend on exports, which is why it was felt the latter would be shielded from the economic crisis in East and Southeast Asia. At the same time, had the rupee been convertible, India too could have been carried away by the wave. At the risk of over-generalisation, some participants suggested that Indian businesses were a lot more “conscious” and “prudent” in their investments than the counterparts to the east.
The meeting also recognised that much had changed in the financial sector since the pre-1991 regulation era. While India uses only a small amount of foreign lending, dividends are now tax-free, rendering the capital market active; the convertibility of the rupee will be done in three phases and the Reserve Bank of India is devolving many of its powers.
Law and policy
Arun Singh, a partner in the London-based Mason Solicitors, said that foreign investors would also do well to comprehend the changes that had overtaken the legal system. For example, he said, non-resident Indians (nris) can now have 100 percent equity propriety.
Said Singh, “Recent and future changes in the legal system in India are some of the most advanced in the world. For example, dispute resolutions and injunctions are more prompt than before. It is the final trial which takes a longer time in India.”
Singh also discussed the culture of business: “India does not take any foreign product with open arms. One has to do proper market research. Any transaction in foreign exchange should have approval. In fact, the situation in India is similar to what existed in the mid-70s in Britain when no British citizen was allowed to take more than GBP 50 out of the country.
“There is a different business environment which needs to be identified. Concepts about punctuality, hierarchies have different connotations there. One cannot afford to be arrogant. One has to check every application for misappropriation and it is important to register a trade name.”
Back to Lord Clive
The seminar also heard John Bray, Principal Research Consultant of Control Risks Group, analysing the Indian attitude towards Westerners. Bray believes that Indians have enormous admiration for Westerners despite the perception that some of them are corrupt and untrustworthy, and tend to hide the real agenda. “India´s attitude towards the West is not always balanced. There is an undeserved suspicion which may be a legacy from Lord Clive´s. The word ´loot´ has come into the English vocabulary thanks to the work done by Lord Clive.”
Bray also handed out some nuggets on Hindi business-speak. “Westerners need to learn some practical Hindi words too: sifarh means ´relationship favours´, hawala means ´unofficial economy´. This financial system works very fast and very efficiently. Chaipani is ´a small payment´, which is given to bureaucrats for ´lubrication´. Rishwat encompasses every social attitude towards corruption. Many Indians still have a handout mentality and they are used to having subsidy.”
However, observed Bray, “in spite of cynicism, things really work; they have a legal system which works and foreigners do win cases. Elections are held properly and one can expect proper justice in the Indian system.”
Shifting focus to the whole of the region, Bray said: “India has not enjoyed the best relations with its immediate neighbours over the years, yet now there is more focus on cooperation between neighbouring states, as is illustrated by the purchase of Bhutan´s hydro-electric power by India. Similarly, the American company Unocal is hatching ambitious plans to build a transnational natural pipeline from Turkmenistan to Pakistan and hopefully onto as far as Delhi, although as long as there is still dissent in Kashmir, this may prove to be impracticable.”
All this apart, there´s a human side to investment and development, as noted by Julian Parr, Regional Manager of The Prince of Wales Business Leaders Forum. Parr was concerned about the ways in which multinational companies are operating in developing countries. He feels that the process of development not only requires market-oriented policies, but also greater economic participation, social cohesion, human development, environmental sustainability and accountability.
While all this may be true, one aspect of European exports was never discussed at the seminar (and neither has it been in so many others) – the export of arms to the Third World, including South Asia. There was absolute silence when the matter was raised during the luncheon. At that point, everyone concentrated on the food.