“cut red tape and roll out the red carpet”

http://www.theaustralian.com.au/business/oz-firms-keen-for-modis-india/story-e6frg8zx-1226919448107#


Oz firms keen for Modi’s India

AMANDA HODGE |
The Australian|
May 16, 2014 12:00AM

AFTER a tough few years for Australian business in India, the anticipated election today of a pro-business prime minister, Narendra Modi, is tipped to herald a new era of investor-friendly government for the South Asia giant.

Six months ago, BHP Billiton walked away from nine Indian oil and gas exploration projects, citing persistent delays in exploratory permits. (At about the same time, South Korean steelmaker Posco and Luxembourg-based Arcelor Mittal also abandoned plans for large steel plants.)

Last week, the manager of Thiess Minec, the India-based arm of Australia’s Leighton Holdings, was arrested and jailed after arbitration with a Singapore-based partner broke down over alleged contract breaches at its controversial Jharkhand operation.

Even Rio Tinto, a constant presence in India in recent turbulent decades, has yet to bring a single exploration project to operation.

The experience of some of Australia’s biggest mining and infra­structure companies has proved a cautionary tale for potential Australian investors in the Indian market. But, if the suddenly buoyant financial markets and corporate analysts are to be believed, that is about to change.

Successive days of record growth in India’s Sensex Index this week reflects expectations of a decisive win for Modi, Chief Minister of western Gujarat state, and his business-friendly Bhara­tiya Janata Party when 550 million Indian votes are tallied today.

The final count comes after a bitter five-week election that has captivated Indian voters and raised hopes that years of policy paralysis in New Delhi is drawing to an end. From record growth in its first five years in office, India’s outgoing Congress Party-led administration has become most famou­s for corruption and policy flip-flops on economic reforms such as foreign direct-investment limits, and for imposing retrospective tax imposts on telecommunications giant Vodafone.

Business confidence has slumped and many foreign companies have put off investing in one of the world’s largest markets.

But Modi has promised to “cut red tape and roll out the red carpet” for business, as he has in Gujarat, which has built a reputation under his tenure as India’s most business-friendly state.

His campaign has revolved around removing regulatory hurdles that have placed India 134th out of 189 countries in the World Bank’s Ease of Doing Business index, and lifting the annual growth of an economy that has slipped from 8.5 per cent to less than 5 per cent since 2010 — too low to accommodate millions of young Indians joining job queues each year.

Rio Tinto India manager direc­tor Nik Senapati is cautiously optimistic about the “Modi effect”, though he sees little immediate relief for Rio, whose exploration interests are caught in the fallout of a larger Supreme Court concern over illegal mining.

“There’s a view that Modi will be positive for business; things that have stalled can get moving again,” Senapati tells The Australian.

“The only thing he can do to create a sustainable mining sector is take on the whole question of mining and how to get things going, and that’s a one to-two year process.”

Although Rio continues to focus on its mining services business, which employs 1500 people from the back-office to front-end research and development sectors, Senapati says key to expanding that business is the removal of layers of bureaucratic obstacles.

“We’re looking for an environment that’s conducive to doing business in India,’’ he says.

“My assumption is Modi as PM would devolve more power to the states and get them to run more independently.

“If there are 10 states flourishing, then India flourishes, and I don’t think that would be a bad outcome.”

Australia India Business Council chairman Dipen Rug­hani, a Gujarati by ancestry, believes a Modi victory can be only good for bilateral business relations, though much depends on how large a mandate voters deliver him for his economic reform agenda.

The AIBC has been working hard to build relations with Modi, and in January last year sent its biggest business dele­gation to his Vibrant Gujarat conference.

(There are rumours that Tony Abbott will lead the Australian delegation to Vibrant Gujarat next January.)

Rughani says Canberra’s impartiality over the 2002 Gujarat riots, in which Modi is accused of failing to act quickly enough to prevent the slaughter of some 1000 mostly Muslim civ­ilians, will also help Australian relations with India’s most likely new prime minister, a politician famed for his autocratic style.

The EU only recently lifted its boycott of Modi, and the US — having previously refused Modi a visa — has sought to make up ground by appointing a Gujarati-born ambassador to India.

In contrast, Australia has worked hard to build a profile in Gujarat, and fostered good relations with Gujarat-based mining and energy giant Adani Enterprises, whose chairman Gautam Adani is a close associate of Modi.

Last week, Adani won Queensland approval for a $16.5 billion coal and rail project in the Galilee Basin, and is now awaiting federal environment approvals.

But Rughani fears Australian business is largely failing to pay attention to the changes taking place in India.

One India-based Australian business contact says he has found the current lack of interest in India depressing: “I’m not sure there’s much appreciation for what’s happening here.

“In Australia it’s all China, China, China, except among those businesses who already have a presence on the ground here.”

It is a frustration shared by Adrian Mutton, whose Delhi-based Sannam S4 business provides market-entry services for Australian, British and US companies in India.

“You only have to look at the demographics; China’s consumer market is going to slow down but India has half a billion people under 25,” he says.

He points to Modi’s stated priorities as prime minister: new roads, six bullet trains linking major cities, a shake-up of India’s shambolic energy industry, greater focus on tourism and youth vocational training — all areas where Australia has specialist skills.

Though Australia has worked hard to engage with India since the notorious Indian student bashings of 2009, and is currently in free trade agreement negotiations, Mutton believes now is the time to step up efforts.

“If I were (Trade Minister) Andrew Robb I would be working out how we can position ourselves as world leaders in those areas so we can come to Modi and say, ‘We’re here to help you,’ ” Mutton says.

“India is a market that you ignore at your peril.”