| Home |
| About Us |
| Latest News |
| Features |
| R-100 Index |
| Newsdesk |
| Free Email Alerts |
| - - - - - - - |
| Wireless Business Review |
| - - - - - - - |
| Three out of four ain’t bad |
|
|
| Friday, 23 March 2007 | |
|
India’s government is on the verge of extending foreign ownership thresholds from the current 49% to 74%. Given the market’s potential, this is probably a mistake. But it’s a nice problem to have. In an entirely understandable attempt to avoid its lucrative telecom market being carved up by overseas predators, India has long resisted any amendment to its rules on foreign direct investment (FDI) in key sectors like telecom. Levels are currently set at 49%, although there are various ways of getting around them.
New rules, which have been on the table for years (this is India, after all, which marries a fast-growing economy with an ever-growing bureaucracy) would lift this to 74%. Taking into account the wrinkles in restrictions on foreign ownership, this would permit outside investors to control Indian companies and vital infrastructure with a near-100% shareholding. The new rules also allow for non-Indians to serve as senior officers on the boards of Indian companies, although a majority will still be required to come from the home country, Opponents argue that India has capitulated to pressure from treaty organisation such the WTO: this may explain why the change has been argued over since 2005 (when first mooted), if not earlier. There are two very opposite reasons to find peril in this change. The first, for an outsider, is that it might easily (although lengthily) be reversed. Those domestic vested interests who do not see the merit in tying up with foreign partners could lead a counter-attack and there are plenty from inside the political class who will support them. The second, for Indians, is that outside investors will treat India like a ‘get rich quick’ scheme: they’ll drain it and then dump it. Hutchison’s departure from the cellular market gives an unsavoury whiff of how this might happen. The contrast between the new regulations in India with those in China could not be more stark. Like India, China is an exploding telecom market. Unlike India, China intends to keep the resulting revenues for itself. You can bleat about China’s reliance on monopolies and oligopolies but that system has produced the world’s biggest and most heavily-capitalised mobile company and some other big telcos to boot. In bowing to the West, India has surrendered much of its dignity along with billions of rupees in revenue and tax. Still, it can always fall back upon the software and customer service industries on which these new outside investors depend. Jim Chalmers
|
| < Prev | Next > |
|---|
|
|
|
|
|
|
|
|
|
|