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M. Somasekhar

More FDI is bound to come once new sectors are opened up. For example, in insurance Allianz and in banking Deutsche Bank have entered. As markets open up more big companies are bound to come.

HYDERABAD, Dec. 2

THE German industry's presence in India is quite large and often the foreign direct investments (FDI) figures do not give the correct picture. With over 650 companies in diverse sectors, Germany would like to be a major partner in the country's growth path, says Mr Heimo Richter, German Ambassador in India. On a visit to Hyderabad, where he visited various industries, met Government officials and interacted with industry and academic leaders, he spoke to Business Line on a variety of issues.

Excerpts from the Interview:

What are the efforts underway to increase FDI from Germany, which seems to be dipping now?

The FDI from Germany show mixed trends. While the curve went up between 1990-97, with it occupying the second position, there was a slackening in 1998. The end-2001 figure is not impressive, with the country down to No. 7 position in terms of volume, which is not very satisfying to us.

However, we have to distinguish between short and medium-term trends. The internal situation in Germany - unification costs, reaching political stability in East Germany have also had a bearing. For example, to bring East to the levels of West, the net transfer costs have been put at 50 billion euros. Similarly, a good part of investments from the industry, government are heading to the East.

The next major factor is the increasing competitiveness and cost factors in the Asian markets. Countries such as China (which has attracted nine-fold FDI in comparison to India), South Korea and Thailand are becoming attractive destinations. In contrast, the cost factor in India because of infrastructure, transportation and power that are improving is sometimes working out higher in comparison with Asian competitors.

More FDI is bound to come once new sectors are opened up. For example, in insurance Allianz and in banking Deutsche Bank have entered. As markets open up more big companies are bound to come.

Have the 9/11 event and tensions between India and Pakistan impacted on Indo-German trade. What are the latest bilateral trade figures?

The 9/11 events have definitely not impacted bilateral trade between our two countries, except in the case of tourism. In fact, trade in several commodities showed an upward trend again, with overall trade figures of around 3 billion euros in commodities.

The September 11, 2001 events were not an Indian phenomenon, but a global one. And prior to that itself economic recession was setting in several industry sectors and countries. Since more than 650, including most of the big German industry is already present in India, the cross-border tensions would not weigh much, as far as FDI is concerned. On the contrary, Iraq may weigh heavily on the investment decisions of German companies.

Germany has opened up to Indian IT professionals by offering `Green Permits'. What has been the response and what is ahead?

The scheme has worked well. In proportional terms, India has profited most. So far 2,700 Indian IT professionals have got permit. However, there are two more new developments - the increasing presence of Indian IT companies in Germany and spurt in offshore work done for Germany from India.

India has a good competitive advantage. For example SAP has deployed 650 professionals in India, doing jobs for Germany. It is also in the process of enlarging its presence in the country.

German companies have been putting social and ecological conditionalities for import of Indian goods, like child labour. How can this be resolved, in your opinion?

The most important person determining product sale is the consumer. And in Germany, NGOs and consumer organisations influence decisions. Therefore, these issues can turn out to be negative points. However, if products can be properly certified, a major hurdle can be cleared. We already find that products certified from India are sold easily.

Which are the new areas of collaboration that you think the two countries can pursue?

New areas will comes as we see India opening up its economy. For example, retail, insurance, financial services are prospective sectors. Collaborations can happen in biotechnology, pharmaceuticals and science and technology where both countries have strengths.

The opportunity is to bring together the large small and medium enterprises (SMEs) in Germany, especially in manufacturing to India. There is huge potential. We foresee a brand of manufactured in India emerging, wherein this sector can play a key role.

Germany had launched a drive to attract students and researchers to its universities and institutes. What has been the experience so far?

Yes, we made lots of noise in India, and even conducted road shows in the four metros. It has yielded some results. The number of Indian students has increased four-fold. There are 2,400 students now. Though, numbers are low, they are increasing. Though, full work permit is not given, a limited offer exists, which partly covers living costs. Education, anyway, is free in German universities.

However, the new immigration law to come into effect from January 2003 is expected to further open up opportunities and Indian students and professionals should be gainers. The advantage would especially lie in areas where Germany needs professionals, here work permits would be given.

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