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Rasheeda Bhagat

HONG KONG, Nov. 26

A DESPONDENT Divestment Minister, Mr Arun Shourie, seems to have thrown in the towel as far as the divestment process is concerned and talked the other day of the privatisation dukan (shop) having been virtually shut down by a section of India's political brigade as far as the PSUs are concerned.

As if on cue, the prices of PSU scrips dived on Friday on the Indian bourses. While our stock market analysts are scoffing at the political flip-flop on divestment and the broking community is saying that the FII sentiment has been adversely and irrevocably affected by India's dithering on the privatisation front, it was tempting enough to get a perspective from Hong Kong.

Particularly because on the one hand, the Communist China is constantly singing the capitalisation and economic reforms mantra constantly, resulting in its economy vaulting ahead merrily. But on the other hand, India is facing all kinds of problems, ironically from within the NDA Government itself.

So Business Line on Monday posed a question to Mr Ian K. Perkin, Chief Economist of the Hong Kong General Chamber of Commerce, and asked him to make a comparison between the two economies and foreign investors' perceptions on them.

With a smile, he replies, "Well in China, it is a matter of control. The leadership at the Central or the provincial level still has very extensive controls. So when a decision is taken... whether it is a big decision to build the Three Gorges Dam, or whether it is a small one to allow a $1 billion joint venture in Shanghai or wherever... when that decision is taken, the project goes ahead." Such decisions do not encounter delays or arguments.

is no real debate in China on the direction of the country or the decisions made by its rulers on behalf of the country. And, hence there are no democratic delays that you find in a democracy like India, where people debate: Have we done the right thing? Has an environmental impact report been prepared? What will this decision mean for the people on the streets? That does not come into play in China and that is the big difference between India and China."

Saying that what India is facing at the moment are both the "strengths and weaknesses of democracy", Mr Perkin comments the strength is that everyone has a say in the Government's decision. The weakness is that things get delayed because of this. But this does not happen in China. So it is only natural, he says, that foreign investors prefer China to India. "It takes you a few months to get the required signatures on the papers in China.

But once you've got the top signatures, you can do anything that you want!" But, he cautions, as China turns democratic, even if only at the grassroots or township levels, which it is beginning to do, the more there is going to be a debate about what is good for the town or the region. "But as of now, this is not possible, and hence it continues to be a very attractive investment destination for business people, who like decisions to be made straightaway!" he adds.

Does he think that the recent smooth transition in the top leadership of the Communist Party of China, which had attracted a lot of admiration worldwide, a positive development for China? "Well, it's positive if you believe in that system of Government. But it is negative in the sense that the only people who decided were the leaders themselves. The debate and the battle were carried out within a very selective group of people. And the policies do not change whatever.... not a whit." On the other hand, he points out, every time there is a change of Government in India, "you have businessmen beating their breasts and saying: Oh my god, what does this mean for my project? Will I be able to survive in this business? In China that never happens, and its business as usual."

As far as Hong Kong's economy is concerned, things are far from rosy. After registering a negative growth of 0.5 per cent in the first quarter, its GDP growth rate in the second quarter has been 0.5 per cent. And, with this rate being expected to be around three per cent in each of the next two quarters, the annual GDP growth rate is likely to be around 1.5 per cent, lower than the projected growth rate of 2 to 2.5 per cent. "With the world now one huge crisis management centre, forecasting the immediate economic outlook is more difficult than ever. The war on terror, Iraq, lacklustre economies, deflation, corporate greed and who knows what else, have to be taken into account," he adds gloomily.

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