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"We anticipate an additional $4.6 bn of US investment over the next four years." - Views on News from Equitymaster
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  • Mar 9, 2000

    "We anticipate an additional $4.6 bn of US investment over the next four years."

    ...I believe that such flows will continue to grow as Indian industry tries to integrate with the global market".

    On the eve of US President Bill Clinton's visit to India, Mr. David P Good, Consul General of the United States of America, Mumbai paints a positive picture for Indo-US relations. Having completed assignments in Jerusalem, this is Mr. Good's third stint in India. An easy going personality, Mr. Good is fascinated by books on history and politics. He cites Richard Reeves' "President Kennedy" on American presidential decision-making, Michael Brecher's "Nehru's Mantle" on the politics of succession in India, and Henry Kissinger's books on his years as Secretary of State as those which have created an impression on him. His favourite however remains Joseph Heller's "Catch -22" - a satire on war.

    In an interview to equitymaster.com, Mr. Good,Consul General of the United States of America, indicates that India has the potential to attract higher inflows through FDI. However he stresses that US investors would look favourably at issues like reduction in customs and excise duties, legislation giving full patent protection, better enforcement of intellectual property rights and a level playing field for foreign insurance sector.

    EQM: There is considerable anticipation on the forthcoming visit of President Bill Clinton to India. How do you see it strengthening the economic ties between the two countries?

    Mr. Good: Although there has been relatively little high level contact between the United States Government (USG) and the Government of India (GOI) on economic issues since liberalization in 1991, the last six months have shown a significant change in that trend. Recent visits from senior USG officials, including the Energy Secretary, Treasury Secretary, Deputy US Trade Representative, Under Secretary of State for Economic Affairs, US Ex-Im Bank Chairman, and several Congressmen have all underscored the need for greater understanding and cooperation on economic issues. The impetus for some of these visits has no doubt been to lay the groundwork for the forthcoming presidential visit. Many of these officials, however, have come on their own initiative to capitalize on the recent change in attitudes in the GOI on issues such as bilateral trade, foreign investment, and financial reform. These are some of the themes that President Clinton will further emphasize during his trip here later this month. We anticipate that there will be significantly greater interest in Indo-American trade and investment following this trip.

    EQM: How do you see the flows of US investment into India over the next few years and in which specific sectors/industries?

    Mr. Good: Based on a survey done by the US Embassy of 118 companies, we project that the total market value of US investment in India at year-end 1998 was around $10 billion. Of that amount, an estimated 55.3% was in manufacturing, 29% in energy, 4.5% in telecommunications, 4.1% in banking, and 3.4% in software/computers. We project an additional $4.6 billion of US investment over the next four years. Current economic and commercial trends suggest opportunities for US firms in the fields of software/computers, telecommunications, aircraft manufacturing, oil and gas, power generation and transmission, plastics processing, and steel equipment and services. Additionally, portfolio investments from the US have already begun to rise indicating confidence in India's IT and pharmaceutical industries. I believe that such flows will continue to grow as Indian industry tries to integrate with the global market.

    EQM: There is a feeling that the level of information/communication to US investors about opportunities in India and economic reforms needs to be enhanced. Do you share this opinion?

    Mr. Good: Yes. Many American firms, particularly the small and medium-sized ones, are of the view that investment information on India is lacking. This is changing rapidly, however, with the proliferation of Internet web-sites that are providing economic and business content to the global market. More information is available today than just twelve months ago and potential investors can find out about not only trade and investment opportunities, but also schools, housing, entertainment, and living standards. Government and private sector entities must continue to encourage this development in order to keep up with competing economies of South East Asia that have traditionally been more proactive in disseminating information.

    EQM: Where would you rate India vis--vis other Asian countries in FDI investment and particularly vis--vis China?

    Mr. Good: From 1990-98, US Foreign Direct Investment (FDI) in India has averaged $452 million per annum. That is in comparison to the following yearly averages over the same term of US FDI in: China $1.1 billion; Indonesia $3.3 billion; Japan $20.5 billion; Korea $2.6 billion; Singapore $6.2 billion; and Thailand $2.2 billion.

    These figures indicate that there is tremendous room for the growth of US FDI here. It is interesting to note that population size and political ideology do not necessarily drive investment. In Singapore, for example, US investment is almost fourteen times that in India, despite the fact that it is nation of only 3.5 million compared to India's 1 billion. If we look at China, we see that US FDI is more than two times that in India, the largest democracy in the world. These basic comparisons lead one to conclude that India's reluctance to open its markets over the last fifty years has put it far behind other nations in the region that are competing for FDI. It is also clear that the reform process started in 1991 has failed to live up to the hopes of US investors.

    There are signs of change, however, that are raising perceptions of India. Stable growth patterns (6 percent per year), controlled inflation (2-3 percent per year), a low current account deficit (less than one percent of GDP), and rising foreign exchange reserves (around $32 billion) have made India a more attractive investment destination. The Asian flu that caused a major setback to American investment in other Asian countries has diverted more attention towards India. Furthermore, the convergence of our two nations in knowledge-based industries such as pharmaceuticals and information technology is likely to propel US FDI even further.

    EQM: Are there any hindrances or economic barriers you would like to see removed which would result in India becoming a more attractive destination for US business?

    Mr. Good: There are both structural and regulatory barriers in the current system that need to be eliminated in order to improve the attractiveness of India as an investment destination. The structural changes include the need to simplify foreign investment procedures, improve the transparency and speed of government clearances, and implement legal system reform. On the regulatory side, US investors would look favorably upon a reduction in customs and excise duties, legislation giving full patent protection and better enforcement of intellectual property rights, and a level playing field for foreign insurance sector entrants. The quick implementation of stated goals is also a critical element, as delays will force investors to seek opportunities elsewhere.

    EQM: How do you see US employee visa regulations changing given the tremendous demand for software engineers from India?

    Mr. Good: The number of employment-based visas (H1-b) available on an annual basis is set by the US Congress. The most recent legislation temporarily raised the annual limit from 65,000 to 115,000. Congress has requested a report on the effects of this change from the interested government agencies and will make further adjustments in the number of these visas as it deems appropriate. Congress can, at any time, decide to change the program, and proposed legislation has been introduced in the Congress to raise the number of employment-based available each year. It is impossible to predict at this time if action will be taken on this proposed legislation. We do know that 115,000 H1-b visas will be available worldwide this year.

    EQM: Which book or person has influenced you significantly as an individual?

    Mr. Good: Rather than one book, I would have to say that books on contemporary history and politics are the most influential on my thinking. Books on decision-making by great historical figures are fascinating to me, like Richard Reeves' "President Kennedy" on American presidential decision-making, Michael Brecher's "Nehru's Mantle" on the politics of succession in India, and Henry Kissinger's books on his years as Secretary of State. My favorite work of fiction continues to be Joseph Heller's "Catch -22", which is a brilliant satire on war.

    EQM: Which has been the most challenging assignment you have had in the Foreign Service?

    Mr. Good: I spent many years in the Middle East between my two tours in India. Four of those years were spent in Jerusalem, where the heart of the Middle East conflict lies. I would have to say that working in an atmosphere where Israelis and Palestinians were constantly in confrontation with one another, and where tensions ran high every minute of every day, was a huge challenge. Anyone who has lived in that atmosphere can only hope that the current Middle East peace process will succeed. That is why I still follow Mideast events almost as closely as I do South Asian ones.



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