Wednesday, November 18, 2015

Multi Billion foreign investments and my problems with it

Our PM Modi is traveling around the world and in each country announcing multi-billion dollar investments from various companies. Even state governments regularly organize GIM (Global Investors Meet) and end of it make announcements of multi-billion dollar investment agreements. Reading these it sounds like a great achievement. Investments mean money and jobs, so should be a welcome thing. But I have some problems with these announcements.

Further details of these agreements are seldom made public. No foreign company promises investment as charity. If they promise investment, they would also seek lots of benefits in return- such as tax concessions, free land etc and plan to take back 10 times the amount as profit. Without making public what exactly government has promised in exchange for investment, just announcing deal value looks to me like a mere publicity stunt or could even be detrimental to the nation.

Consider these:
Investment duration: Would all the money be pumped in one shot? Usually No. The investments are done over a period of time. But the details of breakup- when would first investment happen, how much over how many years etc are never disclosed. Announcements sound as if all the money is ready in suitcase to be invested next day. In reality it may take over a decade to materialize.

In a normal scenario, an investment company should pay applicable rates for the land, pay various applicable taxes, employ large number of local people, should take stringent measures to ensure safety and security of environment, employees, society etc. Only when these happen, the benefits of investment is realized by the host country. But when our politicians go begging for investments, corporates lobby for wide range of benefits- such as tax waiver, free land, relaxation of pollution norms etc. When these concessions are offered, benefits of investment take forever to materialize or sometime may be even negative. Our politicians not making public what exactly was offered to these companies to secure investments causes lots of suspicion in my mind. Even our media doesn’t probe these things- they are happy to make headlines out of large numbers.

To quote some examples, Vodafone is fighting huge tax claim in India. Without that getting sorted, how would Vodafone bosses commit to mega investments? Unless say some heavy concessions are offered?

It costs nothing to make an announcement about a possible investment or even to sign an agreement to that effect with dozens of fine print, by invoking a few of which investment decision can always be delayed or negated. Our politicians are only interested in first time deal announcements- no one knows what happened to previous deals. Government of Karnataka has held few GIMs in past few years- how much of those investments have materialized? What is the status, how much jobs created? Why not release an yearly update informing public on the status? I hope Modi’s deals don’t get forgotten and materialize into something meaningful.

May be I am just being too cautious. But I prefer to dig little deeper than taking political headlines at their face value. Because fine details of these investment agreements are not in public domain, I am sharing my concerns in this post. I am not ridiculing Modi's efforts. May be most of his deals are genuine and will materialize in some benefit to nation and its people, but just that I don't know the details. I did scan few goverment websites and internet in general for details, but no further details were available. Hence this post.

Do share your thoughts.


Deepak Raju said...

A timely post. Just this morning a paper showed Karnataka govt. promised 7 lakh crores of foreign investment 10 years back. So far barely 1 lakh crore has come in.

Shrinidhi Hande said...

True.. media has no interest in following up. people forget easily