China, India pursue different routes to prosperity.

FOREIGN direct investment (FDI) has certainly played a vital role in the economic progress of most developing countries in Asia.

One good example is China, which absorbed US$53bil worth of FDI in 2002. The growing inflow of FDI has helped fuel economic growth over the past decade.

However, India - another economic giant in Asia - has lagged behind China in terms of attracting FDI. In 2002, only US$4.7bil worth of FDI flowed into India - worlds apart from the amount of FDI received by China.

Economists and policy makers have said that the Indian government should learn from China in attracting FDI so that the continent could also achieve the impressive economic growth that China enjoys.

But to Professor Tarun Khanna from Harvard Business School, the two countries have pursued radically different development strategies and thus a comparison between the two might show that FDI was not the only path to prosperity.

Speaking at a seminar organised by the Harvard Business School Alumni Club of Malaysia in Kuala Lumpur yesterday, Khanna said the Chinese authorities had created an environment that was conducive for multinational companies (MNCs) to set up their manufacturing base there.

India, on the other hand, did not have the necessary infrastructure and labour force that the MNCs needed for mass production, he added.

“The Indian government has massive problems with blue-collar labour,'' he said, but added that India was a “liquid market for highly talented labour''.

As a result of this, he said, the development of that country's knowledge-based industries had been much faster than its labour-intensive industries.

Khanna said FDI to China had effectively substituted its domestic entrepreneurs as the drivers of the country's economic progress, which had in turn resulted in the absence of world-class Chinese companies that could rival the MNCs in the global market as the country's private sector had been left out.

The situation is, however, different in India. Khanna said India had spawned a number of companies that could now compete internationally.

Last year, Forbes 200 - an annual ranking of the world's best small companies - included 13 Indian firms but only four from China made it. Among the well-known India-based companies that have global presence are software firms Infosys and Wipro, and pharmaceutical and biotechnology powerhouse Ranbaxy.

In Khana's view, India has developed a much stronger infrastructure to support private enterprise.

He said the capital markets in India operated with greater efficiency and transparency than the ones in China.

This, he added, provided the avenue for local entrepreneurs in India to raise the capital required for business start-ups and expansion.

Oil Hits Record on China, India Demand

Thu Aug 19, 2004 06:30 AM ET By Andrew Mitchell LONDON (Reuters) - Oil prices struck a fresh record high above $47.50 a barrel on Thursday as fresh evidence of demand growth in China and India underlined how rising appetite for oil is straining the world's supply system. U.S. light crude rose (CLc1: Quote, Profile, Research) 28 cents to $47.56 a barrel and London Brent gained 27 cents to $47.30 a barrel. U.S. prices have set record peaks in all but one of the past 15 trading sessions and are up by about $10.50 a barrel, or 28 percent, since the end of June. Rising demand in emerging economies China and India have shaken up the oil market this year, intensifying competition for supply with established consuming giants such as the United States. China's refineries have processed 17.2 percent more crude so far this year than in 2003, the county's State Statistical Bureau said on Thursday. Crude imports have soared nearly 40 percent from last year. India's biggest refiner, State-run Indian Oil Corp. Ltd. (IOC.BO: Quote, Profile, Research) , said it expected India's crude oil imports to rise by 11 percent in 2004/05 as demand rises by nearly 4 percent. In the United States, which guzzles around a quarter of the world oil, demand so far this year is up 3.4 percent, stopping inventories building much as rising consumption absorbs extra imports from OPEC producers such Saudi Arabia. U.S. government data for the week on Wednesday showed commercial crude oil supplies had fallen 1.3 million barrels to 293 million barrels last week, the third straight week of declines. Rising demand has left little slack in the system to cope with any supply problems, such as those in Iraq where Shi'ite militia have said they will target oil infrastructure if U.S. forces do not leave the holy city of Najaf. Iraq's main southern pipeline has been shut since a sabotage attack on Aug. 9, curbing export flows to about a million barrel daily, half normal rates, through a secondary line. "The situation in Basra is still deemed too dangerous to operate the line, although headquarter employees returned to work today and events in Najaf are encouraging," a South Oil Company official on Thursday. Nerves were little calmed by OPEC assurances on Wednesday that it had raised output in July to a level that should permit a substantial build-up in world oil stocks in the fourth quarter. OPEC is pumping at its highest level since 1979 and has said it will raise production to 30.5 million barrels per day (bpd) next month. -------------------------------------------------------------------------------- © Copyright Reuters 2004. All rights reserved. Any copying, re-publication or re-distribution of Reuters content or of any content used on this site, including by framing or similar means, is expressly prohibited without prior written consent of Reuters. Quotes and other data are provided for your personal information only, and are not intended for trading purposes. Reuters, the members of its Group and its data providers shall not be liable for any errors or delays in the quotes or other data, or for any actions taken in reliance thereon. © Reuters 2004. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world. Close This Window

India has developed a much stronger infrastructure to support private enterprise.

Not to take anything away, but U.S. taxpayer-supported World Bank and other U.S. taxpayer supported organizations (such as OPIC) have done much to make it all possible for developing nations. It's not a Republican v. Democrat thing. Both Parties support "raising everyone's boat" in developing nations. Democrats for world socialism, Republicans for immediate profits. There's no such thing as a free lunch. Gee, I wonder who's picking up the Democrats' and Republicans' tab?

It's not all infrastructure and university degrees, however.

"India's inadequate protection for patents and copyright materials discourages foreign companies, representing sectors like pharmaceuticals and biotechnology, from enhancing investments in Asia's third largest economy, experts added."

"India must tighten IPR laws to become research hub," IANS Tuesday, March 02, 2004

http://www.siliconindia.com/shownewsdata.asp?newsno=23242&newscat=Business

It also affects India's companies. I believe that India's press is among the best in the world. Look to them to find "the rest of the story." It used to be that way here in the U.S. We would do well to outsource our mainstream media employees.

So why do the Chi-coms attract so much FDI when they are far, far worse offenders? Well, any group that can make the best flim flam man we ever produced crawl through Tianneman Square on his hands and knees has got to have something going for them.

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