'Open up insurance, banking & remove bureaucratic hassles'

To attract higher inflows of FDI into the country, India will have to open up sectors such as insurance, banking, retail trading, and also remove bureaucratic hassles faced by foreign investors in India, so feels Dr. Jacques Derron, Economic Counsellor, Embassy of Switzerland in India. In an interview with Amitabha Sen, he also points out that "the foreign companies definitely look forward to reducing of import tariff and non-tariff barriers in India, as well as easing of administrative burdens and rigid labour laws, so that doing business in India becomes more attractive."

AS: India completes 55 years of first signing bilateral agreement with the then Swiss authorities on 14th August. Against this backdrop, how would you like to rate the growth in Indo-Swiss bilateral trade today?

JD: The bilateral trade between Switzerland and India has been growing since long, but with the opening up of the Indian economy in 1991, a new impetus has been given to our trade flows. Remarkably, the Swiss exports to India rose from Swiss Francs (CHF) 358 million in 1992 to CHF 641 million in 2002 and, during the same period, the Swiss imports from India also increased from CHF 306 million to CHF 516 million. Moreover, the bilateral trade figures available for the first half of 2003 show better scenario unlike in the previous two years when the impact of global economy slowdown was more severe.

AS: Could you enlighten on the areas of cooperation between the countries that may lead to step-up in bilateral trade?

JD: First of all, the setting up of the Swiss Business Hub in India in 2001 is a clear signal that Switzerland recognises Indian market as one of the attractive destinations. We have identified many areas where increased business cooperation can be achieved, e.g. environmental technology, biotechnology, power, manufacturing engineering, textile, and information technology.

AS: How do you find the foreign investment policy of the Indian federal government? Could you kindly focus on sectors that require further liberalisation of foreign investment policy?

JD: The Indian government follows a basically liberal foreign investment policy and ensures that the foreign investment and its accruals are easily repatriable. Over the past many years, the FDI regime in India has been made more and more investor-friendly. However, the implementation phase for foreign investors in India remains troublesome, as they have to encounter with a fairly large number of regulatory approvals, especially at the State levels.

India can achieve higher inflows of FDI provided it further opens up sectors such as insurance, banking, retail trading, and also remove bureaucratic hassles faced by foreign investors in India.

AS: What are major features of the foreign investment policy that may attract investment by Indian companies in Switzerland?

JD: Traditionally, Switzerland has followed an open policy for foreign companies to invest in the country. Due to its strategic location within Europe, many multinational corporations have moved into Switzerland to set up their headquarters/subsidiaries there and many small high-tech foreign companies have also chosen Switzerland as business location. The other attractions for the foreign companies to invest in Switzerland include its political and economic stability, highly motivated and well-trained manpower, excellent infrastructure facilities, high quality of life for the employees, internationally renowned financial market, and relatively favourable taxation system.

AS: IT has assumed a significant, in fact, a deciding place in the business industrial policies of any forward looking country. India being one of world's leading software country how it is fitted into Swiss government's future scheme of things for IT sector? What is the scope in Switzerland of those small and medium-sized Indian IT companies who are qualitatively internationally competitive and also doing business in other countries?

JD: The strength of Indian IT professionals is well appreciated in Switzerland by the both government and private companies. The Indian IT companies are allowed to establish their subsidiary/joint venture in Switzerland. As a matter of fact, some large Indian IT companies as well as many small and medium-sized Indian IT companies have presence in Switzerland catering to the needs of the local market as well as neighbouring markets.

AS: Economic reforms is the driving force behind a new India since early 1990s. How do you look at the pace of reforms? What do you expect things to shape up, say in next five years, in this respect?

JD: India started its economic reforms in 1991 and the first half of 1990s witnessed very positive impact of such reforms. However, the initial strong push for economic reforms was not sustained in the second half. The so called 'second generation reforms' are still far from being actually put into force. The foreign companies definitely look forward to reducing of import tariff and non-tariff barriers in India, as well as easing of administrative burdens and rigid labour laws, so that doing business in India becomes more attractive.

AS: Last but not least, going by trade statistics, India is continually facing trade deficit with Switzerland for quite some years now? Don't you think that this can act as a dampening factor in future growth of bilateral trade between the countries? What corrective measures you would be suggesting to correct the glaring imbalance?

JD: In the emerging globalised economy, it is the position of the overall foreign trade of a country and the pace of its strengthening within the global trade that matters and not so much the balance of trade between any two countries. Switzerland is a major exporter of gold and silver to India (they constitute almost 80-85% share of exports). However, such export is not reflected in Swiss trade statistics as gold and silver are considered to be part of the financial market. Therefore, as per Swiss statistics, you will find that the balance of trade is of course still in favour of Switzerland but at a quite reasonable level - about 10 per cent of total bilateral trade (minus gold and silver) in 2002. Furthermore, the Indian software and IT-enabled services have a good market in Switzerland and more and more Swiss and Indian companies are forming business alliances to boost export of such services to Switzerland.

September 3, 2003


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