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Pradeep
S. Mehta, Secretary General, Consumer Unity & Trust Society (CUTS); Kirit
Parikh, Member, Prime Minister’s Economic Advisory Council; S Sunder,
Distinguished Fellow, TERI; Sanjeev Ahluwalia, Secretary Finance to the
Government of Uttar Pradesh; Pradeep Srivastava, Chief Economist, National
Council of Applied Economic Research.
1.1
Pradeep S. Mehta in his welcome address explained in brief about the investment
and competition projects currently being implemented by CUTS, namely the
Investment for Development (IFD) and Comparative Study of the Competition
Regimes of Seven Developing Countries of the Commonwealth (7-Up) Projects. While
speaking about the broad objectives of these projects, he said that one of the
main aims was to
educate and build capacities of consumer organisations and civil society and
spread awareness
on the critical issues. He
also highlighted that this workshop was very timely, given that it is being
organised just after the Doha Ministerial Meeting where Competition, Investment
and Regulation were discussed as a WTO negotiating agenda. He also
highlighted the need to deal with these in our own domestic agenda in the
context of international trade. He further mentioned that CUTS had
suggested a radical idea to the government, namely to ‘institutionalise the
National Development Council’ to ensure that there is better policy coherence
between the state and the central governments.
1.2
Mr. Kirit Parikh in his inaugural address, reiterated that the country has
suffered from the absence of competition in the past. He said that the
country must learn to accept globalisation as a fact and also face rapidly
changing technology as a blessing. He also said that most developing countries
were in need of huge investments. However, he implored that the countries
needed to put their houses in order to attract investments.
1.3
Mr. S. Sunder complimented CUTS for creating a common platform for competition
and investment experts and regulators to discuss critical issues. He opined that
the approach to regulation has not been cohesive and is often reactive in
approach to, for example, foreign investors. There is a need to empower
regulating authorities to ensure facilitation of competition.
1.4
Mr. Sanjeev Ahluwalia said that infrastructure services are major determinants
of economic growth and therefore remain a core area for a continued government
role. He also said that it was important to decide what the nature of governance
should be. He felt that the reforms should be public oriented.
1.5
In his delivery of the vote of thanks, Mr. Pradeep Srivastava highlighted the
need for the three issues to be well understood and advocacy to be taken up by
civil society.
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Chair:
S. K. Sarkar, Senior Fellow, Tata Energy Research Institute; Speaker: Pradeep
Srivastava, Chief Economist, National Council of Applied Economic Research;
Commentator: K. C. Ganjwal, Secretary, Monopolies and Restrictive Trade
Practices Commission.
2.1
Pradeep Srivastava’s presentation was primarily on the findings of the survey
conducted under the 7-Up project on the level of awareness among various
stakeholders on competition issues. He began the presentation by giving a
brief introduction of the existing competition regime in India.
2.2
The survey initially looked at 100 respondents, but only a total of 14
respondents responded to the questionnaire. Some of the highlights of the
findings as explained by Mr. Srivastava are as follows:
·
Nearly everybody is
of the opinion that the country needs a competition law.
·
However, an
overwhelming majority felt that the existing legal provisions were not adequate
to deal with the existing competition concerns. When it comes to the question of
cross-border competition concerns, even more people felt the inadequacy. But
interestingly, nobody felt that the existing laws in this regard are enforced
effectively.
·
When it comes to the
prevalence of several anti-competitive practices, the awareness level seems to
be on the lower side. On the face it may not seem so, but considering the fact
that the sample was targeted and questionnaires were sent only to the
stakeholders, one would expect a higher level of awareness.
·
About 80 percent of
the respondents were aware of the cement cartel and 64 percent believed in the
existence of cartels in the pharmaceuticals sector. But only 36 percent thought
that cartels were operating in shipping and road haulage.
·
People complained
that the problem of exclusive dealing existed especially in the consumer durable
sector. This exists also in government purchases, mainly due to its policies on
this.
·
Abuse of dominance
is visible in food & beverage, cosmetic products, pharmaceuticals and more
importantly in the insurance sector which until recently was exclusively in the
domain of the public sector.
·
As against domestic
competition concerns, awareness on cross-border issues is much lower. About 43
percent of the respondents knew about the infamous vitamin cartel, but most of
them did not know about any other international cartel. Awareness on
international mergers is of course on the higher side. Very few people knew
about the soda-ash export cartel although it generated quite a lot of heat and
was in the media.
·
As regards abuse of
a dominant market position by a foreign firm, half of the respondents mentioned
the banking and pharmaceutical sectors as the main affected areas. However, they
also mentioned fertiliser, petroleum products, agro-chemicals and insurance.
This is a bit confusing since there is no possibility of a foreign firm being
dominant in most of these sectors, except pharmaceuticals and agro-chemicals.
Bid rigging by foreign firms is not so prevalent, according to the respondents.
·
However, a high proportion of the respondents was aware of dumping
in several sectors, especially by Chinese manufacturers of electrical goods and
toys. Interestingly none of them thought that government had taken any action on
it despite the fact that India is one of most frequent users of anti-dumping
measures.
2.3
Mr. K. C. Ganjwal commented that the new competition bill would help in
addressing some of the prevailing competition abuses in the country.
2.4
Mr. S. K. Sarkar in his summary stated that the study was not broad based
enough, but agreed to the fact that awareness on competition issues was very
marginal. While appreciating CUTS, he felt that more and more NGOs should
get involved in spreading awareness on these issues. However, it should
not just be the responsibility of NGOs but also the government and competition
machinery.
2.5
In the open house session, one issue which came up was that, perhaps level of
awareness was not as low as was being stated. A couple of examples from the
experience of CUTS with villagers were quoted. The discussion also focused
on why the MRTP Act did not cover a number of anti-competitive issues and it was
pointed out that the MRTP Act was framed in a totally different situation, when
our economy was regulated.
2.5.1
It was pointed out that India has got several problems: Not only that it is a
country with high rate of illiteracy, but it is also a multi-lingual country.
Hence it would be necessary to involve the consumer groups with grass-root
outreach for creating awareness on the issue.
2.5.2
It was also pointed out that because India had a long history of a socialist
type economy, with short supply in the market, consumers did not have much
exposure to competition, and awareness about their rights was also very low.
Consumers were used to accepting anti-competitive practices as facts of life.
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Chair:
Pradeep S. Mehta, Secretary General, Consumer Unity & Trust Society (CUTS);
Speaker: Ujjwal Kumar, Legal Researcher & G. R. Bhatia, Additional Director
General, Investigation and Registration, Monopolies and Restrictive Trade
Practices Commission; Commentator: Reena George, Supreme Court Advocate
3.1
Ujjwal Kumar traced the origin of the New Competition Bill and the various
phases it went through before coming to the current phase, which is with the
Parliamentary Standing Committee.
3.2
He highlighted some of the salient features of the New Bill and also pointed out
some of the gaps that still needed to be filled, while noting that most of the
gaps have been filled to a large extent. Among the issues which have not
been addressed and which need to be addressed are:
·
The independence of
the Commission is likely to be under threat, as it would be required to adhere
to the policy guidelines from the Central Government from time to time.
·
The Bill appears to
be soft on serious competition abuses like hardcore cartels.
·
Competition abuses
that might arise due to intellectual property rights have not been addressed at
all, and on the contrary an exemption has been given in this regard.
·
The provision of
high retirement age for the Commission Members and Chairperson is a cause for
worry, as it may become a resting ground for retired bureaucrats and judges as
in the past.
·
Exemptions from the Act (Bill) are left to the discretion of the
Central Government without any guidelines and thus leave room for confusion as
well as misuse.
·
Dominance criteria
has not been defined in the Bill.
·
There is no
provision for compounding of offences and this should be introduced in the bill.
3.3 Mr. G. R. Bhatia identified some of the highlights of the New Bill, which
are as follows:
·
Education and
accounting have been included under the term ‘Services’ and are subject to
the jurisdiction of the Competition Commission.
·
It has been
recognised that abuse of dominance and not the dominance per se is bad for the
market and the consumers. This is the same direction that the rest of the world
is moving to in this regard.
·
Cartels and bid
rigging have been explicitly dealt with in the Bill.
3.4
Ms. Reena George commented that the competition authority should have more
people with legal backgrounds and not just people with technical backgrounds.
3.5
In the open house session, the following issues were highlighted:
·
An existing dilemma
is the choice between technical and judicial persons to serve as members of the
commission. People from technical as well as judicial fields must be considered
to serve as members of the Competition Commission. Society would be benefited by
the combination of judicial and technical knowledge.
·
Regulatory
Authorities may strive to bring competition in different areas.
·
Temporary Injunction
Provisions need to be included otherwise anti-competitive practices continue to
operate pending adjudication
·
There is a need for
regular Competition Audit of the important sectors of the economy.
·
With regard to
recruitment of members, it was opined that the age limit of 70 was on the high
side and it was also stated that a good compensation package needs to be devised
to attract talent.
Mr.
Pradeep S. Mehta stressed the need for a well-strengthened consumer movement for
the effective implementation of the laws.
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Chair:
T. C. A. Srinivas Raghavan, Associate Editor, Business Standard; Speakers: P. L.
Beena, National Council of Applied Economic Research & G. R. Bhatia,
Additional Director General, Investigation and Registration, Monopolies and
Restrictive Trade Practices Commission; Commentator: Surendra Kanstiya, Consumer
Guidance Society of India
4.1
P. L. Beena’s presentation was primarily on a study she has conducted on
mergers and amalgamations pre-1996. She highlighted the fact that there
has been a steep increase in M&A activities both domestic and cross-border.
Although most of them take place in developed countries, they create ripple
effects all over the world, including in India where the M&A of the Indian
subsidiaries impact the market. She also added that Indian competition law does
not control M&As and as a result many M&As have taken place in recent
times, which have caused serious erosion of contestability in the market.
4.2
Mr. G. R. Bhatia spoke on the cross-border competition issues that affected
India. These are mainly international mergers, international cartels, export
cartels, cross-border predatory pricing or dumping, cross-border abuse of
intellectual property rights and transfer pricing.
4.3
Many international cartels have been in existence and many still exist in
several products. Many of these cartels have been busted, especially in the US
and the EU. There is no doubt that they had impacted on the Indian market as
well but no action was taken here.
4.4
As an example, Mr. Bhatia quoted the action, which was taken by MRTPC against
American Natural Soda Ash Corporation (ANSAC), for acting as a cartel. This is
an example of an export cartel that was pulled up in other jurisdictions as
well, including the EU.
4.5
Another case which he quoted was of a global tender floated by a public sector
undertaking, where it was found that 10 Japanese suppliers of steel quoted
identical prices and uniform terms and conditions of supply. The MRTPC initiated
a case but no adverse order was passed.
4.6
Surendra Kanstiya commented that there was very little awareness on cross-border
issues among consumer organisations. He cited that his organisation was
one of the 100, which received the survey questionnaire of the 7-Up project, and
while they were filling it up, they realised that a number of people were not
aware of many of these issues.
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Chair:
Subir Gokarn, Chief Economist, National Council of Applied Economic Research;
Speakers: Pradeep S. Mehta, Consumer Unity & Trust Society (CUTS) and Mr.
Nitya Nanda, Consumer Unity & Trust Society (CUTS); Commentator: Rohit
Bansal, Senior Editor, Financial Express.
5.1
Pradeep S. Mehta traced the origin of the International Trade Regime. The
following are some of the highlights of his presentation.
5.1.1
History of the WTO: In 1948, the Havana Charter called for the setting up of the
International Trade Organisation (ITO) but inspite of the adoption of the
Charter by 50 countries, the ITO never came into existence. Later on GATT was
agreed upon by the international community which was largely based on the Havana
Charter. Thus the idea of a multilateral competition policy is not a new one.
5.1.2
It is generally presumed that large business houses have a great influence on
the WTO. Unfortunately, consumers have no power to influence international trade
policy making. MCP could be designed to discipline big business and rectify the
persisting business-consumer imbalance in the WTO.
5.1.3
The number of cross-border competition concerns is increasing day by day with
the emergence of globalisation, and to deal with it domestic competition regimes
alone are not sufficient, especially for the developing countries.
5.1.4
The formation of Cartels undermines the benefits of healthy competition by
creating barriers to entry for other producers. A recent World Bank Study
estimates that in 1997, developing countries imported goods worth US$81.1bn from
firms involved in price-fixing conspiracies during 1990s. Discovering and
proving the existence of international cartels and then tackling them is
extremely difficult and outside the realm of domestic competition law.
5.1.5
An MCP could consider the anti-competitive impact of cross-border mergers in
developing economies and impose conditions which could address competition
concerns on a country-to-country basis.
5.1.6
Anti-competitive practices involving the use of IPRs could take the form of
horizontal or vertical restraints. Further, licensing agreements limiting the
manufacture or distribution of products in a particular country could be a
global competition concern. In the absence of clear-cut international rules on
parallel imports, different countries are following different practices. An MCP
could strengthen countries that permit parallel imports against attacks by
exploiting brand owners.
5.2
The
main points of the presentation by Nitya Nanda are as follows:
5.2.1
The WTO is the best platform to facilitate MCP since the WTO is an international
competition regulator. MCP is necessary to check anti-competitive practices and
the WTO is the only forum for consideration. Most of the developing countries
are against the WTO since there is a general perception that big business houses
govern WTO and overlook the interests of small firms.
5.2.2
Cooperation from the EU and the US is very important to control cross-border
anti-competitive practices and to regulate global monopolies. The US and the EU
should offer unilateral positive comity to developing countries so that they can
check cross-border anti-competitive practices impacting their markets. This
would help to remove the apprehensions of developing countries and would instil
confidence in them.
5.3
In the open house, participants said that there was no doubt that a multilateral
competition policy is highly desirable. But what is desirable is often different
from what is feasible. The key issues that were discussed in Doha did not
include Restrictive Trade Practices which shows a lack of concern by the WTO.
5.4
Yet another opinion that many of the participants expressed was that the WTO and
UNCTAD should together come out with a policy or tool to address the problems
and bring harmony. Some corrections to the WTO’s policies with regard to MCP
are necessary, and there is always scope for further innovation, they said.
5.5
Rohit Bansal highlighted that though the media can act as a catalyst, the issue
of competition has not yet hit the media. People in the Media need to be
sensitised on this issue so that they deal with it appropriately.
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Chair:
Jyoti Parikh, Indira Gandhi Institute for Development Research; Speakers:
Gajendra Haldea, Chief Advisor, National Council of Applied Economic Research
& Sanjeev Ahluwalia, Secretary Finance to the Government of Uttar Pradesh;
Commentator: Srinivas Krishnaswamy, Consumer Unity & Trust Society (CUTS)
6.1
The sessions on Competition and Consumer Concerns in Regulatory Reforms in India
primarily focused on two key infrastructure sectors, namely power and telecom.
The main theme of both these sessions was competition, investment and consumer
welfare.
6.2
The power sector session had two speakers namely, Dr. Gajendra Haldea, Chief
Economic Advisor, National Council for Applied Economic Research and Shri.
Sanjeev Ahluwalia, Former Secretary of Central Electricity Regulatory Commission
and current Finance Secretary of Uttar Pradesh with the commentator being
Srinivas Krishnaswamy of CUTS.
6.3
In his presentation, Mr. Gajendra Haldea discussed the problems of the power
sector, the current scenario which persists, and the structure. Giving the
example of Orissa, he said that the present structure in Orissa consisted of: an
inter-connected chain of monopolies that eliminated any form of competition and
the attendant efficiency gains; the sole buyer of all power from generating
companies is the state-owned transmission company called Gridco; all
distribution companies can only buy from Gridco; and the consumers must buy from
the distribution companies alone. As a result, there is a complete lack of
choice, and all tariffs are fixed on a cost-plus basis – a sure recipe for
high tariffs and neglect of the consumer. He added that most states were
following the same model with or without minor modifications. He felt that
this was the reason for the dismal scenario in the power sector today.
6.4
Having said this, he suggested a model which would promote competition, induce
investments and protect consumer interests. He reiterated that only competition,
could help to change the dismal scenario of the power sector.
6.5
Mr. Sanjeev Ahluwalia however differed with Mr. Gajendra Haldea’ view point.
He felt that competition in the infrastructure was ideologically justified but
not workable, given the fact that there was a huge investment requirement with a
long gestation period. He felt that it was a core area for continued government
role. He quoted the example of the UK, where privatisation only helped the
large consumers while the small consumers were not benefited much. He also
said that in a country like India where huge subsidies are required, in a
completely market determined system, this would not work.
6.6
Srinivas Krishnaswamy felt that though competition was essential, keeping in
view the requirement of huge investments in the power sector, the time was not
as yet ripe, since some basic questions still need to be addressed. The
most important question is whether private investors would be ready to invest in
the country given the huge network of rural connectivity and whether they would
be prepared to supply power to rural areas. He felt that the first step towards
this would be to increase people’s participation in the reform process, create
a questioning society, and make people realise that there is no ‘free lunch’
and people have to pay for services. He also said that there needs to be
more unanimity of reforms between and among politicians, who tend to resort to
populist measures.
6.7
The Chair, Dr. Jyoti Parikh summarised the presentation with the statement that
people must be told that power needs to be paid for and also agreed that
services in the power sector must improve and the regulatory framework must
address issues of consumer concern.
6.8
In the open discussion, a number of participants spoke about the role of
governance and the creation of transparency in the system. They also felt
that there needs to be a greater degree of participation from the civil society
in the regulatory process.
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Speakers:
S. Sunder, Distinguished Fellow, Tata Energy Research Institute; S. K. Sarkar,
Senior Fellow, Tata Energy Research Institute, Mahesh Uppal, Director,
Telecommunications and Computer Information Systems; Shirish Deshpande, Mumbai
Grahak Panchayat
7.1
S. K. Sarkar highlighted two major issues, namely, the low level of
participation by NGOs and civil society in the regulatory process and on the
quality of services.
7.2
With regard to quality of services, he said that a consumer satisfaction survey
needs to be done to determine standards of services. He also said that
tariff increases must be linked to the quality of services.
7.3
To ensure greater participation by civil society, he said that the capacities of
consumer organisations and NGOs need to be built to enhance their knowledge and
awareness on issues, and funds need to be made available for this purpose.
7.4
Mahesh Uppal stated that barriers to competition urgently need to be removed to
improve the system. He also said that private sector participation needs
improvement in terms of spread.
7.5
Mr. Sundar felt that all regulatory bodies should follow a common approach with
defined consumer interests.
7.6
Most of the participants felt that greater participation of consumers is a must
to bring about improvements in the infrastructure sector.
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Chair:
Muchkund Dubey, Former Foreign Secretary, Government of India; Speaker: Bulbul
Sen, Commissioner of Income Tax, Income Tax Appellate Tribunal; Commentator:
Manoj Pant, Professor, Jawaharlal Nehru University
8.1
Bulbul Sen made a presentation on GATS, existing commitments for India, and
expectations from new negotiations. She opined that free flowing Movement
of Natural Persons should be allowed in order to remove asymmetries in the
commitments between different modes of supply. She also said that we must press
for the removal of barriers to the free flow of natural persons on the grounds
of ‘economic need’, ‘recognition of degree’ and other administrative
problems such as ‘restrictions on visas’.
8.2
Further, she felt that India should strengthen its endeavour to increase the
export of services through electronic commerce.
8.3
Manoj Pant highlighted the need to include qualified persons and civil society
representatives in a larger way in the negotiation process for better results.
8.4
In his summary, Muchkund Dubey highlighted that countries must respect
autonomous liberalisation and respect negotiating guidelines and procedures.
He also felt that we must press for the removal of barriers for free flow of
natural persons on the grounds of economic need.
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Chair:
Reena George, Supreme Court Advocate; Speakers: Rajeev Mathur, Consumer Unity
and Trust Society; Biswatosh Saha, Faculty, Vinod Gupta School of Management
9.1
This session was on the IFD project currently undertaken by CUTS. Mathur
presented the details of the project. The following are some of the main
highlights of the project:
9.2
The ‘Investment for Development’ (IFD) project aims to create awareness and
build capacity of investment regimes and international investment issues in
developing and transition economies. This two-year project, launched in
September 2001, is being conducted by the Consumer Unity and Trust Society
(CUTS), in collaboration with the United Nations Conference on Trade and
Development (UNCTAD) and is supported by the Department for International
Development (DFID), UK. The project involves fact-finding and advocacy work on
investment regimes in seven developing and transition economies, namely,
Bangladesh, Brazil, Hungary, India, South Africa, Tanzania and Zambia.
9.3
The main objective is to assist project countries in designing and implementing
effective investment policies that will contribute to equitable growth and
development. The project would also delineate measures that will help developing
countries in general, and selected countries in particular, to shape an
environment that stimulates foreign direct investment as well as domestic
investment. The project also aims to identify key frameworks and policies that
will help to maximise the benefits of investment on the economy. Besides, the
project would contribute to the assessment of needs and formulation of
negotiation strategies for the developing countries for discussions on
investment issues at the regional and multilateral levels.
9.4
Biswatosh Saha’s presentation was based on a research paper on Foreign Direct
Investments in India.
9.5
The report includes an overview of the macroeconomic context and the main policy
trends as well as trends in foreign and domestic investment over time.
Parameters of investment policy, include registration, rights to entry and
establishment, investor protection, dispute settlement, international investment
agreements, taxation, movement of capital, intellectual property rights regimes,
performance requirements, incentives for investment, regulatory regimes and
regulation on competition, environment and labour. This study is based on the
existing literature, surveys and reports, and was presented and discussed at the
Launch Meeting of the project on 13-14 December 2001 in Jaipur, India.
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Chair:
Subir Gokarn, Chief Economist, National Council of Applied Economic Research;
Speakers: T. C. A Srinivasa Raghavan, Associate Editor, Business Standards; K.
S. Chalapati Rao, Faculty, Institute for Studies in Industrial Development;
Bharat Jhunjhunwala, Freelance Journalist
10.1
The need for appropriate policies to facilitate the flow of FDI was discussed.
Raghavan pointed out that it is more important to discuss methods of
implementing FDI policies than their formulation. He further emphasised that
India needs a strong domestic Competition Policy and a radical improvement in
domestic governance.
10.2
On a slightly different note, he said that Power is a State subject while
telecom is a concurrent subject i.e. under the jurisdiction of both the Centre
and the States. Some of the State Governments have different policies than the
Central Government which explains why reforms did not have the same effect on
the two: telecom reforms have been successful but power sector reforms are in a
mess. Some constitutional changes can be made to correct this. This was said in
the context of attracting foreign direct investments in specific sectors.
10.3
He further highlighted that appropriate and strong institutions must be
developed. A major problem faced in India is that at the micro level, expertise
is lacking on matters of FDI i.e. what are the policies and how to regulate and
retain FDI.
10.4
He also added that a good and healthy infrastructure sector, macroeconomic
stability (stable exchange rates, stable rates of interest etc.) and the
commitment of the State to social development is needed to attract steady and
beneficial foreign investment. In this connection he also said that management
control of companies is important from the point of view of investors. He felt
that 51 percent control of companies by the foreign investors should be allowed
in India to attract FDI.
10.5
Bharat Jhunjhunwala felt that India must have a strong domestic competition
policy with improved domestic governance. He was however sceptical on
globalisation benefiting the disadvantaged. He said that developing countries
should encourage foreign investments in small volumes to energise domestic
industries. This should be done by promoting inflows from foreign
institutional investors, as they would bring in capital to fight transnational
corporations, rather than FDIs which bring in transnational corporations.
10.6
Jhunjhunwala was of the opinion that FDIs is not beneficial for developing
countries in the long run. In the short run however, FDI could spurt the
growth rate. But analyses has shown that the developing countries which
have received a high level of FDI in the past are worse of due to repatriation
of profits and flight of capital. He said that initially when FDI flows into a
country, governments are able to sustain high borrowing but as FDI flows fall in
the long run, they leave developing countries in a debt crisis, as in the case
of Argentina.
10.7
Chalapati Rao emphasised the need for an updated and reliable database for
effective analysis of FDI inflows. He said that India has a lack of data on
issues related to the operations of companies, the sectoral break-up of foreign
investment, details of mergers and acquisitions and greenfield investments.
10.8
Subir Gokarn emphasised the need for a good and healthy infrastructure sector,
macroeconomic stability and the commitment of the state to social development to
attract steady and beneficial foreign investments. He also said that foreign
investments should not be seen differently from domestic investments, as they
are two sides of the same coin. He further said that high rates of investments
are needed in India, but it is important to ensure that such investments are
made in appropriate sectors that could lead to faster and sustainable
investments.
10.9
The highlights of the outcome of discussions on different issues of FDI are
given below:
·
The reason for the
departure of a large number of foreign investors needs to be looked into as it
may throw up areas that require attention of the government.
·
The issue of
increasing domestic investment came up for discussion. Looking to the huge
requirements in some sectors such as power, domestic investment alone may not be
enough. A need was expressed for enhancing the domestic environment to attract
as well as absorb investments covering good governance, emphasis on
infrastructure, macroeconomic stability and commitment of the state to social
development.
·
There is a need for
establishing an institutional base for attracting and regulating investments.
Micro level expertise such as drafting of good investment contracts is also
needed.
·
In order to regulate
FDI, its long term impact along with its short term gains need to be considered.
·
A strong competition
policy needs to be developed.
·
It should be
endeavoured to raise awareness, stimulate national debate and to build the
capacity of civil society on investment issues.
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Chair:
Pradeep S. Mehta, Consumer Unity & Trust Society; Speakers: Manoj Pant,
Professor, Jawaharlal Nehru University.
11.1
Manoj Pant was of the opinion that the interests of the country should be kept
in mind while decisions are taken on FDI. Further, he stated that country
comparisons should be made carefully when analysing the effects of FDI. He cited
the examples of South East Asian and Latin American countries that had received
high levels of FDI in the recent past. The former experienced high FDI coupled
with lower income inequality whereas in the latter high FDI was accompanied by
higher income inequality. This was because Latin American countries did not
emphasise education.
11.2
Speaking on the subject of technology, Manoj Pant said that in a brief
period of 4-5 years, India had to assimilate a large inward flow of technology.
This was too short a period. Delay in assimilation is also to be blamed for
outdated technology, not FDI alone.
11.3
He also mentioned that FDI is not allowed in India in a very important sector,
the textiles.
This
sector has a high relative importance in the economy and could provide large
employment opportunities.
11.4
The highlights of the outcome of discussions on investment in the WTO
context are summarised below:
·
There
is a dearth of proper analysis on different clauses of WTO agreements and their
implications for developing countries particularly India. Some participants
expressed reservations regarding an agreement on investment at the WTO. In an
era of globalisation, developing countries need FDI and must understand the
investment issues properly and comprehensively. However, the developed countries
should not be allowed to push their agenda through a Multilateral Agreement on
Investment (MAI).
·
The Organisation of Economic Co-operation and Development (OECD)
introduced an MAI to deal with expropriation issues and the one
proposed by the European Union (EU) was motivated by political considerations.
In the current context, MAI has to be discussed and debated upon keeping
changing international relations and economic requirements in mind.
·
It
was opined that the developing countries should demand an agreement on Movement
of Natural Persons too if they have to sign a MAI.
BACK
TO CONTENTS
This
session was devoted to discussions on the suggestions and recommendations that
came out of the meeting. Participants were given draft recommendation emerging
out of the deliberations highlighting several action points that need to be
addressed by the policy makers and other stakeholders. A final version will be
drafted, adopted and taken forward at appropriate levels after receiving
participants’ feedback.
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