November 20, 2006	Monday	Shawwal 27, 1427

WHEN Chinese President Hu Jintao lands in New Delhi, he will have a lot on the agenda to discuss with the Indian political leadership. While the nearly half-a-century-old border dispute between the two neighbours will be high up on the list, the Chinese leader is also expected to raise two crucial, trade-related issues.

One pertains to the issue of ‘security’ that Chinese companies bidding for infrastructure projects – especially in the area of ports and telecommunications – face in India. And the other is the growing tendency of Indian manufacturers to demand the imposition of anti-dumping duty on Chinese goods that are being imported into the country.

Leading Chinese port developers and telecommunications companies have been black-listed by the Indian security agencies in recent months, and prevented from bidding for lucrative projects in the country.

The world’s largest independent port operator, Hutchison Port Holdings – a unit of Hutchison Whampoa – Hong Kong, was denied security clearance by the Indian government for developing multi-billion-dollar projects at the Mumbai and Chennai ports. Hutchison had tied-up with Indian engineering and infrastructure giant Larsen & Toubro while bidding for these projects, but the latter had to switch its foreign partner at the last stage, after the Indian government refused to grant security clearance to Hutchison.

Similarly, Kaidi Electric Power Company and the China Harbor Engineering Co (CHEC) were denied permission to bid for the ambitious deepwater international container trans-shipment terminal in Vizhinjam in the southern state of Kerala. One of the reasons cited was that the CHEC is also developing the Gwadar port in Pakistan, which could lead to security complications in India.

In telecommunications, Chinese firms like Huawei Technologies and the ZTE Corporation, have been denied permission to invest in some important projects by the country’s Foreign Investment Promotion Board (FIPB).

But the Communist Party of India – Marxist (CPM), a crucial backer of the United Progressive Alliance (UPA) government at the centre, has expressed its concern over the blacklisting of Chinese firms bidding for ports projects by the Cabinet Committee on Security.

Chinese companies had plans to invest nearly $15 billion in the modernisation and upgradation of the existing Indian ports, but the government’s move to block these investments because of a perceived threat to India’s maritime security has been severely criticised by the leftists.

Prakash Karat, the CPM general secretary, complained to Prime Minister Manmohan Singh about the blacklisting of Chinese firms. The CPM, which is in power in Kerala, is keen that the two Chinese giants build the deepwater trans-shipment terminal near the state capital.

Officially, the Indian government denies that there is any discrimination against Chinese investors, especially in ‘sensitive’ sectors like ports and telecommunications. India’s new foreign minister, Pranab Mukherjee, says there is no such general policy that refuses permission to Chinese majors.

Just because a few Chinese firms have not been given permission to bid for projects does not mean that there is a blanket ban on China companies doing business in India, he notes.

According to official data, of the 38 applications for investments made by Chinese companies over the last two years, 33 have been cleared by the government. This year alone, during the first six months, Chinese companies have taken up projects worth $2.2 billion, a huge jump over the previous year, when they had invested $1.8 billion.

Bilateral trade between the two Asian giants is also on the rise; at present, it adds up to $17.5 billion. Ashwani Kumar, minister of state for industries, wants to deepen the engagement with China and to increase bilateral trade to $50 billion in about four years. Last week, the federal cabinet approved the signing of a bilateral investment promotion and protection agreement between the two countries, during this week’s four-day visit by the Chinese President. The agreement will be valid for 10 years.

This year, bilateral trade is expected to touch $20 billion; just 16 years ago, it amounted to a measly $260 million. China largely exports high value-added manufactured goods to India, and imports mostly raw materials such as iron ore.

About 300 Chinese companies are currently participating at the India International Trade Fair at Delhi’s Pragati Maidan. China is the ‘partner country’ at this year’s event, and thousands of visitors are headed for the Chinese stalls at the expo.

Products from China are also flooding urban India, and everyone, from hawkers on pavements, to hypermarkets at glittering shopping malls are stocking on Chinese goods. Most of them are of good quality, and importantly, inexpensive. Not surprising that the domestic industry is crying wolf.

Recently, Indian tyre manufacturers succeeded in convincing the government about the need to slap anti-dumping duty on imports from China. The federal commerce ministry is also investigating a plea from top auto-component manufacturers in the country, about the need to slap such duties on alloy and steel wheels imported from China.

Though India is emerging as a major auto-component manufacturing hub globally, imports from China have increased phenomenally. Last year, India imported nearly Rs500 million worth of steel wheels from China, as against a negligible quantity in the previous year.

Chinese auto component exports to India have gone up four times, from Rs1.4 billion in 2004-05, to Rs5.8 billion last year. It is expected to cross the Rs10 billion-mark this year. Indian manufacturers complain that Chinese products are 35 to 40 per cent cheaper than Indian products because the government there subsidises Chinese producers.

Dozens of anti-dumping complaints have been filed against Chinese manufacturers by counterparts in India. In fact, China has emerged at the top of the anti-dumping list in India in recent years.

The Indian Institutes of Technology (IITs) are among the most prestigious higher educational institutions around the world. Last month, London-based Times Higher Education Supplement retained the IITs in the third position among the world’s 100 best technology universities, after Massachusetts Institute of Technology (MIT), Boston and the University of California, Berkeley.

But in terms of overall global excellence, the IITs had slid to the 57th position seven places lower than in 2005. India has seven IITs, which admit a little under 4,000 students every year. The government has now decided to set up three new IITs over the next five years, and increase their annual intake by another 3,000 students.

IITs – and the other equally prestigious Indian Institutes of Management (IIMs) – have been in the news of late because of the attempts to force them to reserve a certain number of seats for backward caste students. International and Indian companies make a beeline every year to the IIT and IIM campuses, offering graduates six-figure (in dollar) salaries, and challenging assignments abroad.

Many of the IIT graduates end up as executives with multinational companies, working in the US, Europe or the Far East, contributing to the ‘brain drain’ from India. About 180,000 IIT alumni are spread around the world, working in key positions.

In India alone, there are 1,500 CEOs, who studied at the IITs. In the US, about 30 per cent of the scientists at the National Aeronautics and Space Administration (NASA) are ex-IITians.

The country is facing an acute shortage of highly skilled personnel. According to C.N.R. Rao, chairman, Scientific Advisory Council to the Prime Minister, India produces just about 4,000 PhDs every year, as against 10,000 by Brazil and 16,000 by China.

Rao has called for new IITs and other technology universities to be set up in the country. The government will have to spend about Rs20 billion annually for the next six years on the three new IITs.