Still a laggard

Amidst the hype about India Inc on an acquisition spree abroad, the United Nations Conference on Trade and Deve-lopment's (UNCTAD) World Investment Report, 2007 is sobering. Its index of top developing country transnational corporations (TNC) has listed Reliance Industries Ltd among the top 100 non-financial TNCs. Earlier, there was just one Indian company on that list ��� the Oil and Natural Gas Commission.Hong Kong has as many as 25 companies listed, Taiwan 18, Singapore 11, China 10, South Africa 10, Mexico seven and Malaysia six.
The regions and countries of origin of the top 100 developing country TNCs have changed little over the past 10 years: 78 of them originate in Asia and 11 each in Latin America and Africa. Hong Kong and Taiwan dominate, with 25 and 18 TNCs respectively. In fact, Hong Kong expanded impressively globally in 2006.
Its total FDI outflow was $193 billion, or 16 per cent of world FDI outflows in that year. China consolidated its position as a major investor. Its overall FDI outward stock escalated from $4.46 billion in 1990 to $73.33 billion in 2006.
India in comparison has trailed far behind - its FDI outward flow being just $0.12 billion in 1990 and growing to $12.96 billion in 2006. Twenty years ago, 62 per cent of India's outward FDI was directed towards Asia and 37 per cent towards Africa. In 2006, it was broken into 21 per cent in Africa, 20 per cent in Asia, 18 per cent in the Commonwealth of Independent States, 16 per cent in North America, 14 per cent in Europe and 11 per cent in Latin America and the Caribbean.
India Inc's 147 cross-border acquisitions in 2006 aggregated $20 billion which, although the highest ever level
for the country, formed but a minuscule part of the $4 trillion global mergers and acquisitions involving 31,858 deals. Some of the few high-profile bids made recently by Indian entrepreneurs have, no doubt, demonstrated their confidence and ambition. Indian companies have diversified their operations and investments across the world in software and IT services, pharmaceuticals and biotechnology, hotels and hospitality, automotives and other branded products.
There has been an attitudinal or behavioural change visible in how some Indian companies now conduct business. They increasingly realise that they are operating in a global economy, forcing them to adopt an international vision. Looking for scale, efficiency, competitiveness, they are not averse to taking risks. The main motives that influence their investment decisions now seem to be market-seeking, efficiency-seeking, resource-seeking and created-asset-seeking.
The rapid growth in large developing countries - prominently China and India - is causing concern about shortfall of key resources and inputs for their economic expan-sion. ONGC's purchase, in 2000, of a 20 per cent stake in the Sakhalin I oil and gas project from Russia's Rosneft for $1.7 billion is part of its other bids in Brazil, Columbia, Sudan, Angola and Syria. But the Chinese are again miles ahead of us. Aggressive forays made by them has prompted Alex Yearslay of Global Witness, a London-based NGO, to call them "the new resources colonialists in Africa".
With over $1 trillion of foreign exchange reserves, its trade surplus rising to well over $102 billion, and with total trade amounting to about $1.5 trillion, China is already the world's third largest trading nation, after the US and Germany. The ever-increasing hoarding of "China dollars" has made the promotion of outward FDI an imperative, leading it to adopt a "going global" strategy. The growing economic upsurge will compel India to intensify its global quest.
Some Indian companies have emerged to be among the world's most competitive entities and, therefore, they strategise synergies between the domestic units and foreign acquisitions. They increasingly realise that international mergers and alliances require the fundamental know-ledge of cross-cultural appreciation and good communication. It is also imperative to understand and respect local cultural sensitivities. So while we hail the successes of India Inc globally, we must not get carried away. The good work has begun but we have a lot of catching up to do.
(The writer was with the Indian Railways.)