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Dr Gift Mugano
Continued from last week
The diaspora are seen as sources of financial flows, economic opportunities, technology transfer, political support, progressive attitudes, and a good image of the home country.
Countries of origin that actively court their diasporas do so in a variety of different ways and with different priorities. This week’s reviews India’s policies and practices in attracting diaspora investments.
India
Well within the past decade, the Government of India has moved from a position of somewhat disapproving indifference toward the worldwide Indian diaspora to one of actively seeking their involvement in India’s development. It has followed a multi-prong strategy, pursuing portfolio investment, direct investment, technology transfer and trade links through the diaspora.
Shortly after India’s first nuclear tests in 1998, the Indian government launched a huge sale of 5-year bonds guaranteed by the State Bank of India and available only to non-resident Indians (NRIs). Named “Resurgent India Bonds”, the proceeds were in part intended to help offset the impact of the economic sanctions imposed after the nuclear tests.
Though “patriotic fervour” or the “Hindu rate of growth” was a key theme underlying the sale, the government understood it could not count on patriotism alone, and therefore added significant benefits to make the bonds attractive: an interest 2 percent higher in dollar terms than the US bond market, the option of redemption in US dollars or German marks, and exemption from Indian income and wealth taxes.
The Indian Government launched a massive marketing campaign for the bonds in the US and Europe. The sale was a success: NRI’s worldwide purchased bonds worth £2,3 billion in just over two weeks, more than 50 percent of which came from the Middle East and South East Asia and 20 percent from Europe and North America.
The experience was repeated in 2000 with another bond issue, the India Millennium Deposits, which raised over £3 billion.
In September 2000, the Indian Government tasked a High Level Committee on the Indian Diaspora to analyse the location, situation and potential development role of the estimated 20 million non-resident Indians (NRIs) and Persons of Indian Origin (PIOs).
The report of the High Level Committee on the Indian Diaspora (also called the LM Singhvi Committee) was released to great fanfare by the Indian government in January 2002. The report recommended a new policy framework for creating a more conducive environment in India to leverage these invaluable human resources.
Much of the analysis reflected in the report looks at the question of why FDI and other business flows from the Indian diaspora have been low relative to, in particular, the Chinese.
The 20 million Indians abroad generate an annual income equal to 35 percent of India’s GDP, yet have generated less than 10 per cent of India’s rather modest £2,2 billion of FDI — in contrast to the overseas Chinese, who, as noted above, have contributed half of China’s £26 billion.
A striking theme of the analysis and reporting on the diaspora issue from India was that the Indian Government has ignored or even failed the diaspora, and that it was to blame for the relatively low involvement of overseas Indians in India. This view was apparent in the government’s and Indian journalists’ discussion of the mountains of bureaucratic red tape and corruption that NRIs and PIOs must deal with should they want to invest directly in India.
For example, the summary of the report says: “(The diaspora’s) receptiveness to Indian concerns will depend greatly on the quality of their interaction with the country of their origin and the sensitivity to their concerns displayed in India. It is essential for India to create the necessary structures to facilitate this interaction.”
The report emphasised the need for the Indian government to create an “investor-friendly” environment to attract diaspora funds.
“Several overseas investors have burnt their fingers in investing in projects in India as they wound their way through the plethora of laws and regulations that govern industrial enterprises.
“Many Indians living abroad want to fund small projects in their home villages but the procedural delays and corruption in India have made it difficult to implement their programmes. In other cases, the community felt that the procedures for transferring funds for philanthropic activities was too cumbersome, without much assurance that funds would be used appropriately. Others complain of little protection in case of fraud or cheating in financial or land matters.”
The LM Singhvi Committee posited that efforts by the Indian Government to strengthen the diaspora’s “pride and faith in its heritage” would “revitalise (the diaspora’s) interest in development. Thus the Committee recommended that January 9 — the day Ghandi returned to India from South Africa — be celebrated each year as a day to recognise the contributions of eminent PIOs and NRIs.
The first celebration was held in 2003 in conjunction with the first major Indian diaspora conference, which attracted more than 2000 NRIs and PIOs from 63 countries. The Conference was co-sponsored by the Indian government and the Federation of Indian Chambers of Commerce and was opened by then-Prime Minister Vajpayee.
A series of reforms and new legislation were also announced in response to many of the issues raised in the LM Singhvi report, including measures to ease investment in India from overseas, the creation of a government body with the sole focus of acting as a liaison between India and its diaspora, and the introduction of legislation to grant dual citizenship to PIOs in certain countries.
India’s Ministry of External Affairs now has a “Non-Resident Indian and Persons of Indian Origin” Division. The Investment Information Centre (IIC) is a free “single-window” agency for advice on nearly all issues associated with investing in India. It works with Indians, foreign investors and NRIs and is considered the “nodal agency” for promoting investment in India by NRIs.
It provides “all necessary services” for NRIs in setting up their investments, including explaining government policies and procedures, available incentives, necessary data for project selection, and assists in obtaining government approval. It also provides an information service available to all potential investors on the state of various industries in India and profile of industrial projects soliciting investment.
The focus of debate in India about the diaspora’s contribution to the country’s development has been focused heavily on attracting direct investment (the first priority), portfolio investment, and humanitarian or other philanthropic assistance. Relatively little is said about remittances, despite the fact that India is the world’s largest receiver of remittances in absolute terms, with almost £27,4 billion received in 1991-98. Perhaps this reflects the view that remittances per se are not “developmental” or self-sustaining. The kinds of small-scale investment they fund may be too small to register on the huge canvas of national planning in India. In addition, remittances are seen as the province of blue-collar migrants, whereas India’s diaspora strategy has centred on the successful professionals, technicians, and entrepreneurs.
Although the employment of Indian information-technology professionals in the US computer industry and the resulting build-up of links between US and Indian high-tech firms had little to do with Indian government diaspora policy, and more with its support of outstanding institutions of higher education and general macro-economic reforms. However, the Government has recognised the potential of the diaspora to contribute more to India’s development efforts, and has moved to clear away some of the obstacles to greater engagement. The result of the Indian diaspora’s economic engagement in India thus far has been a significant expansion in the earnings and employment opportunities of the middle class.
Dr Mugano is an author and expert in Trade, Investments and Development. He is a Research Associate at Nelson Mandela Metropolitan University and a senior lecturer at the Zimbabwe Ezekiel Guti University. Feedback: Email: [email protected], Cell: +263 772 541 209.
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