What India wants, not what we think India needs

Globe and Mail

It is hard to get India’s attention. As the world’s second-fastest-growing major economy, with a young population of 1.2 billion people and a quickly expanding middle class projected to reach 580 million by 2025, India attracts a lot of interest.

Canada is one of many countries striving to make inroads in this rapidly emerging market. We can claim some success since exports have grown in recent years. But our market share has fallen, so we are losing ground.

This is not for lack of effort. In recent years, there has been a proliferation of business missions and ministerial visits from all levels of government, culminating in Prime Minister Stephen Harper’s first trip to India in November, 2009. Four new trade offices have been opened and others strengthened. Multiple memorandums have been signed to promote co-operation in a variety of fields. And yet we are far from achieving the ambitious $15-billion target for bilateral trade set by two prime ministers. Why?

There is no single answer, but focusing on what India wants rather than what we think India needs is a good place to start. Shared values and zealous marketing will not get us where we want to be. We need to think more fundamentally about how to raise Canada’s value as a business partner.

Competitiveness is arguably the most important factor. A competitive economy attracts direct foreign investment and spawns competitive companies. However, according to the World Economic Forum’s Global Competitiveness Report, Canada has dropped out of the top ten, slipping to 12th place from 9th in two years. Government and business need to focus on improving areas such as productivity, innovation and integration into global supply chains.

Our low score on innovation is particularly worrisome. Indian companies are looking for innovative products and technologies, not goods that can be produced more economically in India. On innovation, the Conference Board ranks Canada 14th out of 17 countries in the Organization for Economic Co-operation and Development. Lower spending on research and development, especially by business, is a factor, but the biggest shortcoming is our failure to commercialize new technologies. The government is right to identify innovation as a national priority.

Investment policy is another influencer. Like other emerging markets, Indian companies are extending their reach by investing offshore to access new markets, expertise and natural resources. Not just oil and gas, but minerals, forest products and, increasingly, agriculture. Last year, emerging market firms accounted for a third of global mergers and acquisitions. If Canada wants to attract an appropriate share, we must offer both a welcoming environment and a transparent approval process. Cases such as BHP’s failed attempt to acquire Potash Corp. muddy the waters.

India also wants better market access for its goods, services and people, just as we do. Tariffs, non-tariff barriers as well as onerous visa and customs procedures encumber trade; it is in both countries’ interest to reduce them. Several bilateral agreements have been signed or are being negotiated with this objective. The most important are the Comprehensive Economic Partnership and Foreign Investment Protection agreements, which will raise interest, increase confidence and facilitate the flow of trade and investment. They should be concluded quickly.

Physical access is equally important. The cost of moving goods, especially bulk commodities, from Canada to India can be prohibitively expensive if our infrastructure is less than world class. The Pacific and Atlantic Gateway initiatives are a good start, but need to be supplemented by investment in railways, roads and pipelines; this is a productive form of stimulus spending. The inflated rhetoric and controversy embroiling the Great Northern Pipeline is not an encouraging sign.

Above all, government and business must engage at the top level and demonstrate commitment. Mr. Harper has visited India once in five years; some CEOs of large Canadian companies doing business there have yet to go. Moreover, it must be clear that the overall relationship is paramount and that specific irritants will be dealt with in a spirit of good will. Our competitors realize this and also understand the link between mind share and market share. For mid-sized economies like Canada’s, out of sight is out of mind.

By strengthening these fundamentals – competitiveness, innovation, investment policy, access and engagement – we will raise Canada’s standing as a preferred business partner for India, China and other emerging economies that today account for the lion’s share of global growth.

Peter Sutherland is a senior business adviser with the Toronto law firm Aird & Berlis LLP and vice-chairman of the Canada-India Business Council.

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