Made outside India
By The Economist
From The Economist
Published: August 14, 2013
Aug 10th 2013 | COLOMBO, DUBAI AND MUMBAI |From the print edition
As growth slows and reforms falter, economic activity is shifting out of India.
INDIA'S diaspora of 25m people is something to behold. In colonial times Indian labourers and traders spread across the world, from Fiji to the Caribbean. A second wave of Indians left between the 1970s and mid-1990s, when the economy was in a semi-socialist rut. Migrant workers rushed to the Persian Gulf and South-East Asia, then booming. Educated folk and entrepreneurs fled to the rich world. Plenty struck gold, including engineers in Silicon Valley and Lakshmi Mittal, boss of ArcelorMittal, a giant steel firm. Often they now have little to do with India beyond sending cash to relatives and groaning as the once-vaunted economic miracle fades.
Yet alongside this distant diaspora, a network of people and places is more directly engaged with India's economy. Its most conspicuous element is the plutocrat who owns firms in India, but like his Russian and Chinese peers shops in Paris, educates his children in America and Britain and sometimes has foreign citizenship: Cyrus Mistry, the boss of Tata Sons, India's biggest firm, has an Irish passport. At the network's core, however, is not the gilded elite but offshore hubs, including Dubai and Singapore, often with sizeable Indian populations and with their own economic strengths.
The idea that some things are better done abroad is hardly new. Hong Kong was a gateway to imperial and then Red China. In 1985 Yash Chopra, an Indian film-maker, led a trend of shooting Bollywood "dream sequences"—in which the hero and heroine sing amid meadows and snowy crags—in Switzerland. The Alps were easier, cheaper and safer than the more familiar location of Kashmir.
Film buffs now view Swiss dream-sequences as cheesy, but India's big offshore hubs are more in fashion than ever. They present a mirror image of India's red tape, weak infrastructure and graft. Dubai is a prime example. For long-haul flights Indians prefer its airline, Emirates, to their own. More than 40% of long-haul journeys from India go via a non-Indian hub, often in the Gulf. Indian airports no longer make grown men cry (Delhi's is first rate), but few foreign airlines want to make them their base. Indian planes are usually serviced in Dubai, Malaysia and Singapore, reflecting a history of penal taxes in India and high customs duties on imported spare parts.
A stroll round Dubai's gold souk, a glittering warren of shops and discreet offices, housing bullion worth $3 billion-4 billion, points to another specialism—trading jewellery as well as precious stones and metals. A third of demand is from India, reckons Chandu Siroya, one of the market's big participants. Indians go to Dubai to avoid taxes at home and because they trust its certification and inspection regime.
Dubai's ports, air links and immigration rules also make it a better logistical base than India. Dawood Ibrahim, a Mumbai mafia don, ruled from Dubai by "remote control" before eloping to Pakistan in 1994. Since those wild days legitimate Indian firms have thrived in Dubai. Dabur, which makes herbal soaps, oils and creams, runs its international arm from there. Dodsal, which spans oil exploration in Africa to Pizza Huts in Hyderabad, is based in the emirate. Its boss, Rajen Kilachand, moved from Mumbai in 2003. "Dubai is a good place to headquarter yourself," he says, adding that a "Who's Who" of Indian tycoons has a presence. Dubai is gaining traction in finance, too. Rikin Patel, the chief executive of Que Capital, an investment bank, says Indian firms are raising debt in Dubai to avoid sky-high interest rates at home.
Treasure Island
About 5,000km (3,000 miles) south of Dubai lies Mauritius, an island so beautiful that Mark Twain said God had modelled heaven on it. About half its people are descended from labourers brought from India when Britain ruled both places. It is the main conduit for foreign investment into India with 30-40% of the stock of foreign capital sitting in funds domiciled in the island. A 1982 tax treaty allows investors using Mauritius to pay tax at the island's rate (which, in practice, is zero), not the Indian rate. Foreigners also like the stability of Mauritius's rules and its army of book-keepers and administrators. Many investors also use "P-Notes"—a kind of derivative with banks that gives them exposure to Indian shares without having the hassle of directly owning them.
Sri Lanka has testy relations with India, but Colombo is a vital port. About 30% of containers bound for India go via intermediate hubs fed by small vessels, either because big shipping lines do not want to deal with India's customs regime or because their ships are too big for the country's ports. About half of this trans-shipment business happens in Colombo. Its importance could increase now that a big extension to the port there has just opened. The project was funded by a Chinese firm probably too polite to admit that its investment is partly based on the idea that India's ports will never be world-class.
A roll of the dice
Sri Lanka also wants to develop a casino industry. Gambling is illegal in almost all India, so people use offshore bookies or the internet. James Packer, an Australian business dynast with a gambling empire in Macau, is said to be considering creating a casino resort in Colombo aimed at attracting Indian high rollers.
The largest hub for Indian trade is probably Singapore. It is the centre for investment banking, which thrives offshore, owing to the tight regulation of India's banks and debt markets. Reflecting this, the global exposure to India of Citigroup and Standard Chartered, the two foreign banks busiest in India, is 1.9 times the size of their regulated Indian bank subsidiaries.
Fund managers running money in India are often based in Singapore. India's best financial newspaper, Mint, now has a Singapore edition. At least half of all rupee trading is offshore, says Ajay Shah of the National Institute of Public Finance and Policy in Delhi. Investors and firms do not like India's fiddly rules and worry that the country may tighten capital controls if its currency falls too far, says one trader in Singapore. He denies, though, that the rupee's fall is mainly the work of speculators abroad. "The onshore guys have as much of a role," he says.
Indian e-commerce firms often get their data crunched in Singapore, using web-hosting and cloud-computing firms, such as Google and Amazon. Amitabh Misra, of Snapdeal, says bandwidth costs less, technology is better and you avoid India's headaches—such as finding somewhere to work, coping with state-run telecoms firms and having to wait to import hardware.
Singapore is also a centre for legal services. International deals involving India often contain clauses which state that disputes be arbitrated outside India, with its clogged courts. Singapore, along with London and Paris, has become the preferred jurisdiction. "The level of comfort Indian companies get from Singapore is unmatched," says Vivekananda N of the Singapore International Arbitration Centre.
When India's economy thrived, in 2003-08, so did its offshore hubs. Singapore's service exports to India tripled. Yet these centres may sometimes be a reverse barometer. If things improve in India, activity should shift to the mainland, and vice versa. By gradually improving its ports, for example, India has convinced more shipping lines to make direct stops.
The government wants to attract activity back to create jobs and boost foreign earnings. Pride plays a role, too—it is unbecoming for a potential superpower to have outsourced vital economic functions. India has far less control over Dubai and Singapore than China does over Hong Kong. Plenty of policy statements in recent years argue that India should become a global hub for aviation, legal arbitration, diamond trading and international finance.
In the real world, however, the question is whether activity is leaving India as its prospects have dimmed. A lead indicator is the purchase of gold by Indians—a form of capital flight. Gold imports have hit $50 billion a year, almost offsetting the boost the balance of payments gets from remittances from Indians abroad.
Some service industries do seem to be shifting from India. India's balance of trade in business and financial services has slipped into modest deficit from a surplus five years ago. The number of big India-related corporate legal cases at Singapore's arbitration centre has doubled since 2009, to 49 last year. It is setting up a Mumbai office to win more business. Trading of equity-index derivatives has shifted—a fifth of open positions are now in Singapore and DGCX, a Dubai exchange, is launching two rival products this year. A recent deal by Etihad, the airline of Abu Dhabi, to buy a stake in Jet, an Indian carrier, should see more long-haul traffic shift to the Gulf. (Jet's boss, Naresh Goyal, lives in London.) More rupee trading seems to be taking place offshore.
The biggest worry is that heavy industry is getting itchy feet. Coal India, a state-owned mining monopoly sitting on some of the world's biggest reserves, plans to spend billions of dollars buying mines abroad—red tape and political squabbles mean it is too difficult to expand production at home.
Some fear manufacturing is drifting offshore. In the five years to March 2012, for every dollar of direct foreign investment in Indian manufacturing, Indian firms invested 65 cents in manufacturing abroad. Some big firms such as Reliance Industries plan to invest heavily in India, but others such as Aditya Birla are wary. Its boss, Kumar Mangalam Birla, has said that he prefers to invest outside India—an echo of his father, who expanded in South-East Asia during India's bleak years in the 1970s.
The Gulf has seen tentative signs of Indian manufacturers shifting base. Rohit Walia, of Alpen Capital, an investment bank, says that in the past year he has helped finance an $800m fertiliser plant and a $250m sugar plant. Both will be built in the United Arab Emirates, by Indian firms that will then re-export much of the output back home. The Gulf's cheap power and easy planning regime make this more feasible than setting up a plant in India. "It's a new trend," says Mr Walia.
The temptation for India is to invent new rules to keep economic activity from moving abroad. In 2012 the government tried to override its treaty with Mauritius, only to scare investors so much that it had to back down. To try to plug its balance of payments, India is tightening rules on buying gold. The country's ministry of finance is said to be examining the shift of currency-trading offshore. The government has intervened to insist that shareholder disputes arising from the Etihad-Jet deal be settled under Indian law—not English as originally proposed.
Yet in the long run, coercing Indians and foreigners to do their business in India would be self-defeating. Some may simply go on strike and it is far better that activity takes place abroad than not at all. Any rise in the share of offshore activity is best viewed as a warning system about what is most in need of reform at home.
The biggest warning sign would be if Indians themselves started to leave. Despite some mutterings among the professional classes, that does not seem to be happening. Still, if India does not kick-start its economy and reform, more than derivative trading and Bollywood singalongs will shift abroad.
Editor's note: Contrary to our style, an earlier version of this article mistakenly described the Persian Gulf as the Arabian Gulf.
印度經濟活動面臨外移危機
2013-08-14 Web only 作者：經濟學人
印度擁有2,500萬名旅外僑民。早在殖民時代，印度勞工和商人便走向世界各地；第二波出走潮，則出現於70年代至90年代中期；當時，印度經濟走上半社會主義式的道路，勞工湧向波斯灣和東南亞，企業家和教育程度較高的人則逃往富有世界，不少人也在那裡賺了大錢。這些人除了寄錢回家、抱怨印度經濟奇蹟消逝之外，通常與印度本地的經濟發展沒有太大關係。
不過，還有另一群人和地區與印度經濟有著更直接的關係。最顯而易見的，就是擁有印度企業的富豪，他們將子女送往國外讀書，有的人還擁有外國國籍。然而，這個經濟網絡的核心並非富有的精英階級，而是杜拜、新加坡等海外樞紐。這些地方通常都有不少印度人，而且不同地區擁有不同的經濟優勢。
印度的海外經濟樞紐，與印度本地的官僚作風、基礎建設落後、貪汙等形象，形成了強烈對比。杜拜就是個非常好的例子。印度人會去杜拜買寶石，除了可以避開國內的稅賦外，也因為他們相信杜拜的認證和檢驗系統。杜拜的港口、航線和移民法規，都使得杜拜比印度更適合作為後勤基地，業務範圍廣泛的Dodsal就將基地設在阿拉伯聯合大公國。
位於杜拜南方5千公里的模里西斯，是外國投資進入印度的主要門戶。運往印度的貨櫃，有近3成會先運到中繼站再轉運，其中約莫半數會通過斯里蘭卡的可倫坡。
至於印度最大的海外貿易樞紐，要算是新加坡了。新加坡是印度投資銀行中心，以印度為投資標的的基金經理人多半在新加坡工作；印度電子商務企業通常會在新加坡分析資料。此外，新加坡也是印度的法律服務中心。
印度政府希望能將經濟活動移回國內，以創造就業機會並刺激海外收入。當然，自尊心也是因素之一，對於一個有機會成為超級強權的國家來說，將關鍵經濟活動外包到其他地區，實在很沒面子。印度對杜拜、新加坡的掌控力，遠遠比不上中國對香港的控制力。近年許多政策聲明亦指出，印度應該成為航空、法律、鑽石交易和金融的全球樞紐。
然而，真正關鍵的問題在於，這些活動移出印度，是不是因為在印度的前景不佳。印度人購買的黃金是重要的指標，這會導致資金大量外流。印度每年的黃金進口額已達500億美元，幾乎完全抵消了旅外印度人匯回國內的薪資收入。
部分服務業也開始移出印度，5年前商業和金融服務貿易為順差，如今已轉為小幅逆差。最讓人擔心的則是重工業也有意出走，坐擁豐富礦藏的國有礦業公司印度煤礦，計畫花費數十億美元購買外國礦區，出走的原因即在於官僚作風和政治糾紛嚴重影響營運。
目前印度政府傾向以設立新規範來避免經濟活動移往國外。2012年，印度政府原本計畫推翻與模里西斯之間的貿易協定，最後因為嚇跑了投資人而不得不作罷。另一方面，為了解決國際收支平衡問題，印度便提高購買黃金的限制。
不過，長期來看，強迫印度人和外國人在印度作生意，只會弄巧成拙。有些人或許會乾脆選擇放棄，而有些經濟活動在國外進行，總比完全沒有來得好。印度應該將海外樞紐的經濟活動不斷增加視為一種警訊，找出國內最需要改革的地方。要是連印度人都開始外移，那才是最大的警訊；目前此事似乎並未發生，但如果印度再不啟動經濟和改革，移往國外的將不僅只是衍伸性商品交易和寶萊塢歌舞片。（黃維德譯）
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