NRao wrote:49% FDI in defence unlikely to enthuse US companies: USIBC
"It is incremental because foreign defence manufacturers are indeed eager to partner with Indian defence industry, but in order to transfer sensitive technology, or collaborate on truly innovative and high-end manufacturing capability, there must be an ownership structure to the Joint Venture where management and certain intellectual property would have to remain in the control of the foreign investor," Madhavan said.
and ................................
"Since 2002, when foreign defence contractors were eligible to invest in India's defence sector, only USD 4.8 million has flowed into this sector. This meager figure is unlikely to change in a substantive fashion unless the threshold increases to allow 51 per cent or above," Madhavan said.
Is that right?
Part of lobbying and psy-ops probably. The figure of 4.8 million is correct AFAIK. But I think its not just owning to that fact that the FDI is limited. If GOI had allowed our private companies in big way to participate, there would have been more opportunities for JVs and more money would have come up. With the kind of atmosphere we have where there is no assurance of any kind for orders, heck not even for participation in defense equipment sell, which foreign company would want to invest huge sums?? If I am interested in investing in a JV with say TATA for say Howitzer, why would I invest B's of $$ when GOI is not showing any interest in buying those guns?? I would probably start with small token amount. If there are orders coming up, or GOI shows pro-active support for the JV I would be happy to invest more heavily. Until then I might just pay some bribes and see if I can sell my own product as direct import and the SDREs are quite gullible.
The main point to consider is they want the full management control and IPRs with them. That's the key as far as I am concerned. I was reading about TISA (Trade In Services Agreement), that the Wikileaks released recently, the other day. Of coarse US is most enthusiastic for pushing this. Here is some analysis presented on the same.
https://wikileaks.org/tisa-financial/analysis.html
Some of the key demands by US corporate world are:
US Securities Industry and Financial Markets Association21
Suppliers should be able to choose their corporate form (e.g., a 100%-owned subsidiary, a branch or a joint venture) and be treated no less favourably than domestic suppliers (i.e., national treatment).
Other measures, such as the protection of cross-border data flows and transfers, and the inclusion of investor-state dispute settlement commitments, the ability to store and process data from a central regional location, rather than establishing a local facility is essential.
Buying and selling financial products across borders, participating in and structuring transactions, and providing investment advice, without establishing a commercial presence and without being subject to separate licensing and approval requirements that generally apply to firms commercially present in a market.
Permit consumers travelling outside their territories to utilize any capital markets related service in the other Party’s jurisdiction
Agree not to adopt or maintain measures that prevent or restrict transfers of information or the processing of financial information, including transfers of data by electronic means, or that prevent transfers of equipment, where such transfers of information, processing of financial information, or transfers of equipment are necessary for the conduct of the ordinary business of a financial service supplier.
And there are many more. Its very easy to see what they are trying to do. They want unrestricted share of the markets of other countries without conceding any ground on control or liabilities to law-of-the-land.
I think this is ubiquitous feature of their overall strategy in every field and I don't think its inappropriate to extrapolate it to defense sector as well and connect the dots there. They will try to push as hard as possible for getting unrestricted access to our market without relinquishing any control whatsoever, until we keep showing gullible faces to them. They agree for 100% or even 200% offsets in other countries and cry foul over our 30% requirements. Unless we be very strict on our stance and let them know in no uncertain terms that if they want to operate in our country it would be on our terms, we will keep seeing such reports and lobbying.
One solace is India is not party to TISA. The whole TISA episode is very disturbing and we should take our lessons from it. We should keep protecting our own interests.
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