100% FDI in Defence: Understanding Pros and Cons

[Karan M]

Actually methinks best course is to forget about this harebrained 100% FDI in defence (frankly which other "independent" nation allows such an abomination- Russia?,China?,Brazil?,Iran? - nyet nyet nyet nyet..)

And do some long overdue balltwisting on Aerospace Giants etc by legislating offset clauses in procurement of civilian Aircraft and the like.How did China get itself a Boeing jumbojet assembly line hain ji?

Definitely not by allowing 100%FDI in Defence but by some old style ball twisting and simultaneous dangling the carrot of huge orders.
So yes 100% FDI is allowed but not in defence(which is a strategic sector) but in the assembly lines you are going to setup for manufacturing parts of civilian aircraft (which btw we too are going to purchase).

+10000

Exactly Lilo Ji!!

[schinnas]

Don't really get all the noise about strategic concerns. We are importing 70% of equipment. If that is not a strategic concern I dont know what else? Atleast having the design and manufacturing done in India puts us in a better position. We are decades away from making high end equipment anyways. (Ex: Kaveri engine). So instead of importing makes sense to have 100% FDI for domestic manufacture of these. Atleast we get to keep the Forex and generate local employment and trickle down benefits to local industries. For low tech gear, there is really not much strategic concern anyways.

Have just one thing to ask all those that oppose this and say we can make this make that IF xyz is there. What is the track record of our PSU in all the past decades? Despite so many decades of effort, they couldnt even make a SINGLE world class automatic rifle or a pistol. Nuff said.

[Karan M]

Karan M: that's a rather long post, and I expected someone to say all that. However, if you think about it, it's not strictly a matter related to FDI, but rather, the defence procurement process in general. I don't think FDI will solve anything if procurement processes remain broken.

Frankly, the FDI in defence thing is something I'm hesitant to support . Not merely because of the strategic issues involved, but simply because I do not think it's the immediate priority. Access to technology is the primary driver, but the ability to acquire it depends on a level of maturity and far sightedness at procurement that does not currently exist. I would rather see GoI overhaul the procurement process , get the defense PSUs in line and give the local private sector a substantial stage in defence production, before talking FDI.

Of course, it's possible that GoI *is* working on overhauling MoD and other defence procurement logistics quietly, and the FDI in defence just happens to get most of the press, because foreign vendors have every reason to trumpet it, even if GoI ultimately has no desire to rush through with it, and is simply dangling bait.

Bingo!

In short, current systems - 26% FDI + offsets + pvt sector entry in industry would bring in capital and technology as well.

If our systems are broken and they are, exactly as you point out, over ambitious/harebrained schemes like the majority FDI scheme will backfire bigtime.

We have already seen the much needed offset policy/laws (which have done good) being misused for corruption/money laundering in the AgustaW deal and also, being danced around (civil stuff marked as offsets).

The FDI stuff will be misused 100times over and is a danger.

[vic]

First we have to raise our defense R&D to at least Rs 50,000 crore per annum, give half of OT to Pvt Sector and then after ten years, talk about foreign FDI in defense sector.

[Suraj]

From an economic perspective, my support for FDI lies primarily in the imperative to build things in India. This is a general defence imperative. As far as possible, I advocate something being built within our shores. We already import a huge amount, and that in itself is a strategic risk. I would rather change that dynamic by having the foreign vendor produce locally, sign contracts to be paid in Rupees only, and deal with exchange rate risk themselves. They're welcome to bring in blackbox technologies and secure those technologies themselves, with the understanding that we will make every effort to steal it in any manner we can. Having the means to make defense equipment nailed to the ground in India itself, is a substantial gain. They can sanction us and refuse to export to us, but once the factories and machinery are in India, we gain more means to retaliate. Business psychology - especially the American kind - is extremely averse to losing out sunk costs to transient political issues, and will lobby to keep the peace to ensure status quo. That's the approach the Chinese followed.

[Cosmo_R]

That really depends. What if the weaponry is exported? I remember when Lockheed mooted the idea of making India a regional maintenance hub to service the F-16 fleets of Asian countries if we procured the F-16 for the MMRCA. There was much heartburn in Pakistan about it.

Exactly. Moreover, I'm puzzled by the reasoning that 100% FDI in a defense company somehow is more of a security threat than say 50%. What does share ownership on paper do to increase the threat level? If the FDI gets 100% of the profits, they also take 100% of the capital risk. Plus the wages they pay Indian workers translates into tax revenues.

As to "assured sales" because the GoI is the only buyer, as Mihir points out, exports belie this claim.

100% FDI is independent of whether GoI wants to buy /commits to buying the product.

[Karan M]

Don't really get all the noise about strategic concerns. We are importing 70% of equipment.

For crying out loud, there is an entire Defence R&D thread- please go through it!
This 70% stuff is absolutely misleading and skewed by both programs we don't have a foot in (e.g. cost prohibitive stuff like C-17s which we dont have the heft to make) and legacy programs (the vast bulk of the 70s-2000's imports like the Army, Navy, AF gorged on thanks to friendship programs!).

Today, if you track sector by sector, the achievements are huge and have made a significant dent.
In SAMs for instance, the Akash order is Rs 23,300 Crore. Thats with all its associated radars. That same program spun off 37 more Radars for the AF, and 45+28 radars for the Army. Thats hundreds of millions parked in India right there.

Similarly, in EW - we make our own jammers, RWRs etc. In ships - sonars are mostly Indian, and now they are targeting LFTAS as well, which is the last frontier we haven't cracked (VDS, sub sonars etc are all in service).

Point is with limited investment our indigenization has delivered. Where it has flopped is when items are relegated to the DPSU complex marked by certain orgs which are trade union heavy and inefficient.

Hasn't it ever struck you that India can make an Agni missile able to hit out 5K Km away with complexity a 100 times more than the average small arm - but the latter is an issue?

By keeping the private sector out, good designs and workable products fail in mass manufacture. This is a case with small arms and land systems in particular which are the domain of the OFB.

Net, the situation is hardly as bleak as you make it to be, even if its not ideal.

If that is not a strategic concern I dont know what else? Atleast having the design and manufacturing done in India puts us in a better position. We are decades away from making high end equipment anyways. (Ex: Kaveri engine). So instead of importing makes sense to have 100% FDI for domestic manufacture of these. Atleast we get to keep the Forex and generate local employment and trickle down benefits to local industries. For low tech gear, there is really not much strategic concern anyways.

See above.

Have just one thing to ask all those that oppose this and say we can make this make that IF xyz is there. What is the track record of our PSU in all the past decades? Despite so many decades of effort, they couldnt even make a SINGLE world class automatic rifle or a pistol. Nuff said.

Again, above. There are tons of world class gear in service - the IAF has literally halved its imported EW gear for many of its fighters thanks to domestic advancements.. the successful programs get buried under tons of negativity from the lay press about how nothing is done, nothing can be done etc.

BTW, small arms are the low hanging fruit, private vendors can address double quick - IF - they were allowed to go w/them.

[member_23694]

India to share 100% of LCA or Arjun technology and they allow 100% FDI.

take my vote, subject to the condition that during that time India is in an advanced stage of AMCA development/production.
Further 100% FDI also imply 100% ownership by the parent company , followed by a better order book and profitability . Better for diplomacy too.
Will US have any problem in setting up a F-18 production line in India when it is flying F-35 and F-22 etc. Now if someone counters
that it means we get low grade tech, then please tell me , will US give F 22 tech to India if we pay them $25 billion . Answere is NO.
So in that case why not get the things manufactured in India which someone is ready to give rather than direct import.

In India's 100% FDI scenario, my understanding is that hardly any global defence manufacturer of some repute would like to miss out on
India's annual capex of around $15 billion. From a long term perspective this figure will be some mind boggling number.
Having a staggered FDI cap based on the TOT involved will also be an incentive for any one planning to invest apart from benefit for
India in terms of local manufacture,industrialization , saving forex etc.
Early movers and who really play well, provide good tech , understand our requirement and manufacture locally will gain a lot down the line.
For ex. Rafale's development cost is around $60 billion. Would it like to stop with the ~200-250 French fighter order or would like
to sell 126 more to India even though it may require setting up a shop in India.
What if tomorrow EADS say that since Dassault will not setup a shop in India so we will do in a quick time, give us the contract.

Bottom line is opening up the sector will lead to a lot of option available at the door step of the armed forces,
increase transparency and reduce cost.
Just to add, China has an assembly line for A320 but not India . Why? India seems to be more comfortable in recent years
in direct Import than manufacture. China in some time will be flying its own airliner.
Those who talk about strategic sector etc , why do we want some other country to successfully implement this model and
then we follow it. Can we try to be pioneer of something.
Rafale deal and 100% FDI will probably be helpful in changing that.
Only thing of concern will be for the DPSU who will need to reinvent themselves and compete

[abhik]

abhik: Industrial production, particularly in medium and heavy industry, entails a substantial upfront investment in facilities and production systems. As the buyer, the government then gets to spend over a much longer time horizon, within which it has a better ability to make the capital outlay to buy, as opposed to funding the upfront capital cost of setting up the facility *and* subsequently being the buyer. This is an economic approach that spreads out the cost of the produced goods over time, as opposed to spending on both the facility and the output.

Any Investor will not only recover the initial capital but also the cost of the capital itself. So either way the Government will have to eventually pay the full cost. If the Government is short of cash it can take loan and stagger the payments and achieve the same result.

Also, the government need not be the sole customer if the facilities produces military equipment for export. Doing so further enables the investor to quickly get back the capital invested in setting up the facility.

As I have mentioned in an earlier post I do not think the export thing is actually going to happen.

Now, I don't know details of the financial and technological wherewithal of the defense PSUs. If the argument is that they don't need capital and can handle things themselves, I would ask 'why is GoI talking about FDI in defence then ?'

The DPSUs are all making record profits and paying out record amounts of money back to its main shareholder i.e the government.

[Karan M]

That really depends. What if the weaponry is exported? I remember when Lockheed mooted the idea of making India a regional maintenance hub to service the F-16 fleets of Asian countries if we procured the F-16 for the MMRCA. There was much heartburn in Pakistan about it.

Exactly. Moreover, I'm puzzled by the reasoning that 100% FDI in a defense company somehow is more of a security threat than say 50%. What does share ownership on paper do to increase the threat level? If the FDI gets 100% of the profits, they also take 100% of the capital risk. Plus the wages they pay Indian workers translates into tax revenues.

As to "assured sales" because the GoI is the only buyer, as Mihir points out, exports belie this claim.

100% FDI is independent of whether GoI wants to buy /commits to buying the product.

There is no 50% today.

Even Brahmos as I recall is 51% Indian, 49% Russian, and we have long standing agreements with Russia about IPR protection, in fact ramped upwards for the FGFA. For instance, electronics which we get from Russia are customized for our requirements as versus what they sell elsewhere.
That sort of protection is not the norm. The Brahmos case shows the amount of effort GOI went to for this one case, we simply don't have the heft to monitor, track, enforce all this industry wide in India.

Also, 100% FDI for exports is a pyrrhic idea - wont happen. Where are the cost advantages after having to reinvest in local replication of expensive lines already set up abroad?

Offsets at least address these concerns by baking the extra cost into the product itself. Eg SAAB is selling 36 Gripens to Brazil and committing to a $150Mn aerostructure plant in Brazil.. needless to say, the cost associated will be baked into the lifecycle costs of the aircraft itself.

[Cosmo_R]

@KaranM ^^^ Why don't we leave the economic rationale to the FDI investor? It would be their money.

[abhik]

This is simply not true because the government is the sole customer of defence products. Any investments made will be recovered via government contracts. Which means that the government is paying for it anyway, so effectively defence FDI does not actually bring in any money.

That really depends. What if the weaponry is exported? I remember when Lockheed mooted the idea of making India a regional maintenance hub to service the F-16 fleets of Asian countries if we procured the F-16 for the MMRCA. There was much heartburn in Pakistan about it.

Just a way to meet contractual offset obligations.

[Karan M]

From an economic perspective, my support for FDI lies primarily in the imperative to build things in India. This is a general defence imperative. As far as possible, I advocate something being built within our shores. We already import a huge amount, and that in itself is a strategic risk. I would rather change that dynamic by having the foreign vendor produce locally, sign contracts to be paid in Rupees only, and deal with exchange rate risk themselves. They're welcome to bring in blackbox technologies and secure those technologies themselves, with the understanding that we will make every effort to steal it in any manner we can. Having the means to make defense equipment nailed to the ground in India itself, is a substantial gain. They can sanction us and refuse to export to us, but once the factories and machinery are in India, we gain more means to retaliate. Business psychology - especially the American kind - is extremely averse to losing out sunk costs to transient political issues, and will lobby to keep the peace to ensure status quo. That's the approach the Chinese followed.

The Chinese even insisted on very strict technology transfer for local production (so complete assembly plants for civil aircraft built in China) and also, high offset levels sourced from state owned firms (so Boeing/Airbus had to transfer tech to Chinese MOD garbed as civilian subsidiaries).

I have no concerns if we follow a similar path for civilian side (though as you'd note the distinction can be arbitrary) but I would definitely put a very hard firewall around preventing acquisitions of local Indian firms.

[Karan M]

@KaranM ^^^ Why don't we leave the economic rationale to the FDI investor? It would be their money.

My point is policy cannot be built upon dubious economic rationale so we need to look at that. If we do something to our own policy, we must have hard data or workable assumptions to base it off of, no.

[Karan M]

Also please note the very private vendors who are supposed to be "saved" by 100% FDI are opposed to it.

In short, they will not get tech if foreign firm can set up a 100% subsidiary. And that foreign vendors would rapidly buy out smaller Indian rivals and hence cripple possible Indian rivals who depend on those smaller vendors.

Ajaishukla.blogspot.com

Defence industry, MoD hunker down for FDI battle


By Ajai Shukla
Business Standard, 31st May 14

After the UPA tried unsuccessfully since 2010 to raise the 26 per cent cap on foreign direct investment (FDI) in defence production, a move that indigenous defence companies and former Defence Minister AK Antony resisted staunchly, the new government has initiated a fresh attempt along the same lines.

In 2010, the department of industrial policy and promotion (DIPP) --- at the behest of Commerce Minister Anand Sharma --- had pushed to raise the FDI cap to 74 per cent. This time, under Nirmala Sitharaman, the DIPP has mooted three separate options in a cabinet note --- proposing 49%, 74% or 100% FDI.

Commerce ministry sources say that, given the new government’s focus on promoting manufacture to generate employment, and with a new defence minister who is less protective of indigenous defence industry, the international defence industry’s longstanding demand to lower entry barriers into India might well be granted.

Even so, there will be stout resistance from the department of defence production (DDP), and from an indigenous defence industry that worries that the unfettered entry of international vendors would wipe out fledgling Indian defence companies.

“Please name one country that allows foreign defence companies unfettered access to the market. America theoretically allows 100 per cent FDI, but its laws mandate that every single employee must be a US national and the company must operate exclusively on US soil. India hasn’t the means to enforce such rules, and foreign companies will take full advantage,” says the CEO of a major Indian private sector defence company.

So watertight are the US laws that the Tel Aviv based president & CEO of, say Israeli company Elbit is required to take Washington’s permission before he can visit his own company facilities that operate in the US.

Furthermore, say defence industry CEOs, there is no evidence that increasing FDI provides any benefit to an industry. They cite the example of telecom, where permitting 100 per cent FDI has failed to galvanize the emergence of telecom manufacture. To this day, there is no significant Indian manufacturer of telecom equipment.

In 2001, the DIPP permitted private sector participation in the defence industry, vide Press Note No 4 of 2001, which notified several measures for liberalising the FDI regime of that period. Paragraph (iii) of that notification said, “The defence industry sector is opened up to 100% for Indian private sector participation with FDI permissible up to 26%, both subject to licensing.”

A 26 per cent holding allows the foreign partner only a veto over major policy decisions. Were the FDI cap raised to 49 per cent, the foreign company would still not control the company or the board, but would be able to repatriate a higher share of the profit. A significant FDI limit rise would be if foreign companies were permitted 51 per cent or above. And were 100 per cent FDI permitted, foreign entities would be able to buy out Indian companies in full.

Defence ministry officials and major Indian defence industries want to retain the 26 per cent cap, since it allows the Indian partner to demand technology infusion from the foreign original equipment manufacturer (OEM).

Indian industry sources point out that, while India proposes to raise FDI caps, Germany has recently reduced its defence FDI cap from 26 per cent to 25 per cent in order to further curtail the rights and powers of the foreign partner.

Citing an agreement signed this week between Samsung, and Larsen & Toubro (L&T), officials say the Korean defence major would have probably chosen to go it alone, had 100 per cent FDI been allowed.

“Since L&T is the controlling partner, it will ensure that Samsung brings in the technology, which will be translated by low-cost Indian workers into cheaply priced defence equipment. That is the model to follow,” says the official who requested not to be named.

Foreign OEMs deny this, arguing that they would be ready to bring in high-end technology, and to source Indian-built defence equipment for their global supply chains, if only they had more control over the joint venture company.

Indian CEOs counter this with the question: Can you name one foreign OEM that has willingly transferred technology to India? They point out that 72 multinational corporations employ two lakh Indian engineers in research and development (R&D) centres in places like Bangalore, Hyderabad and Pune. Yet none of the technology that they have developed is available to India.

The question at the heart of the FDI dilemma is: Should the government regard the defence industry as just another avenue for creating manufacturing jobs? Or should the government nurture a defence industry as a national strategic objective. A government focused on job creation might not be inclined to treat defence as a special sphere.

[Karan M]

BTW FICCI was firmly opposed to the July 2010 proposal to raise the cap to 100% and only supported it to 49%. Please read it.

http://dipp.nic.in/English/Discuss_pape ... ust201.pdf

[abhik]

A lot(most?) of the foreign maal being 'imported' are actually assembled(or the so called 'screw-driver') in India mainly by the DPSUs. With 100% FDI this 'screw-driving' might just shift to the foreign owned firm with no net improvement for us.

[prahaar]

Gurus, can someone give the implied close connection between procurement and 100% FDI? Not unlike permission for foreign owned nuclear plants initiative was disabled by liability clauses.

Without looking at procurement policy reforms can 100% FDI effects be correctly understood?

------------------

Sorry if I missed some obvious new posts, in the time I read some parts and made these questions, many more posts got in.

[Karan M]

A lot(most?) of the foreign maal being 'imported' are actually assembled(or the so called 'screw-driver') in India mainly by the DPSUs. With 100% FDI this 'screw-driving' might just shift to the foreign owned firm with no net improvement for us.

With assessment by the foreign owned firm that its making everything in India & giving valuable employment no less.

That apart, the main grouse against "screw driver TOT" - BRFs favorite grouse, was that it had little impact (or thereabouts) on indigenous programs.

In other words, HAL assembling (and even making) MiGs didn't help LCA.

One fails to see how MiG making MiGs in India would help the LCA either. (Apart from the fond hope that one day, MiG employees would leave and create mini MiGs in India, and those would make the LCA).

[Cosmo_R]

@KaranM ^^^ Why don't we leave the economic rationale to the FDI investor? It would be their money.

My point is policy cannot be built upon dubious economic rationale so we need to look at that. If we do something to our own policy, we must have hard data or workable assumptions to base it off of, no.

No. This top down hard data workable assumptions apply to a command and control economy. We've moved beyond that. Let me give you a real world example:

"STX Europe, a subsidiary of STX Shipbuilding of South Korea, constructed the forward halves of each ship in Saint-Nazaire, and was responsible for transporting them to DCN's shipyard in Brest for the final assembly.

....

Starting from Dixmude, the rest of the French Mistrals and the first two of the Russian Mistrals will all be built in Saint-Nazaire by STX France, which is jointly owned by STX Europe, Alstom and the French government, with STX Europe having the majority stake.

http://en.wikipedia.org/wiki/Mistral-cl ... sault_ship

STX Europe builds many other kinds of vessels that based on pure market risk attenuated by reputation and brand.

http://www.stxeurope.com/products/Pages/default.aspx

I don't see why SoKo could not do the same in India.

As to acquisitions of private Indian companies by foreigners, I'd say go ahead on the grounds that the founders are entitled to cash out just as Ranbaxy did with the Japanese. All MoD has to do intelligently frame the terms of the acquisition to guard security interests.

IMHO, too much of a vestigial East India Company hangover. Different times, different country.

[Suraj]

In light of what abhik and Karan M have mentioned about the profitability of DPSUs, I'd like to ask again 'so why is GoI talking about FDI in defence then ?'

Come to think of it -I already asked for this thread several days ago in the Modi thread when discussion there veered towards this topic - can someone succinctly explain what is FDI in defence ? . Take the case of local production clause for Su 30 MKIs or some other similar example. Why is that not 'FDI in defence' ? What kind of such defence manufacture constitutes FDI and what does not ? Personally, I think a lot of the debate is because different people have different ideas about what it is, and in addition, others assert that the primary issues related to defence procurement lie elsewhere.

Considering the general approach of the new PM, this whole topic strikes me as a trial balloon meant to deflect attention onto something GoI has no strikingly urgent imperative to deal with. It just needs something to take cover fire while it addresses more important matters elsewhere quietly.

[Mihir]

Also, 100% FDI for exports is a pyrrhic idea - wont happen. Where are the cost advantages after having to reinvest in local replication of expensive lines already set up abroad?

I agree with Cosmo_R. Let's leave the rationale to the investor. If it's profitable for them and does not put our own programs at risk, we should allow them to invest. Also, not all lines are very expensive/hi-tech. Foreign companies may well decide to shift a potion of their high-volume, low-tech manufacturing to India. "Simple" stuff like rubber tires, rifle ammunition, artillery shells, etc. It brings jobs to India, it brings in foreign investment, it increases tax revenue, and it equips workers with crucial technical skills that can be utilised elsewhere.

Obviously, one imagines that GoI would have the backbone to, as you put it, "put a very hard firewall around preventing acquisitions of local Indian firms".

[Karan M]

I agree with Cosmo_R. Let's leave the rationale to the investor. If it's profitable for them and does not put our own programs at risk, we should allow them to invest. Also, not all lines are very expensive/hi-tech. Foreign companies may well decide to shift a potion of their high-volume, low-tech manufacturing to India. "Simple" stuff like rubber tires, rifle ammunition, artillery shells, etc. It brings jobs to India, it brings in foreign investment, it increases tax revenue, and it equips workers with crucial technical skills that can be utilised elsewhere.

Obviously, one imagines that GoI would have the backbone to, as you put it, "put a very hard firewall around preventing acquisitions of local Indian firms".

Mihir, not that straight forward because of the bold portions in particular - GoI should have a backbone to do x or y. More like ability to do x or y. Unfortunately, vested interests can make hay when the system is absolutely weak.

Fact of matter is our detection, track, monitor and enforcement mechanism sucks to a huge degree, to put it mildly. It will take another odd decade to fix- hopefully half that with the first term of NaMo govt, but then again, who knows.

The constant challenge hence has been to determine the "good companies" from the "bad ones", and to put it mildly, we don't really have a working method to do so besides the "x" revenue, track record, will do y in z years claim from the Govt.

Just see our arms imports - we have not been able to even fix proper vendor lists based on relatively simple criteria, and as such we remain vulnerable.

In fact, what we have had are import shops, dubious ones which run as import dubious kit sell it via touts and middlemen to GoI and then get blacklisted. Some of the ones even sold stuff to Intel orgs.

A couple of years back, another high profile facility which was to be set up, turned out to be a shell company under investigation. It was supposed to handle avionics repairs for some of IAF's older fleet and was ostensibly supported by the manufacturer. Others claim it was actually linked to a London based gent who wanted an alternative route to legitimize his activities in India, without relying on his network of unofficial agents.

I am fairly certain that this was one of many that were to come in, and was more of a trial balloon.

As you'd remember, the recent Offsets policy was also similarly misused by to transfer money back and forth in the AW deal per the CBI, and it was also bypassed in the P8I and other deals, with all sorts of dubious stuff passed off as Defence Offsets.

In short, this is exactly what the FICCI refers to when they say India does not have the ability, via laws, to dissuade such activity, since we lack the entire rigorous track, monitor and enforcement mechanism to actively pursue such cases and get it done.

Ironically, our entire MSME structure has developed in the absence of any formal coherent policy - more in fits and starts, program to program, thanks to DRDO and DPSUs (of late). This ad hocism is a huge challenge.

For instance software companies which are registered w/Indian defence labs may ostensibly be marked as civil, but their acquisition may (say) put the development of Mission Computer software for an aircraft upgrade at risk.

The lack of coherence, in terms of a unified national aerospace authority, which tracks the industry in detail, plus the lack of an institutional response mechanism for deterrence (to monitor and track any fraudulent activity) is a big challenge for us.

Net net, this is why somebody claims to open up a special facility in India with little to no commercial justification, skepticism is warranted because our ability to recover from such mishaps is limited.

Also, whether such moves warrant a policy change in toto.

[Karan M]

No. This top down hard data workable assumptions apply to a command and control economy. We've moved beyond that.

Unfortunately, we haven't. We are a mixed economy transitioning to a more unplanned one, with severe limitations in what we can manage. Comparing us to some foreign nation with an entirely different law & order & enforcement mechanism is completely apples to oranges!

That apart, you bring in completely tangential comparisons.

You talk of Europe - and compare it to India! Can India's MIC do the same as the French one, which is integrated more and more with Germany's MIC and even UK's MIC? What of the security risks? Our strategic requirements?

This when a practical alternative exists. SoKo or France can work with L&T and set up whatever they wish.

L&T gets technology, employment happens, control remains in Indian hands. Why should we let this bargaining chip go?

They are willing to do so, work with India. Why should we, voluntarily cede 100% when even in the arty upgrade and several other programs, foreign firms committed to working with us even at 26%.

As to acquisitions of private Indian companies by foreigners, I'd say go ahead on the grounds that the founders are entitled to cash out just as Ranbaxy did with the Japanese. All MoD has to do intelligently frame the terms of the acquisition to guard security interests.

IMHO, too much of a vestigial East India Company hangover. Different times, different country.

Actually, no personal offense intended, it is your method which is merely a repackaged East India company takeover, albeit couched in "modern terms" and will result in a similar outcome all over again.

1. The security aspect

It also completely ignores real world issues by dismissing them as "MOD has to intelligently frame the terms to guard legitimate security concerns"..as if MOD has a magic wand to do anything of the sort!!

No other country behaves in such a frivolous manner and if this attitude is displayed by decision makers, yes, we will have an East India company redux - repatriation of profits et al on a mass scale, while Indian industry lies gutted and Indian national security is in tatters.

Does Russia allow NIIP to sell off its suppliers to foreign firms?
Will LETRI be up for acquisition for foreign firms?
Can India buy Thales?

Your suggestions completely ignore India's strategic interests which are to safeguard its hard won private (and public) expertise from acquisitions which:

a. expose both the inner workings of its local technology (such as what goes into Akash and Agni) to potentially hostile powers

b gut an ecosystem that can work on strategic programs for tomorrow.

2. Strategic Independence

What happens when India decides it wants to build a 10,000 km range Bomber that needs actuators that were being previously sourced from the small private firm, that is now sold to an European firm? Do you seriously think that the MTCR/xyz cartel loving western firms will acquiesce to letting that capability flow back into Indian hands?

In short, your world view is that of an India which is merely a secondary power and will always be subservient or pally with the current dominant camps. I would submit, India's strategic aims are entirely the opposite in that it should have the ability to stand on its own and retain an independent capability.

We will never be the UK with an US supplied missile deterrence force or exploring how to have a Joint Expeditionary command as the UK and France were doing.

3. MOD has significant power to make things happen

Next, is this point that all that MOD has to do is behave "intelligently" and all will be well.

Do you think the MOD behaved foolishly in ALL its deals so far? Unfair, correct? Why is it so, then, that in almost all the deals we have struck, the partners gypped us in some form or the other?

Because they could. All of them behave that way, when they can, no exceptions and their Govts intercede on their behalf.

Russians? T-90 deal - reneged on armor tech, gun barrel tech, ballistics software
French? Scorpene go slow until India acquiesced to revised terms , restrictions on Milan and other systems sold in terms of TOT
Israelis? Sold us malfunctioning gear (SAR pods) - we were guinea pigs, we had to get it fixed

In each case, whenever MOD speaks up, two things happen. Other acquisitions are at risk, existing item support may end up getting delayed.

Only in recent years, with Indian programs making headway, has their been some negotiating power. E.g. if France acts smart on Fennec, then there is the option of a local LUH.

Point is agreements are not worth the paper they are signed on, until and unless you have the negotiating power to play hardball and the ability (economic primarily) to do so on a constant basis and are willing to accept tradeoffs (reduced military capability).

Unfortunately, we dont and nor do we need to go down on this path at all, if we have a decent policy.

Our aim should be to extract every positive from our spend, via offsets and the like, and not act like some sort of market for everyone, which gains nothing out of the deal.

We are at a unique period in our history (modern one anyhow), wherein we have a robust spending ability, even as Europe and many other areas gut their military. Their oversized MICs are looking for orders and we have the negotiating power. Why should we fritter it away to set up the game on their terms.

[Karan M]

In light of what abhik and Karan M have mentioned about the profitability of DPSUs, I'd like to ask again 'so why is GoI talking about FDI in defence then ?'

Come to think of it -I already asked for this thread several days ago in the Modi thread when discussion there veered towards this topic - can someone succinctly explain what is FDI in defence ? . Take the case of local production clause for Su 30 MKIs or some other similar example. Why is that not 'FDI in defence' ? What kind of such defence manufacture constitutes FDI and what does not ? Personally, I think a lot of the debate is because different people have different ideas about what it is, and in addition, others assert that the primary issues related to defence procurement lie elsewhere.

Considering the general approach of the new PM, this whole topic strikes me as a trial balloon meant to deflect attention onto something GoI has no strikingly urgent imperative to deal with. It just needs something to take cover fire while it addresses more important matters elsewhere quietly.

Suraj - two possibilities

1. This shoddy note from DIPP (if what I saw of the original was all it was) was just rehashed and rereleased wherein BJP Govt came in and new CoMin signed off on it. Basically rinse, lather, repeat

2. Some wise spark suggested this route to get "easy money in" for defense so that GOI can ignore spending on DPSUs/ defence infra capex etc and everything will magically sort itself out, with "capitalism", "FDI" etc.

Unfortunately, I think its a mix of both. Point 2 - because Arun Shourie was mentioning this very policy sometime back, and he has been acting like an unofficial adviser apparently to the NaMo admin, and has been running tea discussions where "prominent individuals" share their views with him. IIRC Arun Shourie was no fan of the PSU complex either & would want them done away with, which might have made this FDI idea attractive to him.

I hope (with all sincerity!) you are right and this is a storm in a teacup without any credence to it and the present status quo in FDI policy measures is retained (albeit with private sector unleashed).

PS: Re: Su-30 MKI manufacture in India, not really FDI. We are paying for it, with both TOT clause and our own investment in manufacturing.

I guess technically, the Maintenance center (with spares stockpiled) being set up by the Russians as part of the MiG-29 upgrade program offsets, qualifies as FDI in defence.

[Suraj]

Err why is Su 30 manufacture not FDI ? Say acme proposed an FDI plan to make fasteners, all of which MoD will buy. They bake in their sunk cost into the price. In effect 'we are paying for it'. If 'we are paying for it' is the criterion for calling something defence FDI, then I point out that in economics terms we pay for it no matter what's produced , less exports . Why would anyone else pay to modernise our weapons ? So my question again is, what is FDI in defence ?

I don't really think GoI plans to go anywhere with this. It serves as a great debate topic, but I see very little differentiation from what already exists. My thinking is that this is just atrial balloon to deflect attention.

[kshirin]

[quote="Karan M"][quote="Cosmo_R"]No. This top down hard data workable assumptions apply to a command and control economy. We've moved beyond that. [/quote]

Unfortunately, we haven't. We are a mixed economy transitioning to a more unplanned one, with severe limitations in what we can manage. Comparing us to some foreign nation with an entirely different law & order & enforcement mechanism is completely apples to oranges!

That apart, you bring in completely tangential comparisons.

You talk of Europe - and compare it to India! Can India's MIC do the same as the French one, which is integrated more and more with Germany's MIC and even UK's MIC? What of the security risks? Our strategic requirements?

This when a practical alternative exists. SoKo or France can work with L&T and set up whatever they wish.

L&T gets technology, employment happens, control remains in Indian hands. Why should we let this bargaining chip go?

They are willing to do so, work with India. Why should we, voluntarily cede 100% when even in the arty upgrade and several other programs, foreign firms committed to working with us even at 26%.

[quote]As to acquisitions of private Indian companies by foreigners, I'd say go ahead on the grounds that the founders are entitled to cash out just as Ranbaxy did with the Japanese. All MoD has to do intelligently frame the terms of the acquisition to guard security interests.

IMHO, too much of a vestigial East India Company hangover. Different times, different country.[/quote]

Actually, no personal offense intended, it is your method which is merely a repackaged East India company takeover, albeit couched in "modern terms" and will result in a similar outcome all over again.

1. The security aspect

It also completely ignores real world issues by dismissing them as "MOD has to intelligently frame the terms to guard legitimate security concerns"..as if MOD has a magic wand to do anything of the sort!!

No other country behaves in such a frivolous manner and if this attitude is displayed by decision makers, yes, we will have an East India company redux - repatriation of profits et al on a mass scale, while Indian industry lies gutted and Indian national security is in tatters.

Does Russia allow NIIP to sell off its suppliers to foreign firms?
Will LETRI be up for acquisition for foreign firms?
Can India buy Thales?

Your suggestions completely ignore India's strategic interests which are to safeguard its hard won private (and public) expertise from acquisitions which:

a. expose both the inner workings of its local technology (such as what goes into Akash and Agni) to potentially hostile powers

b gut an ecosystem that can work on strategic programs for tomorrow.

2. Strategic Independence

What happens when India decides it wants to build a 10,000 km range Bomber that needs actuators that were being previously sourced from the small private firm, that is now sold to an European firm? Do you seriously think that the MTCR/xyz cartel loving western firms will acquiesce to letting that capability flow back into Indian hands?

In short, your world view is that of an India which is merely a secondary power and will always be subservient or pally with the current dominant camps. I would submit, India's strategic aims are entirely the opposite in that it should have the ability to stand on its own and retain an independent capability.

We will never be the UK with an US supplied missile deterrence force or exploring how to have a Joint Expeditionary command as the UK and France were doing.

3. MOD has significant power to make things happen

Next, is this point that all that MOD has to do is behave "intelligently" and all will be well.

Do you think the MOD behaved foolishly in ALL its deals so far? Unfair, correct? Why is it so, then, that in almost all the deals we have struck, the partners gypped us in some form or the other?

Because they could. All of them behave that way, when they can, no exceptions and their Govts intercede on their behalf.

Russians? T-90 deal - reneged on armor tech, gun barrel tech, ballistics software
French? Scorpene go slow until India acquiesced to revised terms , restrictions on Milan and other systems sold in terms of TOT
Israelis? Sold us malfunctioning gear (SAR pods) - we were guinea pigs, we had to get it fixed

In each case, whenever MOD speaks up, two things happen. Other acquisitions are at risk, existing item support may end up getting delayed.

Only in recent years, with Indian programs making headway, has their been some negotiating power. E.g. if France acts smart on Fennec, then there is the option of a local LUH.

Point is agreements are not worth the paper they are signed on, until and unless you have the negotiating power to play hardball and the ability (economic primarily) to do so on a constant basis and are willing to accept tradeoffs (reduced military capability).

Unfortunately, we dont and nor do we need to go down on this path at all, if we have a decent policy.

Our aim should be to extract every positive from our spend, via offsets and the like, and not act like some sort of market for everyone, which gains nothing out of the deal.

We are at a unique period in our history (modern one anyhow), wherein we have a robust spending ability, even as Europe and many other areas gut their military. Their oversized MICs are looking for orders and we have the negotiating power. Why should we fritter it away to set up the game on their terms.[/quote]


I endorse Karan M's positions.

I think our worst mistake, is that we are proceeding from a position of supplication which we should discard forthwith.
We keep talking at the strategic level of power shifting from West to East but fail to draw negotiating lessons from this. The American economy has shrunk 1% in the first quarter of this year. Advanced countries are desperate for our market. They know we are getting serious about domestic defence production. So they have to mount their attack and make their move now.
Proof of their actions/ desperation:
• Why was the DIPP note leaked in the first place and by whom? This leaves the scent of blood and MNCs will not let go, sensing an opening.
• Why was the PMA (preferential market access policy which would have helped the indigenous electronics and telecom sectors ) diluted and further scuttled in the national spectrum project for the armed forces to make Indian companies ineligible? TEMA stalled it by filing a court case.This was done by our own people! (God help us). the entire manufacturing and its attendant skills/ R & D/ employment eco system would have shifted abroad.
• Why was brown-field investment in pharmaceuticals permitted? Please see the eye opening Parliament committee report which pointed out all the disadvantages of the policy being followed: http://164.100.47.5/newcommittee/report ... ce/110.pdf
• Why does nobody look at any anti competitive practices of FDI companies and MNCs in our economy including acquisitions?
• Why are we continuing unilaterally to give away airlines seats when our goal is to be an air traffic hub so that we can reap the attendant benefits of the huge market that will be created by Maintenance Repair and Overhaul facilities, as pointed out by Chairman HAL?
• Why are we allowing the RBI to permit free outflow of our capital when our rupee still remains below the 45 per dollar bandwidth before 2012?

We need to take a concerted cross sectoral overall view of all this otherwise we shall surrender all our advantages, fail to exploit this historic opportunity created by a nationalistic dispensation, and bring on the demographic nightmare. No other country is doing 100% FDI in defence.
Solution:
• Let us launch 100% OFFSETS (South Korea routes FDI through Offsets so it retains levers to extract technology) and launch a few projects with Indian companies as the leading partner and see where we get.
• Let us have faith in our companies and our R&D facilities and let that be a starting point.

[nachiket]

So my question again is, what is FDI in defence ?

Well in simple terms, 100% FDI in defence will allow two things.

1. Foreign arms manufacturers setting up wholly owned Indian subsidiaries which manufacture/assemble their products here. E.g. Beretta setting up a production line for the MX4 Storm to be bought by the BSF etc. This is desirable.

2. Foreign arms manufacturers will completely buy out Indian SME's which make defence components and supply them to DPSU's who use them in strategic and tactical missiles, LCA, ALH, etc. This is certainly not desirable and what Karan M is so passionately warning us about.

I'm not saying either of these things will certainly happen, but they will be legally allowed if 100% FDI goes through.

[NRao]

Question:

IF a 100% FDI participant leans on Indian SMEs how can they be considered for the 100% category? Conversely, if there are Indian SMEs, then why 100% FDI in that area?

100% FDI should be for areas where there is very little to none Indian SMEs.

Generally speaking. I am sure this cannot be adhered to a 100%.

[NRao]

Also, with "FDI" - one should expect some of the current players to be buried. It would be desirable to see some of these DPSU either totally vanish or become so good that they start competing and pushing FDI participant out.

Middlemen, interest groups, etc should see a big shift.

[member_22733]

DPSUs should morph into Universities(pvt/public)-Factories (pvt) and a finance arm (govt). Much like how DARPA works in the US. That is a successful model and can be adopted in India.

[NRao]

On the topic of "no other country ......":

Code: Select all

2013 rank 	Recipient 	                       Arms imports
1 	          	India 	                       8283
2 	                United Arab Emirates      6153
3 	                China 	                       1534
4 	                Saudi Arabia 	               1486
7 	                Pakistan 	                       1002
5 	                Azerbaijan 	               921

(Sorry for the formatting) But, SK is not even in the top 15 and India has such a huge import bill.

India should be able to throw her weight around and get good deals without fear - no matter which path she selects. Even at 100% she should not be afraid of dealing with the situation - tear up the old and rewrite the contract.

[Cosmo_R]

" Unfortunately, we haven't. We are a mixed economy transitioning to a more unplanned one, with severe limitations in what we can manage. Comparing us to some foreign nation with an entirely different law & order & enforcement mechanism is completely apples to oranges!

That apart, you bring in completely tangential comparisons."

I have a higher confidence in the ability in the genius and perspicacity of Indian entrepreneurs and this new Modi government than the average person. I stand guilty.

I have heard this 'tangential' argument since 1974 when it was argued India did not need cars, phones or whatever because we first had to do something at the village level. "We are different you see..."

It matter little what "kind of economy" we are in anyone's opinion. Fact is we have to make a huge leap and it won't be done by people who don't have money at risk"

We are talking about FDI. If SoKo wants to (and I know they want to) invest 100% in a shipyard to build XYZ that would build civilian and military vessels at their own risk why would I stop them?

We are getting delivery of

http://www.newindianexpress.com/states/ ... 264258.ece

They were built in Abu Dhabi. 100% non FDI

It can be argued that everything is tangential when one is in denial.

[shiv]

Current FDI rules
http://www.icsi.edu/webmodules/icsiweb/ ... Points.doc

2. How does a foreign company invest in India? What are the regulations pertaining to issue of shares by Indian companies to foreign collaborators/investors?

A) Automatic Route

FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which require prior approval of the Government:

Activities/items that require an Industrial License;
Proposals in which the foreign collaborator has an existing financial / technical collaboration in India in the 'same' field,
Proposals for acquisition of shares in an existing Indian company in: Financial services sector and where Securities & Exchange Board of India (Substantial Acquisition of Shares and Takeovers ) Regulations, 1997 is attracted;
All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted.

FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the Government or RBI. The investors are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors.

B) Government Route

FDI in activities not covered under the automatic route requires prior Government approval and are considered by the Foreign Investment Promotion Board (FIPB), Ministry of Finance. Application can be made in Form FC-IL; Plain paper applications carrying all relevant details are also accepted. No fee is payable.

General permission of RBI under FEMA

Indian companies having foreign investment approval through FIPB route do not require any further clearance from RBI for receiving inward remittance and issue of shares to the foreign investors. The companies are required to notify the concerned Regional office of the RBI of receipt of inward remittances within 30 days of such receipt and within 30 days of issue of shares to the foreign investors or NRIs.

3. Which are the sectors where FDI is not allowed in India, under the Automatic Route as well as Government Route?

FDI is prohibited under Government as well as Automatic Route for the following sectors:

Retail Trading
Atomic Energy
Lottery Business
Gambling and Betting
Housing and Real Estate business
Agriculture (excluding Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture and Cultivation of Vegetables, Mushrooms etc. under controlled conditions and services related to agro and allied sectors).
Plantations (Other than Tea plantations).

100% FDI is permitted in case of trading companies for the following activities:

exports;
bulk imports with ex-port/ex-bonded warehouse sales;
cash and carry wholesale trading;
other import of goods or services provided at least 75% is for procurement and sale of goods and services among the companies of the same group and not for third party use or onward transfer/distribution/sales.

The following kinds of trading are also permitted, subject to provisions of EXIM Policy:

Companies for providing after sales services (that is not trading per se)
Domestic trading of products of JVs is permitted at the wholesale level for such trading companies who wish to market manufactured products on behalf of their joint ventures in which they have equity participation in India.
Trading of hi-tech items/items requiring specialized after sales service
Trading of items for social sector
Trading of hi-tech, medical and diagnostic items.
Trading of items sourced from the small scale sector under which, based on technology provided and laid down quality specifications, a company can market that item under its brand name.
Domestic sourcing of products for exports.

Test marketing of such items for which a company has approval for manufacture provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facilities commences simultaneously with test marketing.

FDI up to 100% permitted for e-commerce activities subject to the condition that such companies would divest 26% of their equity in favour of the Indian public in five years, if these companies are listed in other parts of the world. Such companies would engage only in business to business (B2B) e-commerce and not in retail trading.

Power: FDI In Power Sector in India

Up to 100% FDI allowed in respect of projects relating to electricity generation, transmission and distribution, other than atomic reactor power plants. There is no limit on the project cost and quantum of foreign direct investment.

Drugs & Pharmaceuticals

FDI up to 100% is permitted on the automatic route for manufacture of drugs and pharmaceutical, provided the activity does not attract compulsory licensing or involve use of recombinant DNA technology, and specific cell / tissue targeted formulations.

FDI proposals for the manufacture of licensable drugs and pharmaceuticals and bulk drugs produced by recombinant DNA technology, and specific cell / tissue targeted formulations will require prior Government approval.

Roads, Highways, Ports and Harbors

FDI up to 100% under automatic route is permitted in projects for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbors.

Pollution Control and Management

FDI up to 100% in both manufacture of pollution control equipment and consultancy for integration of pollution control systems is permitted on the automatic route.

Call Centers in India / Call Centres in India

FDI up to 100% is allowed subject to certain conditions.

Business Process Outsourcing BPO in India

FDI up to 100% is allowed subject to certain conditions.

[disha]

I am myself ignorant of the pros and cons - but imagine Beretta setting up a plant with 100% FDI. They could export to a whole lot of nations while supplying Indian needs. Indian labor would be paid and whatever can be outsourced to local companies will benefit local industry. The young engineer who works for Beretta for 10 years and leaves may some day start something on his own at a later date. etc.

Highlighting the above., as it is not just big ticket items like F-22 and Nuke Submarines., but also of items like the following:

http://www.waste-management-world.com/a ... award.html

Imagine a Sulabh sited on the above technology and 100s of such Sulabhs? Of course the technology is exported for US Army's Sulabh and also implemented in Indian Cities and towns.

Or you can take any manufacturer from say US DOD small manufacturer for metal panels https://www.dodmantech.com/JDMTP/Metals who would want to manufacture at a lower cost in India. The same panels can be used for say various other industries if the cost comes down!

India needs to get into the manufacturing game and instead of making say cheap iphones, it can make cheap titanium panels and composites and become the advanced material manufacturing hub for the globe.

Further, being plugged into such a global supply chain, it will be difficult for other bakis to show their bakiness.

Yes, it is a double edged sword, but I think we need to stop this negative thinking and stop looking everything from the prism of zero-sum game.

[abhijitm]

I don't see any harm in bringing 100% fdi in non sensitive defence tech. No law is perpetual. If we dont get expected result then can always take counter measures. But keeping closed mind for something to be tried first is not advisable.

Dont want to draw parallel here but when we opened up economy we heard similar concerns. But credit to PVNR's perseverance we are reaping benefits today.

[abhijitm]

First FDI not necessarily buying out company and do whatever you want with it. Tatas did not buy out jaguar LR, they invested in those british companies. The tech is still protected and they dont have the access. JLR is still a british company.

I dont see a problem in inevstors pumping money in our SMEs. Anyway, if someone wants to steal technology then there are many other ways than just FDI.

[Karan M]

They are not just pumping money in your SMEs, they are also ensuring those SMEs no longer work on programs detrimental to their home nation's strategic interests. And the Indian effort in creating a SME network that makes India sanction proof is gone.

Comparing Tata's acquisition etc is beside the point. The regulatory and enforcement structure abroad is much much better beside which thanks to the Cold War, the MIC in the west and even Russia is much stronger with surplus galore. There are half a dozen firms apart from the bigwigs working on every subcomponent type the integrator needs. It matters not a whit, if one or two of these disappear. In India, we barely have two, in some cases just one.

We have had a decade of BRF, in which we have discussed these issues threadbare, and yet people ask "who is Ram, who is Sita". Sigh.

[Karan M]

Also, why do we need Beretta to set up a 100% FDI plant in India to sell to Indians? What do we get out of it bar assembly by Indian workers of technology Beretta chooses to send across?

Why cant a Mahindra Defence Systems make the guns in cooperation with Beretta and tomorrow, MDS can walk out and start its own fully proprietary small arms factory based off of own/DRDO designs having gained assembly and manufacture experience via the other JV?

Option 2 is better for Indian interests overall, as versus Option 1. That is the reason why India stipulated originally that all these entries into the Indian market should have a proper partner, with the FDI cap at 26%. Many agreed. Those that did not, for obvious reasons, lobbied and continue to lobby hard.

As regards getting into the global supply chain - that is why we have offsets!!

So, if MDS-Beretta JV makes guns locally, even so, depending on the quantum of the deal, they would have to sign up for offsets. That could be satisfied with the MDS-Berretta JV itself.

Even so, Indian firms integrate into the global supply chain & India retains control.

100% FDI is not even necessary for items such as small arms which are relatively low tech and can be addressed by companies like MDS, Tata, L&T, Walchandnagar, Punj LLoyd and many others who are itching for the chance to be given a fair run against the OFB monopoly which has made a hash out of small arms design and manufacture in India.

[abhijitm]

They are not just pumping money in your SMEs, they are also ensuring those SMEs no longer work on programs detrimental to their home nation's strategic interests. And the Indian effort in creating a SME network that makes India sanction proof is gone

Speculation. Your risk is acknowledged. What you are speculating is it is hard to mitigate. Just like I too am speculating it can be mitigated.

Again the risk you are highlighting is already there irrespective of fdi. There are other better avenues available to them like bribing for arms import than indigenous development etc. In next 20 years at least we will ne net defence importer of billions of $. There is not going to be any magic to turn this around. Now it is up to us to turn this into some kind of opportunity. FDI could be one of the measures. We need to wait and watch.