Hong Kong businessmen ready to make large investments

By Sushma Ramachandran

HONG KONG, FEB. 28. The five-day India exposition in this strategically located entrepot has highlighted the importance of raising the level of bilateral economic and business ties. Exports can be stepped up globally by ensuring a presence here as all leading international buying houses have regional hubs in Hong Kong.

Equally important is the fact that businessmen of this former British colony are prepared to make large-scale investments in the infrastructure sector in India. Hutchison Max in telecom and China Light and Power (CLP) in power are examples of such companies. Similarly, India's growth as a software exporter has evoked tremendous interest in this region and the dot com companies are all set to make exploratory visits.

For financial services and portfolio investments also, there is need to keep in close touch with Hong Kong as most of the major regional India funds are managed from regional headquarters based here. These include companies such as Morgan Stanley, Jardine Fleming, Merrill Lynch and Credit Suisse First Boston as well as, of course, HSBC Securities.

The exposition organised by the India Trade Promotion Organisation (ITPO) and the Indian Consulate General was thus significant as it provided an opportunity for senior Government officials and businessmen from both sides to interact and examine possibilities of closer collaboration. The discussions were meaningful mainly because a galaxy of senior officials participated in the seminar.

These included a high level delegation headed by the Union Commerce and Industry Minister, Mr. Murasoli Maran, and comprising the Commerce Secretary, Mr. P.P. Prabhu, the Industry Secretary, Mr. Ajit Kumar, and the MMTC Chairman, Mr. S. D. Kapoor. In addition, the Information Technology Secretary, Mr. P. V. Jayakrishnan, and the chairman of the Securities and Exchange Board of India (SEBI), Mr. D .R. Mehta, came to make special presentations at the seminar.

Coincidentally, the exposition took place just as the Hong Kong capital market was shaken up by an IPO issued by a company known as Tom.com floated by the leading industrialist, Li Ka Shing. The issue evoked a most un-Hong Kong-like response with winding queues for applications and disorganised crowds and led to an over-subscription of 1,500 times, according to preliminary estimates. The Securities and Futures Commission chief, Mr. Andrew Sheng, was constrained to tell bankers to the issue that things had not been properly organised. Mr. Sheng also felt the hysteria over this dot com company indicated the public is not sufficiently educated about the long-term prospects for such companies.

Mr. Mehta is believed to have discussed the issue of soaring stock market prices of info-tech companies with Mr. Sheng. The importance of educating the public was apparently highlighted by the Hong Kong securities commission chief who pointed out that there would be many failures among the internet start-up ventures now being floated. There was also considerable possibility of frauds by unscrupulous elements. Both Mr. Mehta and Mr. Sheng agreed on the need for educating the public in this areas especially with infotech stock prices soaring to phenomenal heights.

The boom in infotech shares was the main area of interest for Hong Kong-based companies in the IT secretary's presentation. He pointed out that the market capitalisation of IT companies in India rose from $ 4 billion in January 1999 to $ 42 billion in December 1999. From then till February 1, this year, the market cap has grown further to $ 62 billion. And the market cap of Infosys and Satyam Computers, the two companies listed on the Nasdaq is pegged at $ 36 billion.

With this kind of growth, it is no wonder that representatives of Hong Kong's IT companies told Mr. Jayakrishnan that they planned to visit India in April for a preliminary study of investment possibilities. This was indicated during a special meeting with IT companies organised by a prominent Hong Kong legislator, Mr. Sin Chung Kai.

Among the organisations represented here were the Hong Kong Information Technology Federation, the Internet Service Providers Association, Culture.com, en2u.com Limited, PR Concepts Co Ltd, China. Com Corporation, Champion Technology Holdings Limited and City Telecom (HK) Limited.

Scope for more FDI

In the other critical area of foreign direct investment, the Indian Consul-General, Ms. Veena Sikri, stressed there was a great deal of scope for luring more foreign direct investment from Hong Kong. The total cumulative FDI approved from Hong Kong into India (1991-99) is approximately Rs.1769 crores.

Hong Kong is ranked eighth in terms of actual inflows of FDI into India which have so far amounted to Rs. 950 crores. In terms of actualisation of FDI, Hong Kong stands first among all sources of foreign investment with an actualisation rate of close to 54 per cent.

Most well-known are the Hutchison Group investments in India in the telecom sector. Ms. Sikri said this group is now keen to move into the port modernisation sector. The infrastructure sector in Hong Kong has the greatest potential for major FDI investments into India.

Unfortunately, two major power projects, started with much enthusiasm, have been bogged down with delays over implementation. Should they materialise, Hong Kong would jump into the top five league of major investors here. The two power projects are the 1,000 MW Cogentrix Power Project and the 660 MW IB Valley power project in Orissa.

Direct air services

Another contentious issue between Hong Kong and India is the question of increasing direct air services - Cathay Pacific has been seeking more direct flights to Delhi and introduction of direct services to Mumbai. The problem has not yet been resolved because negotiations and an air services agreement has been stalled for various reasons for the last six years. Air India currently is the only carrier with direct flights from Delhi and total services of the two airlines are nine a week. Cathay Pacific maintains that traffic is sufficient for daily direct services from Hong Kong to Mumbai and Delhi while Air India claims that their experience does not back any such arguments. In fact, Air India fears that Cathay will bring passengers from the West Coast of the U.S. instead of only from Hong Kong. Air India does not have landing rights on the West Coast.

The arguments fly fast and furious on both sides but the bottomline is that an agreement needs to be concluded that equitable and fair to both carriers and which will meet the needs of Indian and Hong Kong businessmen for quick connections.

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