FOREIGN TRADE
New business opportunities with India
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India has great potential but faces challenges
if it is to become “the next China”
(Photo: Chambre de Commerce Luxembourg)
How can Luxembourg take advantage of the subcontinent’s booming economy?
India has been labelled “the next China”, with a young middle-class – 55% of the population is aged 25 and under – taking advantage of unprecedented economic growth rates averaging 8% over the past three years (according to World Bank figures). A conference at the Luxembourg Chamber of Commerce on 23 October examined the theme of “New business opportunities with India.”
Growth may have slowed and inflation risen to 11%, said Jean-Claude Vesque, Head of International Trade – International Department at the Luxembourg Chamber of Commerce, but the importance of India as an emerging economy should not be underestimated. Luxembourg is certainly aware of the significance of the subcontinent, with the Ministry of the Economy and Foreign Trade leading some ten economic missions to India in the last decade.
A Luxembourg Embassy was inaugurated in New Delhi in 2002 (recently enhanced by the addition of a First Secretary-Deputy Head of Mission) and a Board of Economic Development (BED) Trade and Investment Office was also established in the same city.
However, both Vesque and Jean-Claude Knebeler, Director of Foreign Trade at the Ministry of the Economy and Foreign Trade, said that all was not rosy. Indian bureaucracy is notoriously slow and complex – a point admitted by Honorary Consul General of India to Luxembourg Jim Penning – and although a recently signed double taxation treaty has been welcomed by the authorities, its conclusion required some 13 years of negotiations. Nevertheless, Penning said, “India is a giant ready to participate in the industrialised world.”
Penning posited that to make any headway in India businesses first have to understand the Indian mentality. “You have to go there!” he told his audience. Indeed, many successful multinational companies were quick to recognise the opportunities available, and those who did go there at the outset of the economic liberalisation of 1991 –“the end of the license Raj,” as Penning called it – had managed to establish themselves in time for the economic boom. But, as Knebeler also warned, India is not a place to make easy money. It requires hard work.
Pharmaceutical logistic hub in Luxembourg?
One of the most dynamic areas in which India is emerging as a major player is the pharmaceuticals industry. It is now growing at 16% a year since 2006, and was averaging more than 11% in the five years before that. TS Jaishankar, Chairman of the Confederation of Indian Pharmaceutical Industry was the keynote speaker at the Chamber of Commerce. He examined the rewards Luxembourg could reap from the sector – worth some $620 billion globally and expected to double in value by 2020, according to a recent study by PricewaterhouseCoopers – if it developed a pharmaceutical hub.
There are several services that Luxembourg could offer the industry, Jaishankar explained. They range from acting as a marketing base for Indian pharmaceutical companies, or serving as a coordinator for the lucrative mergers and acquisitions of pharmaceutical companies, to the more concrete aspects of the supply chain, such as exporting raw materials to India or even acting as a consignment depot for the fast-growing African market.
Indeed, as PricewaterhouseCoopers has pointed out (in its 2007 report, Pharma 2020: The Vision - Which Path Will You Take?), “The future supply chain will be responsible not only for distribution of all products and services, it will also create new channels through which to market products, becoming revenue generating rather than a cost centre.” Jaishankar says that the time-sensitive logistics sector already account for between 45 and 55% of operating costs for India’s pharmaceutical industry and was worth close to 200 million US dollars in 2006.
Jaishankar had opened by saying that the Luxembourg government’s 140 million euros investment in bio-medical research was “a great beginning”. His address included elements of a presentation he had made to his Confederation’s members about Luxembourg last year, and he later told paperJam that they had shown great interest. “They are excited but so far have no links with Luxembourg,” he said. The industry in India seems to be waiting for Luxembourg entrepreneurs to contact them, a situation that is not untypical in the subcontinent. Jean-Claude Vesque concluded by inviting Jaishankar to bring a delegation of his members to the Grand Duchy and allow the Chamber of Commerce to set up meetings with potential investors.
