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IPA Special

Domestic Investors Continue To Avoid West Bengal

By Subrata Majumder

            West
Bengal has so far organized four Bengal Global Summits and the fifth one is on
the way in February. Sarcastically, each summit raised big hopes for
investment, but all those hopes were belied. In the previous summit, big houses
queued up and they were upbeat on making investments. They included the likes
of L.N. Mittal, Mukesh Ambani, Kishore Byani and Sajjan Jindal and announced
big plans, reposing trust in Mamata’s slogan ‘Bengal means business’. Mukesh
Ambani even predicted that ‘West Bengal will be Best Bengal’.

            Unfortunately,
till now, not a single big investment proposal has materialised. As if, the
Singur hangover is still looming large and labour unrest haunting investors.
But in contrast, foreign investors have not felt deterred by Mamata’s
unfriendly stand against Tata’s Nano project or the labour unrest which made
most of the investors run away from West Bengal. During the six year period of
Mamata’s rule, more FDI flowed in compared to the 34 years of Communist regime.
During 2013-2018 (up to June) the FDI in West Bengal was worth $ 2.6 billion,
against $ 2.2 billion during 2002 to 2013.

            Why
were domestic investors sulking while their foreign counterparts were upbeat on
investing in West Bengal during Mamata regime? It seems that trust deficit and
lack of a pragmatic policy approach by the state government were the reasons.
Unlike ‘Vibrant Gujarat’, the state lacked the policy to create an
investment-friendly image through near term and long term visions to boost
industry.

            The
state is yet to announce any comprehensive industrial policy. There is no
industrial map, which is important for setting up manufacturing plants in
respect of geo-political advantages and infrastructure facilities required for
a competitive investment planning. Nor was any fiscal incentive announced to reinvigorate
the state, which was once an engineering hub before the communist regime took
over.

            Nevertheless,
the state has several advantages, the biggest being geographical. Located in
the east, it is ideal for border trade with four nations and North East by way
of road connectivity. Sonar Bangla has abundant natural resources under the
soil, consisting of large deposits of coal. It is reckoned as the gateway to
east and paves the way for Act East policy.

            Chief
Minister Mamata Banerjee reiterated that the state has a big land bank. But,
the big investors are skeptical over the potential benefit of the land bank.
According to state government data, there is one lakh acres of land in the land
bank. But, it is difficult to find big areas of contiguous nature, which is
required for setting up large factories.

            West
Bengal has distinct advantages to become a potential trading hub for India and
gateway to South East Asia, thanks to its proximity to Bangladesh, Nepal,
Bhutan and Myanmar. West Bengal can act as an Indian Silk Road to neighbouring
countries. Myanmar has emerged as a prospective trade destination after the
return of democracy. The road connectivity provides enough potential for border
trade with these countries. With the cost cutting opportunity in logistics, a
competitive tool for buoyancy in trade, border trade unleashes greater
opportunities to augment trade with neighbouring countries.

            West
Bengal has a unique advantage to become a strong foundation for global value
chain (GVC) manufacturing operations in the eastern region. In the wake of
China loosing cost competitiveness, which resulted foreign investors looking
for alternatives, West Bengal can provide base for GVC manufacturing operations
between India and ASEAN. The state is considered to have one of the lowest
costs in manufacturing. To this end, it 
can offer a unique opportunity as 
the hub for exports to assemblers in ASEAN and other Asian countries.

            Given
the present structure of industry in West Bengal, which hinges on labour
intensive products with low and middle level investment, lessons from Vietnam
and Bangladesh would be pertinent. Success stories of ‘supporting industry”
model in Vietnam and uptick in garment industry in Bangladesh can be important
lessons for industrialization in West Bengal.

            Supporting
industry, or component base industry, was the trigger for growth of automobile
industry in Vietnam, which is the second biggest manufacturer of motorbikes in
ASEAN. Foreign investors played an important role in the development of
supporting industry. West Bengal can also be an important destination for
electronic industry. Manufacturing of mobile phones and electronic components
are low capital and high labor intensive industries. There are several factors
which favour West Bengal as a better destination for mobile phone and
electronic component manufacturing. Cheap wage, low land cost, surplus
electricity and availability of highly skilled labour forces (owing to three
big technical education institutes) can prove propitious for the development of
mobile and electronic component manufacturing in West Bengal

            Mamata
should focus on Chinese investment in West Bengal. Ever since the trade war
broke out and USA hurting Chinese export by punitive tariffs, China has vowed
to engage India as an important trade and investment partner. Burying the
hatchet of political row, India too is eager for Chinese investment and expansion
of trade relation by exporting agriculture products.

            This
was exemplified by the Chinese participation in the last Bengal Business
Summit. Over 30 Chinese companies attended the summit. Of these 10 attended for
the first time. Given the historical linkage and a large number of Chinese
domiciled in Kolkata, Chinese investment can help boost the state’s investment
potential. (IPA Service)

The post Domestic Investors Continue To Avoid West Bengal appeared first on Newspack by India Press Agency.

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