The Telegraph
Since 1st March, 1999
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Indian lifeline for Canada towns
- Largest recipient of Ottawa aid turns investor, pumps in billions to buy local businesses

Ottawa, Sept. 18: Acquisitions such as Corus by Tata Steel may make global headlines but similar, albeit smaller, investments here by Indian companies are providing a lifeline for some towns in Canada.

There was a time when Canadian aid kept many Indian villagers alive: for years India was the largest recipient of aid from Canada. Sixteen years of economic liberalisation and a major transformation in Indian business have reversed roles in recent years.

In Nackawic, a riverside town in New Brunswick of only about 1,100 residents, Birla is now a household name, thanks to this change.

It is equally true in Atholville, another New Brunswick town of just over 2,000 people. Atholville is now thriving, in part, because the Aditya Birla Group has bought into and reopened a closed pulp mill which had provided employment for three generations of families in this town.

In Nackawic, too, the Aditya Birla Group has infused new life into the town by acquiring and reopening its largest employer, a pulp and paper mill with 400 jobs.

Encouraged by the success of their Canadian foray, the Indian conglomerate has recently acquired Minacs Worldwide, Canada’s biggest business process outsourcing (BPO) firm, for a price of about Canadian $126 million.

Minacs Worldwide, headquartered in Toronto, has more than 11,000 employees in 30 facilities in Canada, Germany, Hungary, India, the UK, the US and the Philippines, providing services in 28 languages, according to a company press release.

Its brand new facility in Manila was opened on India’s Independence Day this year by the Philippines President, Gloria Macapagal-Arroyo.

Recently, Hindalco, the flagship company of the Aditya Birla Group, bought the Canadian aluminium giant, Novelis, for US$6 billion.

Novelis, which was earlier part of the Alcan Group, is the world’s largest aluminium rolled products company.

While the Aditya Birla story may be one that catches popular imagination and touches many hearts here because of the lifeline it has provided for small Canadian towns with limited opportunities, there are others that are bigger in scale.

A few months ago, Essar Global acquired Algoma Steel of Ontario for Canadian $1.85 billion.

The Tata firm VSNL now owns the Montreal-based Teleglobe, one of the biggest wholesale providers of international telecommunications services — including mobile, Internet and voice services — in the world.

The Tatas acquired the company at a cost of Canadian $285 million and pumped in another Canadian $30 million to upgrade it. Teleglobe has since been renamed VSNL International.

A company announcement said that as a result of this acquisition, India’s VSNL was able to “extend its global reach to over 240 countries and territories... and access five geo-stationary satellites through over 30 dedicated earth stations”.

An arm of the Canadian government, Export Development Canada (EDC), provided US$75 million to VSNL to complete the purchase of Teleglobe.

The gesture was also aimed at attracting investment from a resurgent India into Canada. As a confidence-building measure, EDC has been helping Tata Steel to identify ways to support its expansion plans outside India — including financing requirements — which have made worldwide news.

Encouraged by their experience with the acquisition of Teleglobe, the Tatas are now engaged in talks with Toronto-based Magna International, the fourth largest auto components manufacturer in the world, for the latter’s increased presence in India, including a possible joint venture.

Canadian aid, which once sustained lives in India, is now less than a third of what it was 10 years ago.

Ironically, it was India’s nuclear tests and Canada’s self-defeating and ineffective sanctions on New Delhi that brought about the change.

Canada suspended aid to new projects, but was eventually constrained to resume financing activity under a face-saving formula that aid would be only for “humanitarian assistance”.

The view in South Block is that the “punitive” Canadian action eventually helped India because it changed the India-Canada relationship into one based on trade and investment, rather than aid.

The results are now visible from New Brunswick to Toronto.

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