Bid to calm Posco, retail nerves
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- Published 29.10.10
Hanoi, Oct. 28: The Manmohan Singh government has sought to reassure investors abroad by suggesting he would address concerns in South Korea over Posco and hinting at easing some restrictions on foreign direct investment (FDI) in retail.
Singh will assure the President of the Republic of Korea that despite the cloud of uncertainty hanging over the Posco project in Orissa, investments from South Korea will be “encouraged” and “any outstanding issues will be addressed in a constructive manner”, commerce and industries minister Anand Sharma said.
The statement by Sharma, who was speaking to journalists accompanying the Prime Minister on his visit to the Asean-India and East-Asia summits that begin in the Vietnam capital on Friday, came against the backdrop of several projects being held up in India largely because of environmental concerns.
The government is worried that an impression is gaining ground that the Congress’s voter-friendly thrust leaves little room for manoeuvre on big-ticket industrial projects and reforms.
In response to a question on Posco whose blockbuster steel project has run into objections from the environment ministry, Sharma said: “It was discussed at previous meetings (with South Korean leaders). It is the biggest investment from the country to come into India. The government has conveyed its appreciation of South Korea’s engagements in car manufacturing and steel-making. Issues that delayed clearance have been looked into.”
Sharma said that if the Korean President raised Posco at his meeting with Singh tomorrow, “we will be able to reassure the leadership that investments will be encouraged and any outstanding issues will be addressed in a constructive manner”.
Sharma’s carefully chosen words reflect the government’s unenviable task of balancing the imperative to reassure investors and the compulsions of the Congress to be seen as protecting those threatened by land acquisition.
Sharma hinted that the government might flag an open-door, case-by-case policy in retail. The Congress has so far been proceeding with caution on retail.
A test case could be that of Ikea, the Swedish homes and interiors brand. “The Prime Minister has talked of further liberalisation. We might consider 100 per cent FDI for Ikea because it is sourcing 30 per cent of goods from India. In the case of 100 per cent FDI in retail, we need a full back-end linkage. We are the largest producer of food grain and the second-largest producer of fruits and vegetables, so we need FDI in post-harvest technology,” Sharma said.
In single brands, FDI is limited to 51 per cent while such investments in multi-brands are not allowed. Full FDI is permitted in wholesale trade.
Sharma mentioned that Malaysia had relaxed its cast-in-stone “bhoomi putra” (sons of the soil) policy by permitting Indian companies to acquire 51 per cent majority stake in construction and healthcare with a local partner. So far, Malaysia had capped FDI at 30 per cent.