Tuesday, July 21, 2009

Kerala’s bid to attract investors to rural areas

Gulf Today

The government of Kerala is laying the red carpet for investors once again. This time it is looking for investors willing to set up big or small projects in the rural areas.

The world investor meet, scheduled for July 24 and 25, will showcase the opportunities that the state’s village panchayats, numbering about 1,000, offer. Road shows were held in several Gulf States to build up interest in the meet.

The initiative for the meet came from the Kerala Chamber of Commerce and Industry. A study conducted by the chamber showed that there was scope for attracting investment to the villages in spite of the recessionary trends worldwide.

The chamber views the meet also as an opportunity to help rehabilitate non-resident Indians affected by the economic meltdown. Recent data shows that return migration now exceeds outmigration.

Rubber, spices, poultry and food processing are among the areas identified as suitable for the rural areas. The emphasis will be on small projects with a minimum investment of Rs.500,000, requiring not more than 1.50 acres of land. However, if there are takers the authorities are ready also to accommodate large investors with projects requiring 100 to 150 acres of land.

This investor meet is the latest in a series organised by the government in the last six years in collaboration with industrial and commercial interests. The government routinely claims success after every meet but so far there is little to show by way of results.

The promotional effort began in the wake of a 2002 study, conducted by the Confederation of Indian Industry and the World Bank, which rated the state’s investment climate as poor. The same year the department of Non-Resident Keralite Affairs (NoRKA) set up a field agency called NORKA-Roots. One of its stated objectives is to help NRKs identify investment opportunities in various sectors.

In 2007 NoRKA decided to float a company to facilitate structured investment by Non-Resident Keralites in the state. It was stated that the company would work as a subsidiary of NoRKA-Roots and ensure greater investment by Keralites working abroad in various upcoming projects. There is nothing to indicate that the proliferation of new agencies under NoRKa has resulted in increased investment.

Since 2003, the state government has organised several investor meets. After the first meet, it said it had received investment commitments of the order of Rs 260 billion. The figure was arrived at by totting up investments on Central government schemes like the Vallarpadam container terminal project and private projects like the Thiruvananthapuram International School which were already under way.

High hopes arose when the United Democratic Front ministry began negotiations with the Dubai Internet City authorities to set up Smart City in Kochi to attract global players. The Left Democratic Front ministry concluded the deal with the Dubai authorities in 2007 but a dispute over land rights has held up work on the project.

Two years ago the state government organised a road show at Bangalore as part of an effort to invite domestic investments in information technology and IT enabled services. An official spokesman said at the time the state had made a total investment of Rs. 30 billion in two parks, Technopark in Thiruvananthapuram and Infopark in Kochi and that it was seeking an investment of Rs. 60 billion to set up a new 507-acre Technocity in Thiruvananthapuram.

There was also talk of developing an IT corridor extending from Thiruvananthapuram to Kollam.

The changed global scenario has cast doubts on these plans. To make things worse, the first chief executive of Technopark has voiced fears about the future of that flagship IT park. In a magazine article, he said the government had raised funds for another park by mortgaging Technopark and the banks might take over the institution as the state was in default.

Last year Industry Minister Elamaram Kareem and Tourism Minister Kodiyeri Balakrishnan visited the US looking for investors interested in areas such as tourism, non-conventional energy, biotechnology and healthcare. An official said later that a New Jersey-based photovoltaic panels manufacturer was likely to invest about Rs. 40 billion in a manufacturing facility in the state. Nothing has been heard about it since then.

For more than three decades the state has benefited from remittances by Keralites working abroad, mostly in the Gulf States. The annual inflow grew from an estimated Rs. 3 billion in the late 1970s to about Rs.300 billion in the early part of this decade. Only a small portion of it went into productive channels.

Some who amassed money abroad have made investments. However, the vast potential of small and medium investors remains untapped.

A recent World Bank study has listed Kerala as one of India's most investor friendly states. The improved investment climate alone will not enthuse the large body of potential small and medium investors. Official agencies do not inspire much confidence in them. Credible, professionally managed institutions are a crying need. – Gulf Today, July 20, 2009.

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