New National Telecom Policy 2012: Roaming To Become Free

The Union Cabinet has approved the National Telecom Policy (NTP) 2012, which has been released after a delay of over a year. The policy aims to ultimately abolish roaming charges, allow users to retain their numbers even if they move from one zone to another, in addition to boosting transparency and growth in the scandal-hit sector. 

The draft of the new policy was released by Minister for Communications and IT Minister Kapil Sibal in October 2011. The target is one nation-one mobile number portability and working toward one nation free roaming.

Advantage

Under the new policy, roaming charges would be done away with thus allowing subscribers to use same number across country without having to pay extra money. Also, it would allow a subscriber to retain his/her original number while shifting base from one city or state to another.

However, consumers will have to wait for some time for this, as the Department of Telecom will first work out modalities of the new scheme before it is brought into force. No timeframe has yet been fixed for the implementation of the policy. The new policy seeks to provide a predictable and stable policy regime for a period of nearly 10 years.

The NTP 2012 envisages increasing penetration of telecom services in rural area from current level of around 39 to 70 per cent by 2017 and 100 per cent by the year 2020. Incidentally, the draft NTP had suggested a 60 per cent rural penetration by 2017.

Under the new policy, broadband speed has been increased to minimum of 2 megabit per second (mbps). This change will come into force with immediate effect.

Delinking of Licenses

Moreover, the NTP-2012 will also separate telecom licenses and spectrum, against the current practice of bundling them, and will charge a market-derived price for the airwaves; the same will apply in the case of broadcasters. Also, rules for Internet telephony would be relaxed under the new policy as it envisages increasing penetration of telecom services in rural areas from the current approximately 39 per cent to 70 per cent by 2017, and 100 per cent by 2020.

However, post the Supreme Court judgment of February 2, 2012, which mandates spectrum auctions, the separation of license and spectrum has already become an undeniable reality. Regardless of the NTP 2012, the DoT would have to separate licenses from spectrum just as it did through an executive order following a Group of Ministers (GoM) direction to auction 3G and BWA spectrum in 2010.

The policy also seeks liberalization of spectrum even though the Telecom Regulatory Authority of India (TRAI), in its latest recommendations, while setting up the reserve price, has already cleared service and technology neutrality with regard to future spectrum auctions. Critical of this move, industry body AUSPI says the proposal to liberalize spectrum in the 1800 MHz band is one of the policy's biggest flaws.

Provisions Under Draft Policy

Originally intended to be NTP 2011, the draft policy was released for public comments only in October 2011, forcing it to be rechristened NTP 2012. The actual timelines for implementation of individual announcements within the new telecom policy are yet to be made known.

With the new policy in place, consumers who use national roaming can now expect to pay local call charges though it is unclear when ‘free roaming' will be initiated. At present, consumers pay local call charges and a premium when traveling outside their service area. The policy also allows national number portability, but again, with no visible timelines.

Other forward-looking propositions like resale of services could become critical in the backdrop of the Supreme Court's cancellation of 122 licenses, which will cease to exist as of August 1, 2012. A sharp reduction in the competition level from 14 operators currently to 7-8 operators could be made up by allowing mobile companies to set up resellers. Services resale is universally recognized as a way to increase competition without duplicating infrastructure or fragmenting the spectrum.

Additionally, it mentions cloud computing, next generation networks, IPV6 and Voice over Internet Protocol (VoIP) as thrust areas — all of which are forward-looking and embrace future technologies. It remains to be seen whether average Internet users will be allowed to use VoIP, especially since this move has been opposed vehemently over the last 5 years by cellular mobile operators.

There is very little in the policy that will help end the impasse faced by the telecom sector. Spectrum pricing, reserve price for the upcoming 2G auctions, historical pricing of spectrum for operators who have received spectrum beyond 6.2 MHz and the more recent contentious issues of reframing, etc, will have to be dealt with through executive decisions, most of which fall outside the purview of the NTP 2012 announcement.

It is also unlikely that the policy by itself will see any major reestablishment of investor confidence, which has been on the decline since late 2010. Both Foreign Direct Investments (FDI) and domestic investments faced a sharp decline during 2010-11 vis-à-vis previous years, according to a recent PWC report. The trend has continued downwards even for the fiscal year ending 2012.

Global Hub of Domestic Manufacturing

The policy aspires to make India a global hub of domestic manufacturing, though not much detail on how this mammoth objective will be achieved is available. The draft policy had mentioned preferential market access for Indian vendors as one of the tactics to ensure a boost to telecom manufacturing in India. This drew severe criticism from the Commerce Ministry on grounds that it violated India's commitments at WTO and GATT. The DoT was forced to give an explicit commitment that WTO and GATT's concerns would be kept in view while issuing guidelines on operationalization of the policy.

The NTP 2012 expects to take India's rural teledensity from 39 to 70 percent in the next 5 years with the target that every single Indian will have a phone by 2020. The policy also gets a formal approval of the new unified licensing regime which allows companies to provide ISP, fixed line, international long distance, national long distance, and a few other services through a single license, whose cost has been proposed by the Department of Telecommunication (DoT) at Rs. 10 crore. So far, very few companies, if any, have shown a desire to acquire the new unified license.

Earlier policies

The policy will be seen as driving small incremental changes with very little ability to solve the existing sector crises, unlike the NTP 1994, which spurred not just private sector investment in mobile and fixed line services but also initiated 49 percent FDI for the first time — ushering in telecom liberalization.

Earlier in 1999, a second policy — which lasted nearly 13 years — slashed costs across the board for the operators and by extension the consumers by moving from a license fee regime to a revenue share structure.

It also opened up the sector to future competition, breaking the duopoly contractual arrangements which had existed in mobile and fixed line telephony until 2000.

Later, starting 2002, additional competition was introduced in the national and international long distance sectors, which led to the slashing of tariffs, in some cases, by more than 90 percent.

Assessment

The new telecom policy is very welcome as, among other things, it brings in transparency and takes away powers of vital decision-making from the telecom minister of the day and vests it with a ministerial panel. Perhaps there should be a time frame set for the panel so that decisions are not in limbo waiting for the panel to meet.

The other laudable provision is to make India a manufacturing hub for telecom equipment. This is a challenge as manufacturers will have to compete with China in terms of price and volume.

New Benefits

Roaming Fun: With national roaming set to become free, the subscribers need not worry about charges being levied on them while traveling to a different city or state.

Broadband Boost: Speed increased to minimum of 2 mbps. This will come into force with immediate effect

More Transparency: Licenses to be de-linked from spectrum. The policy will allow operators to provide services based on any technology by using airwaves and will not restrict them to use it for particular service using any specific frequency band.

White Paper on Black Money: Opposition Terms Document Disappointing, Non-Paper

Finance Minister Pranab Mukherjee presented the White Paper on Black Money in the Parliament on May 21. The 108-page Paper trashed the huge figure of illegal wealth stashed away by Indians in Swiss banks and said much of the money may have already come back into India through illicit means. It did not disclose any names of Swiss account holders or provided any fresh estimate of black money in India.

Indian Black Money Issue

The Bharatiya Janata Party (BJP) has termed the government's White Paper on black money as "disappointing" and a "non-paper." The Opposition party said that it is "like a bikini" as it hides the essentials and reveals only the less significant details.

The issue of Indian black money stashed abroad has been raked by the Bharatiya Janata Party (BJP) time and again both inside and outside Parliament. Party veteran L K Advani had taken out a month long Jan Chetna yatra across the country to highlight the issue.

The White Paper has not revealed the quantum of Indian black money kept in tax havens abroad. Neither has the government shared details of steps it has taken to repatriate this wealth.

The bank deposits of Indians in Swiss banks have decreased from Rs 23,373 crore in 2006 to Rs 9,295 crore in 2010. The government has not disclosed where this money has gone. Has it come back to India? Or has it been transferred to some other tax haven? Or has it been invested somewhere?

The Opposition has been demanding that the government make all efforts to bring back this money as has been done by countries like the United States, Germany and Ireland, among others.

The White Paper is also silent on the black money made by illegal sale of arms and armaments, evasions on stamp duty especially in land transactions, and use of such funds in politics. This document has several shortcomings. It does not explicitly explain what has been done to deal with black money in arms and armaments.

The generation of black money through stamp duty evasion especially in land transactions has not been revealed. The black money made by corrupt politicians has also not been revealed.

Tax Immunity Scheme

On the possibility of any tax immunity scheme, especially gold deposit scheme, to deal with black money, the White Paper said, "The issue of complete tax immunity needs to be examined in the light of other policy objectives." The document seeks to dispel the impression that government was not doing enough to deal with black money and talks about various policy options and strategies it has been pursuing to address the issue of corruption in public life.

Referring to the issue of institutions like Lokpal and Lokayuktas, the Paper said, "(they) need to be put in place at the earliest, in the Centre and the states respectively, to expedite investigations into cases of corruption and bring the guilty to justice."

The government has not been able to push through the Lokpal Bill in Rajya Sabha (upper house of the Parliament), despite pressure from the civil society. The Bill was approved by the Lok Sabha.

Introduction of Goods and Services Tax

The introduction of Goods and Services Tax, the White Paper added, would be a major step in integrating the efforts of different agencies dealing with black money.

Referring to the misuse of corporate structure, the Paper stated, "The Vodafone tax case provides an instance of the misuse of corporate structure for avoiding the payment of taxes."

In this case, it said, the Hutchison Group had made investments in India from 1992 to 2006 through a number of subsidiaries having 'separate corporate personality' but which were essentially post box companies based in the Cayman Islands, British Virgin Islands, and Mauritius.

The Hutchison Group sold its entire business operation in India in February 2007 to the Vodafone Group for a total consideration of $11.2 billion and the same was effected through transfer of a solitary share of a Cayman Islands company.

Global Financial Integrity (GFI) has estimated that from 1948 to 2008 a total of $ 213.2 billion has been shifted out of India through illicit outflows and the adjusted gross transfer of illicit assets by residents of India amounts to $ 462 billion as of end-December 2008.

The White Paper’s view is that this money has at least partly already returned to India. This may have been happened through Foreign Direct Investment route and stock markets.

Four-Pronged Strategy

The Paper suggested four-pronged strategy to curb generation of black money. These include more incentives for voluntary compliance of tax laws, reforms in vulnerable sectors of economy and creation credible deterrence. It mentioned that reform of financial and real estate sectors would help in reducing generation of black money in long term as freeing of gold imports had helped in checking smuggling.

On the need to curb this menace in vulnerable sectors like real estate, the provision of deducting tax at source on payments made on real estate transactions and mandating it as a pre-condition for registering of the transacted property could be considered.

Large number of transactions in bullion and jewelry are unaccounted and there is also urgent need to improve the reporting and monitoring systems in this sector. On the informal sector and cash economy, the Paper states that there is a need to amend laws to check keeping very large amounts of cash. Another important measure could be the promotion of banking channels, including use of credit and debit cards through tax incentives, since they leave adequate audit trails and hence disincentivize black money generation. Levying tax at source at a low level on cash purchases may also be considered as a possible policy option.

The White Paper states that there does not seem to be much progress on repatriation of black money abroad. It says that the government has been working on bilateral treaties. However, these treaties do not have provisions for repatriation of undisclosed assets. Without international consensus on this issue it is difficult to implement domestic law on repatriation of assets located abroad.

Assessment

Undoubtedly, we now know that based on some recent international data, India is 15th in the world in terms of outgo of unaccounted or “black” money, namely money that has evaded the tax net and has been parked overseas.

The White Paper does not say anything that is not public knowledge but shifts the focus from foreign banks to domestic culprits and sources. Since the finance minister had refused to disclose the names of those holding illegal assets abroad in the Supreme Court as well as Parliament, it was futile to expect their mention in the White Paper. The government report talks of the possibility of one-time amnesty scheme for tax evaders to encourage disclosures and recover tax.

The Paper gives an idea of the generation of black money in the system, and calls for reforms in the financial sector, including taxation and in investment instruments such as participatory notes, as well as in real estate.

Some Facts

* To curb black money, a four-pronged strategy — reducing disincentives against voluntary compliance, reforms in vulnerable sectors of the economy, creating effective credible deterrence and supportive measures — is being worked out.

* The White Paper states that encouraging the use of credit and debit cards — as they leave adequate audit trails — could also help in preventing black money generation.

* It also proposes improved reporting and monitoring systems to track bullion and jewelry transactions and wants close tabs on real estate deals

Hillary Clinton’s India Visit: New Delhi Reminds Washington of Country's Interests in Region

US Secretary of State Hillary Clinton wrapped up her three-day visit to India on May 8. Her trip came at a time when India and the United States are perceived to have taken somewhat different positions from each other on various issues. After two decades of increasing proximity, disagreements between the two countries over several key matters now seem to be slowing down the momentum of bilateral relations. Those who had hoped that Clinton’s visit would put the spark back in the ties will have been a bit disappointed as both parties have not done much, in addition to reiterating already-known positions.

During her stay, Clinton met key Indian leaders, including Prime Minister Manmohan Singh and Congress President Sonia Gandhi. and discussed a range of issues, including China, regional security and civil nuclear cooperation.

Pakistan’s Role in Eliminating Terror

The US secretary of state has pressed Pakistan to do more to ensure its territory is not used as "launching pad" by terror groups for attacks and also said that Hafiz Saeed was "one of the "principal architects" of the November 2008 Mumbai terror attacks. Hillary's comments came at a joint news conference after her talks with External Affairs Minister SM Krishna who spoke of the need for elimination of "terrorist sanctuaries" in the neighborhood.The two leaders nudged Pakistan to bring to justice the perpetrators of the 26/11 attacks and pledged to continue to work together in combating the menace.

In his remarks, Krishna said the recent terrorist attacks in Afghan capital – Kabul -- highlighted the need for elimination of terrorist sanctuaries in the neighborhood and for Pakistan to take steps against terrorism, including bringing to justice the perpetrators of 26/11 attacks. He also stressed the need for stronger action from Pakistan on terrorism, including on bringing to justice the perpetrators of the Mumbai terrorist attack.

In April 2012, the United States offered a $10 million reward for information leading to the conviction of Saeed, the founder of the Pakistan-based terror group Lashkar-e-Taiba (LeT).

Afghan Problem

The vision for Afghanistan was also discussed at the meeting. India stressed the need for sustained international commitment to build Afghan capacity for governance, security and economic development, and to support Afghanistan with assistance, investment and regional linkages.

To ask India to “do more” on the Iranian issue, therefore, is not fair on the part of the United States. The US secretary of state should understand that if the US has to do all it can to safeguard its geo-political interests in the Afghanistan-Pakistan area, India, too, has its interests in Kabul which cannot be properly taken care of if New Delhi loses the Iranian link.

US Investment in West Bengal

Clinton’s offer to Chief Minister Mamata Banerjee to invest in West Bengal is, however, a welcome development. The state will also gain immensely once the issues between India and Bangladesh are settled conclusively. An agreement between the two neighbors on the Teesta River water issue could have been signed by now had Banerjee not taken a stand different from New Delhi’s line of thinking. But, as External Affairs Minister SM Krishna told his Bangladesh counterpart Dipu Moni, in New Delhi, efforts are on to bring the West Bengal Chief Minister to the view that the country’s overall interests must be given precedence over the state’s interest.

Earlier, the West Bengal chief minister had scuttled the United Progressive Alliance’s plans to allow Foreign Direct Investment in multi-brand retail, arguing that the move would destroy small businesses. The US secretary of state seems to have failed to force a change of heart in the feisty Chief Minister Mamata Banerjee.

Issue of Oil Imports From Iran

The Damocles sword is still hanging on India. The United States gave no firm assurance to India that the proposed American sanctions will not apply to it for oil purchases from Iran even as New Delhi stated that the Iranian issue was not a source of discord between the two countries.

Continuing to resist American pressure over the matter, India also made it clear that it would abide only by UN Security Council sanctions against Iran and not those imposed by individual countries.

The US pressure on India regarding oil imports from Iran leaves a bad taste in the mouth. Does it not tantamount to interference in our internal affairs? As long as Manmohan Singh is the prime minister any directions of the United States in India's internal affairs and treaties like nuclear deal are cake walks.

In March 2012, the United States announced sanctions which threaten to shut out importers of Iranian oil from the US financial system unless they make significant and continuing cuts to their purchases by the end of June. Japan and 10 European Union nations have been granted exemption while India and China remain at risk.

In addition to its need for oil, there are two reasons why India must not take the US pressure lying down. India's only reliable land-route into Afghanistan and Central Asia runs through Iran. Moreover, the current US approach is likely to make the Iranian — and regional — security situation worse, not better. Saudi Arabia and Israel, which is already nuclear-armed, worry that a nuclear-capable Iran would tilt the regional balance and want the squeeze put on Iran. But too much financial or military pressure could backfire, goading the regime to commit to acquiring a strategic weapon — something it has not done until today.

India has demonstrated that it has come of age and stood its ground. Iran, despite its saber rattling, is a responsible power and we have a very useful conduit to their Leaders, which could be invaluable, when the World needs stability and growth. India must neither shut off Iran's oil imports nor Iran's access routes to Afghanistan and Central Asia. Pakistan can make overtures to a new relationship, but India cannot afford to alienate the country that can provide a counter balance to the Taliban-Pakistan nexus.

India has been firm in its foreign policy right since independence, and rightly so; we are a country with one of the fastest growing economy. We have recently done an arm deal which is considered world's biggest. We have to manage our allies ourselves. The Indian external affairs minister’s decision to disagree with Clinton and reminding her of India's interests in the region.

Corporate Governance in India: Aims and Objectives

Corporate governance, in plain terms, refers to the rules, processes, or laws by which businesses are operated, regulated, and controlled. The term can refer to internal factors defined by the officers, stockholders or constitution of a corporation, as well as to external forces such as consumer groups, clients, and government regulations.
However, an enforced corporate governance provides a structure that, at least in theory, works for the benefit of everyone concerned by ensuring that the enterprise adheres to accepted ethical standards and best practices as well as to formal laws. To that end, organizations have been formed at the regional, national, and global levels.
In recent times, corporate governance has received increased attention because of high-profile scandals involving abuse of corporate power and, in some cases, alleged criminal activity by corporate officers. An integral part of an effective corporate governance regime includes provisions for civil or criminal prosecution of individuals who conduct unethical or illegal acts in the name of the enterprise.
Aims and Objectives
It is said that good corporate governance helps an organization achieve several objectives and some of the more important ones include:
• Developing appropriate strategies that result in the achievement of stakeholder objectives
• Attracting, motivating and retaining talent
• Creating a secure and prosperous operating environment and improving operational performance
• Managing and mitigating risk and protecting and enhancing the company’s reputation.
Some aspects covered in the poll include:
• Corporate governance regulations in India
• Corporate governance concerns in India and role of independent directors and audit committees in
addressing these concerns
• Board practices, board oversight of risk management and the importance given to integrity and ethical
values
• Practices that are fundamental to improved corporate governance.
In comparison with developed countries that impose stringent penal and criminal consequences for poor corporate governance, penalty levels in India are considered to be inadequate to enforce good governance. 71 percent of the respondents considered penalty levels to discipline poor and unethical governance to be low. 22 percent of the respondents were either undecided or did not know if the penalty levels are low.
Enforcing Clause 49
In recent years, more and more Indian companies have been raising capital overseas by getting themselves listed on international stock exchanges. These efforts have been accompanied by the Indian government's drive to attract more Foreign Direct Investment (FDI). Both factors have gone hand in hand with the realization that if Indian companies want more access to global capital markets, they will need to make their operations and financial results more transparent. In other words, they will need to improve their standards of corporate governance.
The Securities and Exchange Board of India (SEBI), which regulates India's stock markets, took a major step in this direction a year ago. It asked Indian firms above a certain size to implement Clause 49, a regulation that strengthens the role of independent directors serving on corporate boards. Have these steps made a difference to corporate governance in Indian firms?
Corporate Social Responsibility
Corporate Social Responsibility (CSR) is a concept through which organizations consider the interests of society by taking responsibility for the impact their activities have on customers, suppliers, employees, communities and the environment. This responsibility goes beyond compliance with regulations and is about organizations voluntarily taking further steps to improve the quality of life for employees as well as for the local community and society at large.47 percent of the respondents believe that CSR is not high on the agenda of Indian companies. Thirty percent of the respondents were undecided on this aspect.
Integrity and Ethical Values
Indian companies have been focusing on code of conduct and whistle blower mechanism as a fundamental of good governance. Respondents were asked if similar importance was given to integrity and ethical values. Majority of the respondents say that although Indian companies give similar importance to integrity and ethical values, significant scope exists to enhance integrity and ethical values within the organization and the eco-system.
Effectiveness of Corporate Governance
Monitoring the effectiveness of corporate governance practices is also a key concept emerging in India. We asked respondents who should monitor the effectiveness of corporate governance practices. Forty-seven percent of the respondents believe that effectiveness of corporate governance should be monitored by way of corporate governance audits carried out by corporate governance specialists. Twenty-six percent of the respondents believe that it should be monitored by the boards themselves through self-assessment tools. Fifteen percent of the respondents believe that the monitoring should be by way of investors / minority shareholder groups having access to full information and another 12 percent believed that the monitoring should be through rating agencies.
Factors To Improve Corporate Governance
• 85 percent of the respondents think that the remuneration of Chief Executive
Officers (CEO) should be significantly linked to company performance
• Most respondents believe that while steps at introducing the code of conduct
and whistle blower policy have been introduced, there exists a significant need
to enhance integrity and ethical values in the larger eco-system
• 72 percent of the respondents believe it is necessary for an independent and
transparent process to evaluate performance of board members
• Two-thirds believe that exclusive sessions of independent directors are essential
• 47 percent feel that the effectiveness of corporate governance should be
monitored through audits by corporate governance specialists.

Government’s Initiatives
The Ministry of Corporate Affairs has proposed the New Companies Bill 2008 which aims to improve corporate governance by vesting greater powers in shareholders. These have been balanced by greater emphasis on self-regulation, minimization of regulatory approvals and increased and more transparent disclosures. 53 percent of the respondents believe that the new Companies Act might have a limited or insignificant impact in addressing contemporary corporate governance issues in India. 28 percent of the respondents believe that its impact is likely to be positive. The remaining 19 percent were undecided.
In October 2011, the Ministry of Corporate Affairs said it was in favor of introducing a corporate governance index that would offer rankings to companies adopting governance standards. The index would offer rankings for corporate houses adopting governance standards.
The Ministry was keen to introduce a corporate governance policy to take forward the government's efforts towards better governance in companies. It had been worked out and the competition law would be revisited and amendments would be introduced soon.
Supreme Court’s Verdict
In May 2011, the Supreme Court has given a very fair judgment, with far-reaching implications both for the government and India Inc., in the Reliance Industries Limited (RIL) vs RNRL gas pricing case. It has established unequivocally that the production sharing contract between the government and RIL overrides any private memorandum of understanding arrived at between two individuals. In short, it refused to give sanctity to the Memorandum of Understanding (MoU) signed between the two Ambani brothers. This principle had to be established in the interest of corporate governance or it would have created havoc in the corporate world with promoters of public limited, quoted companies coming together and signing MoUs without a care for the shareholders and other stake holders in the company. Till today the shareholders have not okayed the MoU entered into between Mukesh and Anil Ambani when they divided between themselves the empire created by their father, Dhirubhai Ambani.The second important aspect of the judgment is that the natural resources of a country belong to the government and the government has the right to price it and prioritize the beneficiaries. While it is a well known fact, even internationally, that natural resources belong to the government, the government as a monopoly has the sacred responsibility to put the interest of the nation before everything else when deciding on its use and sale price. This is where the judgment has implications that go beyond the Ambani brothers. The petroleum minister has expressed his happiness that the apex court has upheld his contention that the gas in this case belongs to the government and RIL is only a contractor who can market the product. But it will be the government that will decide at what price it should market it, and to whom it should market it. This is a double-edged sword.

Sri Lankan Government Launches Five-Year Strategic Plan for Development, Sustainability

The Sri Lankan Economic Development Ministry has launched its long overdue five-year strategic plan for development and sustainability. Sri Lanka Tourism Chairman Dr Nalaka Godahewa said the government had clearly identified several areas which needed development for the country to achieve its ambitious goal of 2.5 million tourists by 2016 hoping to earn more than $2.75 billion in foreign exchange. He underlined several key areas in which the private sector could get involved.
Employment Opportunities
The government was expecting to attract more than $ 3 billion in Foreign Direct Investment to support the industry that needs to add around 22,500 additional rooms to its current capacity. According to the strategic plan, we expect investments from the private sector to amount to more than $500 billion by 2020 while the public sector would invest close to $ 20 million.
The government is also strategizing to attract high-spending tourists, diversifying from the current market to achieve $2.75 billion in earnings and creating more than 500,000 direct and indirect employment opportunities.
The government expects to attract more than four million tourists by 2020 with the foreign earnings expected to reach $8 billion at the same time.
Enhancing National Image
In the initial stage of positioning Sri Lanka as the world's most treasured tourism destination, the Sri Lanka Tourism Development Authority and other stake holders would create a conducive environment to attract high spending tourists and ensure their departure at a positive note which would contribute to enhance the country's image.
The country would be marketed under eight themes displaying Sri Lanka as a favorable tourist destination and for its prestige of being the wonder of Asia. The cabinet had appointed a committee to evaluate the procedures of several line agencies to make it better and easier for investors to invest in the tourism sector.

Bangladesh Trade Deficit Crosses $7 Billion

Despite a bullish trend in the export sector, the country's trade deficit has increased by an enormous proportion due to a massive import cost and a slow pace in remittance inflow. According to Bangladesh Bank's (BB) latest statistics on the balance of payment, the trade deficit in the first 11 months (July-May) of the fiscal 2010-2011 increased by 46 percent in comparison with the corresponding period of the previous fiscal. The BB released this information on 14 July 2011.
Difference Between Import and Export
According to the BB information, the import cost during the July-May period of the fiscal 2010-2011 stood at $27.710billion. The export earning during the same period was at $20.610 billion. The difference between import and export that means the trade deficit stood $7.1 billion. The deficit during the corresponding period of the previous fiscal was $4.87 billion. And as a result, pressure has been created on the balance of payment because of the rise in the trade deficit.
The balance in the current account surplus for the said period was only $610 million. The current account surplus for the same period of the previous fiscal year (2009-10) was at $2.970 million. On the other hand, a deficit of $750 million has been created in the overall balance. During the same period of the previous fiscal, there was a $2.66 billion surplus in the overall balance.
Balance of Payment
The BB while preparing the report on the balance of payment adjusts the export earning as the FOB (excluding transport cost of goods before loading ships and shipping cost). And as a result, the figure of export earning in the BB report is comparatively lower than that of the Export Promotion Bureau (EPB).
However, a 10 percent deduction on account of insurance and shipping cost is made from the statistics of import cost received on the basis of C and F (shipping fare and other cost) to include the import cost in the statistics of balance of payment on FOB basis.
About this state of the balance of payment private research organization, Prof Mustafizur Rahman, executive director of the CPD (Center for Policy Dialogue), said that though there has been a big growth in the export the import cost also increased very significantly due to a rise in the prices of commodities in the international market. He said that a big chunk of our export earning is spent for importing the raw materials of the export items. He said that the current account balance has come under a tremendous pressure due to a rise in the trade deficit side by side with a slow pace in the remittance inflow. He said this pressure will continue in the coming says in the wake of the present state of commodity prices in the international market. To overcome this situation, he suggested diversification of the export items and export market in one hand and taking effective measures for increasing remittance inflow on the other.
According to the BB statistics, the deficit in the service sector has also increased side by side with the trading sector. In the first 11 months of the last fiscal year, the trade deficit in the service sector stood at $2.23 billion. The figure was $1.58 billion during the same period of the previous fiscal. At present there is a surplus of $11.14 billion in the current transfer account. Of the amount, remittance inflow was $10.61 billion. A 5 percent growth was registered in the remittance inflow in the first 11 months of the last fiscal year. On the other hand, a deficit of $1.1 billion was recorded during the same period. The deficit in the previous fiscal was $290 million.
FDI Decreasing
According to information in the BB report, in the first 11 months of the last fiscal year a $720 million net Foreign Direct Investment (FDI) came to the country. The net FDI in the previous fiscal was $820million. Meanwhile, a $22 million portfolio foreign investment was withdrawn from the share market. During the same period of the previous fiscal, the portfolio foreign investment withdrawal was $85 million.
Pressure Mounted on Reserve
Pressure has been mounted on foreign exchange reserve because of a rise in the trade deficit and a overall negative impact on the balance of payment. The reserve at the end of May 2011 was increased by a minor proportion in comparison with the same period of the previous fiscal. But the situation has been deteriorated in consideration of the ability of meeting the import cost. The reserve at the end of May 2011 stood at $10.43 billion, which is equivalent to meeting the import cost for 3.6 months. The reserve had the capacity of meeting the import cost for 4.9 months in the previous fiscal.

Chinese Direct Investment in Vietnam in Past 10 Years

The Vietnam-China relationship during the last 10 years has reached a new development era, starting with the defining the framework for the relationship between the two countries in the new century with the 16-word slogan "friendly neighbors, total cooperation, long term stability, looking forward to the future" (1999) to the introduction of four good spirits "good neighbors, good friends, good comrades, good partners" (2002) and finally the upgrading the bilateral relationship to become comprehensive strategic partnership cooperation (2008).

Together with the increased political trust building process, leaders of the two countries always give utmost attention to the building of effective, practical economic relations which are being concretized with development plans to create close links between the two economies such as "two corridors, one belt", "one axe two aisles", "expanded Tonkin gulf cooperation" and they are working towards equilibrium of trade balance and increase Chinese investments in Vietnam.

As one of the main content in the cooperation between the two countries, Chinese direct investments in Vietnam would play an active role in stimulating the mutual cooperation between the two countries. China's direct investments in Vietnam have transformed radically in the past few years as compared to the first nine years after the two countries normalized their relations. Since 2000 until today, Chinese investments have increased rapidly, both in quantity and scale, not to mention the invested localities. This article will present in general China's investments in Vietnam for the last 10 years.

Increase in Project Number and Scale
If during the first nine years since normalization (from November 1991 to December 1999), China only had 76 projects with a total invested capital reported in licenses of $120 million, then ten years later at December 2009, this number has increased up to 657 projects with a total registered capital of $2,673,941,942. In other words, within ten years, the number of Chinese projects in Vietnam has increased eight fold and the registered capital twenty two times compared to the first nine years after normalization, making China the 11th biggest investor among the 43 countries and territories that are investing in Vietnam at present.

Chinese investments increase progressively over the years, with 125 percent in 2008. Nevertheless, due to the global financial crisis together with the downtrend in Foreign Direct Investments (FDI) to Vietnam, China's investments to Vietnam have been reduced drastically in 2009 compared to previous years both in number of projects and newly registered capital. The number of projects and volume of newly registered capital of China in Vietnam in 2009 (with 48 projects and $180.4 million) were about the same with that of 2004 or half of 2008 in number and one third in capital. In the first nine years, the average invested capital of each project was relatively small, with around $1.5 million and there were projects with more or less $100,000 in capital. At present, the average invested capital of one project is $4.3 million with many ranging from $1 to $10 million.

Projects with invested capital ranging from over $10 million to $100 million mainly came after 2007 with landmark projects such as the $175 million BOT (build-operate and trade) project to build the infrastructure of the Haiphong industrial zone by the Shen Viet Joint venture company; the $100 million BOT project to build industrial zone and real estates in Tien Giang province by the Tien Giang Investment and Management company (China); the $60 million project to manufacture footwear in Dong Nai province by Tung Fang company (China); the $33 million steel mill project in Thai Binh province; the South Nam Hoang Dong I Urban development project worth of $27,750,000 of Thanh Ba company, Nannin, China; the $20 million Wolfram starch production project in Quang Ninh province by Wolfram Ha Long company; the $20 million project to manufacture plastic syringe s and plastic products of Takaotek Corporation, China; the $18 million project to produce electronic components in Danang province by Tuong Huu scientific and technological company; the $10 million project of Glory Wing company, China to manufacture MDF boards in Long An province; the $10 million project to supply injection printing, designing and publicity services in Ho Chi Minh city of Hai Thai company, Shantung, China and so on. These projects have contributed to change the outlook of Chinese investments in Vietnam in recent times.

Shift of Investment Portfolio

Chinese investments in Vietnam in the past 10 years have shifted from the hospitality, catering and consumer products sectors to the industrial manufacturing and processing sectors. Among the 17 sectors that China have invested in Vietnam, industrial processing and manufacturing is the top choice with 501/657 projects accounting for 76 percent and followed by construction with 5.3 percent and agriculture-forestry-marine products 3.8 percent.

In addition, Chinese investments are also found in other sectors like real estate business, travel agency, catering, mineral exploitation, information and communication, power, gas, water and air conditioners. To this date, Chinese investments are mainly concentrated in traditional sectors and there is no project in the high-tech sector with large investment capital. Nevertheless, the shift in the areas of investment has caused changes in the scale as well as the form of investment.

Change in Form of Investment
In the past, the majority of Chinese direct investments in Vietnam were under the form of joint ventures with Vietnamese businesses, but for the last ten years, there was a visible change. By 2009, there were 441/657 projects with 100 percent foreign capital accounting to 67 percent of the total projects followed by 169/657 joint ventures (25 percent) and a small number of business cooperation contracts and share holding companies.

The present change has shown that Chinese investors have passed the exploring or experimenting stage by joining with local partners who have a better grip of the market in the nineties of the last century. They are now more confident, more informed to do business by themselves and most of all, they believe in the Vietnamese market.

Expansion of Investment in Localities
At present, Chinese investments are present in 52 provinces and cities of Vietnam; nevertheless, they are mainly concentrated in populous urban areas with large labor forces and good infrastructure appropriate for the import export trade and convenient for traveling to and fro China. Ranking first in attracting Chinese investments by the end of 2009 is Hanoi (112 projects), Ho Chi Minh City (60), Binh Duong (52), Haiphong (43), Quang Ninh (37). Most of the projects in these localities are in the processing, manufacturing, real estate and construction.

Nevertheless, together with the above-mentioned advantages and the policy of China to boost investments overseas (from 2002 to 2007, China's FDIs at overseas has increased nearly seven fold with direct investment capital increasing from $2.5 billion to $18.7 billion helping China to jump from the 26th place to 13th in the world list and become the top investor among the developing countries, we have reason to believe that China direct investments in Vietnam will continue to grow and contribute greatly to each other economy as well as to the Vietnam-China relationship.