Finance Minister P Chidambaram will find a receptive audience when he visits Toronto next week to pitch India, especially its infrastructure sector, as an attractive destination for investors from Canada . While his schedule has not been publicly announced, it is learnt that he will meet with a team of Canadian CEOs as well as leaders of some major Canadian pension plans on April 15.
Among those pension plans is the Canada Pension Plan Investment Board (CPPIB), which runs Canada's largest single-purpose pension fund, and one of the largest such funds in the world, managing over $172 billion.
CPPIB's CEO Mark Wiseman told Business Standard, "As CPPIB seeks to invest and diversify the CPP Fund, a key priority is the fast-growing emerging markets of Asia, including India. India needs foreign investment to fuel its GDP growth, and CPPIB can act as an engaged, productive and patient investor."
CPPIB established its presence in India last year by retaining investment banker Vikram Gandhi's firm, VSG Capital Advisors, as its advisor. The pension plan's first private equity investment in India was a $100 million committed to the Multiples Alternate Asset Management International Fund. "We are also interested in opportunities in the infrastructure and real estate space," said Wiseman.
In recent years, Canadian pension plans have emerged as significant players around the world with large-scale and diversified investments in sectors such as real estate, infrastructure and natural resources, both in developed countries and emerging markets. The top-five plans alone control over half a trillion dollars in assets.
Some of the other pension plans Chidambaram is expected to meet with include the Ontario Teachers' Pension Plan (OTPP), the Montreal-based Caisse de depot, and the Ontario Municipal Employees Retirement System (OMERS). Funds such as OTPP, Canada's largest single-profession pension plan that manages nearly $130 billion, already have investments in India. Last year, OTPP committed under $100 million to the Indian private equity firm Kedaara Capital.
"Canadian pension plans are branding themselves as global investment players and want to be in touch with deals and opportunities around the world," says Rob Stapleford, partner at Mercer, a Toronto-based retirement and investment consulting firm. However, he cautioned India was still playing catch-up to China as an investment destination in Asia.
"The first stop for plans will probably be China as compared to India and you get a sense that the business environment, the entrepreneurial spirit, the growth, I'll say less bureaucracy, may be pluses for China, and in India there would be the rule of law, and democracy would be a plus," said Stapleford. "India probably wouldn't be the first destination but it will be up there for sure," he added.
The finance minister will also invite foreign direct investment (FDI) into India, having stated during a recent visit to Japan that India could easily absorb $50 billion in FDI every year. In Toronto, he is scheduled to hold a round-table discussion with a group of CEOs from the Canadian Council of Chief Executives (CCCE). The council's vice-president of policy, international and fiscal issues, Ailish Campbell, told Business Standard, "Canadian companies have a keen interest in expanding their commercial relationships with India, and building on strengths in infrastructure, banking, transportation and insurance services, among other sectors."
Canada is currently a net importer of FDI from India. Industry leaders say the absence of a bilateral investment treaty is one of the main reasons for Canadian companies holding back on investments in India. The two countries had in fact concluded a Foreign Investment Protection and Promotion Agreement (FIPA) in 2007, but it was put on hold after India began an internal review of its investment policies.
As Peter Sutherland, president and CEO of the Canada-India Business Council, said, "We need to work in parallel to expedite the signing of FIPA because that's a very important psychological as well as legal document. This concern about FIPA is still in front of people's minds, particularly with respect to retroactive taxing on other investments."
The CCCE's Campbell added, "The CCCE also hopes that Canada and India will prioritise the conclusion of a bilateral investment treaty so as to facilitate increased two-way flows of investment, and supports the negotiation of a Comprehensive Economic Partnership Agreement (CEPA)."
Confidence in the regulatory system is also important to pension plans looking at infrastructure investments, said Ryan Bisch, principal at Mercer. "Infrastructure is an asset class where one of the key risks you're taking is regulatory risk. These are monopolistic assets typically, often regulated by a government body and hence understanding how the government is going to treat these assets over the long term is very important," Bisch said.
Apart from private meetings with the CEOs and pension plan leaders, Chidambaram's only public engagement in Toronto is a speech hosted by the Canada- India Business Council, also on April 15.
After his meetings in Toronto, Chidambaram is scheduled to go to Ottawa to meet senior Canadian officials including his counterpart Jim Flaherty, the governor of Canada's central bank Mark Carney, and other Cabinet ministers. A meeting with Prime Minister Stephen Harper may also be on the cards, although Canadian officials declined to confirm any of the engagements.
Chidambaram will be accompanied by Chief Economic Advisor Raghuram Rajan, and senior officials from the finance ministry, the Reserve Bank of India and the Securities and Exchange Board of India. From Canada, the finance minister will travel to the US, where his engagements will include the 2013 Spring Meetings of the International Monetary Fund and the World Bank.