Mea Expresses Concern At Hurdles To Fdi

The Union ministry of external affairs has expressed serious concern about the hurdles being faced by foreign investors due to the slow pace of decision-making and procedures, which is being construed as bureaucratic dilly-dallying. According to the ministry, this is resulting in prospective foreign investors shying away from India.

In a strongly worded note to the Foreign Investment Promotion Board, prepared by the investment publicity division of the MEA, the ministry has pinpointed four areas of concern. These are the adverse effect on foreign investors of the governments decision to bar foreign airlines from picking up equity in domestic airlines, the poor perception about the Indian bureaucracy, the growing gap between projects approved and actual FDI inflows, and the numerous procedural delays and hurdles faced by foreign companies while putting up projects in India. The note adds that the situation calls for a serious examination of what is holding back foreign investors.

Responding to the MEAs concerns, the core group of secretaries of the FIPB has decided to discuss these issues at its next meeting, to be held in a few days.

The MEA note asserts: Indias open door policy on foreign investments has received a jolt by the decision not to allow foreign airlines equity access in the local civil aviation sector. The world media has cried foul and described it as a retrograde step, putting doubts on Indian commitment for market and global economy.

The note adds: According to our High Commission in Singapore .... (these decisions) have vitiated the climate of economic cooperation from Singapore.

The note also points out: Unfortunately, a perception is persisting that India is still in the vicious grip of red-tapism and a tenacious bureaucracy. It also touches upon the fact that there are certain factors which are pulling them (foreign investors) from putting their money in India. The note says this is clearly reflected in the yawning gap between investment proposals approved and actual FDI inflows.

The note points out that in countries like China, Malaysia and Indonesia, nearly 60-70 per cent of the proposals received and approved eventually fructify. Our figures, on the other hand, have been hovering around 20 per cent.

The MEA notes that the big gap between approvals and actual investment could perhaps be on account of a definite preference of a foreign investor for investing his money in these countries rather than in India.

As a remedial measure, the note urges the government to not only make our system more investor-friendly but also to make it appear to be so. This could be achieved through an aggressive public relations exercise, by keeping constant liaison with the foreign investors after approval of the proposal, and facilitating various steps involved in the actual implementation of the proposal.