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China and India compared as investment destinations

[Topics under debate]: GOOD GOVERNANCE
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I thought this piece should be of interest to IPI members.

Ram Narayanan

The Wall Street Journal of June 17, 1999 summarizes the findings of an
interesting survey that gives U.S. companies that operate in both India
China a chance to compare the attributes of the two huge emerging

With U.S. relations with China in turmoil, some U.S. multinationals have

declared India to be a more acceptable investment risk and a comparable
market opportunity, according to a recent survey.

The survey, whose results were presented at a meeting of the U.S.- India

Business Council on June 16, gave U.S. companies that operate in both
and China a chance to compare the attributes of the two huge emerging

Gautam Mahajan, the president of the management consulting firm
India Ltd., which co-sponsored the survey, said it gives China
better scores in political stability and market size and rates the two
countries about the same on the level of corruption. "But India wins
down in language, legal system, prices and the quality of management and

work force," he said.

Some 53% of the executives surveyed judged India to have an overall
country risk, while 13% gave their nod to China. The companies that
submitted responses included Motorola Inc., General Electric Co., Compaq

Computer Corp. and Xerox Corp., which also co-sponsored the survey.

The survey was conducted between November 1998 and February, when
relations were already starting to sour over trade and
human-rights issues.

But even before Indian businessmen attending this Washington meeting had
chance to gloat, Stuart Eisenstat, the undersecretary of state for
affairs, reminded them that India 's performance still lags far behind
potential. He noted that foreign investment in Indian infrastructure,
four successive New Delhi governments have identified as a high
has "remained flat when it should be

Mr. Eisenstat called on India to "break out of the vicious cycle" of
outworn infrastructure, inadequate domestic capital formation and high
fiscal deficits. He also warned that India won't begin to catch up with
China in trade until it "accepts the challenge of globalization." The
two-way U.S.- India trade amounts to only a little over $10 billion
annually, while China has a trade surplus with the U.S. approaching $60
billion a year.

Mr. Eisenstat, however, called attention to the fact that when India set

off a series of nuclear tests in May 1998, both the U.S. government and
U.S. business community bent over backward to ensure that trade with
wouldn't be severely damaged by U.S. sanctions. He said the U.S. is
to give India (and Pakistan, which conducted its own nuclear tests last
year), another yearlong waiver from most of the effects of these

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