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Vinay Kamath

SIR ROB YOUNG, British High Commissioner to India since January 1999, returns to the UK after four tumultuous years when powerful events gripped the world stage. As he says, the last few months of his assignment have been spent in defending his government's role in Iraq and its aftermath. During his stint here, Sir Rob worked tirelessly behind the scenes to improve Indo-British relations, both at a government level as well as in trade. In Chennai recently, before he retires after 36 years in the Foreign Service, Sir Rob spoke to Business Line on a range of issues.<150>

Excerpts from the interview:

At a time when the Indian privatisation programme seems to have gone off the rails, it would be relevant to ask you about the success of the privatisation programme in the UK. There have been some very successful cases of privatisation, like British Airways, but of late some of the privatised entities in the UK, such as British Rail, are offering deficient service. What have been the pluses and minuses of the privatisation programme in the UK ?

I think the privatisation experience in the UK has been overall quite positive. What has happened is that we have introduced competition into the marketplace in most sectors. That has led to more investments, better services and greater focus on consumer needs.

Success rates have been pretty high. Take, for example, water and electricity, where there have been enormous investments in the last 10-12 years.

In real terms, costs have come down, the consumer has a choice and if he does not like a service, he can switch to another provider. That keeps everybody on their toes and you get value for money. Of course, some sectors have been subject to the international economic climate, like BA, which was extremely successful in the first 10 years of its privatisation.

One failure of privatisation is that of British Rail; we all accept that. That is because of the way in which British Rail was broken up into too many operating companies and also because the franchise periods were too short for firms to get reasonable returns on their investments, which meant that investments were too low.

We have got to sort out the rail system because it has coloured people's views of privatisation. But most people in the UK will agree that the process has been successful in terms of services and cost to the consumer.

What are the lessons India can learn from the UK's privatisation programme?

I think one of the key lessons is that you do not replace a public monopoly with a private monopoly. You have to ensure that privatisation is also exposed to rapid competition.

The most telling example of that in India is telecom. Many companies are in the marketplace and costs have come down dramatically.

The second point I would make is to have an effective and light regulatory framework; again after some fits and starts, India seems to be on the right track.

But it is important that the government does not oversee with a heavy hand the way the privatisation process develops. Regulation should be there only to provide a level-playing field

The Foreign and Commonwealth Office has a number of scholarships under the Chevening banner for Indian students. How has this programme evolved? Has it met the FCO's objectives and what are the spin-offs that you see coming out of the enormous investments that the FCO puts into scholarship programmes for students from the Commonwealth and, in particular, from India?

The number of students from India to the UK has gone up from 4,000 five years ago to 12,000. We expected to reach that figure in 2005, but we have already hit it in 2003-4. That is due to a number of factors.

One of these is the recognition that the UK offers consistently top quality education across the range of universities; it is not the question of some being good and the others not so good. They know they get a good product when they get to the UK, and also the fact that you can convert your student visa to a work permit has also helped.

About 40 per cent of all Indian students in the UK are all doing management-related studies.

As far as scholarships are concerned, we need to maintain its level where Chevenings are, at about 130, and the total number of scholarships offered under all sources is about 700.

That is a small proportion of the total but it provides the brighter students who may not be able to afford a British education the means of doing so.

For us, it brings high quality, enquiring minds into the UK; we learn from them the same way they learn from us, and usually it makes a friend for life for my country. People tend to think British, think about British goods and services, think about even sending their own children later for a British education.

It develops a bond and I personally think one of the strengths of the India-Britain relationships is the extraordinary fabric of people-to-people links built for generations. Indian students going to the UK assisted by scholarships is a way of rejuvenating that process.

The UK is India's second largest trading partner and many say that there is a `cultural fit' in doing business with the UK and vice-versa. Do you see Indo-British trade blossoming further and, specifically, what are the problems that you see can hamper this relationship?

Both countries feel comfortable dealing with one another because of a shared political and judicial framework, commercial practices are the same and, of course, English.

Clearly, the biggest factor in developing trade and investment into India from the UK in the past 10 years is the trade and reform process; it has opened up the market in a big way and that will continue while FDI caps are raised, making it easier for British firms to set up subsidiaries in India; that will be a big factor.

Lower taxes will also be a factor. Continued reforms will act as a stimulus to trade and investment from the UK. It has developed fast in the other direction as well; we have 450 Indian firms investing in the UK and that has more than tripled in the last five years.

The majority is in the IT sphere, but that is a big blow for confidence in the British economy, which has grown faster than any other economy in Europe in the last 10 years. In general, anyone looking to do business in Europe uses the UK as a springboard.

As for the factors hampering investment, one is the pace of reforms; the faster they go, the faster, I believe, FDI will grow. Conversely, delays in privatisation; if there is a delay in the privatisation of HPCL and BPCL, that could effect at least one major British oil company in India.

Two British companies are interested; one could be successful. The longer the delay in privatisation, the longer the delay in investment.

The debate about opening up the economy has been largely won, internally in India, but there are still pockets of resistance, either for ideological reasons or vested interests, but also the bureaucracy can be slow.

If a small or medium-sized firm wants to invest and cannot clinch a deal in one or two visits, it gives up because it does not have the resources. Red tape still exists, but not everywhere.

Some States have become investor-friendly and have much smoother procedures than others, so it is a question of spreading best practices around the country to encourage more FDI.

In my time, I have seen a big improvement. I see a great future for trading and investment relationship between India and the UK. The pace is, to some extent, for India to set.

There have been reports about the enormous scope for outsourcing work from India. But there seems to be a backlash in the countries that are looking to India as a destination to source their work from. What is the British attitude to this? Do you see outsourcing of British jobs to Indian companies creating problems for companies and politicians back home? Will there be a social backlash against Indians working abroad?

The British government's attitude is very simple: if a firm believes it needs to outsource its activities to remain competitive, then it should outsource; the alternative is to become uncompetitive and die. So, while we are not encouraging outsourcing, we very well understand why some firms need to do it. It is a virtuous circle in which the firm grows internationally, thereby, creating more jobs back home.

Now, some firms are managing this without too much of reaction from the trade unions while others are running into choppy waters. But we come back to the same question, how does the firm remain competitive and grow? So, outsourcing is here to stay.

There are call centres and back-office transactions, and they like the product; it works. British firms are satisfied that they get good results from India.

There has been some backlash from the trade unions but politicians are not going to let that be an overriding factor; they see the key issue as competitiveness of British firms.

Despite the seeming pressure that the UK and the US exert on Pakistan to come to the negotiating table, the Pakistan President stills puts Kashmir on top of the agenda in international fora, like he recently did at the UN. Do you see any solution in sight for better Indo-Pak relations?

A solution will take a long time; the issues are very long-standing ones, and have caused a great deal of bitterness on both sides; attitudes are entrenched.

The Indian Prime Minister has made great efforts through his three initiatives to try to break the deadlock. But there is a serious issue about terrorism and continuing support across the LoC.

We are continuing to work with the Pakistan authorities to complete their commitments they made last year to stop support for terrorism permanently. There is some way to go, but we are continuing to work on it because, undoubtedly, cross-border terrorism is an obstacle to talks.

You must have spent a considerable part of your last few months in India defending the British decision to wage war in Iraq. How bad was that?

In one word, yes! But, I don't know how many people were convinced. But it was the right thing to do. Saddam Hussein had flouted, ignored 17 UN security council resolutions demanding that he comply to give up his weapons of mass destruction; he was given one last chance last November; that resolution made it clear that if he did not comply serious consequences would follow, and everyone knows what that means in UN terms.

He did not comply, and we felt entirely justified in taking action as did the Americans.

Clearly, the aftermath of the exercise is throwing up a number of problems, not least of all the security implications. We have to sort that out, provide a secure environment for the people of Iraq where they can develop their political process and economy.

I believe the majority of Iraqis want peace and prosperity within a democratic framework. That is what we are aiming to provide and then we shall get out.

What do you say was the main challenge in your tenure in India? And if there is anything you would like to do all over again, what would that be?

When Harold Macmillan was asked this question when he gave up office in 1963, he gave a one-word answer: Events. And it is true that events have a capacity to throw the best-laid plans off course.

sI think what I have tried to do in my time in India with my Government is to increase the levels of trust between the two countries.

The relationship had been developing considerably since the time the reforms process began. There was a hiccup in 1997-98 for various reasons, but I came feeling that the levels of trust were not as high as they should be and that was inhibiting cooperation in a number of fields.

I do feel that now we have established a much deeper understanding and greater trust. I think we are now in a position to deal with differences amicably without their becoming front-page problems and we are genuinely trying to identify common ground on the totality of international issues and trying to coordinate our approaches. So, I see a deepening of our relationship on the major issues of the day.

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