The West has been liberal in advising India on the virtues of a flexible labour market. It is now clear that this was meant only for the Third World.
Not too long ago, overseas acquisition was the flavour of the season for India Inc, as some of its members snapped up assets across the globe in sectors from steel, coal mines and aluminium to telecom, wind power, port terminals and hotels. Today, some of those deals have turned sour. In July, Jindal Steel & Power exited from Bolivia, accusing its Government of not allocating the promised natural gas for a proposed $2.1 billion mine-cum-steel project. More recently, the Maldives Government issued a termination notice on the GMR group over its $500 million contract for modernisation of the Male airport. The deepening recession in Europe has, likewise, led Tata Steel to contemplate axing 900 jobs in the UK, over and above the 1,200 that it did last year.
But the entity facing real rough weather is ArcelorMittal – though it is admittedly not an Indian company, being headquartered in Luxembourg and with a London-based promoter (Lakshmi Mittal). The world’s biggest steel maker has been warned by France’s Socialist President, Francois Hollande, that its entire plant at Florange in the Lorraine region would be “nationalised” in the event of any move to shut down the loss-making blast furnace operations in the complex. ArcelorMittal had announced the closure as part of a restructuring plan, entailing retention of only the more viable cold-rolling facilities. The French Government’s hostility to the plan, aiming to restrict job losses to a quarter of the total 2,800-strong workforce at Florange, only goes to show the double standards of the West: Their governments – not to speak of companies or multilateral institutions controlled by them — have been most liberal in dispensing advice about the virtues of globalisation, free trade and flexible labour laws. But when it comes to their own economies or labour, a different protectionist language not shy of employing the ‘N’ threat — reminiscent of the times of Francois Mitterrand or Indira Gandhi — takes over.
There are lessons in this for Indian companies, the most important being that ‘making’ acquisitions is just the first step. No less challenging is ‘managing’ these acquisitions. Very often, it involves dealing with regimes as recalcitrant and unpredictable as the State Governments here, or with countries whose labour markets are as, if not more, rigid as in India. Learning to navigate through these diverse local environments is a necessary part of the transition to becoming true multinationals. Indian companies need to get reconciled to this reality. Nor can they, unlike the Chinese, expect much help here from the Indian Government. But given how suspiciously the world today views the likes of Huawei Technologies or Chinalco — hampering their prospects of bagging contracts — the lack of state backing for Indian companies can actually be an advantage.