Opinion

Australia up against entry barriers

M. Somasekhar | Updated on September 17, 2011

Mr PETER VARGHESE, AUSTRALIAN HIGH COMMISSIONER IN INDIA

We see food processing, mineral resources, energy, iron ore, healthcare and education as big-ticket areas for Indian investors.



India-Australia bilateral trade is in a buoyant phase. It has been growing at 20 per cent for the past five years. From A$8 billion in 2008, it has touched A$23 billion now. The next target is to double it in the coming five years, to touch A$40 billion. Driving this growth is the surging Indian investment in Australia's resources and the growing basket of traded items. With the economies of both countries doing well compared with most advanced countries, the near-term bilateral engagement looks promising, feels the Australian High Commissioner in India, Mr Peter N. Varghese. In a freewheeling interview with Business Line, Mr Varghese, who is of Indian origin and is completing two years in office in India, spoke on a wide range of issues.

Excerpts from the interview:

You mentioned that there has been a surge in Indian investments in Australia. In which areas specifically?

The resources sector, especially coal mining, has attracted many Indian players. For example, the Adanis have committed A$10 billion to mine acquisition and infrastructure. Similarly, Lanco has bought mines. It is another matter that Lanco is in legal trouble. As far as we are concerned, our interest is to help both companies to invest and do well. The legal issues have to be dealt with by the courts.

In the pipeline there are huge investments. We see a quantum jump in Indian investments in the next 3-5 years. We estimate Indian companies to hold over A$20-billion investments. With Australia expanding its gas production, especially LNG (liquefied natural gas), and given India's appetite for resources, the growth story should get stronger.

What other areas in Australia could attract Indian investors?

We want to broaden the economic base from pre-dominantly commodities. We see food processing, mineral resources, energy, iron ore, healthcare and education as big-ticket in the future.

For example, Australia intends to put nearly A$80 billion into the resources sector in the next 12 months. This will throw up opportunities for Indian infrastructure, power and IT companies.

Manufacturing has presented some opportunities. Mahindra Aerospace has made an investment in Gipps Aero to make small aircraft. The initiative is to make 10-seater aircraft with diversified uses in the Indian market, with intentions of reaching out to other markets later.

Have the contentious issues surrounding education been resolved?

By and large, I think we have put the student issues behind us. Our intention now is to refocus on education sector. We would like to lay stress on attracting Indian students for higher education to Australia, with greater collaborations and linkages across Universities, offering dual badge degrees, Ph.Ds, etc.

At another level, we want to set up vocational training activity in India. We have proposed a School of Mining to be set up in India with the intention of developing trade skills. It is at the feasibility stage now.

It will have Australian curricula and quality standards and we hope to see Indian private sector participation through funding and skill training. The trainees would get a certificate akin to what they would get in Australia. They would get job offers from the funding industries on priority. We have commissioned Chandler & McLeod, a noted HR consultant, to do the feasibility study.

At what stage are the negotiations on FTA (Free Trade Agreement) between the two countries?

We completed the first round of talks in July. It was essentially skirting around issues, explaining systems and focusing on broad issues. The FTA can be a useful step in driving the growth of bilateral trade, which is anticipated to be around A$45 billion soon. I don't think either side expects the negotiations to be easy. It will take time and discussions.

Indian IT companies were bullish on Australia a few years ago and established a presence there. Does the momentum continue or is there a slowdown?

Australia continues to be among the fastest growing markets for Indian IT majors. There are 18 large Indian companies Down Under. With the Australian Government developing the national broadband project, with an investment of A$40 billion, to take broadband connectivity to every home, we see big opportunities for IT companies.

Similarly, Australian IT companies have also found a good foothold in India. iSoft, a health software firm, has nearly 2,000 employees in India. Several Australian majors are looking at outsourcing legal services to India. There is movement in the area of back-office work too.

What are the limiting issues for growth in bilateral trade, according to your perception?

While many issues have been ironed out, market access in certain sectors is hindering growth, For example the agriculture market is restricted in India. We want to see more Australian agri-products reaching India. Similarly, the investment caps on foreign direct investment in sectors such as insurance and multi-brand retailing are a limitation. Finally, the tariff barriers in very few items are bothering us.

What is the scope in renewable energy and also in nuclear energy, where India expects to import uranium?

On the nuclear front we are still talking, there is not much to report on progress. On renewable energy, the emphasis is more on R&D. The Australia-India Science Fund, which has matching funds of A$65 million from each country, is pursuing several projects on solar energy.

Solar power for cold storage in rural areas is one area. TERI (The Energy Research Institute), New Delhi, and the CSIRO (which has a chain of national research institutes in Australia) are working on some research projects. Suzlon, an Indian company, has a wind farm near Canberra.

The Australia-India Strategic Research Fund has taken up Grand Challenge projects in four areas — health, water, energy and environment.

How do you see the Australian presence growing in India?

In the financial sector, three of Australia's top four banks are present in India. Insurance companies are waiting. SBI has a tie-up with AIG. In infrastructure, Leighton Infra has A$2 million worth of projects, while logistics firm Lindfox has a tie-up with the Tatas.

Thiess, a subsidiary of Leighton, is executing a very large contract in a A$25-billion project in the mining sector. Further, the expected reforms in the mining sector will see many Aussie companies coming to India. Croma, the retail chain is growing.

These are some examples, but we are optimistic of faster growth.

Published on August 31, 2011

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