R Srinivasan

Taking on China is not Modi’s job alone

R Srinivasan | Updated on December 23, 2020

Hurting sentiment: The Wistron worker unrest has marred India’s image

From entrepreneurs to bureaucrats, everyone has to do their bit to showcase India as a credible investment destination

Two recent incidents highlight just how badly all stakeholders — private sector, as well as the Central and State governments — need to get their act together, if India is to seriously take on China both politically and economically.

The first was the recent violence at Apple’s contract manufacturer Wistron’s facility in Kolar, Karnataka. The second was a quiet change of guard at India’s telecommunications testing and certification agency, the Telecommunication Engineering Centre (TEC). Together, they show up the gaps between strategic policy intent at the top and the executive arm at the ground level.

The Wistron fiasco

The Wistron violence first. Hundreds of workers at the Taiwanese manufacturer’s plant, which has been on a hectic expansion spree after the Centre’s ‘performance linked incentive’ scheme for telecom manufacturers was announced and the world’s most valuable company decided to place a larger bet on India, went on a rampage, vandalising manufacturing facilities. Preliminary investigations found that many temporary staff had not been paid, some for months, and that there was a major misunderstanding/communication gap over changed working hours.

Wistron has sacked the Vice-President tasked with overseeing India matters and said it is reviewing its processes vis-à-vis workers, temporary staff in particular. Apple, meanwhile, said it is freezing further business to Wistron till it is satisfied that the supplier meets its “supplier code of conduct” requirements.

But the damage has already been done. Wistron’s India plans, which included as many as 20,000 hires, are on hold, as are Apple’s in India. India’s “Make in India” strategy has suffered a blow, as has its ease of doing business reputation. More seriously, India’s targeted bid to encourage global brands to shift (or at least split) their manufacturing capacity from China to India has suffered a blow. The booming handset manufacturing sector in India, which was earlier estimated to add as many as 50,000 jobs in 2021 alone, may go slow till they are sure that their units will not suffer a Wistron-like blow-out.

China’s state-controlled media has been quick to seize on this, warning other manufacturers of the “danger” of shifting their base from China to a country whose economic and social stability is “under threat.”

Note the difference here. While our local media has been reporting on the Wistron issue as yet another industrial relations problems faced by one particular manufacturer in one particular State, the Chinese media has quickly made it a national problem and an example of failure of India’s state policy. This narrative has also been picked up by some influential trade analysts and think tanks, as well as global media. India has done nothing to counter this narrative so far, which may end up hurting future investments in some way.

There is a clear lesson in this for everyone who has a stake in the India Growth Story, not just Apple and Wistron. Samsung and Apple’s decision to significantly up their manufacturing presence in India was a significant win for the “make in India” initiative, as well as a win in India’s undeclared economic offensive against China, particularly post Doklam. Samsung went to Uttar Pradesh, Wistron to Karnataka.

Both are ruled by the BJP, which is also in power at the Centre, but it is moot whether either or both States saw these developments as business wins of national and strategic importance and treated them accordingly.

The world is watching

Apple is the world’s most valuable company. How Apple fared with its India bet is being watched the world over, not just by phone makers, but by investors in other industries, as well as the other nations who are interested — or rather worried — by China’s economic superpower status. It should have been treated as a project of national importance, not just by the Centre, but by the State government, to ensure that the plans went off smoothly and that both India and Karnataka had an example to showcase to the world for soliciting manufacturing investments.

Instead, it was treated like just another investment in India. Which meant that the red carpet and the single window vanished after the investment was committed and the company left to fend for itself. It is clear that while there were several systemic and procedural failures at Wistron, there was also a lack of understanding of both the legal and regulatory requirements as well as local conditions, which close monitoring and handholding by the administrations in both Delhi and Bengaluru could have helped the company avoid making, averting a major PR disaster for India in the process.

A routine transfer?

Now turn to the second incident. The Department of Telecommunications, under whose administrative ambit the TEC falls, recently replaced the head of the testing and certification agency. While the transfer was sought to be passed off as routine, insiders say that the Ministry acted after finding out that the TEC had not only certified equipment from Chinese manufacturers like Huawei and ZTE as acceptable for being deployed in Indian networks, it also found to its alarm that the TEC had drafted representatives of Huawei, which has already been banned by the US for its alleged links with the Chinese military, as members of several expert advisory groups which were working on plans for India’s ambitious 5G roll-out.

The certifications have now been put on hold and the Union Cabinet was forced to quickly bring out a policy on “trusted” suppliers specifically for the telecom sector.

So this is the other lesson. India’s frosty relations with China are not a recent development, nor are security concerns over China-made core telecom network equipment something which would have been unknown to India’s top telecom administration. Yet, the fact that such equipment was cleared even as a specific policy against precisely this development was in the works, and the fact that experts from these companies whose equipment is considered a security risk are allowed to not only be privy to but actually help draft India’s future network plans, takes our traditional “right arm not knowing the left arm’s action” problem to another plane altogether.

For better or worse, good reasons or bad, India has decided to go toe-to-toe with China. But this is a battle which needs to be fought not just by the soldiers on the icy Himalayan heights but by investment bankers and babus as well, even, I daresay, the worker who assembles that iPhone. And unless such a realisation percolates nationally, ensuring China’s industrial transfer shifts to India may remain, as a Chinese Twitter handle gleefully noted, “sheer fantasy.”

The writer is a former Editor of BusinessLine

Published on December 23, 2020

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