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Tuesday, November 27, 2007

Guangdong vs Gujarat

Hot special economic zones. Booming industries. Busy ports. Rapid economic growth. Massive inflows of foreign direct investment. Yup, that's Guangdong Gujarat.

This week's Asia Times has a long study of the success of the Indian state of Gujarat (Wiki Gujarat):

The northwestern state of Gujarat - notorious for horrific communal violence in 2002 in which over a thousand people, mainly Muslims, were killed - has emerged as India's favored destination for investments. Its dazzling economic success is being highlighted by Chief Minister Narendra Modi in his election campaign as he makes a bid for a third straight term in office in upcoming assembly elections in the state.

According to a recent study by the Reserve Bank of India, the country's central bank, Gujarat stood first in the country with investments of US$17.8 billion in 2006-07 or 25.8% of India's total investment of $69 billion during the year.


The article is well worth a read, for it gives a glimpse of India, clicking along at 8-9% annually growthwise....

"Gujarat has emerged as India's special economic zone [SEZ]," Modi boasted in his speech at a recent meeting of the World Economic Forum at Dalian in China, referring to huge success that Gujarat has experienced in attracting domestic and foreign investment.

Gujarat's experience with setting up SEZs has been pretty smooth. Unlike in other parts of the country where land acquisition for SEZs has encountered massive protests, in Gujarat where 33 SEZ proposals have been approved since the state's SEZ Act was passed in 2004, the process has been largely trouble-free. Barring the case of Reliance's SEZ near Jamnagar, where farmers went to court, and some protest in Por near Vadodara, Gujarat has seen little protest over land acquisition.

This is because Gujarat's port-led development of SEZs involves setting up SEZs along its 1,600-kilometer-long coastline. SEZs are located on large tracts of fallow and saline land in Kutch and Saurashtra. This is arid land that had no takers earlier; but the SEZs now hold out the promise of economic activity and are welcomed by the locals.

The Mundra SEZ, for instance, is being built on land virtually unfit for human habitation and it has brightened economic prospects immensely. A plot here which might have fetched a price of $2,500-$5,000 a few years ago now sells at $250,000. Farmers are eager to sell their land. This is not the case in other parts of India where SEZ developers are eyeing rich agricultural land that farmers are reluctant to sell.

At the same time, Asia Times also reports that across the Strait, Guangdong is close to realizing its long-cherished goal of overtaking the Four Little Dragons, according to Chinese officials:

Guangdong Governor Huang Huahua declared last week at a public function that the province could overtake Taiwan this year and would continue to strive to catch up with South Korea.

Chinese media quoted Huang as saying that Guangdong's GDP was expected to reach more than US$390 billion for the whole of 2007, after registering a year-on-year growth of 14.7% from January to October.

According to official estimates, Taiwan's economy is expected to grow 5 % to more than $380 billion this year. In 1998, Guangdong's economy reached $103 billion and that of Singapore generated $82.8 billion. In 2003, the province's economy hit $191.4 billion, surpassing Hong Kong's $158.5 billion.

"From 1991 to 2006, Guangdong registered an average annual economic growth of 14.4%, which was not only more than four times the average annual growth in the world, but also higher than the average annual growth of 'the four little dragons' in the 1970s when they experienced rapid growth," Huang said.

"Guangdong generated an economy of 2.6 trillion yuan [US$351 billion] last year, increasing by 14.1% when compared with 2005. The figure doubled that in 2001 and accounted for one-eighth of the country's total," he said.

However, experts say it may not be easy for Guangdong to catch up with South Korea in a few years. In South Korea, the Ministry of Finance and Economy in July revised its GDP growth estimate for the whole of 2007 to 4.6% from 4.5%, due to strong export and domestic demand. In 2006, South Korea's GDP grew by 5% to $897.4 billion, due to popular demand for key export products such as mobile phones.

As readers of this blog know, I've long advocated closer Taiwan-India ties. China is not the only country in the world growing at booming rates, and there is no reason why Taiwan should not be trying to cash in on Indian growth as well. The government has recently been working to develop India ties -- as evidenced by the Taitronics expo there in September and the signing of trade agreements between the two nations.

7 comments:

  1. The problem is, other than it being "the right thing to do," what incentive does the average Taiwanese businessman have to invest in India, a (more) distant country with different languages and culture, than to just join his fellow Taiwanese businessmen across the Strait, where the language and customs are more familiar?

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  2. I read through the links you put on your comment thread about Taiwan's program for accepting high tech workers. From everything I saw there, it looked like a very recent liberalization of visa rules. If that's the case, we may be seeing a lot more Indian tech workers here in Taiwan in the near future.

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  3. Adam, I think that's something both governments have to work on more. Overcoming the food and language barriers -- which I suspect are major problems for Taiwan businessmen, heck they import Taiwan food into China!....

    Mark, there is already a big wave of INdian tech workers coming in. Frankly, anything that raises the availability of INdian food in Taiwan is a good thing, IMHO.

    BTW, that probability problem of yours was absolutely fascinating. More stuff like that, please.

    Michael

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  4. Adam, Taiwanese businesspeople are already starting to divest from the Mainland and reinvest in friendlier economic climates, such as Vietnam and The Philippines. A strengthened relationship with India, as well as these other countries, puts Taiwan in good company of countries who are already vigilant of and worried about Mainland hegemony.

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  5. Thanks, Michael. I'm glad you liked it. It may have been the first time any thread of mine has actually gotten a comment out of Wayne.

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  6. So u think the indians will not cheat the tw business man? India is, although a democracy, even more corrupt than china. Check it out:
    http://www.nationmaster.com/graph/gov_cor-government-corruption
    Ever did business with india? its a pain in the ass: never delivered in time, ridiculous excuses and slooow working speed. at least in china, the taiwanese know what or with whom they r dealing with. In case of problems, u r at least able to understand what ppl around u r talking about.
    The reason why tw r investing somewhere else is simple:
    they cant beat the fierce competitions from south korea or the west(US,Germay etc). Tw has lost its meanings as an investment power for china, Sk has taken its place. China is now not depended on tws investments anymore. China imports more goods from Tw than exports. In order to survive, Tw bus. man has to find other places. China just dont care about that as much as the tw gov want it to be.
    They think when they threat china with investment retreatment, china will get pissed off. But...Ups, its too late to scare china. Sk will love to jump into the hole
    and get richer and richer, while the tw man is struggling to start a new business in a foreign country with no garantee, no given advantages(KP does)from the indian gov. I wish them good luck.

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  7. The lack of laws in China is leading to Businesses to divest into other countries. Ever have to deal with an inspection from the government and told to pay 400,000rmbs or you will face a shut down or have the manager put into a holding cell? Most of the small to medium businesses from Taiwan, registered in a different country but Taiwanese, or even their own Chinese citizens have to deal with this blackmail all the time. You are at their mercy.

    http://www.chinapost.com.tw/print/119900.htm

    It's basically like paying protection money every year in the west but from the government instead of gangsters.

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