India is unable to exploit the situation despite a superior manpower pool
As businesses are leaving China, Vietnam (another communist country) is taking the major share, and India is unable to exploit the situation despite manpower pool far superior than that of Vietnam. Why?
There is only one reason
The starting up of a business in India is challenging due to the number of approvals needed, and the lack of a ready infrastructure to move in and start in no time. Bureaucracy is an old reason that has been a successful impediment for 70+ years. So, less said the better.
I had lived in Vietnam for about 25 years. Their most striking quality is simplicity in approach to an object, sharply in focus. The object is Foreign Direct Investment (FDI) and Jobs. No official asks you more than “How much will you invest and how many jobs will you create?” The focus is on FDI. Produce here to export anywhere. There are many operating problems and expenses in Vietnam but all are overlooked as business costs for the ease of starting a business in Vietnam.
The Government has to pass an ordinance immediately. “Instant approvals for FDI in manufacturing/services,” and “Make here to export anywhere scheme.” PSUs to set up Industrial Parks with government authority to license instantly.
The Industrial Policy is clearly stated. The “No List” is clear. The areas of natural resource exploitation, retail, etc., are for the Vietnamese, the prohibited list. Manufacturing of any type is welcome. The labour law is simple. It is contractual. There is a social Insurance payable to the employee and transferrable from employer to employer. A minimum wage is prescribed and rest can be negotiated.
To set up a business in a pre-approved industrial park doesn’t need any governmental approval. The Industrial Park will grant the license obtained from the local authority. The negotiation can be once or twice and the construction can start within a week.
Now to do this in India?
- The Government has to pass an ordinance immediately. “Instant approvals for FDI in manufacturing/services,” and “Make here to export anywhere scheme.” PSUs to set up Industrial Parks with government authority to license instantly.
In Industrial Zones to be set up by PSUs, government approvals can be instant for FDI projects.
- Layout the guidelines for approval and most importantly state the prohibited list. The rest of it is approved for FDI.
- Identify suitable PSUs to make Industrial Parks of not more than 1000 acres each
PSUs must be
a) Financially sound
b) Managerially capable
c) Have a land bank
If all three are not with the same PSU, allow partnership between them. For Eg:- Railways or Visakhapatnam Steel has land and SBI, BHEL, AMUL, or NTPC has management capacity and capital, they form a partnership.
- PSUs with land and infrastructure must be chosen for speed in execution.
- Don’t make it more than 1000 acres. Size attracts un-wanted attention, politics.
- Make 12 such parks across the country which have a good connection to port or Highway/Railway.
- The Industrial Parks are purely for SME/MSME only. The land requirement will not be more than 10 acres maximum per unit. The land is available on rental or purchase for the Industrial units. All services are chargeable in the Industrial Park.
- The Industrial Parks must have basic infrastructure of roads, water, power, customs/GST office and normal ETP, canteen and small office facilities. No need to go out. Practically the government inside the park.
- Industrial Park must have a small workshop.
- All recruitments in Industrial Park can be contractual and voluntary. Severance of contract with 3 months’ notice possible. The minimum wage applies. PF, ESI, gratuity rules apply. All employee benefits are transferable from one employer to another when the worker moves. No trade union in the Industrial Park. Since these Industrial Parks are owned by PSUs they can have special status on labour laws as practically it will be government-owned special Industrial Parks.
- Industrial Parks will have labour recruitment facilitation center. No FDI enterprise needs to go searching.
- Labour welfare center in the park to resolve issues.
- Park will have a small health care center for any emergency.
Since the Industrial Parks will be PSU owned, public confidence & investor confidence will be higher. Since they are government-owned parks, they can enjoy a special status.
- The list of PSUs must be ready in 2-3 weeks. If NCLT companies that have a large debt to PSU Banks have land and infrastructure, take it immediately. Transfer it to a PSU. Make an Industrial Park out of that. The Industrial Parks must be operational by Dec 2020.
- They should be completely managed by the PSU. The PSU will have its officer as the CEO of the park.
- They should be empowered to give the license for FDI within 72 hrs.
- Ask the Indian Embassy everywhere to market it. Each park can target a country USA, Germany, Japan, etc.
- Any applicant who obtains a license has to start construction within 120 days or they forfeit their deposit.
- The parks (PSU owners) must have a 10-year Income Tax holiday. 100% depreciation in 2 years.
- The FDI in all the parks in the first 12 months i.e., from January 2021 to Dec 2021 will have 3 years Income Tax holiday.
- Contractual Employment with purely market-determined wages. No trade union and labour protected as all monetary benefits as per existing law are given – The biggest attraction for FDI.
- When timelines are put on either side, 72 hours for the license, and 120 days to start construction, then the potential investors take it seriously.
- Railways/PSUs that have land can make use of it immediately.
- Since the Industrial Parks will be PSU owned, public confidence & investor confidence will be higher. Since they are government-owned parks, they can enjoy a special status.
- Industrial Parks can have partner banks. Indian lenders will provide only working capital as per their norms to FDI investors. No questions asked about the FDI except that the prohibited list is not allowed.
- Speed in licensing will bring in investors and if the first 50 come in by goodwill, more will migrate.
- FDIs will give jobs and exports to India. GST on local sales. 3 years Income Tax waiver will be more than made up if jobs and exports came in. A quick boost to the economy.
- Ease in managing labour, a big attraction for FDI.
1. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.