GMR case is an eye-opener on the risks of foreign investment ( Economic times )
The Singapore Court of Appeal's ruling upholding the right of Maldives to annul the contract entered into by the previous government with GMR might seem a particularly bitter lesson for GMR.
After all, the company has reportedly spent close to $230 million so far. But the ugly spat carries many lessons worth pondering by other Indian companies, with dreams of going global, and the Indian government.
The fact is that for all the talk of globalisation and rising cross-border capital flows, the legal framework governing cross-border transactions is still largely a work in progress.
International law accepts that when it comes to issues like nationalisation or reneging on contracts by governments, there is not much the law can do to protect commercial interests. It is caveat investor. Sovereign risk is a reality that cannot be wished away.
The first lesson for Indian corporates, therefore, is that when they invest overseas, they must pay close attention to factors like the political dispensation and political stability. In their haste to enter new markets and win attractive deals, companies often overlook these risks.
The second lesson is that one can never be sufficiently careful while drawing up agreements, especially the clause governing jurisdiction in case of disputes.
GMR moved the Singapore High Court as the concession agreement allowed parties to approach the high courts of London or Singapore to sort out disputes, if any. It is open to question whether the court in London would have taken a different view.
The third lesson is that devices like bilateral investment protection agreements and the World Bank's Multilateral Investment Guarantee Agency (Miga) can at best cushion the blow, not eliminate it. The fourth lesson is for Indian banks.
They need to remember that overseas investments are a different kettle of fish altogether. The last lesson is that India needs to grow its limited diplomatic clout.
No Respect for Parliament
If you have watched live debate in Parliament on the issue of FDI in retail, it will become clear that members of Parliament (MPs) are not interested to listen to valuable views of colleagues and neither in maintaining discipline and in saving waste of time on non-issues. When a MP speaks others either sleep or cry so that even others cannot listen seriously.
Ruling party MPs are sure to win the vote because they have managed those who are opposed to FDI by blackmail tactics or by offering handsome fund in lieu of support. Opposition parties are poor in number and hence they are sure that their points against FDI will never be heard in Parliament.
In fact government is bent upon introducing FDI despite large scale protest. Even their allies like DMK and many MPs of Congress Party itself are against FDI. Parties like SP and BSP are though against FDI and they have openly admitted in Parliament that FDI is against the interest of nation but they for the sake of power will vote in favour of FDI. In brief they are ready to act as anti -national only because they do not want BJP to win the vote. For these greedy parties , wealth, wine ,power and post for their colleagues are more important than the interest and image of the country.
WEDNESDAY, DECEMBER 5, 2012
Why FDI in Retail ?
It is important to mention here that even US government has not allowed Walmart like companies to open their chain of shops in big cities like Newyork and Washington. Government of USA has allowed Walmart to open their retail chain in rural areas and small towns only whereas clever leaders of Indian government has allowed Walmart to open their shops only in big cities and Metros. If foreign companies are forced to open their retain chain in only rural areas and small towns like USA , there may be little hope that these companies will buy farm produce directly from farmers and small scale industries and only then dream of reduction in number of middlemen and brokers may be fulfilled by pleaders of FDI.
Moreover there are already numerous retail marts working in metros and big cities. There is no need further to add foreign companies and give a further rise in prices of real estate. If foreign companies will help in reducing prices for the benefit of consumers and increase price for the benefit of farmers , these companies may prove more helpful in rural areas and small towns which are deprived of retail mart till now.
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