Copyright © 2003 The International Herald Tribune |
Ramesh Thakur IHT
Tuesday, January 7, 2003
Ask foreign investors
NEW DELHI A decade ago, China's per capita GDP was about the same as India's. Today it is double. China is outperforming India in almost every facet of national competitiveness, attracting more than 10 times as much foreign capital, increasing its share of world markets and being courted as a responsible manager of global order.
While keeping costs as low as India's and offering the allure of an even bigger domestic market, China has built much better highways, telecommunications, power supply, seaports, airfields and other infrastructure than India.
Meanwhile, some of India's long-standing advantages over China are eroding or becoming less relevant, including English language competency, democracy and the rule of law.
Where China no longer allows ideology to come in the way of national interests, and its version of "socialism with Chinese characteristics" is starting to embrace capitalists within the fold of the Communist Party, significant groups of Indians remain resolutely committed to ideology. India joined the World Trade Organization not out of conviction but because it had little choice. China, by contrast, embraced the WTO as a lever for imposing external discipline to achieve key domestic economic reforms favored by the leadership. Indian economic nationalists remain fiercely opposed to foreign investment, insisting that it will undermine economic autonomy and domestic interests. Many Chinese see foreign capital as an essential tool to buttress national sovereignty. Foreign investment brings not just money for productive enterprises but also modern technology and management expertise to increase efficiency and productivity.
China's leadership sees economic growth as the key to retaining its hold on power, increasing influence in the world and strengthening the military to cope with threats to national security, including international terrorism.
The level of foreign capital tied up in China gives the country a major lobby within the leading economic powers to shield it from hostile foreign government policies. This adds another layer of sovereignty protection.
Fifty years of socialist dogma and policies have left India with such bad infrastructure and mind-sets that foreign investors doubt they can make reasonable profits. Political and bureaucratic hurdles are labyrinthine, while bribery is rampant at many levels in the chain of decision-making required to get government approval. Debilitating state intervention and subsidies constrain rewards for enterprise, initiative and merit on the one hand, and the operation of the price mechanism on the other.
Democratic governance probably assures better long-term stability for India than what China can expect. Thus India may be better able to cope with the threat of an AIDS epidemic because an independent press and the reality check of elections will force governments to intervene early enough to stave off large-scale death. China's closed system makes a strategy of denial easier.
But electoral calculations in India put a premium on sectarian interests and short-term political compulsions that override the long-term national interest. I strongly suspect that more Chinese than Indians would believe that their respective political leaders act in the national interest rather than for personal or partisan gain.
The volatility of democracy makes it exceedingly difficult for Indian governments to make decisions that are timely and forceful. So many different constituencies and interests must be appeased, so much time devoted to getting consensus, that what is necessary for national advancement gets whittled down to what is possible for political survival.
Meanwhile, as part of their longer-term strategic vision, Chinese leaders have been promoting English language and information technology skills, backed by the necessary telecommunications and power infrastructure. The IT sector is a super-success story in India because by its nature and speed it managed to escape government control and regulation. Yet the success may be replicated in China as a result of active government policy.
The writer, vice rector of the United Nations University in Tokyo, comments here in a personal capacity.
Copyright © 2003 The International Herald Tribune