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India’s communist bastion woos overseas investors

SINGAPORE—It has the world’s longest-serving elected communist government but the Indian state of West Bengal is wooing the world’s wealthiest to pour money into its industries, ports and airports, and with some success.

Along the way it’s beginning to shed much of the dogma, which had made it renowned left-wing bastion for decades. “We’re encouraging foreign direct investments because we need it badly,” West Bengal’s Chief Minister Buddhadeb Bhattacharya said yesterday in Singapore, where he was on a roadshow to lure investors to the state, which has the third-biggest economy in India.

“We either reform or perish.” West Bengal, with a population of about 80 million and bordering Bangladesh in India’s east, has had a communist government for the past 28 years.

For decades the state and its capital Kolkata have been synonymous with militant trade unions, strikes, falling productivity and a reputation of being hostile to industrialisation.

When the central government in New Delhi favoured a command economy during the 1970s and 1980s, there was not so much of a contradiction. But when India began embracing economic reform in the early 1990s, West Bengal had a difficult choice to make.

Indian communists have changed over the past decade, Bhattacharya said, learning their lessons from the collapse of the Soviet Union, the rise of China and economic reforms in communist Vietnam.

“We’re not fools. We’re trying to learn from our mistakes,” he said.

“One thing is very clear globalisation has become a must and nobody can hold back this process. The world has become a global village and we have to take advantage of this situation.”

Bhattacharya has been chief minister for the past five years and a senior minister in the state government since his Communist Party of India (Marxist) first came to power in 1977.

He says agricultural reforms in West Bengal had strengthened its rural economy and helped the state economy grow by an average 7 per cent annually in the past 12 years, faster than India’s overall growth rate.

The state government was now building on its strong agricultural base to develop the industrial sector, using an abundance of resources such as coal, iron-ore and minerals, Bhattacharya said.

The pitch appears to be working. West Bengal has already attracted a George Soros-affiliate to set up eastern India’s biggest petrochemical plant near Kolkata, formerly known as Calcutta, at a cost of $1.2 billion. This month it got Japan’s Mitsubishi Chemical Corp. to set up a second petrochemical plant, taking Mitsubishi’s total investments in the state close to $700 million.

West Bengal has jumped on the outsourcing bandwagon as well, and banned labour strikes in the sector the first for an Indian state to ensure the inflow of funds.

Information technology companies such as IBM, Computer Associates and India’s Wipro have opened software and business-process outsourcing centres that have employed tens of thousands of highly qualified, English-speaking graduates. Militant trade unionism in the early decades of the communist government led to a massive flight of capital from the state. But Sanjeev Goenka, one of West Bengal’s top businessmen who was on the roadshow with Bhattacharya, said the labour situation had improved and the government has even helped one of his companies to lay off 30 per cent of its workforce. “The reality is very different from the perception,” Goenka said. “Please come and invest.”

Bhattacharya says his government will allow 100 per cent foreign ownership in new ports, airports and other infrastructure, which the communists were implacably opposed to in the past.

“You want fifty per cent (stake), I’ll give you 100 per cent,” he said, in response to a question.

But even some of the most hopeful in the state acknowledge that the government faces an uphill task in changing investors’ views of the communist-run government.

“It’s very difficult to change perceptions,” said Tarun Das, who headed the Confederation of Indian Industry, India’s biggest business organisation, for 30 years. “Perceptions don’t change overnight.”

It has not helped that communist parties, which provide vital support to the federal government coalition, have blocked some of the reforms proposed by Prime Minister Manmohan Singh.

The left has consistently opposed efforts by the federal government to sell critical state-owned companies such as airlines, airports, oil refiners to foreign investors.

Bhattacharya said although his party is opposed to the sale of profitable state-run companies, it is all for selling control in unprofitable state units because they need the infusion of new technology and capital.

“There is no basic difference between us,” he said, referring to the federal government. “If there are differences we discuss and settle it through dialogue.”