Spurred by UAE investments, Kerala govt woos further FDI

TRIVANDRUM — Boosted by the investments from United Arab Emirates (UAE), the Left Democratic Front government in Kerala has launched a concerted effort to attract more foreign direct investments (FDI) that they opposed while out of power.

By T K Devasia

Published: Fri 25 May 2007, 9:38 AM

Last updated: Sat 4 Apr 2015, 8:37 PM

More than Rs20 billion being invested by DP World on the International Container Transshipment Terminal at Vallarpadam and Rs17 billion to be invested by the Dubai Technology and Media Free Zone Authority (TECOM) on the proposed SmartCity at Kakkand are by far the largest FDI Kerala has received so far.

The state has been lagging behind many other states in the country in respect of FDI despite being one of the largest recipients of remittances from Keralite workers abroad. Remittances now constitute about 22 per cent of Kerala's domestic product.

From January 1999 to December 2005, the FDI approved for the State was Rs.12.17 billion in 184 projects, which constituted only 1.26 per cent of the total FDI approvals in the country, according to the state's economic review.

Maharashtra ranked first in the FDI list with Rs22 billion in 2629 projects followed by Delhi, Tamil Nadu, Karnataka, and Gujarat. Kerala was in the 12th rank in getting FDI as on December 2005. The state attracted only seven foreign companies in 2005 compared to 1280 by Delhi.

While the arrival of the DP World has raised the prospect of massive investments in port-based projects, the advent of SmartCity is expected to pave way for substantial FDI in the information technology, in which the state has several distinctive advantages.

The projects spurred by the container terminal include port-based special economic zone (Rs.75 billion), LNG Terminal (Rs.30 billion), single buoy mooring (Rs.7.5 billion), petrochemical complex (Rs.35 billion) and many others. Work on some of these projects has already started.

The government is now trying to rope in foreign players to develop a similar terminal at Vizhinjam to ensure a similar investment boom in the capital district of Trivandrum. A high-level delegation that visited the Gulf countries recently discussed the project with UAE authorities.

Industry Minister Elamaram Kareem, who headed the delegation, told Khaleej Times that the UAE had evinced interest in investing in port, power and knowledge sectors. The two are in the process of setting up a joint working group to identify the projects.

Chief Minister V S Achuthanandan is exploring the possibility of Russian collaboration for the Vizhinjam project. He has held one round of discussions with Prime Minister Manmohan Singh and Russian envoy to tap the 'Rupee-Rouble fund' for the infrastructure project.

The Russians have already come forward to invest in the mineral sector. A memorandum of understanding (MoU) has already been signed with Russian government-owned Rosoboron Export (RoE) for producing value added products from minerals.

The government is also ready to join hands with Malaysian government for setting up a satellite city at Calicut in North Kerala. A MoU in this regard is expected to be signed next week. The project envisaging a medical city and an IT park will be a joint venture of Kerala and Malaysian governments.

The new-found zeal of the LDF government in pursuing FDI has raised eyebrows among Communist hardliners, who had opposed the FDI while in opposition. Curiously Achuthanandan was in the forefront of the campaign against FDI, saying such investments without technology will harm the state.

He had opposed the SmartCity project pursued by the previous United Democratic Front government's tenure, terming it a real estate project. But today he and his party describe the signing of the final agreement for the Smart City project as the biggest achievement of the LDF government.

Achuthanandan has apparently shed his image as a hardline Communist after he assumed office and is pursuing foreign and private investments in all key sectors to revive the state's battered economy as his West Bengal counterpart and posterboy of reforms Buddhadeb Bhattacharjee did.

The state government has set up a company called Infrastructure Kerala Limited (InKel) to attract NRI investments for developing infrastructure for hi-tech industries. The NRIs and NRI groups have offered about Rs4 billion as share capital for the venture as against Rs740 million sought by the government.

Tourism has already been attracting sizeable FDI without much effort. The latest major FDI in the sector comes from the Singapore-based Banyan Tree Hotels and Resorts and the Kuwait-based Kapico Group. They have joined hands with Mini Muthoottu Group to set up a 7-star resort at Cherthala in Aleppey district at an investment of Rs1.5 billion.

The FDI is expected to give the much-needed take off Kerala looks forward to in the industrial front. The industrial growth in Kerala remained tardy and much below the national average despite the continuing efforts to make it investor-friendly.

The industrial growth was negative in 2001-02 at constant and current prices. Though there was a revival in the following two years, the growth turned negative yet again in 2004-05, but picked up in 2005-06.

According to the latest Economic Review by the State Planning Board, the average industrial growth rate for the period between 1999-2000 and 2005-06 was a meagre 1.54 per cent and from 2003-04 onwards 2.29 per cent. This was far below the national average of around 10 per cent.

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