THIRUVANANTHAPURAM, 20 January 2007 — Industry Minister Elamaram Kareem sounds more liberal and investor-friendly than any of Kerala’s state officials. A trade union leader from the Communist Party of India-Marxist, he was handpicked to boost industrialization in a state that remains industrially backward despite huge remittances from its migrant workforce.
As with many modern leftist political leaders (Brazilian President Luis Inacio Lula da Silva comes to mind), Kareem is in the challenging position of balancing fiscal discipline and economic growth with maintaining social benefits and preserving the southern Indian state’s communal heritage.
No doubt, Kareem has proved his mettle within a short span of time after assuming office in May. His main goal is to boost investor confidence in Kerala to attract foreign and Indian direct investment. One of his main goals, he says, is to boost industrial growth, which has taken second strong to the robust growth in the services sector.
In an interview with Arab News Kareem spoke about his plans to boost industrialization in the state.
Q. What are your government’s plans to attract investment and generate revenue?
A. The remittances from the Gulf have helped a lot in strengthening the economy and boosting the tertiary sector. In 1974 and ’75, when a large-scale migration to the Gulf started, primary sector (agriculture) constituted 48.9 percent of the state’s economy while the secondary sector (industries) constituted 18.3 percent. The tertiary sector, which involves trade, commerce and services, accounted for 33.6 percent of the GDP. But by 2004 and 2005, the primary sector’s share had declined sharply to 16.6 percent and the secondary sector (industries) remained static at 18.7 percent. Instead of the industrial growth taking over agriculture, what we have been witnessing in Kerala is a growth of tertiary sector with a 64.7 percent share. We are now making a serious attempt at streamlining this and making Kerala a major hub for commerce and trade. Our policies should be based on this fact and should be driven by the market’s demand without neglecting the manufacturing sector altogether.
Q. Do you have specific programs?
A. On the model of the business-to-business meet we have been holding each year in Kochi, we are planning a business-technology meet that would showcase the best available technology from all over the world for the benefit of the entrepreneurs. This will be held in April-May in Kochi. We recently held a mini meet for the polyurethane slipper manufacturers in Kozhikode and it went well with the producers here. We received tremendous response from machinery manufactures from countries like China and Taiwan.
Q. What are other areas of focus?
A. We would be releasing our industrial policy next month and its draft is already in circulation. The focus this year is on turning the port city of Kochi into an electronics-manufacturing hub by taking advantage of the excellent airport and seaport there. The Kerala market is flooded with electronic goods coming from outside as we have very few manufacturers. In the 80s, we showed the way to the rest of India by setting up the Kerala State Electronics Corporation (Keltron). But it failed to meet the competition from Indian and foreign companies by upgrading technology and adopting an aggressive marketing strategy. We are now looking at the public-private-partnership model that was behind the success story of Cochin International Airport Limited (CIAL) for this industry to take off. We are in talks with some companies that had international experience for creating world-class infrastructure for a product-specific special economic zone on 250 acres. The Kerala State Industrial Development Corporation has been asked to acquire land within a month.
Q. What would be the role of Non-Resident Indians in these projects?
A. We are facing an acute shortage of built-up space for new generation industries like information technology, biotechnology and nanotechnology, which are in great demand. The Technopark here and Infopark in Kochi are fully sold out. So we decided to launch an infrastructure development company for creating high-tech parks and world-class roads that would attract investors. As in the successful model of CIAL in which 10,000 NRIs from 30 countries have invested, the state government will hold 26-percent stake in the proposed Infrastructure Kerala Limited (INKAL) and offer the rest to the NRIs. The company will have a paid-up capital of one billion rupees from 100,000 shares and raise funds through term loans and other financial instruments for the projects. INKAL will spend Rs15 billion for creating infrastructure in the first year alone.
Q. What would be the flagship project of the company?
A. The INKAL will first take up the hi-tech corridor project along the Thiruvananthapuram-Kollam stretch of the national highway in southern Kerala. The hi-tech corridor will house new generation industries that cause no pollution or overuse natural resources. Rainwater harvesting would be made mandatory for all projects to meet shortage of potable water. The government is planning roadshows in the Gulf countries to promote the company in March and April. We want the average NRI to pick up shares. There’s no reason to doubt the success of the venture since it will be free of bureaucratic trappings and the board will have the freedom to run the company viably, like CIAL, which has been registering an annual growth of more than 20 percent. The idea is that anyone from anywhere can come to Kerala and start business in a plug-and-play environment here.
Q. Kerala lacks good roads and excellent physical connectivity is essential for economic growth. Is the expressway project of the previous government still on the government’s agenda?
A. Lack of good roads for the movement of men and materials is a major hurdle to economic growth. Good roads for express travel have to be built. The new company would take up the road projects too. You call it by any name. The “labor pains” have just started and the delivery is expected soon.
Q. What would be the level of government investments in these projects?
A. The government’s investment in these projects would be minimal and private investment would be encouraged in all sectors. The government would concentrate on generating power and improving existing infrastructure and it likes to remain as a facilitator.
Q. Do you see any perceptible change in investor confidence?
A. The investment climate in the state has gone through a drastic change. The employer needs the right to pick suitable employees without trade unions harassing them with their own employment lists. At the same time, employers shouldn’t import cheap labor from outside Kerala at the expense of local workers. We put an end to ghost money collection at Kochi port within months of assuming office. (A union used to draft labor for work at the port and pocket huge commissions.)
Q. How do the trade and industry respond to your initiatives?
A. I have been meeting potential investors almost everyday and we receive good responses. We decided not to announce several projects fearing speculative land deals. Sobha group (headed by ex-NRI PNC Menon) has started work on its Hi-Tec City on 310 acres in Kochi for manufacturing units for electronic goods, medical equipment, etc., besides a township with shopping malls and entertainment facilities. The project will create 54,000 jobs. They also have plans for captive power plants and rainwater harvesting. Another NRI group is planning the state’s first private university in Kozhikode offering foreign degrees. They don’t ask for concessions and offers to pay services charges to the government for clearing bottlenecks.
Q. Kerala is known for quality manpower and its human development index comparable with advanced countries. What would be your department’s contribution in strengthening this?
A. We aim to develop Kerala as a global center of excellence with state of the art education and skills aimed at preparing a pool of multi-skilled, technically competent individuals and organizations. We will promote and help facilitate establishment of specialized skill development institutions at key locations suitable for manufacturing and knowledge-based industries.
Q. Kerala still has an image problem among the big investors. Is there any specific program to improve the image?
A. We have some groups such as Nest, Eastern and Kitex that had scripted success stories without the government support. Able entrepreneurs head them and they experience no labor problems. They have mastered the art of management and they know how to run a business in Kerala.
