THIRUVANANTHAPURAM, 21 April 2007 — With both the state government and Dubai’s Tecom Investments agreeing to set up Smart City, an exclusive zone for information technology in Kochi, industry circles here are upbeat about the prospects of global IT majors coming to the port city.
Tecom’s Dubai Internet City has almost every global brand that matters, including Microsoft, Intel, Sun Microsystems, Hewlett-Packard, Cisco Systems, IBM, Dell, Siemens and Sony Ericsson. These companies are expected to shift their labor-intensive units to Kochi.
The special economic zone where four million sq. ft. of built-up space has been planned is expected to change the profile of the state that lags far behind its neighbors.
Last year, the state exported software worth Rs.2.9 billion compared to Karnataka’s Rs.370 billion, Tamil Nadu’s Rs.139.6 billion and Andhra Pradesh’s Rs.125.21 billion.
With India projecting its booming software industry’s annual export at Rs.2,600 billion by 2010, Kerala also hopes to join the big league.
The Tecom (Technology, Electronics, Commerce and Media Free Zone) is expected to invest Rs.17 billion in the Smart City. This would be the second major foreign direct investment after the Dubai Port World’s international container transshipment terminal (India Gateway Terminal) project at the Cochin port.
As the Smart City’s prospects are bright, leading builders in India are also flocking the city. They have already announced their housing and allied projects with a total of 12 million sq. ft.
The Smart City is expected to create 90,000 IT jobs in five years. Four thousand to 7,000 workers are expected to be employed on daily basis during the construction of the facility. The first block would be completed in 18 months, sources at the chief minister’s office said.
Kerala Chief Secretary Lissie Jacob received a go-ahead from Tecom officials last week in response to the draft proposals she had sent earlier. The proposal got a nod following talks between Chief Minister V.S. Achuthanandan and Tecom officials.
The state government would hand over land on a 99-year lease. It has also agreed in principle to the Tecom Investments’ demand for freehold on 12 percent of land outside the special economic zone.
The state’s Left Democratic Front (LDF) government had informed the Tecom Investments that their claim for freehold inside the SEZ, considered almost a foreign territory that allows tax free investments and repatriation, cannot be considered since the Communist Party of India-Marxist (CPI-M) that leads the LDRF was opposed to FDIs in the SEZs.
The talks were stalled after Tecom reportedly insisted on freehold on the land inside the SEZ. Achuthanandan then approached the CPI-M for a political clearance arguing the case of Smart City was different since the state would have 16 percent stake in the company, which was to be raised to 26 percent gradually.
Both parties agreed to the new proposal since the CPI-M was not ready to change its position.
Meanwhile, the state government looked into the proposals from two other companies but they failed to convince the government about their expertise in building world-class infrastructure and market the space globally.
Ernakulam Chief District Administrator A.P.M. Mohammed Hanish said that except for 10 acres, the 246-acre land earmarked for the project, was ready to be handed over to the Smart City anytime.
Tecom authorities signed a memorandum of understanding with the state government in 2005 despite stiff resistance from Achuthanandan, then leader of opposition.
Talks resumed with fresh conditions after the LDF came to power in May 2006.
As per the draft agreement released by the previous United Democratic Front (UDF) government, the state government will hold a nine percent stake in the joint venture and the existing Infopark will be transferred to the new company.
The government stake has now gone up considerably and Infopark (which made an accumulated loss of nine million rupees last year) would remain with the state government, though many doubt its ability to withstand competition from the Smart City. The price of land has also gone up threefold since the negotiations began.
The state now enjoys freedom to take equity participation in similar ventures in the region. The number of direct jobs to be created also goes to 90,000 from 33,000.
Companies operating out of the state-run Technopark and Infopark jointly employ less than 20,000 IT professionals currently while more than 20,000 engineers being churned out by the state’s colleges were being forced to take up jobs outside the state every year.
As agreed during the UDF dispensation, the state government would nominate the chairman and two of the 11 directors of the company. Seventy percent of the land would be utilized only for IT business and the rest for housing and recreation in the self-contained city where companies can work in a plug-and-play environment.
Tecom Investments’ Chief Executive Officer Abdullatif Al Mulla had held talks with the government authorities here two months back but that was inconclusive and there were reports that the project was uncertain.
Talks on the Smart City started in 2004 after Tecom proposed creation of an exclusive zone for knowledge-based industries in the port city and the state government was finding it extremely difficult to meet the growing demand for built-up space for its fledgling IT industry.
A memorandum of understanding was signed in September 2005 when Oommen Chandy was the chief minister. Achuthanandan then opposed the transfer of the existing properties to the joint venture and demanded better price for the land.
The UDF government was close to signing an agreement early in 2006 but it was challenged in the High Court after elections were called. The LDF government that succeeded decided to renegotiate and an agreement was almost arrived at in September.
However, it hit roadblocks again as some officials negotiating for the state toughened their stand and raised fresh demands. The talks resumed in February under the mediation of NRI businessman and Abu Dhabi Chamber of Commerce director M.A. Youseffali.
As part of its Going Global program, Tecom Investments is seeking to create a global network of knowledge-industry business campuses. The Smart City here is to be a key part of this network in Asia. Another one will be set up in Malta for Europe.
