New Delhi: Chief executive officer at UK Trade and Investment, or UKTI, the British government body that markets the UK overseas for investments, Andrew Cahn has had an extraordinary career. Cahn left British civil service in 2000 to join the private sector from where he was chosen to head UKTI two-and-a-half years ago. In an interview, he spoke about UKTI’s strategy to boost trade and investment ties with India. Edited excerpts:
You recently announced that you developed a new five-year strategy beginning July to boost UK’s trade ties. Could you give us an overview?
India is key to our five-year strategy. When I was appointed to my present job, (British Prime Minister) Gordon Brown, who was then our finance minister, charged me with developing a new strategy. He was clear the central part of that strategy was focusing on UKTI’s efforts on those markets that were the really exciting, dynamic growth markets of the future. He identified India and China as two big markets that mattered.
Betting big: UKTI’s chief executive officer Andrew Cahn says Britain has ‘huge expertise’ in providing banking services that India, with a large underbanked rural area, could benefit from. Ramesh Pathania/Mint
One of the elements of the strategy was increasing staff in key markets such as India. So, over the last year, I have increased my staff in India by 20% and decreased staff in America and even more in Europe. That is not to say America and Europe aren’t important. America remains our biggest source of inward investments. (But) India is where the fantastic growth prospects are.
One element of my strategy is to simply focus resources on India. The second element is attract inward investment from India. Partly, that is happening anyway. You see the big-ticket items. Behind that are large numbers of smaller transactions, which are really important. We had over 70 inward investments last year, (and) I expect even more this year. The second component of the strategy is to maximize inward investment from India.
And the third is to encourage British companies to export more to India. There is still, I believe, a perception gap in the minds of British companies. Some still have the folk memory of an India of 10 or 15 years ago where there were always bureaucratic problems, problems of corruption, payment problems. Those haven’t disappeared entirely. Every market has its challenges and complications. Part of our job is to show them the opportunities, make an introduction and leave them to it.
The last thing I would say is the most exciting thing of the whole trip—the opening of two offices in New Delhi.
In terms of investments into the UK from India, we have seen some really big-ticket deals. Do you see a steady flow of smaller investments coming in, something that is below the radar?
It is growing, but there is still a long way to go. Despite big-ticket deals, if you look at the overall pattern of Indian investment into the UK, it is primarily in the IT (information technology) sector and secondarily in life sciences, particularly pharmaceuticals. We are delighted to see more investments in those sectors.
But I think we need to look at other sectors. Financial services would be a good example. London is a global centre for financial and professional services. I would like to see more Indian investment there. ICICI Bank already has nine branches, I think, in Britain. I would like to see other Indian financial institutions there.
The answer to your question is, yes, it is. I think what we tend to see in the past are the big entrepreneurs coming in. What we are now seeing is far more smaller firms, second- order firms in terms of size, coming in. They are also the firms that will grow rapidly. I do want to see more diversification, there is too much in the IT sector. To call it fairly disappointed is not right. I am very disappointed. Let me put it this way. India is holding back its own economic and commercial development by keeping its banking sector closed. We have a situation where there are no constraints on Indian banks entering the (British) marketplace. The only constraints are same requirements for capital adequacy any British bank has to meet.
You mentioned the financial sector. British companies are fairly big here in both banking and insurance. When you talk to them, they are fairly disappointed at the pace at which India has opened up. Do you expect to see a little more progress here? What is your sense of it because we are still not sure if the banking sector will open up next year?
India would do itself a huge favour if it were to do the same thing. Instead, you have this rather absurd situation where foreign banks are allowed a maximum of 20 branches. This is trivial stuff. India has a huge rural area which is underbanked. We in Britain have huge expertise in providing banking services which could help develop India’s rural areas. I think this is an example of India harming itself.
I find it inexplicable why it should happen...one must look to further liberalization happening after the (next year’s) general election.
On inward FDI (foreign direct investment), I want to use the example of Singapore. We have seen a jump in investment there as companies want to use Singapore as a platform to invest in East Asia. Do you notice something similar, such as Indian firms using the UK as a platform to tap European Union markets?
Absolutely. We position Britain...our catchphrase is ‘a springboard to global growth’. We try and attract investment into Britain by not just saying come here. We also say something different. We say come to Britain and we are your gateway to Europe...and the world.
We have the most flexible labour market, best regulation, lowest corporation tax and very attractive taxation. We have the best environment for investors. We have the best skills. Three of the top 10 universities in the world are British. Once you invest in Britain, we treat you as British. We will help you globally. I think that is an offer nobody else makes.