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Crossing the bridge to the East

Crossing the bridge to the East
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First Published: Wed, Nov 21 2007. 12 02 AM IST

Updated: Wed, Nov 21 2007. 12 02 AM IST
India, perhaps because of our historical connection to the UK, has always looked Westwards for inspiration and role models. In the process, we have missed observing the growth patterns and learning from the mistakes of countries in our own, Asian, backyard.
These countries faced the same problems that we are facing now, and while much remains for them to do, most of them have overcome their basic infrastructure problems, particularly in areas such as power, roads and airports. India would do well to look at these countries, learning from the problems they faced and how they overcame them.
I remember China’s very first effort in solving the power project in the Guangdong area bordering Hong Kong. It was there in the mid-1980s that the very first BOT (build-operate-transfer) model was implemented for a project called Sharjao B. The contractor was a Hong Kong company called Hopewell Holdings Ltd, a real estate company owned by Gordon Wu, a Princeton-educated infrastructure visionary.
As with the Dabhol project much later on, the issue was who would guarantee the off-take commitments. Eventually, it was decided that the province’s investment company would provide the guarantee—the understanding being that the project had the provincial government’s implicit support. The off-take price would ensure a certain guaranteed minimum return. The project was very successful and for some time became the role model for other projects in China, but then the rules were changed. After numerous provincial investment and trust companies (known as ITICs) issued these guarantees, the financiers were informed that these companies did not have the legal and regulatory authority to do so. When some of these projects started getting into trouble, the financial institutions had to swallow hard and bite the bullet—in the interest of being able to do business in China over the long term.
Similarly in the Philippines, when faced with a crisis in the late 1980s and early 1990s, Manila worked with Hopewell to build power projects on a BOT basis. The problem was sorted out, but it appears that it will now have to go through a second phase of similar build-outs.
Roads were also an issue for the region, and China again set the ball rolling with Hopewell with a similar BOT concept. Subsequently, Malaysia built the North-South highway; despite initial controversy, it was eventually built to a world class standard. Also, it has been gradually urbanizing its palm oil plantations into building townships. Perhaps what made it easier was the fact that the plantations were owned by corporations rather than individual farmers.
Bangkok was notorious for its traffic jams. There, the initial toll road project was won by Kumagai Gumi, but when it opened, there was public protest about the tariffs. Eventually the Japanese had to sell out to local parties. Similarly, in a story Indians can relate to, the mass transit system was mired in problems for some time and was way behind schedule, but is now widely used.
South Korea had its coming out party with the Olympics in the late 1980s when its economy really started taking off. Unlike the Delhi NCR where construction is following the development, Seoul developed townships across the Han river, building bridges, highways and related infrastructure, including a new airport. This is in stark contrast to Delhi, with Commonwealth Games just two years away.
Similarly, Taiwan has gone through the phase of traffic jams and the various stages of development. It now has excellent manufacturing and supporting infrastructure. Indonesia, too, has not been far behind with good airports and highways.
In India the stock response when our history of development is compared to China’s is, “Ah, but we are a democracy,” implying that democracy and development cannot go hand-in-hand. While a few of the Asian countries might have had dictatorial governments for an initial period, most have been democratic for a while and have been successful.
It’s not the case that all Asian countries are perfect role models and should be followed to the extreme. But having a similar environment and issues, does it not makes sense to look at these countries? We need to look at the problems they faced, how they were dealt with as they developed, if only to make sure that we do not repeat them.
We should also look at re-establishing our historical links with these countries which go back many millennia. These links could provide not just markets for Indian goods, but also be a source of natural resources for our increasingly ravenous economy. These countries are wary of the ‘big Chinese brother’ that frequently dominates the region, from both a military dominance and economic dependency perspective. It is time India started looking East much more vigorously than it has done until now.
Avinder Bindra is CEO of Arx Analytics & Advisory Pvt. Ltd. Comments are welcome at theirview@livemint.com
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First Published: Wed, Nov 21 2007. 12 02 AM IST
More Topics: Asia | Development | BOT | China | Infrastructure |