Mumbai: Kerala has the attributes that could have turned it into an economic powerhouse, but some of those very characteristics have scuttled its aspirations.

Business boost: Chief minister Oommen Chandy is trying to persuade investors that the labour force is no longer as militant as it used to be. By Vivek Nair/Mint

Kerala chief minister Oommen Chandy, 68, wants to change this perception and is trying to persuade investors that the labour force is no longer as militant as it used to be.

"Gone are the days of trade unionism," Chandy said in Mumbai at the World Economic Forum’s India Economic Summit recently. "Even the opposition parties are changing. We are taking a series of steps to make Kerala an emerging destination of investment."

According to the Kerala State Industrial Development Corporation (KSIDC), the state has targeted more than 89,000 crore investment through public-private partnerships in the next five years for various large projects, including the Kochi Metro rail project and an industrial corridor.

Chandy may find his ambition impossible to achieve in his five-year term, which began in May. Kerala traditionally switches its electoral allegiance between the Congress-led United Democratic Front (now in power) and the Left Democratic Front headed by the Communist Party of India (Marxist), or CPM.

The Left parties are, however, unapologetic about the labour situation in the state.

"The trade unions are here to stay and investors have to cope up with that," said Thomas Issac, an economist and finance minister during the 2007-11 LDF administration.

He also said that nearly all the projects announced by Chandy had been initiated by the last government. "The Left parties are for acceleration of industrial growth in Kerala, but industries that are suitable for Kerala," Issac said. "There are three conditions for any industrial growth proposals for the state. Firstly, the social security of the poor in the state is ensured, social infrastructure shall always be under the government, and democratic rights will never be compromised."

Apart from labour militancy, the state is infamous for innumerable strikes, prompted by fuel price increases, privatization initiatives and even the execution of former Iraqi leader Saddam Hussein. Since the Kerala high court has banned bandhs because of the disruptions they cause, these are known as hartals, although there is little difference in the impact they have on public life.

Chandy is trying hard to eradicate some of the more pernicious practices in the state, recently declaring Thiruvananthapuram district the first to be "liberated" from nokku kooli. This is a fee that’s paid to unionized workers in an area for allowing an individual or company to load or unload cargo. This could range from the effects of someone moving house to heavy machinery that can only be handled with sophisticated lifting equipment.

Businessmen involved in local manufacturing and other labour-intensive sectors haven’t yet seen enough of a change in the industrial climate that would convince them to increase their investments in the state.

But Thomas George Muthoot, director at Muthoot Fincorp Ltd, a non-banking financial company of the Muthoot Pappachan Group, holds a different view, backing up Chandy’s assertion that the environment is conducive for investment.

"The real investors will vouch for the change," Muthoot said. "The state is very much up the ladder in terms of investment."

Apart from trying to address the labour environment, the state government is fast-tracking decision making so that Kerala becomes a viable destination for domestic and foreign investment, the chief minister said.

The state has several things going for it, apart from high social indicators and being one of the top-rated global travel destinations. It is home to the new International Container Transhipment Terminal, which will eventually become one of the largest such facilities in the world. It also has one of the best natural harbours in the world at Vizhinjam, near the state capital of Thiruvananthapuram.

Chandy said the state will seek to rope in Sam Pitroda, chairman of the National Innovation Council, as chief mentor for Kerala’s planning and development agenda. Pitroda is an adviser to Prime Minister Manmohan Singhand is credited with leading a telecom revolution that has turned India into the world’s second largest mobile phone market. An email sent to Pitroda did not elicit any response, but his official and personal websites had links to the Kerala chief minister’s announcement that he was being named adviser.

While the chief minister himself struggles with a lack of charisma and an inability to communicate effectively with the Congress central leadership, he thrives on keeping in touch with the electorate.

For instance, after assuming office, Chandy launched a 24-hour webcast that shows how his office functions. The site also allows petitions to be filed and people to submit ideas for a Vision 2030 Idea Bank.

In November, Chandy and a group of ministers and bureaucrats held a public darbar in Thiruvananthapuram where complainants could get themselves heard and officials would make spot decisions.

Chandy has also taken his 19 ministers to spend a day at the Indian Institute of Management, Kozhikode, for a "learning and unlearning" process.

Kerala should be clear about what kind of enterprises it wants to attract, said Amit Kapoor, honorary chairman of the Institute for Competitiveness. It should have a 20-year programme and ensure the policy framework and talent availability that will allow the state to achieve this, he said.

"While we are seeking investments from corporations, the state is starting serious investor education programmes for individuals and small and medium enterprises. This education programme will be done by the Bombay Stock Exchange, which will shortly start a regional office in Kochi," Chandy said.

Klaus Schwab, founder and executive chairman of the World Economic Forum, has agreed to facilitate a visit by 25 global chief executives after the next economic summit in New Delhi next year. The state plans to hold an investors’ summit in September, Chandy said.

Projects to upgrade the state’s woeful infrastructure include a Kochi-Coimbatore industrial corridor along the lines of the Delhi-Mumbai Industrial Corridor.

Other projects include a 630km Thiruvananthapuram-Mangalore high-speed rail corridor, and monorail systems in Thiruvananthapuram and Kozhikode, apart from the Kochi Metro rail project. But infrastructure development could be hampered by resistance to land acquisition.

"Labour issues are no more a major problem in Kerala," said M. Parameswaran, assistant professor, Centre for Development Studies, in the state capital."Land acquisition and its costs are the key issues that the state needs to tackle."

Industry has to cope with poor roads and the lack of adequate power supplies, apart from red tape, he said.

Given that environmental awareness is high in the state, opposition is stiff towards issues such as the eviction of people to make way for industrial development, Parameswaran said.