It’s difficult to do business in India: Gopinath Pillai10 min read . Updated: 21 Nov 2013, 09:21 PM IST
Despite the additional costs of setting up a business in India, profitability is higher when compared with Singapore and China, says Pillai
Singapore: Gopinath Pillai, chairman of the Singapore think tank Institute of South Asian Studies (ISAS) and an ambassador-at-large for the city-state’s government, was a mere toddler when he travelled to Kerala with his mother and sister to visit his grandparents. That was in 1939, the year World War II started, and what was meant to be a short holiday stretched into eight years’ residence in the land of his ancestors.
“India was going through its independence struggle then. My uncle, who was a very good student in the university, suddenly decided to quit and join the communist youth movement, and our family was deeply upset over this," Pillai said in an interview. “I admired my uncle and his act has always been stuck in my mind..."
Pillai, now 76, recalls having had a great time with the uncle, who told him stories about the Indian freedom struggle, about anti-British protests raging then, the Chittagong armoury raid of 1930 and about Mahatma Gandhi.
His uncle’s political leanings haven’t influenced his attitude towards the type and nature of democracy followed in Singapore, where he is satisfied with the way the government is “relaxing things in a calibrated fashion".
“Let me give you a simple reason," Pillai explained. “In Singapore, the Indian population is 7-8%, but our representation in the government and bureaucracy is far higher. If you have a populist government, it may not be bothered about meritocracy but only on where it gets its votes from. We are a small country with no resources and depending on talent only; so we cannot have a democracy pattern as that of India, where everything goes, from a vibrant press and noisy press to demonstrations and all that. The offshoots of the type of democracy that India has will not be good for the growth of Singapore."
As a student, Pillai aspired to become a journalist. His father, Villayil Raman Gopala Pillai, ran Kerala Bandhu, the only Malayalam newspaper outside of India in Singapore, and Pillai felt an affinity for the profession. But with the newspaper business “taking a turn for the worse", in Pillai’s own words, he enrolled in a government-funded higher education course, which mandated that he become a teacher afterwards.
“I thought I could get away from it and joined Reuters. But three months later, the government caught up with me and forced me to get into teaching," he said.
Later, he moved to Thailand with Bangkok Bank as an economics research officer; salaries in Thailand those days were nearly double the salaries paid in Singapore, Pillai recalled, and he also became a correspondent with The Far Eastern Economic Review, a magazine run by News Corp.’s Dow Jones, which shut it down in December 2009 after 63 years in print.
After a five-year stint in Bangkok, Pillai joined Malaysian Industrial Development Finance Bhd as an economist and continued in Malaysia even after Singapore became a separate country in 1965.
Following the racial riots in Malaysia in 1969, Pillai and his family moved to Singapore, where he took on the task of running and turning around a government-owned, money-losing garment factory.
“I was told to turn around the factory and find a buyer, which I did," he said.
Along with friends, Pillai then set the KSP group of companies, which acts as the holding firm for several ventures, including listed businesses in India and the UK. KSP stands for the three founders, who are Singaporeans of Indian descent—prominent lawyer Satpal Khattar, diplomat Haider Sithawalla and Pillai.
Khattar in 2011 was the first person from the city-state to be awarded the Padma Shri by the Indian government. Pillai received the same award in 2012.
Pillai has business interests in India, being the founder and chairman of port-related listed logistics company Gateway Distriparks Ltd and its subsidiary Snowman Logistics Ltd and director of another subsidiary, Gateway Rail Freight Ltd.
“Snowman has the largest cold storage facilities in India with a capacity of 60,000 tonnes and our partners are Mitsubishi and International Finance Corp.," Pillai said. “This still is disorganized market with too many small players and there will be some consolidation."
Snowman Logistics is working towards an initial public offering (IPO) of shares and a listing in India. “The IPO will happen soon—Snowman will be hived off from the parent firm Gateway," Pillai said.
Singapore has been ranked No.1 for the “ease of doing business" for seven consecutive years by the World Bank. In contrast, India, despite two decades of economic reforms, is in the 134th position.
Pillai admits that it is difficult to do business in India.
“India is not like Singapore where everything is transparent and where you can register your company on the Internet and then start operations," he said. “Policies are sometimes interpreted in ways that was not the original interpretation. One of the main reasons Singapore investments have been low in India is due to this—they go there and don’t know what the law says and if they go to court, it is a hell of a long process; the movement of the process is almost glacial," he said.
Pillai also points out that it took had taken two years for his venture in India to get approvals to set up a container freight station. “Recently, we had a rail operation in Noida—the approvals came 1.5 years after the construction—all these add to your costs," he said.
Despite the additional costs, profitability in the Indian market is higher when compared with Singapore, Malaysia and even China, Pillai said.
Still, KSP has inserted a clause in all Indian business joint ventures that Singapore would be the venue for any future arbitration proceedings.
“I tell my business counterparts in India, we are both Hindus, but we don’t want to settle our problems, if any, in our next incarnation by using the Indian judicial system," he added.
Edited excerpts from an interview:
What has the Institute of South Asian Studies (ISAS) achieved so far and what is your goal going forward?
ISAS comes out with insights and briefs on issues very quickly after it happens, or, sometimes even before it happens—our policymakers get information and interpretations ahead of anyone else from our scholars. We do research on the economic side also—for instance, we are doing research on North-East India, covering issues such as land connectivity between South-East Asia all the way to China. We are the first to talk on regional diaspora. From the east of the Indus river to the Bay of Bengal was considered one integral unit in ancient times—there was a common identity in this region. The invasion by Muslims and then by the Europeans broke up everything, creating different identities in this region. One of the issues we are studying is remittances of the diaspora and its influence on the mother country—India is the biggest beneficiary. Going forward, we can form a cluster of thought and business leaders in the region. We want to create a cluster in art and media. Our ultimate aim is to bring about greater integration in the region. We are also entering into a tie-up with the Brookings Institute.
But in the recent past, both across South Asia and Asia as a whole, the integration that was happening is being reversed by rising nationalism. Malaysia and Singapore are now looking inwards, especially when it comes to foreign talent. China has border disputes with all its neighbours. Then there is the China-Japan stand-off over Japanese-governed Senkaku islands. Do you see Asia today being similar to that of Europe a century ago? Can Asia ever come to an arrangement like that of the European Union?
The fractious relationship between countries has intensified. South Asia was never united and was always fractious, but Asean (Association of South-East Asian Nations) was a lot closer. Many leaders—from Japanese Prime Minister Shinzo Abe—have been able to flex their position and gain control of politics, riding on rising nationalism—and they all have to be careful. An arrangement like the EU is possible but it will take a long, long time. Asia today may be as divided as Europe a century ago, but it will not go the same way. Europe saw two world wars, but there is too much to lose in Asia by going that way. Asia is also much more prosperous than Europe was then. Tensions will always be there, and my biggest fear is something going wrong in the Japan-China stand-off. I think the US can play a more constructive role to ensure that the tensions don’t escalate. China psychologically has this Middle Kingdom syndrome that they are the centre of the universe and want to be recognized. I think over time, they will have to learn that it is a multi-polar world and they have a role to play. The Chinese in their history have never invaded others, except the little skirmish with India in 1962, and don’t have a history of imperialism.
What do you think of the US pivot to Asia—do you see it as a military or economic pivot?
I am not sure that the Americans themselves have defined what they mean by the pivot. Pivot to me is a very unstable structure—I think what they are talking about, at least on the surface, is an economic pivot because Asia is going to grow much faster, compared with the other regions. There could be a military angle and this could be due to the growth of China. See, China is not worried about India, but they could be if India decides to be part of the US alliance. Everybody in Asia is courting the US—you see how close Vietnam and the US have become...All the old memories have been pushed aside due to their fear of China.
You are Singapore’s non-resident ambassador to Iran—what do you make of the recent talks between Iran and world powers?
I hope there will be a solution, but it will be difficult. I don’t blame Iran—if you look at history, the US and Britain got rid of Iranian Prime Minister Mohammad Mosaddegh in 1953 and installed Mohammad Reza Shah Pahlavi. When this happened, there was anger towards the West as the people felt oppressed. Their anger towards the West only increased when the Shah was toppled and Ayatollah Ruhollah Khomeini took over. But the Iranians have 4,000 years of history, and I think America missed an opportunity when Mohammad Khatami was president, and came out with the idea of “Dialogue among Civilizations". The Americans dismissed it. This was sad, because of which the moderates lost out, and it resulted in Mahmoud Ahmadinejad coming to power. He made a lot of controversial statements unnecessarily and Iran was treated as a rogue state. Iran has always maintained that they will not use nuclear power for aggressive purposes, but only for peaceful means. To an extent, you have to take their word, but other countries are fanning the issue. Now you have a reasonable president. The present talks should yield results because the supreme leader, too, wants to see a solution to the issue.
You have also been Singapore’s ambassador to Pakistan. Do you see Pakistan as a failed state?
Pakistan will continue to have problems because there are far too many centres of power. There is the army, the elected government, the feudal lords, the Taliban—so it will not be a happy existence for them for quite some time, but I don’t think it is a failed state. The very fact that the last government lasted its full term, and that there was a peaceful transition is itself a cause for optimism.
What do you think is Singapore’s role in a rising Asia?
Singapore has always succeeded in reinventing itself, and our basic philosophy has been to be useful to the world. As long as we read the changes correctly and equip ourselves—one example is that 70% of Singaporeans speak Mandarin and this has benefited us with the rise of China, but at the same time, we have maintained our English skills, being useful to the West too. Within Asia, we try and keep a balanced position—we are nobody’s enemies. Singapore has a role to play, both in terms of physical position and infrastructure that we have. It is a hub for travel, banking and other sectors.
Do you think that India lacks a long-term vision with respect to its foreign policy?
India is not punching to its weight—Singapore is always punching above its weight. India is too preoccupied with its internal issues. As a regional power, they should be exercising a little bit more. If India has a stronger leadership—be it the Congress party or the BJP (Bharatiya Janata Party)—then things can improve.