We need corporate nationalism for port infrastructure

Initiatives like the Vizhinjam port in Kerala and a proposed container trans-shipment terminal in Andaman and Nicobar Islands are welcome steps.
Initiatives like the Vizhinjam port in Kerala and a proposed container trans-shipment terminal in Andaman and Nicobar Islands are welcome steps.

Summary

  • As geopolitical challenges get more complex, it’ll help India keep pace with China by serving New Delhi’s aims of trade competitiveness and national security.

A sector’s contribution is traditionally assessed through economic metrics. However, in today’s complex geopolitical landscape, the significance of port infrastructure transcends these measures. This sector holds strategic importance for India’s economic vitality, geopolitical influence and national security. 

To secure India’s future, bridging its port and maritime capabilities gap vis-à-vis China is a geo-strategic imperative. This is why we should embrace corporate nationalism in this sector.

On GDP per capita, India still lags most countries and the world average. With just 4% of India’s working-age population earning over $10,000 annually, we cannot rely on domestic consumption to escape a middle-income trap. 

We should pivot towards exports as our primary driver of economic growth, aiming for exports to contribute 30-35% of GDP within the next 5-10 years. We must work on both price and non-price factors impacting export competitiveness, including integration into global value chains through world-class port infrastructure development.

Also read: Government to set up bureau of port security soon: Sarbananda Sonowal

China’s economic growth was driven by manufacturing, but its export dominance relies heavily on its extensive port infrastructure. Seven of the world’s top ten ports are in China, with no Indian port in the top 25. In 2021, China handled 1,270% more cargo traffic than India, with 95% of its trade passing through ports. 

China has made 92 port-related investments across 56 countries, establishing a strong maritime network. Notably, 10 of these investments have naval potential, strategically located in countries around India: Pakistan, Sri Lanka and Myanmar. As Xi Jinping once said, “To get rich, we must first build ports."

India lags other big exporting nations on port infrastructure for trade. Some of the largest cargo ships, like the Ever Alot, have never docked in India despite visiting Sri Lanka, Singapore and Malaysia regularly. The capacity of Indian ports for such mega-ships isn’t well established, and the scale of India’s trade and location of ports do not justify their visits. 

An estimated 85% of India’s cargo passes through trans-shipment ports in Singapore, Malaysia and Sri Lanka. This exposes us to higher costs and operational risks, undermining export competitiveness. To address this, the government is ramping up port infrastructure and aims to increase merchandise exports to $1 trillion by 2030.

To compete globally, particularly against China, India must prioritize capacity and network enhancements. We need ports capable of handling mega-ships, a growing trend in shipping.

Initiatives like the Vizhinjam port in Kerala and a proposed container trans-shipment terminal in Andaman and Nicobar Islands are welcome steps. These can strengthen our maritime trade and serve geopolitical interests, but their success depends on factors like how advanced their technology is, operational efficiency, workforce skills and the ability to raise capital, all of which India’s private sector is better placed for. Therefore, private sector involvement in port development and management should rise from the current 40-50% to 85-90% over the next 5-10 years.

Also read: Did US take U-turn on exemptions related to India-Iran Chabahar port deal? Can sanctions be imposed?

To counter China’s aggressive expansion via state-run port operators, India’s national strategy should support private port operators of scale and potential through measures like capital access, tax breaks and a conducive policy environment. As with defence procurement, this policy must favour Indian port operators and support their global expansion plans. 

The policy must have sufficient guard-rails to ensure corporate governance and priority access to these facilities for national security. We need at least three major private port operators with global operations, especially along vital shipping routes.

Corporate nationalism involves aligning government and private sector strengths to succeed in critical sectors and is not to be confused with crony capitalism. It also shouldn’t be coloured by any disdain for legitimate wealth creators. Unlike crony capitalism, it focuses on using private capital to create national capacity for the country’s benefit. 

To the extent national champions get the government’s support, it is akin to a nation investing in select athletes for Olympic success. The ethical rationale for corporate nationalism is undergirded by broader considerations that are globally understood.

Countries like the US, UAE, South Korea, Singapore and Germany practise corporate nationalism, fostering global enterprises in strategic sectors like port infrastructure. The South Korean government has historically supported companies like Samsung and Hyundai. 

Global port infrastructure firms like DP World of the UAE and PSA of Singapore receive extensive government patronage, while American and European defence-sector majors exemplify the West’s approach to corporate nationalism. Similarly, the rise of Chinese companies—even in the information technology and automobile sectors—reflects Beijing’s aggressive pursuit of corporate nationalism.

Also read: Govt extends Ajit Doval’s tenure as National Security Advisor, reappoints PK Mishra as principal secretary to PM Modi

As China prepares to inaugurate its first mega-port in South America, India should prioritize an aggressive expansion plan for its privately-owned homegrown port operators to pursue. Given our strategic rivalry with China, which seeks to outpace us across every domain, the rapid development of port infrastructure and capabilities would be crucial for us to avoid being at a perpetual disadvantage.

These are the author’s personal views.

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