Forum boosts trade with India

Last updated 08:51 01/12/2012
India
REUTERS

GROWING MARKET: India is a huge market that is much too big to take on as a country. It also is a growing market and over half of the country’s population are young people, under 25 years of age.

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Bringing business leaders from both countries together has helped advance trade with India, writes Andrea Fox .

Official talks on a New Zealand-India free trade agreement are only at the half way mark but Waikato University's management school may have done more to progress bilateral trade in one day this week than a roomful of policy boffins could achieve in months.

The school's inaugural India-New Zealand business forum brought together commerce, dairying, IT, tourism and research players from both countries in a discussion on business opportunities that appears to have wildly exceeded the university's immediate and medium term objectives.

Forum convenor Asad Moshin, chairman of the management school's department of tourism, says at least four major Indian institutions and organisations have offered to host the next forum in India next year.

What he's particularly chuffed about is the Indian High Commissioner's enthusiasm for the day. Moshin says it means the government of the emerging global economic powerhouse is getting even further engaged in the development of new links and markets.

High Commissioner Avanindra Pandey told the forum that by his government's reckoning, bilateral trade between the two countries, now at $1.3 billion, has the potential to more than double to $3 billion within two years.

He noted economic relations between the two already have a head start with Commonwealth linkages, tourism and sporting connections and Bollywood movie producers' soft spot for Kiwi shooting locations.

More than 110,000 Indians have made New Zealand home and there are thought to be 12,000 Indian students here, Pandey told the forum, which co-incided with Waikato's National Fieldays Society signing an agreement in India with the Confederation of Indian Industry, the organisation behind Agro Tech, India's biggest agricultural technology trade event.

The same day, dairy heavyweight Fonterra announced it was opening its first office in Delhi, to help it better understand the Indian market.

Pandey said that last year New Zealand hosted 29,000 Indian tourists, and 35,000 Kiwis visited India, which is New Zealand's seventh largest market and its 15th biggest trading partner.

New Zealand Trade and Enterprise was there with some real oil for Kiwis on the potential and pitfalls of doing business in India, a country that appeared "chaotic" to the newcomer.

If you want to do business successfully in India, first you need to love the place, advised Cliff Fuller, NZTE programme manager for trade missions.

In his long experience, "some passion, belief and even a love" for India is almost essential to make a business venture there work.

India was "full of the unexpected", Fuller said.

Around 12,000 New Zealand export businesses were currently involved in the India market, with Waikato's agricultural fencing and security company Gallagher Group a pioneer in the country, and Hamilton's Pacific Aerospace another poster company for the right approach to India.

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High Commissioner Pandey described New Zealand investment in India as "very sparse" at just over $129 million, with only a few Kiwi companies having a presence there.

First and foremost, said Fuller, a company had to have confidence it could do business in India.

The country was in a "tremendous" economic transformation, which offered big opportunities for New Zealand business - "but you have to be of value to India".

With GDP of US$4457 billion and a GDP annual growth rate of nearly 7 per cent, India was much too big to take on as a country, he said.

"We need to think of which state, which city, which company (to focus on). India is a universe in itself."

Half of India's population of 1.2 billion is under 25, the biggest demographic of this age group in the world, Fuller said.

While New Zealand's focus on India has been in the food, beverage and horticulture sectors, the forum heard of huge opportunities in other sectors from agri-tech and aviation to biotechnology, clean technology and services to Indian corporates, looking for upskilling, advisory and education support.

Fuller said billions of dollars were being invested by India in its infrastructure. "Change attracts money - you need to go where the money is going."

One of the key challenges facing New Zealand companies in India was its sheer scale, he said.

"A lot of business in India is around mass, and achieving maximum volume. It's about high volume and low cost. New Zealand companies struggle with mass so it's niche (for them).

"Going into India requires resources, two or three times more than you think."

Having connections and deciding where you stand in the value chain and the extent of your influence and ability to extend that influence deserved plenty of thought, Fuller said.

Companies had to be prepared to change the structure of their business to maximise their approach to India, and the importance of considering cultural differences could not be overstated.

The culture was very complex and intense and could seem "chaotic", but it had its own "inherent logic", Fuller said.

Pricing is highly sensitive in India and in negotiations patience and commitment are required.

Gallagher and Pacific Aerospace had taken a long time to achieve their places in the market, he said.

"It takes a learning process of at least four to five years. It can involve a change of strategy, approach, even personnel. It can even mean a change of location. "Also expect not to make any profit for three to four years but it's the long term gain . . . if you pull out, it's so much harder to get back in as the ANZ discovered."

Fuller advised Kiwis never to assume that the way they worked with Australia, the United States and even China was going to work in India.

"Work out if things go wrong, what to do next. This needs to be worked into your strategy. Have a way to build another relationship if the first one doesn't work out."

In India "the unexpected" includes festivals, bandhs (strikes) and terrorism.

Government tenders could be a steep learning curve, Fuller said.

Companies awarded a contract should be prepared for a negotiation for "the lowest price minus 10 per cent".

"Always build that in. In India negotiation is a joy, a frustration and an art form."

There are tariff barriers.

New Zealand cannot sell meat to India. There is a 50 per cent tariff on apples, and 150 per cent tax on wine.

Indian companies buying a New Zealand product will expect equal sharing of risk in the form of marketing and promotional support, Fuller said.

If you want to licence an Indian company to make your product, make sure you are physically there - a lot, he advised.

"If you leave them to it they will work out what suits them best in their market, and when you go back six months later, you may not recognise your product. You need to have your own people there. It's all about presence."

And while New Zealand businesspeople recognise a "universal rule", a value they expect applies everywhere, they will learn in India that doing business is more about relationships, Fuller said.

"We have the sense that time is linear. In India, time is bound up with other things like quality of life.

"Reciprocity is very important. Indian people are very generous and very welcoming, and they expect something back.

"In India so many businesses are run and owned by families, so families do the decision-making."

The India-New Zealand Business Forum will return to Hamilton in 2014.

- Waikato

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