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AP: A $7-bn FDI dream, despite bottlenecks

R Srinivasan in Hyderabad

Andhra Pradesh has set a target of attracting $7 billion (Rs 33,986 crore) in foreign direct investment over the next 10 years, the bulk of it is in the infrastructure and pharmaceutical sectors.

A Rs 2,000 crore 9 (Rs 20 billion) special economic zone near Visakhapatnam and a Pharma City sprawling across 1,900 acres in the same area, along with an airport and a seaport, will absorb the bulk of the investments.

Last week, Chief Minister N Chandrababu Naidu and minister for major industries K Vidyadhara Rao returned after a three-day visit to Malaysia and Singapore where they signed memoranda of understanding for several infrastructure projects and also organised roadshows for the SEZ and the Pharma City.

The state government, with organisations like the Federation of Indian Chambers of Commerce and Industry and the Confederation of Indian Industry, will follow this up in the coming weeks by organising several Asian investors' meetings, starting with a CII-sponsored Technology Summit in Hyderabad on October 8 and 9. This will be followed by a Ficci-sponsored Asean Business meet on October 18 in Hyderabad -- an extension of the same meeting in Delhi a day earlier. The CII is also organising its flagship Partnership Summit on January 9 and 10, 2003.

The focus at these meetings, says Rao, will be the SEZ and the Pharma City. He feels the state's targeted FDI is not too ambitious, considering the world-class infrastructure being planned. Finance Minister Y Ramakrishnudu agrees.

Over 530 FDI proposals, involving an investment of Rs 15,000 crore (Rs 150 billion), have been approved for Andhra Pradesh in recent years. A third of these ventures have already gone into production. In the year 2000, 56 FDI approvals, with foreign equity of Rs 615.61 crore (Rs 6.16 billion), were received by Andhra Pradesh. In 2001, the state received 18 FDI proposals, with an outlay of Rs 4,228.50 crore (Rs 42.28 billion).

Naidu had visited Malaysia and Singapore earlier also, soon after becoming chief minister. Among others, he had then mentioned the Proton car project. There is still no sign of the venture. Subsequently, Naidu visited the US, the UK, Ireland, the United Arab Emirates, Japan, Hong Kong and China.

"Trade teams come and go. There is not even an FDI of Rs 5 in Andhra Pradesh," says Congress spokesman and former finance minister K Roshiah. Roshiah may be overstating the case, but a CNBC-sponsored seminar, Southern Quadrangle, in Hyderabad, also placed Andhra Pradesh at the bottom of the top three investment destinations in south India.

Several bottlenecks were pointed out at the seminar. K Anji Reddy, chairman of Dr Reddy's Lab, recollected how Novartis had wanted to set up a $125 million (Rs 606.94 crore) research and development unit here but went to Singapore owing to poor infrastructure.

Naidu has now promised to remove the bottlenecks. At the Visakhapatnam SEZ, all clearances will be made locally-one need not go to Hyderabad or Delhi chasing files.

Naidu's dream is to develop the SEZ on the lines of a similar one established by China in 1980 --- the Shenzhen Special Economic Zone.

"FDI in Shenzhen is 15 times more than what India has attracted after 1991. The SEZ has witnessed an annual growth of 33.2 per cent over the past 20 years," he says.

"In an increasingly globalised world, we need to look at international best practices rather than confine ourselves to competing within the country. We need to focus on new models of development."

Yet the big question remains: Will Naidu's foreign investment dreams remain largely on paper?

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