Interesting responses by Andrew MacIntyre and others follow Peter McCawley’s recent posting throwing light on Indonesia’s electricity crisis. Further to my subsequent posting on burgeoning FDI into Japan, yet the recent blocking of a English fund’s bid to expand shareholdings in the J-Power wholesaler, I wonder what Indonesia’s overall experience has been in attracting foreign investment into power projects. From Wells and Ahmad, Making Foreign Investment Safe (OUP, 2007), I do know of three major investments that resulted in arbitrations after Indonesia suspended many projects following the Asian Financial Crisis a decade ago. These already involved some involvement from Australia and especially Japan. Hence the question: why and how should we provide for investment arbitration in the Australia-Japan FTA or in ASEAN+ agreements?

Two investment disputes directly or indirectly involved Japanese interests. Tomen, a major Japanese general trading company was a 9% partner in the Karaha Bodas power project consortium, led by two US companies, which was awarded US$261 million in arbitration. Sakura Bank helped finance the Dieng and Patuha power projects, where a consortium led by CalEnergy (in the US) obtained US$570 million out of $3 billion claimed against PLN (Indonesia’s utility company), from a first tribunal including an Australian arbitrator. This consortium then initiated a second arbitration against the Indonesian government itself, alleging sovereign performance guarantees. A third investment involved Enron’s withdrawal from the Pasuruan gas-fired power plant project. Wells and Ahmad are quite critical of these American companies’ limited experience or lack of long-term commitment to such overseas infrastructure developments.

Yet arbitration, often triggering payouts in political risks insurance provided by the home state (of the investor), now often provides significant relief not only against local firms partnering in the investment, but also against the “deeper pocket” of the partners’ host state. Foreign investors not only conclude arbitration agreements directly with the host state, allowing them to claim if the state expropriates or otherwise discriminates against the investment. More often nowadays, investors can invoke commitments to arbitrate made towards the investor’s home state by the host state, in Bilateral Investment Treaties (BITs, like the one between Indonesia and Australia) or in investment chapters of FTAs (like the just-negotiated Australia-Chile FTA). The main attraction is a procedure largely autonomous of the host state’s courts, but other benefits include the expertise of the arbitrators in the public international law and specialist procedures typically involved in such disputes.

Treaty-based Investor-State Arbitration (ISA) is clearly most attractive for the (actual or potential) net capital exporter, such as Australia vis-à-vis developing countries. Conversely, the Australian government was quick to agree to the US proposal to omit ISA from their 2004 FTA. This occurred after the US belatedly had found itself on the receiving end of adverse ISA rulings under NAFTA’s investment chapter; and later US FTAs have reinstated ISA with some adaptations.

Yet even a net capital importer, such as Australia vis-à-vis Japan, has some significant interests in including ISA in an FTA. Short-term, for example, there may be Australian firms investing in Japan, such as Macquarie in Haneda Airport. If the Japanese government discriminates against their investment, for example by invoking national security, Macquarie probably would prefer to bring a direct claim for compensation before a specialist arbitral tribunal rather than suing in local courts, or relying on a “diplomatic protection” claim brought on their behalf by the Australian government in the International Court of Justice. Long-term, for example, we can expect regional FTAs (rather like NAFTA) that combine net capital importers and exporters, as well as developing and developed countries. It should be easier to include ISA in such regional FTAs, like an ASEAN+ FTA involving both Australia and Japan, if countries like Australia and Japan already have committed to ISA in their respective bilateral treaties.

Still, developing countries that have mostly been on the receiving end of arbitration claims (especially in South America) are concerned about the Arbitration Rules provided in treaty-based ISA. Critics point out that ISA disputes involve a wider range of legitimate public interests than strictly commercial arbitration between private firms. Adapting the Rules at the multilateral level is difficult, for reasons unsurprising to those familiar with the WTO. An alternative is to make changes in bilateral treaties, such as the greater transparency obligations detailed in the Australia-Chile FTA.

But another possibility, which I favour at this stage, is to encourage institutions like the Australian Centre for International Commercial Arbitration to develop even more ambitious Arbitration Rules balancing private and public interests in ISA. They should then get the Australian government to include those ISA Rules in their FTAs, as another option for investors to select if proceeding to arbitration. Investors dedicated to Corporate Social Responsibility, or (more instrumentally) wanting to minimize hassles when seeking execution of any arbitral award, would then be advised to choose such Rules over the older ones that some countries remain wary about. This would represent another small but significant step towards PM Kevin Rudd’s East Asia community.

Further reading: Luke Nottage & Kate Miles "'Back to the Future' for Investor-State Arbitrations: Revising Rules in Australia and Japan to Meet Public Interests" Sydney Law School Research Paper No. 08/62 (earlier part also here)

UEM has completed over 700 km of roads with an investment of over Rs 2,300 crore in UP, Karnataka, Kerala, Bihar, West Bengal, Gujarat, Andhra Pradesh, Tamil Nadu and Maharashtra.

“The Indian market is very important for UEM as we see a huge potential in this market. India is a key driver for UEM’s overall growth and we have always been committed towards this market. The company is committed to supporting India in building an advanced infrastructure, suited to its growing business and social requirements. India is one of the top three global markets for the group,” Tan See Yin, senior director, UEM International (East Asia) said.

PLUS Expressways Berhad, a subsidiary of UEM group, is actively participating in pre-qualification bids for NHDP-III and V. As Asia’s largest toll concessionaire, the company is keen to share its experience and expertise, and to play a significant part in India’s road infrastructure growth, Yin said, who was in India to get a sense of the progress of the company’s several initiatives said.

“The group has so far invested in excess of Rs 300 crore to build up its team and resources in India, and will be continuing to invest in expanding our resources in terms of financing, manpower and equipment in line with the expected growth in our order book. India is a focus country for our international expansion and we are committed to contributing in India ‘s infrastructure needs,” Yin said.

UEM plans to become one of the top 20 infrastructure companies in India with a market share of 2%. UEM India aims to become $1billion company in India by 2012. The company is looking at acquiring small and medium size Indian companies with relevant expertise and is open for partnerships with players who provide local knowledge, network and complementary capabilities.

UEM currently has over 10 branches and site offices in India, including presence in major cities such as Delhi, Mumbai, Bangalore, Chennai and Chandigarh and it plans to further broad.

Red Fort Capital which manages three active funds under its aegis including an offshore and a domestic fund for Indian real estate market, as well as a hedge fund for listed Indian entities is already in talks with some of its existing investors for floating the new fund, which would invest in infrastructure projects in the country. It may also rope in new investors to the proposed fund.

Growing infrastructure

“The new fund is likely to be over $600 million and will focus on projects such as ports and power, amongst others. In fact, some of our existing investors approached us for a fund in the infrastructure, a sector whose risk profile is very different than the real estate segment. Globally, the returns for infrastructure projects are in teens whereas in India it averages at about 20 per cent,” Mr Subhash Bedi, Director and Partner, Red Fort Capital Advisors, told Business Line.

He said that in future, the investments in infrastructure projects could also find synergies with the projects that Red Fort has funded in the real estate sector. “For instance, there could be synergies between port projects and development of warehouses,” he pointed out.

In the kitty

Red Fort Capital has already stitched seven deals worth $200 million in the Indian real estate market during the first six months of 2008 and expects to infuse another $300 million by the end of the calendar year. In comparison, the company had pumped-in $300 million into six projects in 2007.

It has an exposure to projects in Delhi, Mumbai, Chennai, Bangalore, Hyderabad and Kolkata and takes positions in affordable housing projects as well as office space projects.

“A lot of PE investors who were aggressive early last year, are now staying away from the real estate market, and we feel that only the serious players who believe in the 10-year growth story of the realty sector are now left in the fray,” he said.

Red Fort Capital, which counts Government entities, Pension Funds and Life Insurance companies amongst its investors, feels that realistic expectation by the developers on project valuations could lead to more deals for the fund this year.

“In the first six months of 2008, we surpassed the total number of deals inked in the whole of last year. We expect to be able to close 2008 with about 10-12 deals in our kitty,” Mr Bedi added.

Trump may create the privately held fund with investors including an Indian family, he said in a telephone interview from New York yesterday. He didn’t give specifics on how he’ll raise the money, or when the first investment will be made.

Trump would join Deutsche Bank AG and Lehman Brothers Holdings Inc. in amassing funds to invest in a market that recorded the world’s highest growth in millionaires last year, fueling demand for luxury homes. The highest borrowing costs since 2002 have ended India’s five-year property boom, curbing valuations of projects and developers.

“The real estate market is in a downturn now,” said Ritesh Vohra, director of investments at Mumbai-based Saffron Asset Advisors, which manages more than $400 million in two property funds. “There’s some more pain left over the next two years or so, and that could be an opportunity to invest.”

Property prices in India are likely to drop by about 20 percent to 25 percent, Sarang Wadhawan, managing director of Housing Development & Infrastructure Ltd., India’s third-biggest developer by market value, told reporters yesterday. His comments echo statements made last month by Keki Mistry, vice chairman of the nation’s largest mortgage lender, and other developers.

‘Appreciate Luxury’

“The fund will be for acquisitions of real estate in the high end, and across the spectrum,” said Trump, 30. “The market place is beginning to understand and appreciate luxury, so there is a great opening for us there, as well as in resorts.”

The number of Indians with financial assets of more than $1 million grew 23 percent in 2007, according to a report by Merrill Lynch & Co. and Cap Gemini SA on June 24, surpassing China’s 20 percent and Brazil’s 19 percent growth.

New York-based Trump Organization Inc. also plans a residential and hotel project in Mumbai with a local partner to tap the growing wealth of middle-and higher-income Indians. The city is India’s biggest trading center for stocks, bonds and commodities, and home to some of the country’s largest companies including Reliance Industries Ltd. and State Bank of India.

“Our entry has to be in Mumbai and that’s where everything is going on right now in terms of the high-end real estate,” Trump said. “That’s the place where one is going to achieve the highest prices per square foot. It sets the tone for all of the other future developments.”

Overseas Funds

Economic growth forecasts of more than 8 percent for this year are luring global funds to India, who expect growing incomes and wealth to fuel demand for property.

Lehman’s real estate fund last month bought a $175 million stake, its biggest investment in India’s realty sector, in a Mumbai project under development by Unitech Ltd. Deutsche Bank and other private equity investors last year pledged to invest $425 million in Mumbai-based Lodha Group.

Deutsche Bank’s RREEF unit, the world’s largest alternative investment manager, in April said it plans to invest more than $1 billion over three years in India’s real estate and infrastructure assets.

Real estate prices in India have climbed for five straight years, boosted by a six-year equity market boom and rising incomes.

The rally in property prices may end this year as falling stock prices and rising interest rates slow sales and make it tougher for smaller developers to borrow money. The 14-stock Bombay Stock Exchange Realty Index has declined 63 percent this year, almost double the 32 percent drop in the benchmark Sensex.

“The pendulum has started shifting back a little bit to the point where prices have started to become a bit more reasonable,” said Trump. “It will allow companies such as ours to justify buying land. It’s a good opportunity for us.”

There's gold in them there iron mines: Carajás, in Pará.

GEOLOGO.COM.BR is a groovy little international news service, in Portuguese, on the global mining sector.

It noted in June:

Nos últimos anos aumentou, exponencialmente, a pressão de várias entidades internacionais no sentido da internacionalização da Amazônia. Esta pressão, infelizmente, consegue influenciar uma série de decisões governamentais, nem sempre boas para o País. Sempre que o assunto é abertura de estradas, barragens, minas ou qualquer obra de porte na Amazônia, estes mesmos grupos aplicam pressões e o Governo Brasileiro, frequentemente, titubeia e acaba sucumbindo com medo das repercussões internacionais.

Pressures from various international bodies have mounted exponentially in recent years with respect to the proposed internationalization of the Amazon region. This pressure, unfortunately, has influenced a series of Brazilian government decisions, not all of them good for the country. Every time the topic of constructing new roads, levees, mines or any other large-scale infrastructure project in the Amazon arises, these same groups pressure the Brazilian government, which often vacillates and winds up giving in, fearing international repercussions.

Do ponto de vista da geologia a Amazônia encerra um potencial mineral e econômico simplesmente gigantesco. Estamos falando de petróleo e gás, do ferro, manganês, alumínio, cobre, níquel, ouro, cromo, tântalo, estanho, caulim, zinco, chumbo, prata, nióbio, terras raras, platina, diamante e das gemas...enfim de um elenco de metais e minerais de profundo interesse econômico que povoam os recantos amazônidas como o Carajás, Tapajós, Pitinga, Amapá, Roraima, Rondônia, Mato Grosso....e por aí afora. Todos ainda inexplorados, a espera de um minerador que possa converter este sonho em realidade.

From the geological point of view, the economic and mineral potential of the Amazon is simply vast. We are talking about oil and gas, manganese, aluminum, aluminum silicates, copper, nickel, gold, chromium, tantalum, tin, zinc, lead, silver niobium, rare earths, platinum, diamonds and gemstones ... in short, a long list of metals and minerals that are of profound interest to the people of Amazonian regions like Carajás, Tapajós, Pitinga, Amapá, Roraima, Rondônia, Mato Grosso ... and so on. All still unexplored, just waiting for a mining concern to turn the dream into a reality.

Devido as pressões dos ambientalistas a mineração na Amazônia passou a ser tratada, cada vez mais, com reservas pelo Governo. Nesse cenário as FLONAS, APAS e outras áreas de preservação ambiental multiplicaram-se. Muitas, coincidentemente, sobre nossas enormes reservas minerais que não poderão, consequentemente, ser exploradas a não ser que o Governo, inteligentemente, possa criar excessões.

Due to pressures from environmentalists, mining in the Amazon region has come to be regarded with increasing caution by the Brazilian government. In this scenario, FLONAs, APAs and other environment preserves are multiplying. Many of these areas happen to coincide with enormous mineral reserves that cannot therefore be explored unless the government creates exceptions in a deliberate and intelligent manner there.

Vimos com pesar e apreensão a multiplicação destas áreas e a falta de interesse de muitos governantes e autoridades em permitir a lavra dos depósitos minerais que lá foram enclausurados. Até leis que podem fomentar um processo de internacionalização , como a a Lei 9.985, de 19 de julho de 2008, foram criadas. O prejuízo para o Brasil e seu sofrido povo será incomensurável se esses entraves se concretizarem.

We view with some concern the multiplication of areas appropriated in this way and the lack of interest on the part of many elected and appointed officials to permit the working of mineral deposits they contain. Laws that might even foment the internationalization process, such as Law 9,985 of 2008, have even been passed. The damage to Brazil and its suffering people will be measureless if such deadlocks materialize.

A Amazônia deve ser preservada e esse é um dos pontos que nós não abrimos mão pois sabemos que é possível compatibilizar a extração inteligente de minerais com a preservação e reabilitação da floresta e de áreas degradadas.

The Amazon must be preserved. This is one point we concede gladly, because we know that it is possible to balance the intelligent extraction of mineral resources with the preservation and rehabilitation of rain forests and degraded areas.

Acusar os mineradores de devastação ambiental não reflete um pingo da verdade que nós, geólogos, conhecemos. Os grandes projetos da mineração, na realidade, preservam e recuperam o meio ambiente, muitas vezes já devastados por garimpos e outras atividades. Não há como comparar a mineração com a agricultura e pecuária que consomem sistematicamente enormes áreas de floresta.

But to blame mining concerns for environmental devastation, to us geologists, makes absolutely no sense. Large-scale mining projects, in reality, preserve and recover the environment, which has often been devastated by informal prospecting (garimpagem) and other activities. You cannot compare mining with agriculture and animal husbandry, which consume vast stretches of forest.

Qualquer projeto de mineração, no seu término, devolve à natureza a área lavrada sem impactos significativos ao meio ambiente. Exemplos deste casamento mineração-ambiente se multiplicam em todo o mundo comprovando,na prática, a tese de que é possível lavrar preservando a natureza.

Any mining project, in its final phase, returns the area worked to nature without any significant impact on the environment. Examples from the world over of this marriage between mining and the environment can be multiplied, proving, in practical terms, that it is possible to mine while preserving nature.

É por intermédio da prática da mineração inteligente e consciente, que o homem conseguirá maximizar os seus recursos naturais.

It is through the practice of intelligent, conscious mining activities that Man will manage to maximize the use of his natural resources.

Esses ataques sistemáticos a nossa soberania parecem, na realidade, dissimular mais uma jogada no tabuleiro da macro-economia mundial. A medida que os ditos países do "primeiro mundo" exaurem as suas reservas minerais e a sua biodiversidade, mais frequentes são os gritos contra o desenvolvimento da Amazônia. Uma Amazônia produtiva e ambientalmente consciente iria colocar o Brasil em uma grande vantagem competitiva sobre esses mesmos países.

[tktktktktktkt]

Este cenário, é lógico, só interessa aos brasileiros. Em paralelo surgem e proliferam os falsos messias ambientais que prometem preservar lotes amazônidas a troco do dinheiro de estrangeiros ignorantes e bem intencionados. Somente uma região extraordinária como a Amazônia poderia abrigar tamanha diversidade e controvérsia.

[tktktktktktkt]

No entanto, alguma luz, surge neste universo cinza que é a política brasileira: finalmente o Presidente Lula, de forma incisiva, soletrou, à todos os interessados, que a Amazônia tem dono. Uma declaração que por mais óbvia que pudesse ser, tem um timing simplesmente extraordinário e sintetiza todos os anseios e esperanças de um povo. Parabéns Presidente. Nós do Portal do Geólogo cientes do papel que a Amazônia Brasileira tém e terá na nossa economia concordamos totalmente com as suas palavras.

But there is some light at the end of the tunnel in this grey area that is Brazilian politics: At last, President Lula has forcefully spelled out, to all interested parties, that the Amazon has an owner. A declaration that, as obvious as it may seem, was extraordinary in terms of its timing, and summed up all the hopes and aspirations of the Brazilian people. Congratulatios, Mr. President. We here on the Geologist's Portal are aware of the role the Amazon plays, and will play, in our economy, and we agree wholeheartedly with your words.

Esperamos que essas palavras sejam o prenúncio das ações tão esperadas pela sociedade.

We hope these words are a prelude to the action that society so anxiously awaits.

Let me see if I can find the text of the statement cited.

Bovespa tem saída de R$ 11 bi em capital externo no ano: Exame magazine reproduces part of a story by Fabiana Holtz of the Agência Estado -- is it really going to be bought up by the Organizações Capivara Globo? -- on influxes and outflows of foreign capital in the Stock Exchange of the State of São Paulo, the Bovespa.

A aversão ao risco no mercado financeiro, diante das incertezas sobre a saúde da economia mundial, continua afastando os investidores estrangeiros da Bolsa de Valores de São Paulo (Bovespa), que, em 2008, já acumula uma saída recorde de R$ 11,275 bilhões em capital externo. Os dados são até a última terça-feira (dia 15 de julho).

Risk aversion in the financial markets in the face of uncertainties about the health of the global economy continues to drive foreign investors away from the Bovespa. In 2008, the Bovespa has already accumulated record outflows of R$11.28 billion in foreign capital. The figures are current as of July 15.

Naquele dia, a Bovespa registrou uma saída líquida de R$ 845,540 milhões em recursos estrangeiros. Este mês até o dia 15, a Bolsa brasileira contabiliza perdas de R$ 4,618 bilhões - o terceiro pior resultado mensal desde março de 1993, quando o levantamento teve início. O montante é inferior apenas ao apurado nos meses de junho (R$ 7,415 bilhões) e janeiro de 2008 (R$ 4,731 bilhões).

On July 15, the Bovespa recorded a net outflow of R$845.54 million in foreign funds. In the first half of July, the Brazilian bourse has racked up losses of R$4.6 billion -- the third worst result since March of 1993, when figures on foreign investment began to be recorded. The sum is second only to outflows recorded in June 2008 (R$7.4 billion) and January 2008 (R$4.731 billion).

Diante dessa saída recorde é importante ressaltar, no entanto, que os volumes registrados em 1994 pela Bovespa eram infinitamente menores. Apenas a título de comparação, em 1994, a bolsa fechou o ano com R$ 12,678 bilhões em vendas e R$ 13,211 bilhões em compras, enquanto que em 2008 já movimentou R$ 275,8 bilhões em compras e R$ 285 bilhões em vendas.

Given these record withdrawals, it is important to recognize, however, that Bovespa trading volumes were infinitely smaller in 1994. For example, in 1994, the stock market closed the year with R$12.7 billion in sells and R$13.2 billion in buys, while in 2008 it has already recorded R$275.8 in buys and R$285 billion in sells.

That is probably very badly translated. All translations here are draft-quality. Since you are not paying me to wrack my brains to produce finished work, you get what you pay for, and honi soit qui mal y pense.

The gist of the story, then: We present you with alarming numbers, only to remind you that they mean absolutely nothing except in relative terms -- as a percentage of total transaction volume and market capitalization, for example.

But we do not go to the effort of calculating those numbers for you. If you want to figure out whether or not you should be terribly, terribly alarmed, fire up your own spreadsheet, or get yourself a cocktail napkin and a pencil.

And unlike the Sousaphone, which is just some guy taking messy notes, Exame does expect you to pay it for the value it adds to (subtracts from) the story.

Relatório reservado nº3423 18/07/2008: The rumor mill has it that Brazil's civil aviation agency, ANAC, is moving to tie the hands of MatlinPatterson while litigation between the U.S. "distressed equity" investor and its Brazilian partners continues.

The lawsuit has to do with how to divvy up the proceeds of the sale of Varig assets to Gol airlines by VarigLog, controlled by Matlin and the Brazilian partners -- an interesting case of the tail selling off the dog. The Chinese investor has tended to get the "evil Fu Manchu" treatment from a Brazilian press with a kneejerk bias against "foreign speculative capital," it seems to me.

Fecha-se o cerco contra Lap Chan. A Anac está exigindo do investidor um compromisso formal de que ele não vendeu ou venderá a estrangeiros participações no capital da VarigLog superiores a 20%. O documento deverá ter aval de tribunais brasileiros e norte-americanos. Parece filigrana, mas trata-se de um acordo visceral, com caráter retroativo, que poderá multiplicar as sanções a Lap Chan, caso venha a ser provada a venda irregular de ações a estrangeiros.

The siege is closing around Lap Chan. ANAC is demanding that the investor state formally that he has not sold and will not sell stakes in VarigLog superior to 20% of its equity. The document will have to be cleared by U.S. and Brazilian courts. It seems like a tiny detail, but this would in fact be a very significant contract, with retroactive force, that could multiply the penalties against the "vulture fund" investor if it turns out he sold shares to foreign investors in an irregular fashion.

Comment: I cannot claim to understand the political risk ramifications of this rumor in the slightest degree. An effort was made to produce a "scandal" over "undue government interference" in the deal in favor of "foreign speculative capital" (see above).

ANAC seems something of a lame duck regulatory agency in the midst of a proposed restructuring of civil aviation (which, oxymoronically, is actually subordinated to the military), and the Minister of Defense wound up demanding, and getting, the resignation of all its commissioners in the wake of last year's aviation disaster in São Paulo.

See also

• “VarigLog Cannot Be Shot Down Just Yet”
• The MiniDef Listens: New Civil Aviation Policy Due Out Soon

So the Varig "scandal" appears to be a dead dog. The press has moved on to a new scandal now: That of Dantas and the Opportunity Fund.

Is this an item for my newswire, which does track regulatory risk? Maybe.

Murali Krishna Reddy, chairman of the Hyderabad-based MAK group feels that international players see lot of opportunities in India. They chose Hyderabad over other cities for their entry as the city is the most happening place with multilingual, cultural population.

The city is also receptive to new ideas. Foreign players look at Hyderabad as a good testing ground. They feel that projects which succeeds here will succeed in other metros as well. Also the government here is very proactive, Reddy adds.

His group recently saw investment coming from Sunway Berhad, Malaysia. The foreign company has formed a SPV with MAK Builders, part of the MAK group to develop a Rs 350 crore integrated township project in Hyderabad. It holds about 60 per cent equity in the SPV and would be pumping in US$ 5 million into the project as FDI. The project would have two million sq ft of residential space besides some retail and commercial space and a hotel.

Tishman Speyer, a New York-based closely held real-estate developer and operator also joined hands with ICICI Venture, a private-equity firm of ICICI Bank, to float TSI Ventures - India’s first fully integrated real estate investment, management and operating company.

The mission of the joint venture is to redefine the Indian real estate portfolio and development industry landscape. The first two projects of the joint venture is coming up in Hyderabad.

According to Yogesh Maurya, deputy head-Hyderabad, TSI Ventures, the city scores over the other cities for three reasons - progressive government, very good infrastructure with roads and international airport and highly vibrant economy. “The government here is very progressive.

It understands the needs of a private investor and creates a win-win situation. Hyderabad is a growing city and that’s precisely why it is fast becoming a hot spot for global players,” he says. ACI Real Estate is yet another international player which entered the Indian real estate market through franchisee route. It began its franchisee network with Hyderabad by appointing Global Properties for the city.

It is looking at similar arrangements in Mumbai, New Delhi, Bengaluru, Pune and Kolkata. Israel-based Property & Building Corporation (PBC) and Electra Real Estate also recently joined hands with Hyderabad-based Incor Infrastructure to develop Rs 4,000-crore real estate projects in Hyderabad, Chennai and Mysore through a joint venture company-PBEL Property Development (India).

The country's outward foreign direct investments rose by 29.6 per cent to $17.4 billion in 2007-08, backed by India's Inc large-scale acquisitions, growing appetite for an overseas presence and the hunt for energy assets. The outward FDI in 2006-07 was $13.45 billion.

Outward investment refers to investment by Indian entities and partnership firms in joint ventures and wholly-owned subsidiaries abroad,

The manufacturing sector led the investments, with a 43 per cent share, followed by the non-financial services (11 per cent) and trading (4 per cent). The manufacturing sector saw proposals in electronic equipment, fertilisers, agricultural and allied products and gems and jewellery.

Related article

• India ready to make multi-billion-dollar oilsands deal in Alberta

Record remittances received in fiscal year 2008
RECORDER REPORT

KARACHI (July 17 2008): Pakistan received the highest-ever amount of over 6.451 billion dollar as workers' remittances in 2007-08 fiscal year (FY08). The workers remittances in FY 08 have also shown an increase of 17.43 percent or 957.59 million dollar, when compared with FY07. As 5.494 billion dollar received in the preceding 2006-07 fiscal year (FY07) on account of workers' remittances.

With Non-Performing Loans finally under control and economic recovery underway since 2002, Japan has also experienced a revival in FDI outflows. Many commentators focus on the large stocks built up in China, but there has also been steady interest in investing in Australia. Rather than tourism and property developments, Japanese firms have been quietly investing in infrastructure projects, and Nomura is reported recently as a possible buyer of the Australian investment banking arm of ABN AMRO.

A more remarkable development is the expansion of inbound FDI, particularly under the former Koizumi government. Fueled by a broader boom in M&A world-wide, Japan's inflow rebounded to US$22 billion in 2007, and foreign investment stocks doubled over the last five years. But flows and stocks are still low by OECD standards relative to GDP, especially compared to the US, the UK and now Australia.

The Fukuda government has also sent more mixed messages recently. The Transport Ministry tried to include a blanket one-third cap on foreign shareholdings in Japanese airports. But others including the Financial Services Agency objected that this would choke off other inbound FDI, so this provision was dropped in March. The government is now considering the introduction of measures that more directly regulate the understandable security concerns arising from operating airports. Macquarie Airports Management Ltd, which already owns 19.9 percent of Haneda Airport, will be following this ongoing debate especially carefully.

A more recent incident involves the government’s first rejection of a foreign investment under the Foreign Exchange and Foreign Trade Law (gaitame-ho), as significantly liberalised in 1998. The Children’s Investment Fund based in the UK (TCI) had applied for the pre-approval still needed under the Law for investments of more than 10 percent in listed sectors deemed potentially critical to national security. The government rejected its proposal to take 20 percent of wholesaler Electric Power Development Co (J-Power), citing energy security risks.

The US, in particular, has also recently invoked national security to block FDI. Australia’s Foreign Investment Review Board blocked Shell’s bid for Woodside in 2001 and was criticized for lack of transparency by the Financial Times in 2005 when it was investigating the Xstrata’s bid for WMC. The Rudd government must have given a lot of thought to China’s BG Group’s hostile takeover bid for Origin Energy this March, especially since the US had blocked Chinese investors interested in Unocal.

Still, Japan’s rejection of TCI’s proposal might have been presented better, and it left much speculation that this was less about national security and more about preventing foreign management turning up pressure on a major Japanese company. Some also tie this to the Supreme Court’s decision last year upholding of a post-bid rights issue (by Bulldog Sauce) discriminating against a hostile bidder (US hedge fund, Steel Partners), or to the hundreds of listed Japanese companies that have recently implemented pre-bid “Advance Warning System” anti-takeover measures (a type of “poison pill”).

Yet this overlooks the significant emphasis on shareholder approval of anti-takeover measures contained in that judgment, as well as in Guidelines (re-)issued by the Ministry of Justice and/or the Ministry of the Economy, Trade and Industry. Incumbent target company directors retain much more discretion in the US, and therefore generally implement much more powerful poison pills despite stricter requirements for independent non-executive directors on American boards. That is why News Corporation recently relocated to the US from Australia, where instead we follow the English tradition in even more strictly controlling poison pills. The Anglo-Australian tradition also makes it easiest to launch hostile takeovers by promptly resolving disputes through a Takeovers Panel, rather than the formal court process.

Nonetheless, at least compared to Anglo-English law, Japanese law does give incumbent managers considerable leeway to protect themselves against hostile takeovers. This helps explain why none has yet succeeded for a major Japanese company, although the threat is now real. Japanese firms also still tend more to acknowledge (legally or in fact) the interests of a broader array of stakeholders. This occurs despite a considerably greater contemporary focus on shareholders, as well as some concomitant declines in the influence of “main bank” creditors and even (a shrinking core of) “life-long employees”.

Unsurprisingly, investors have also experienced mixed results from trying to force changes “from within” to extract greater shareholder returns more quickly. Steel Partners did force venerable wigmaker Aderans to change its management at a shareholders’ meeting in May. But in their June meeting other J-Power shareholders rejected TCI’s proposals to change management, elect more outside directors, limit cross-shareholdings, buy-back shares, and further increase dividends.

In sum, as we explain in a forthcoming book, both FDI regulation and corporate governance in Japan is still undergoing a “gradual transformation” underway since the political and then socio-economic upheavals of the 1990s “lost decade”. A similar shift towards more market-oriented solutions is evident in other industrialized democracies, such as Germany, as shown by Professor Wolfgang Streeck in Cologne. This partially winds back what Karl Polanyi described in 1944 as “the great transformation”, which involved welfare state reactions to the rise of the market economy. Japan reveals its own combination of mechanisms for achieving some changes, while maintaining some continuity. These involve a few relatively immutable baselines, like FDI restrictions in the national interest; and some flexible rules for more everyday situations, as now with takeovers and permitted counter-measures.

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By Shapi Shacinda

LUSAKA (Reuters) - Zambia has enough currency reserves to protect the economy in case the illness of President Levy Mwanawasa prompts some reduction in foreign investment, central bank Governor Caleb Fundanga said on Tuesday.

Fundanga said the only slight worry of the Bank of Zambia (BoZ) was rising oil and food prices, which threatened its single digit inflation target. However, he remained optimistic of achieving 7.0 percent annual inflation in December this year.

Fundanga said it was evident the illness of Mwanawasa, who is in a French hospital after suffering a second stroke, had caused anxiety among some investors but that there was "no need for panic".

"The investors in the mines will continue exporting copper. It is possible that ... some investors may decide to pull out, but we have enough reserves, $1.4 billion held by the Bank of Zambia and another $1 billion by commercial banks," Fundanga told a news conference, adding Zambia had 5.6 months of import cover.

Mwanawasa impressed the International Monetary Fund and other Western donors by cracking down on government spending and launching an anti-corruption drive.

Fundanga said Zambia had investment pledges totalling $1.8 billion so far this year compared with just $1 billion in the first six months of 2007. The government has previously said a number of these investments have been fulfilled.

"Naturally, as a result of the illness of the captain, as some refer to the president, there are some people who might be feeling uncomfortable. Given this situation, are we vulnerable? Will all forex (foreign exchange) dry up? The answer is 'no'," Fundanga added.

He said mining and non-traditional sectors had continued to perform satisfactorily with copper export earnings for the three months to June just 0.1 percent lower than the previous quarter's earnings, at $967.6 million.

Fundanga said non-traditional exports at $187.6 million at end-June were 12.3 percent above the $167.1 million recorded in the previous quarter ending in March.

"Favourable export earnings have led to the strengthening of the external sector reflected in the appreciation of the kwacha against major currencies and a 10 percent increase in international reserves to $1,338.4 billion in June 2008 from $1,216.3 billion in March 2008," he said.

There were inflationary pressures from a 15 percent wage increase for civil servants from January and from higher global oil prices, which would put pressure on transport and commodity prices.

"However, these pressures may be mitigated by pass-through effects of the appreciation of the exchange rate of the (Zambian) kwacha against major currencies on account of external sector performance," Fundanga said.

Fundanga said the kwacha appreciated 11.3 percent against the dollar in the three months to June to trade at an average of 3,259/dollar.

"We cannot give up on 7.0 percent inflation at the end of the year because we have enough food to feed ourselves and we will not necessarily be affected by global food prices," he added.

(Lusaka newsroom + 260-977843609/260-955779523)

© Reuters 2008. All Rights Reserved.

Unitech was jointly developing the project with its local Mumbai partners (the Western Expressway joint venture). “The initial phase entails development of 1 million sq ft of office space, out of the total developable area of about 18 million sq ft.

Lehman Brothers Real Estate Partners and the Western Expressway joint venture will each contribute 50 per cent of the construction costs,” a Unitech statement said. The company further said that architecture firm Skidmore, Owings & Merrill had been roped in to design the master plan for the broader project which envisioned over 100 acre mixed-use development containing office, retail, residential and hotel components.

That may be anybody’s guess. But the education sector, so far immunized from WTO and GATS negotiations, is begging for a ceding of state control.

In a way it’s odd that private investment for profit should still be disallowed in education, particularly in higher education, after two decades of avowed liberalisation. Two decades is plenty of time to implement cultural safeguards. Investments by charitable trusts and religious institutions have been a trickle, and not universally appreciated.

The National Knowledge Commission seeks a nearly four-fold increase in the number of universities by 2015 for India to maintain any competitive edge. At present only about a tenth of college-age Indians are even enrolled in college; China’s comparable gross enrollment rate is two times that.

In order to increase India’s college GER to 15 per cent by 2015, the Knowledge Commission recommends that spending on higher education, which accounts for less than a sixth of the total spent in education, be doubled to at least 1.5 per cent of the GDP.

Even with limited non-government investment in higher education, nearly a third of college students are enrolled in institutions that receive no government aid.

Additionally, India is under pressure to enhance quality in the existing 350 postgraduate universities and their respective families of about 1,770 undergraduate colleges, which together constitute one of the world’s prodigious systems of higher education.

An average Indian university administers more than 100 affiliated colleges; a few universities administer as many as 400. It is akin to a poor family raising scores of demanding kids. India’s per capita spending on higher education, according to UNESCO figures, is one of the world’s lowest.

Members of the Knowledge Commission are aghast. They want some sort of “family planning” for universities – creating as many as 1500 smaller, “more nimble,” universities by 2015, each taking care of far fewer colleges and spending far more per student.

Clearly, immense investment in higher education is a need of the decade. 

Where the money? The government’s resources are already straining from the unmet challenge of universal literacy: India has 380 million illiterates, more people than the populations of the United States and Canada combined.

Other than raising public bonds, inviting investments from competing private entrepreneurs may be the only sustainable solution. John Elliott of Fortune estimates that investment potential to be $40 billion per year and to increase to three times that in a decade.

So what is the government doing?

Earlier in July, Harvard-educated science minister Kapil Sibal, during a visit to Bangalore, declared his intention to invite foreign direct investment (FDI) in higher education. Not just private but foreign too. Whether Sibal was speaking for the Union cabinet is unclear, but he sure got the Communists’ goat: Three weeks later, CPM secretary Prakash Karat pulled the rug from under the government, albeit over the nuclear agreement.

(Ah, was that a grin crossing Mr. Sibal’s countenance?)

So what might be some implications of opening the sluice gates of higher education to private and foreign investment?

# Dollars/Euros would fund the pursuit of applied, high-demand, subjects (biotechnologies, informatics, telecommunications, chemical engineering, etc).  Some investment would go to the humanities (law, mathematics, philosophy), a trickle to the social sciences (psychology, political science, linguistics) and whatever remains to vocational/trade subjects (aviation, metal work, information technology, etc).

# Academy-industry ties would turn more universities, to a larger extent, into petri-dishes of corporations. R&D activities would migrate from corporations to universities due to lower costs. So more active campuses, more rigorous program requirements, more robust degree programs. Result? More patents and other intellectual property, which in turn would attract even more investments, more trickle-down returns.

# A substantial spike in sources of research funding outside the social sector would result in more avenues for productive student employment, more incentives for creative faculty, a tenure system for professors based on research productivity – more reasons to pursue higher education.

# Education would be priced much higher; tuition and fees would be driven not by utopian fundamentals such as margins of profit or social need but by the inexorable demands of the market.  Banks and other lenders would enter a golden age. Credit rating of individuals would blossom as an industry in itself.

# Resistance to egalitarian programs such as reservation in college seats would get stronger, more so in reservation in faculty positions:  Disadvantaged backward/rural students would find motivation to be as competitive as ever.

# Universities from America and Europe, eager to expand their reach and coffers, would be able to offer high quality programs on their own terms: How about access to the portals of Columbia, MIT or Cambridge while sitting in your red-oxide verandah in Vontikoppal? There’d be a celebration of the scientific method, probably with greater emphasis on process than on concepts.

# Short-term disadvantages to regional aspirations such as Indian systems of medicine and therapy, the Kannada chaluvali, Indology and Eastern philosophies would be corrected over time by the higher-impact creative activities and research.

# The academic year’s pace would hasten; university schedules would move into more flexible, credit-driven semesters or quarters.

Churumuri readers might want to discuss the value additions/deletions from the above implications.

Also read: Yella not OK, guru. Nanna makkalu is not learning

Don’t gift them fish. Teach them how to fish

Can Azim Premji do what the government can't/won't?

What can Mysore University do with a windfall

The world's ascendant education superpower?

For some, the opportunity has already arrived. For the funds, the idea is to have better control over their development partners while others are clear that they also want to make the kind of margins that construction offers (25-35%). Apart from the cost advantage, this would also mean a lower dependence on construction companies in a scenario where execution capability bottlenecks are threatening to derail projects.

Trikona Capital, which has over $1-billion investments committed in India, is setting up a development group, which will be headed by the ex-chairman of HUDCO, Dr PS Rana. “There is very little scalability in India. My best development partner has at best developed 5 million sq ft of space,” says Trikona MD Aashish Kalra. Execution is the most important thing, he says.

It is this search for execution that is driving them on to setting up a full-fledged development group within Trikona Capital, which, says Mr Kalra, will oversee all developments, even by their development partners and enhance value. Kalra also sees this is an insurance against partner default too. “If your development partner defaults in any case, you could take control of the project. You can do that only if you know the business yourself,” explains Mr Kalra.

At Saffron Group, which advises Yatra Capital on their real estate investments in India, there is an existing project management team which, says their MD Ajoy Vir Kapoor is being expanded significantly to a 13-15 member team. “This team will add value to the construction partner. There may be an opportunity in doing projects on our own, but not yet,” he adds.

At Trikona though, Mr Kalra does not deny that “we will do our own developments if we are not able to find an appropriate partner for a particular project.” Kotak Realty Fund had recently made an enterprise level investment in Lalith Ganga Constructions. Kotak’s stake in the company has not been disclosed. Lalith Ganga Constructions is a start-up promoted by Kotak Realty Fund along with Girish Puravankara, the erstwhile deputy managing director of Puravankara Projects.

Kotak Realty Fund’s website says: “The said start-up company will be identifying land where Kotak Realty Fund would invest directly and manage the same on behalf of the Fund. The company will be entitled to a project management fee and share in profits over a specified hurdle rate. Kotak Realty Group has an opportunity to create its own real estate company with a highly reputed entrepreneur, who has in the past built a large real estate business and has relationships in Bangalore, Hyderabad, Coimbatore and Pune.”

Though the relationship between the two is not very clear at the moment, a company spokesperson said “that the decision to partner with companies for development depends on location to location. The startup though will be executing some of Kotak Realty Fund’s projects.”

“The funds have realised that there are good margins to be made in real estate development,” explains DTZ investment advisory director Ambar Maheshwari. The margins in development in India are in the range of 25-35%. In its investments, SARE wants to have the flexibility to either invest in a project of a developer (and mostly take a majority stake) or execute the project themselves. The fund has developed suitable development capability and is already executing a project on its own in India.

“There needs to be a degree of control over your projects. We also believe that there is a development margin to be made here and that will now come to us,” says Sunil Agarwal, chief development & acquisition officer at SARE. SARE has $200 million committed across several projects in India.

Angel Broking real estate analyst Shailesh Kanani says that if these funds are able to execute and manage these projects, it is a good move. “Over the years with even subcontractors becoming big and their order books swelling, execution is a huge hurdle for large and small real estate companies alike,” he adds.

This might be the reason funds are looking for execution capabilities apart from the fact that they can save costs and boost their margins. Infinite India Investment Management is also doing a project on its own but they are not looking at getting into full-fledged development.

“In one of our projects where we own 100% we are doing the development on our own because we have the capability and also because the asset is very prime,” says the fund’s director, Jagdeep Pahwa.

Un equipo de investigadores, que incluye al Dr. Habib Benzian del FDI World Dental Federation, la Dra. Ann Goldman de la Escuela de la Salud Pública y de los Servicios Médicos en la universidad de George Washington en Washington D.C., el Dr. Robert Yee y al Dr. Christopher Holmgren, ambos consultores expertos del Comité de Promoción de la Salud del FDI, ha comparado la asequibilidad relativa de la crema dental  fluorada en 48 países. Este estudio es el primero en intentar cuantificar la asequibilidad de la crema dental a través del globo.

La crema dental fluorada es inasequiblemente costosa para la gente más pobre del mundo, según el estudio que fue publicado en el diario "Globalization and Health" en la central de acceso abierto de BioMed.

Los investigadores revelaron que las poblaciones más pobres de países en vías de desarrollo tienen menos acceso de comprar la crema dental.

La crema dental fluorada es el método más ampliamente utilizado para prevenir la caries, pero actualmente solo cerca de 12.5% del mundo se beneficia de ella. Los investigadores creen que el poco uso de la crema dental fluorada es en gran parte debido a su costo, que es inaccesible para las poblaciones pobres en algunas partes del mundo.

Los resultados demostraron que en diversos grupos de ingresos en varios países, como la renta per cápita disminuyó, la proporción de renta necesaria para comprar el stock de un año de crema dental aumentó; siendo la población más pobre de cada país la más golpeada.

"La caries dental es la enfermedad más común en el planeta y el uso del fluoruro es un acercamiento dominante en la prevención de él. El fluoruro está en la lista de medicinas esenciales, por lo tanto, se deben hacer todos los esfuerzos para hacer universalmente disponible y comprable productos que contengan fluoruro, tales como la crema dental. El estudio ha agregado la nueva comprensión de los desafíos que envuelven a las poblaciones pobres de todo el mundo  en lo que respecta a usar un producto preventivo esencial para su salud dental", comentó el Dr. Habib Benzian, encargado de la Salud Pública y Desarrollo de la FDI. "Nosotros estamos enlistados a trabajar de cerca con los fabricantes globales, gobiernos y interventores en este contexto" fue lo que él agregó.

El apoyo de esta investigación es una parte de los esfuerzos encaminados del FDI para promover el uso apropiado del fluoruro para una mejor salud oral. Durante  el 2006 y 2007, dos conferencias fueron llevadas a cabo por el FDI, en sociedad con la Organización Mundial de la Salud (OMS) y la Asociación Internacional para la Investigación Dental (IADR) para discutir y para analizar el impacto, los métodos de la entrega y los planes de estrategias relacionadas con el fluoruro y la salud oral. Ambas conferencias dieron lugar a las declaraciones de llamado para la promoción de la salud oral a través del fluoruro.

INFORMACIÓN ADICIONAL

El artículo, "Global affordability of fluoride toothpaste", Anna S. Goldman, Robert Yee, Christopher J. Holmgren and Habib Benzian, es accesible en línea en www.globalizationandhealth.com website de Globalization and Health´s.

Más información acerca de la FDI, OMS y IADR sobre las declaraciones de la conferencia pueden ser encontradas en el website de la FDI en la siguiente dirección:

 www.fdiworldental.org/public_health/3_2fluoride.html 

The residential project to be set up by the SPV would be launched at Hosahalli in Bangalore, it added.

Today there was an article in the Financial Express (Manoj CG) which talked about the Left’s incessant "opposing", "criticising" and "advising" the Government. I am listing these points here (with additions from other sources), but am not going into the merits of each issue as that is beyond the scope of this article.

1) The Left Front opposed the opening up of the various sectors to FDI.

• Telecom
• Insurance
• Civil aviation
• Agriculture
• Retail

More on that here. And as this Rediff article says the Left opposed FDI in the Education sector too.

1) The Left Front also opposed:

• Divesting shares of public sector units
• The pension Bill
• The ordinance to amend Patents Act
• Foreign policy. For example it told the Government “not to resume military supplies to Nepal under the monarchy,” and not to have military ties with Israel
• Special Economic Zones
• The privatisation of Delhi and Mumbai airports
• Allowing private domestic airlines to operate on international routes

3. And then they've opposed the Nuclear Deal with America. China and India's Left Front see eye to eye on this. In fact our communists are rather worried that once the nuclear deal goes through China will be "encircled," and yes, they have unashamedly said it! The truth is that China has already encircled India. Quoting from that earlier post of mine:

China continues to supply missiles to Pakistan...but Pakistan is not the only country China is building bridges with. It has defence agreements with Nepal, Myanmar, and Bangladesh as well! China is also helping Pakistan build Gwadar port as a base for its navy and is lending a hand to Sri Lanka as well. It has signed an initial agreement worth US$360 million for the constructing the Hambantota harbour in Sri Lanka...

And I wonder what the Left has to say about the "Sino-Pak nuclear cooperation"!!

4. Our Left Front has also interfered in Security issues! This article tells the pathetic tale of how our Prime Minister “made a series of extraordinary threats to secure a guarantee from the Left Front government of West Bengal that a joint Indo-US military exercise would proceed unimpeded.”

I find it disturbing that the Left Front has dared to jeorpardize India's security. It was necessary for India’s security preparedness to interact and learn from other countries. During the Cold war India was limited to interaction with the Soviet Union. Now our country has a chance to expand it's defense know-how but the Left Front is keen that we stick to Russia and China only! As if neither China nor Russia have their self-interest in mind! Sure, America has its self-interest in mind, and so does every other country. Naturally, China supports the Left Front on this as well.

5. The Left has also pressurized the government to “expedite the Iran-Pakistan-India gas pipeline project.” In fact the communists are saying are saying that if the Iran-Pakistan-India gas pipeline's does not go through it means that India is a kow-towing to America! One equals the other!

The Left also created a huge fuss when India voted against Iran at the IAEA on Tehran’s nuclear issue, because according to them this means that India is America’s slave! To the communists, their suspicion of America is the prison prism through which they view everything.

6. The communists vigorously opposed the recent fuel price hike, a hike which was inevitable and in national interest. But they preferred to strike and create mayhem in the country resulting in the loss of crores of rupees to the nation.

7. On the other hand, the communists have been stingy with praise and while they did support the National Rural Employment Guarantee Scheme, they were not giving any television interviews applauding the government although they are quick to give interviews lambasting the government. Nor have they openly praised the increase in budgetary allocation in health and education sectors in the last budget.

Note: The above post was sparked off after reading Manoj CG's story in the Express, and is simply an attempt to sum up for readers the extent of the communists' opposition to the government.

(The photo of the Left Front leaders are from cpim.org)

Related Reading: People in Asian countries don't like each other, but they like America
Does India share common values with the west?
The Economist is opposed to the Nuclear Deal
India has reasons to be wary of China