Left picks holes in note on FDI

Left parties make fresh case for following china's model on fdi in telecom

The Left parties' reply to Finance Minister P Chidambaram's note on foreign direct investment (FDI) in the telecom sector makes a fresh case for following the Chinese example by challenging facts in the finance minister's note on China.

The Left has argued that India should emulate China by indigenising equipment manufacture in the telecom sector. It has said foreign telecom majors should be forced to invest in state-owned companies for hardware manufacture before they were allowed to provide services. India's growing mobile phone market would allow companies to augment their capacities to enter foreign markets at a price advantage, the Left contended.

Reacting to Chidambaram's labelling of this model as being that of an "infant industry", the Left note says, "...this Chinese 'infant' is currently the biggest player in the global cellular market".

The Left's note further said, "The finance ministry's note makes it appear that China has thrown open the doors to foreign capital... it must be noted that China has yet to allow FDI limits of 49 per cent which it would only allow by 2007."

The Left pointed out that Chidambaram's note had inadequate facts about "the foreign-owned companies that carry overseas communication in China" "" AT&T and Alcatel Shanghai Bell. Alcatel Shanghai Bell was an equipment manufacturing firm and not a service provider as the finance minister's note described it, according to the Left note. It said a perusal of the Alcatel Shanghai website would reveal this.

As regards AT&T, the note said AT&T (China) was not an investor in telecom services but only had a representative office dealing in bilateral long-distance phone traffic between China and the United States. The note pointed out that such an administrative office was in operation in New Delhi as well.

The finance ministry had, in its note, said that China had welcomed foreign capital and technology with network and handset suppliers such as Nokia, Motorola and Siemens. As regards operating companies (fixed line companies), the finance minister's note said this was a monopoly of China Telecom until this was broken up and China Telecom allotted 21 provinces and Netcom allotted 10 provinces.

Curiously enough, the Left note remained silent on the government's point on China Telecom and Netcom, though its earlier note said that both companies were offshoots of an earlier state-owned monopoly carrier.

This note, however, drove home the point that China Unicom and China Mobile "" the two mobile phone operators in the country "" were "state-owned enterprises" with more than 70 per cent of their shares owned by enlisted parent companies and ultimately by the ministry of finance.

It further said that China had more than 300 million subscribers as against approximately 45 million in India and accounted for 30 per cent of the world's net addition in subscribers. This growth, according to the Left note, had taken place without any FDI in areas such as mobile, fixed telephony or long-distance services.