The politics of investment

THINK TANK/Harvard Business School professor Richard H K Vietor

He is a top-notch Harvard Business School professor, but his treasured moment in life is when he "flunked" a test.

A week after his wedding, Richard H K Vietor, senior associate dean and Senator John Heinz professor of environmental management, Harvard Business School, was enlisted as a potential cadet for the US army that was fighting the Vietnam war. The strong and healthy professor could have easily cleared the physical test, but for a skin rash. "My wife and I got drunk for a week," jokes Vietor. "I did not like the Vietnam war and I was not willing to go," he adds.

The incident throws up two distinct qualities of the grey-haired Vietor "" commitment towards his family and a strong dislike for war. War and violence are issues that Vietor is extremely critical about "" a possible reason why he is not inspired by the current political leadership in the US and why he is critical of India's nuclear tests.

Politics, however, forms the main course of a conversation with Vietor since he teaches international political economy "" a job that requires him to circle the globe for close to three months every year. When Vietor visited India to announce the intention of setting up a research centre (in either Mumbai or Bangalore), it was at the fag-end of a three-week tour, which included a nine-day visit to Egypt from where he travelled to Tokyo, Hong Kong, China and finally India. His travel diary is completely booked till September 2004, when Vietor plans to return to India, hopefully to open the research centre here. "I have more frequent flier miles than I need," he says ruefully.

But all that travelling does have its benefits "" Vietor says he learns "so much" from his meetings with ministers, heads of state, alumni and also from teaching on executive development programmes. Is there one common concern among his students across countries? "Growth and development are key issues. They want their country's economy to grow better," says Vietor.

"The students are not just interested in tackling their own problems, but also how other countries do it better," he adds. For instance, the Saudi Arabians are interested in Special Economic Zones (SEZs) that the Chinese have used to stimulate economic growth; and students in US are interested in the high savings rate that India achieves. "We learn by looking at alternative strategies that different countries have," says Vietor.

So, is there a strategy India can pick up from countries like Mexico and China to attract foreign direct investment? There isn't one, there are three tactics, says Vietor. "One is investment in infrastructure in a developing country. The second is investment in the country to export abroad. That's where a lot of investment happens in China. The third is investment in the country to sell in the country. There has been a very little of that in India because the market is not deep enough here. When I talk to Americans or Europeans about India, we generally figure that maybe 120 million people are in the market for high-value products. China has possibly 240 to 300 million people along the coast. So, as India continues to grow, deepen and broaden its market, there will be more and more companies wanting to invest," he says.

Are there any things that India should be careful about? Vietor, who recently did a case study on India and speaks highly of Disinvestment Minister Arun Shourie, says corruption is one thing the country has to drastically reduce. He adds that India's fiscal deficit is "way, way, way too large" at nearly 10 per cent of GDP. "That's not acceptable. That will get India in trouble eventually".

He elaborates, "When India finances these deficits, they sell the bonds to Indian investors. So that money is not available for investment and is used to finance the deficit. If the government cannot raise money in taxes, it should not be spending so much. India has got to get some fiscal discipline now; 10 years from now will be too late."

The professor who believes that he is "more of a practitioner and less of a thinker" admits to spending most of his time working, except for the occasional, quick games of squash. "I pretty much work and do not take vacations," he says.

Even when he is at his beach-fronted summer house in Massachussetts, the professor spends quality time facing the sea writing cases, articles and books.

Is this what you would call the Harvard effect?