'We're not even using the FTA properly'

Q&A: Surinder Kapur

Surinder Kapur

Resentment is slowly but steadily growing in corporate circles on the government's decision to sign free-trade agreements (FTAs) with east Asian countries. Several businessmen have started complaining that the agreements are loaded in favour of other countries and hold little promise for India Inc. Not without reason.

During the first three months of the Indo-Thai FTA coming into force, Thailand exported $50 million worth of goods to India, while Indian exports during the period were worth just $125,000.

The automobile components sector has occupied centrestage in the whole debate. The industry has been growing at a fast clip in the past few years, thanks to large export orders and a boom in the country's automobile market.

But there are fears that the party could end soon. Business Standard spoke to Surinder Kapur, the chairman of Sona Koyo Steering, on the controversy. Excerpts:

Is the Indo-Thai FTA against the Indian industry?

It is unfortunate that from India's side, the FTA was signed more for political reasons than economic ones. When the FTA was signed, nobody in the industry was consulted. We were just informed about it "" that it is going to be signed.

It was because of the earlier government's "look East" policy. In the first few months, some people in India and Thailand have taken advantage of this but this has not surprised anybody in the automotive sector.

In my view, the FTA must be for an economic reason and not for political ones. All sectors of industry must be consulted. After all it is not the intention of the government to hurt the industry; the idea is to boost trade between the two countries. If that purpose is not served, I don't think it is a valid FTA.

What could be the political imperatives for signing an FTA with Thailand?

I think there would be a long-term plan that we must become a part of ASEAN, which I think is good. But I also feel it could have been planned better if there were consultations with the Indian industry. Nobody knows how the first set of items, known as the Early Harvest Scheme, were arrived at.

Probably these are the items that Thailand, in consultation with its industry, wanted. But Indian industry was not consulted. We are being consulted only now, when the second round of agreements is going to be signed.

But now that the Indo-Thai FTA is a reality, how are you going to live with it?

I am not the kind of person who will fight with the government. If it's done, it's done. That is the economic reality. Now we need to take some counter measures to ensure that we do not hurt ourselves.

In that sense, we should also start investing in marketing our products there. I think there are opportunities that are unexplored. In the automotive segment, all OEMs (automobile manufacturers) who have come to India have been in Thailand, too, with a longer history in Thailand.

We need to talk to them and see if we can sell some of the products into Thailand. My company, for instance, is exporting to Thailand through Toyota Kirloskar. Though we are competitive, we are not marketing ourselves well.

India offers a large market to Thai companies. Thailand, in comparison, is a smaller market. Was the selection of the FTA partner wrong?

I am not going to get into that. Maybe China would have been the ideal partner. There must have been political reasons to select Thailand for the first FTA.

All I am saying is that we should consider the economic reasons, too. Indian industry can take advantage of the fact the Thailand is part of the ASEAN region. We can go there and set up base there.

How do you expect the Indian industry to set up base in Thailand when there is a general feeling that the country already has excess capacity?

There is a lot of talk about the excess capacity in the automotive segment in Thailand. The same industry that complains of excess capacity being built up globally also keeps putting up new capacity. I am told that Thailand is a net importer of automotive components.

So what you are saying is that Indian industry is competitive, but needs to have a marketing presence in Thailand?

Though we are competitive, logistics costs are still high in India. But the point really is, why are we not in Thailand, trying to sell?

Maybe because Thailand was never on the Indian industry's radar screen....

Why not? That is where the disconnect is. The government is looking East and industry is looking West. There is no integration of government thinking with the businessmen's thinking.

This is part of the problem. We are looking east in the areas of quality control and technology, but are considering the West for matured business, while the government is looking East for trade possibilities.

Why do you think China would have been a better trade partner?

We can look at scaling up our production. We don't have to produce everything here. We can possibly look at some items that can be scaled up in each of the countries. There must be a global strategy for which there must be a global partner.

What is the Surinder Kapur guide for survival in the world of FTAs?

If you want to cater to the customer in Thailand, you must be there. The problems some of them may face is that their foreign partner is already there, in which case we must go through them.

Hence, the strategy is to look at this market as part of your own market.