Sanjaya Baru | Indian business in need of neighbourhood diplomacy

Earlier this month the chairman of Sri Lanka’s Ceylon Electricity Board informed the country’s parliamentary committee on public enterprises (COPE) that a contract had been awarded to an Indian business group, the Adani Group, for a renewable energy project without competitive bidding and that this was done under political pressure. The Sri Lankan Opposition party, Samagi Jana Balawegaya (SJB), accused President Gotabaya Rajapaksa of “pampering [Indian Prime Minister Narendra] Modi’s notorious friends” and the President tweeted back “categorically denying” all such allegations.

While the electricity board chairman subsequently recanted and said he had misspoken, having become too emotional, all the available evidence suggests that the project was indeed awarded to the Adanis at the behest of the Indian government.

This is not the first time that the Adani Group has been caught in a controversy. In Sri Lanka itself it had earlier been charged with securing Colombo’s West Container Port terminal without competitive bidding. Whatever the facts, such corporate controversies overseas do not easily die away, and the Adani Group is not the first Indian business group to get into the political crosshairs in a neighbouring country.

Some years ago the venerable Tata Group was involved in a brouhaha of a different kind in Bangladesh. Caught between pro and anti-India politics in the country, the Tatas had to put on hold plans to invest as much as $3 billion in steel, fertiliser, power and other infrastructure projects. To be fair, there were no accusations of cronyism dogging the Tata Group in Bangladesh, unlike the Adani imbroglio in Sri Lanka. If there is anything common to both situations, it is the challenge of an Indian company getting caught in the crossfire of domestic politics in a foreign land.

It is not often that Indian companies get caught in such political crossfires overseas. Most overseas operations of Indian companies, even of the big ones, are not big enough to attract political attention in the host countries, especially in developed Western markets. Corporate controversies in distant developing countries do not make waves in the Indian media. Consequently, if an Indian firm gets into political problems in an African or a Latin American country, or even in Eastern Europe, the news does not always travel back home.

India’s immediate neighbourhood presents an altogether different context. India’s size within its neighbourhood creates a geopolitical context that bedevils Indian firms. Consider, for example, the dramatic exit of the GMR Group from the Maldives, after it was awarded a $500 million contract to operate the Ibrahim Nasir International Airport on Hulhule Island, near Male. The award was given by the government of Mohamed Nasheed and promptly annulled by a rival political group that deposed Mr Nasheed in a coup.

There have been less dramatic and less visible problems for Indian firms in other neighbouring countries. In Nepal, the Dabur Group has been repeatedly accused of selling adulterated soft drinks. The local authorities seized thousands of cartons of Dabur’s Real juice. The Nepali media reported that the government’s Commission for Investigation of Abuse of Authority (CIAA) had raided Dabur Nepal’s unit in Bara district and sealed juice cartons for allegedly altering the date of manufacture. In this instance too, Dabur’s senior executives blamed the local political elements for targeting them as part of an anti-India tirade.

Further afield, in South Africa, an Indian-origin business group, the Gupta family, has had its members arrested due to accusations of business malpractice and cronyism, but there too there is a political and diplomatic edge to the case. More recently, Indian businesses have faced a consumer boycott in the Gulf region due to the recent controversy over the alleged anti-Islam remarks of an Indian political activist.

These incidents draw attention to the political risk of overseas business in general, and of doing business in India’s neighbourhood in particular. There is no doubt that in each of the South Asian cases, an element of anti-India, and perhaps pro-China, sentiment played its part. The two Asian giants cast a long shadow in the region. The anti-India sentiment gets bigger play when political elements are able to point to evidence of cronyism.

All this points to the need for the Indian business community to have a better understanding of the link between business, geopolitics and host country political risk. Globalised Indian business must factor in the political and diplomatic risk of doing business in countries where India is or likely to be the target of domestic politics. At one point Mukesh Ambani had a global advisory council with a retired American diplomat, a head of a British think tank and a former Japanese minister as its members. Business persons like JSW’s Sajjan Jindal have episodically invested in securing a better understanding of the politics of countries in which he has had business interests.

Several multinational firms invest in seeking or retaining professional political and economic expertise on countries in which they invest and, more widely, on global and regional geopolitical and geo-economic issues that might impact their businesses. Similarly, Indian businesses foraying overseas must also remain alive to domestic politics in the host country, relations between home and host countries and wider regional geopolitical issues that are likely to impact business.

The lazy option for many Indian companies has been to depend on serving or retired Indian diplomats for advice and help in getting out of tricky situations. Most professional diplomats steer clear of such involvement to avoid getting into sticky situations. Several diplomats and officials have often complained that Indian companies approach them too late in the day when in trouble and that stepping in to help may then raise the eyebrows of superiors.

Of course, not all diplomats are so finicky about their professional conduct and willingly double up as advisers to influential business leaders in the name of economic diplomacy. Till a couple of decades ago, few diplomats would run the risk of getting too close to Indian business overseas for fear of attracting negative attention at home. More recently, as the lines between politics, business, government and diplomacy get increasingly blurred, more diplomats and officials are willing to go the extra mile for Indian companies, till a scam hits the headlines.