Archive for the ‘ Business ’ Category

India misses Pipeline of Prosperity

After fourteen years of delayed negotiations over what started as the Iran – Pakistan – India (IPI) cross boarder gas pipeline project, Pakistan and Iran have finally signed a $ 7.6 billion agreement in Tehran on May 20, 2010. The project termed as the ‘peace pipeline’ by officials of both countries, has been signed in presence of Pakistani President Asif Ali Zardari and Iranian President Mahmoud Ahmadinejad on the sidelines of the tripartite summit on Afghanistan Security in Tehran. The gas pipeline once operational, is expected to take care of as much as 20 per cent of Pakistan’s energy needs.

According to the initial plan, the 2700 kilometer long pipelines would cover around 1100 kilometers in Iran, 1000 kilometers in Pakistan and around 600 kilometers in India, and the size of the pipeline was estimated to be 56 inches in diameter. The estimated project completion time was estimated to be 5 years. The pipeline will deliver 750 million cubic feet of natural gas a day to Pakistan within four years. The pipeline will connect Iran’s giant South Pars gas fields with the troubled Pakistani provinces of Baluchistan and Sindh.

The IPI project was conceived in 1995 and after almost 13 years India finally decided to quit the project in 2008 despite severe energy crisis in the country. Security consideration and inability to come to an understanding with Pakistan over transmission charges saw India waver time and again over joining the project amid speculation that New Delhi is coming under Washington pressure not to do business with Tehran. Delhi has been reluctant to join the project because of its long-running distrust of Islamabad, having fought three wars since independence in 1947.

News paper reports say Pakistan too was facing severe criticism from the US over any kind of economic deal with Iran. The deal was speculated to be not welcomed by the US – because of Tehran’s suspected ambitions to build nuclear weapons. But the sudden change of stance from Pakistani government is seen as softening of stance by the US. This is perhaps the greatest diplomatic coup d’état Pakistan has pulled off in the recent past.

In the aftermath of signing the landmark civilian nuclear deal between President George Bush Junior and Prime Minister Manmohan Singh in 2008, Pakistan too argued that it too should make a similar deal with US, but Washington had not shown much enthusiasm. But now Pakistan has cheaper source of power compared to India’s investments in civilian nuclear reactors to help fulfill its increasing energy demand.

Photo : Copyright with BBC

World’s Longest Traffic Jam; Great Stall of Superpower China

Recently crowned the world’s second-largest economy, China now has the dubious distinction of spawning the world’s longest traffic jam. Baffled by the bumper-to-bumper gridlock, the Chinese government has mobilised hundreds of policemen to clear the 100-km (60 miles) long stretch of the Beijing-Tibet Expressway, riddled with vehicles for 13 days, with the pile-up almost reaching the outskirts of the capital.

Experts say the mega-jam on National Expressway 110 would take atleast a month to clear. But unlike India there have been no reports of road rage, and the main complaint has been about villagers on bicycles selling food and water at 10 times the normal price.

 The pile-up of trucks brought traffic into China’s capital to a grinding halt and is directly attributable to China’s voracious appetite for energy and automobiles. And it was created by a surge in trucks carrying coal from the province of Inner Mongolia to the suburbs of Beijing, where power plants continue to suck up and incinerate millions of tons of the black rock. China still relies on coal for 70% of its energy demands and most of that coal travel on roads connecting mines in the nation’s hinterland to its eastern ports.

Last year Inner Mongolia surpassed Shanxi province to become China’s biggest coal supplier. A shortage of railway capacity connecting Inner Mongolia to port cities such as Caofeidian, Qinhuangdao and Tianjin, where coal is shipped to power plants in southern China, has forced suppliers to rely on trucks to feed the power plants around Beijing. The roads overloaded by coal trucks damaged the highway roads and pavements which necessitated maintenance work. Since Aug. 14, due to road maintenance and extreme congestion, China’s Expressway 110 has become a big parking lot.

At its current pace of consistent GDP growth for last 30 years, some analysts believe that China’s economy could overtake the US by 2020. But this incident has raised questions about whether China’s infrastructure is adequate for handling the growing number of cars and trucks added to its streets every year.

In 2009, China with its fast-expanding middle-class, overtook the United States to become the world’s biggest car market and now in 2010 China seems to be building another Great Wall. It’s just that this one is made of cars. So much for the Superpower debate going on in Indian television’s after Ragahav Bahl’s book – Superpower? The Amazing Race Between China’s Hare and India’s Tortoise.

Photo : Copyright with Telegraph

Chop Shop @ Infosys

Our politicians fight over every trivial issue, but we saw an unusual ideological unity across the political spectrum when it came to the ‘chop shop’ remark by US Senator Charles E Schumer.

During the discussion in US Senate of Border Security Bill, which aims to provide a $600 million emergency package for strengthening the porous US-Mexico border Republican Senator Schumer had described Indian IT Major Infosys and its peers as a ‘chop shop’ – the American slang for places where stolen cars are dismantled for their parts.

The industry bodies and politicians are outraged by the Senator’s snide remark. Congress’s Manish Tiwari says “The use of the phraseology for one of India’s premier IT company, and possibly one of the best in the world, is regrettable. To compare the company to a chop shop reflects complete non understanding of the contribution that Infosys has made to the global economy”.

BJP’s Ravi Shankar Prasad said “It is a flight of arrogance which also concedes that inability to compete fairly. It is because Americans have realised that other parts of the world, notably India, have the capability in entrepreneurship and quality services which are globally competitive as embodied by Infosys.”

While politicians across all hues come on prime time television to ‘sensationalise the insult’ and declare a ‘war with adjectives’, Indians in the US and more knowledgeable people in India, have been more dismissive. They and other US citizens used to another Republican President George Bush gaffes know Senator Schumer famously called ‘Chuck’ Schumer was indeed ‘chucking the whole word’ by mistake.

It is commonsensical that the Senator meant ‘body shop’ and not ‘chop shop’. My take on the whole discussion is that it is a rhetorical positioning by a man who faces re-election at a time of stubbornly high US unemployment (now standing at 9%). But even the use of word ‘body shop’ is not a very positive statement about outsourcers, like India, but certainly is not same as ‘chop shop’, which has more to do with stolen cars.  The Senator, however, might not apologise or clear up the confusion, because this posturing would work to his advantage in the impending elections.

But what Indian industry and politicians should be more worried is that the Border Security Bill, when approved by the Senate, would see significant hike in application fees for H1B and L1 visas, which are most sought after by Indian IT professionals. The Bill would hike the visa fees to $2000 per application on those entities that have less than 50% of their employees as US citizens. And the Bill is expected to increase the annual visa cost for India’s $50 billion outsourcing industry by $200-250 million annually. For example if the next year Infosys applies for 3000-4000 visas the impact could be $4-6 million (14 to 17% of Infosys revenue).

We might still have a cost arbitrage, but slowly it is decreasing. What are we doing about the shrinking cost arbitrage for outsourcing? Slowly the most ‘capitalist’ nations on earth is switching gear and behaving like the most ‘socialist’ to protect their economy. What are we doing about protecting our economy and protecting our jobs?

Photo : Courtesy Senator Charles Schumer’s official website.