Switzerland-based Frank-Jürgen Richter is known by the top business, political and intellectual leaders around the world, for building bridges between the emerging and developed markets. Moreover, Richter is a scholar and an author, known for creating powerful platform for cooperation among Asian countries. One of the most-talked bonds in the market – Masala bonds, was one of his pet projects. In an interview with Free Press Journal, Horasis’ founder and World Economic Forum’s former director talks about the future of Asian market.
Having worked with Indian companies, what do you think are the common mistakes Indian companies make while investing overseas?
India is like a new force of globalisation. Today, you see more and more Indian investors investing overseas mostly in the US and UK, followed by other European countries, Africa and South-East Asia. It is the first wave of globalisation. Of course, there are success stories and also failures. In the long-term, Indian investments will be very successful, if it is invested into the right sectors. The world needs India as a market and a force of innovation. This innovation is not limited to IT outsourcing, it also goes in bio-tech, fin-tech and also into traditional manufacturing. Also, Indian companies should be very careful, do the right diligence and should not overpay, while investing overseas. In the past, many companies have had an issue integrating and making things work. There is lot of room to grow especially in continental Europe where mid-size companies are for sale. There is an emerging trend where more and more European companies are looking for investments from India. It goes both sides and is beneficial for the market.
What is your take on Asian Infrastructure Investment Bank (AIIB)?
Clearly, India is also part of the bank. The Americans have some concerns around it but eventually it will change. Chinese-led AIIB is doing a good work. Maybe, it looks more political from outside, due to the Chinese interest. However, I do not think it is the case. If you look at AIIB’s board members, you will see representative of various countries. Interestingly, UK was the first country to sign-up and now, Germany is on board. AIIB is not an alternative but an addition to World Bank.
Infrastructure is a key for economic development. It is the backbone of growth. Through this initiative ‘One Belt, One Road’ by the Chinese and other Asian countries, it is attempting to save globalisation and boost growth. Since 2008, we have seen demise of globalisation. Until 2008, everything was moving up including trade, investments and globalisation. However since 2008, there has been a fall in trade, decrease in investments and decline in migration. Through AIIB, it could be said that it is revival of globalisation.
How much investment would the bank need to be fully-functional?
I do not have the figures as the bank itself does not know it. However, Chinese have put some base financing. Hopefully, the United States will come on board as well.
I believe that AIIB should look at investing beyond Asian markets. IMF, World Bank and other banks will have to come forward to support African countries especially failing states that are out of the radar. For instance, Sudan, Central Africa and so on, are under war but very little is reported. By investing in infrastructure, one can stop war and reduce poverty in these regions. India understands it. Thus, it engages more in Africa by building hospitals, highways and other infrastructure, as it will help revive Africa.
What should India do more to invest heavily in African region?
There are many entrepreneurs in African region who are of Indian origin and this a great advantage India has over other developing countries. India needs to have an orchestrated state investment policy where they can connect with people of Indian origin. This helps to connect and arrange a reverse brain drain. India needs more trade missions and brings investments to both sides.
There are many central banks that are autonomous compared to their Indian counterparts. Do you think India should follow that path?
We cannot compare one country by another. What is good for one country might not be good for another country. It also depends on the stage of development. Europe and the United States need independent central banks. While emerging economies like India and China, require more guided approach, considering they are in their early stage of economic development. This means central banks will have little more government influences but it should not be totally controlled. There were talks around the tenure of the former governor Raghuram Rajan. He had to leave because his contract ended. However, it was over played by the Indian media. Ministers and governors come and go, it is a continuous process.
Going forward, I would like to see central banks around the world to work in cooperation with each other. There is a need for co-ordination and governance for central banks around the world. It should not be limited to formal dialogue but should be extended to informal dialogue as well.
How can India’s very own Masala bonds be used to benefit other Asian markets?
Masala bonds are a great way of fund raising. India should not keep it for them but share it with others to chug on it as well. This would allow the investment to multiply. Masala bonds are one of my pet projects. I like the word to start with and Masala bonds need to globalise. We need to use these bonds all over the world. At least in financial capitals around the world, the Masala bonds should be on sale.
There is a lot of drama in Asian Market. Comment.
Yes, it is drama. Economy is always drama but I believe it’s always a drama with a happy ending. There are always road blocks across countries in the Asian continent. There are countries like Myanmar that are very poor, and then there are countries like Singapore. Then, you got countries like India, China and Japan. Country like Japan has different set of problems – aging society with no babies. Chinese’s population might also take the same route due to their one child policy but with India, large portion of its population is young and it is looking for work. Keeping all these factors in mind, I would say each country has different type of drama.
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