New U.S.-India Commercial Alliance encourages key infrastructure

The U.S. - India Commercial Alliance (USICA), launched during Secretary Ronald H. Brown's Presidential Business Development Mission to India in January, seeks to foster activities and dialogue among business organizations to increase ties between the United States and India, particularly in key infrastructure areas. Secretary Brown and Indian Commerce Minister P. Chidambaram participated in the inaugural meeting of the U.S. - India Commercial Alliance Board on June 19. This Alliance is intended to be the private sector's principal interface with their governments to clear away obstacles to a deeper and broader Indo-U.S. commercial relationship.

The board, which consists of ten senior executives from each country, used its first session to launch a plan of action for the next two years. This plan targets four priority sectors: information technology, transportation infrastructure, agribusiness, and power generation. Other sectors of mutual interest will be added to the work of the commercial alliance. Work on small- and medium-sized company activities will be organized by sectoral groups under the Alliance.

Jack A. Shaw, Chairman and Chief Executive Officer of Hughes Network Systems, and A.K. Rungta, President of the Federation of Indian Chambers of Commerce, are the cochairs. The U.S. and Indian governments will meet with the board at least once a year to discuss the activities and recommendations of the business alliances and to try to identify any problems that may arise.

Following a lunch in honor of the USICA board and Minister Chidambaram, Secretary Brown and the Minister delivered remarks during the plenary session of a conference entitled, "Information Technologies: Opportunities in India." The conference, sponsored by the U.S. - India Business Council of the U.S. Chamber of Commerce, was endorsed by the U.S. - India Commercial Alliance as the first initiative of the Information Technology Business Alliance.

During the conference, sessions covering telecommunications, software, and electronics explored the opportunities and issues in these industries in India. A summary of these sessions follows.

Telecommunications

The telecommunications session was moderated by Eric Nelson, Vice President for International Affairs at the Telecommunications Industry Association. During his summary, he suggested three policy issues the U.S. and Indian governments should work to resolve: * Regulatory reforms in India need to happen at a faster pace, with more certainty and greater transparency. * Regulatory reforms in India should promote competition at all levels and be technology-neutral, and should especially not discourage the application of new technologies. * The government of India should acceterate the privatization of the Department of Telecommunications.

Nelson also noted that Minister Chidambaram and most others in the Indian government recognize the need to improve the country's telephone system in order to maintain its growth rate of nearly 10 percent per year. They are committed to increasing within the next few years the country's teledensity from its current rate of one person per 100 inhabitants with access to a telephone to at least ten per 100. That goal, though, will require $60 billion in investment.

One factor working in India's favor is that the country will be able to leapfrog outdated technologies and deploy state-of-the-art networks, such as satellite, wireless, and fiber optic backbones, that are best suited to its needs. Jon Bensky, Senior Commercial Officer at the U.S. Embassy in New Delhi, highlighted several areas where improvements are needed, including the low (35 percent) call completion rate and the lack of access to the Worldwide Web on the Internet in the wired network, and the high costs of cellular phones. These areas present tremendous opportunities for U.S. telecommunications suppliers.

A U.S. attorney based in New Delhi noted that cellular telephony may advance faster than basic telephony, because cellular does not compete directly with existing telecommunications services.

Computer Software

Indian officials outlined ambitious goals for software development and exports from India. By the year 2000, India plans to develop $4 billion in software-half for India's domestic market, half for export. In terms of policy issues affecting software, the Indian government and company representatives were quite firm in their belief that significant progress has been made. Nevertheless, United States business continues to have concerns.

First, although the Indian government instituted a strong intellectual property rights regime covering software in May 1995, it is still too early to see how effective it will be in combating piracy. U.S. industry is particularly interested in seeing how the new policies will be enforced.

Second, while tariff rates on imported software have been lowered substantially, they remain very high compared to other countries. Most importantly, India levies its tariff on the content value of the software, rather than on the media value, as does every other major country. Observers believe that this policy must be changed for India to be a major player in the worldwide software industry.

Electronic Hardware

From the perspective of U.S. information technology electronics hardware vendors, the Indian market is highly promising. India's computer equipment market of $592 million ranked 27th in the world in 1994. That same year, U.S. exports of computer equipment to India were $89 million. Projected growth rates over the next several years are in the 15 to 30 percent range.

The Indian electronic hardware market has several promising characteristics. These include trade liberalization initiatives started in 1991, the second largest population in the world, a large cadre of electronics and software engineers, world-class educational and research and development institutions, rapidly increasing economic growth and demand for technology products, and an established industrial/commercial base. In addition, the country will need to invest heavily to upgrade its transportation and communications infrastructures. Import duties have declined to 40 percent on hardware and to 35 percent on components. Import license requirements have been eliminated on many computers, but licenses are still required for systems under $5,000.

Indian information technology equipment companies feel that their industry could burgeon with the right amount of stimulation and direction. With its software industry leading the way, they believe that India is capable of establishing world-class hardware production capabilities by the year 2000. Currently, the country has no large-scale electronics manufacturing facilities, although there are several printed circuit board assembly plants, which are ISO 9000-certified. Production in 1994 equaled $500 million. According to Indian business leaders, establishing an electronics industry in India will require the creation of an adequate infrastructure, including science parks, the leadership of both the industry and government, a commitment from the financial community, and strong foreign technology partners. One speaker listed several examples of electronics products that provide good collaboration opportunities: semiconductor fabrication, including memory chips; personal computer circuit board assembly; development and production of software intensive hardware, such as intelligent input/output cards; and production of personal computers, workstations, printers, and monitors.

For more information on the U.S.-India Commercial Alliance, contact the Commerce Department's Office of Computers and Business Equipment at tel. (202) 482-3548.

The United States-India Commercial Alliance

The U.S.-India Commercial Alliance (USICA) was established on January 16, 1995 during Secretary Brown's Presidential Business Development Mission to India. The Commercial Alliance was envisaged as an innovative government-business initiative to generate new bilateral business development efforts and dialogue over a two-year period.

As outlined in the terms of reference signed by Secretary Brown and then-Indian Commerce Minister Mukherjee, the agenda will be driven by business organizations and trade associations in both countries. A board of ten business leaders from each country, nominated by the Secretary of Commerce and the Indian Commerce Minister and serving without compensation, will work closely with business organizations in each country to develop a workplan of conferences and other activities to advance U.S.-Indian commercial ties. The board will encourage Indian and American business organizations to team up in "business alliances" for purposes of carrying out such activities, with government support and facilitation.

Given the diverse interests and concerns of business organizations in both countries, a wide range of activities will be sponsored under the aegis of the Alliance. The terms of reference stress fostering business alliances in four key sectors of promising commercial cooperation: power generation, information technology, transportation infrastructure, and food processing and packaging. But the board may decide to include activities that focus on additional sectors or issues.

Because the Secretary and the Indian Commerce Minister have agreed to participate in the board meetings at the end of each year, the USICA will also serve as a forum for business to provide its perspectives and recommendations to government officials. The sponsors of each conference or activity are encouraged to report on the event and the concerns and recommendations that may emerge from the discussions. These reports will be considered by the Board at each annual meeting. The board will work closely with the U.S.-India Economic/commercial Subcommission, which focuses on promoting government-to-government dialogues. At its meeting to review activities during the second year, the board may consider whether the Alliance has achieved its objectives or whether to recommend its extension as is or in a modified form.

The Alliance has been shaped to a large extent by each government's consultations with business organizations. The Commerce Department has worked closely with the U.S.-India Business Council, the India Interest Group, and the National Association of Manufacturers. The Indian Ministry of Commerce has worked with the Confederation of Indian Industries, the Federation of Indian Chambers of Commerce and Industry, and the Associated Chambers of Commerce and Industry. Other trade associations are expected to become involved, articularly in sector-specific activities.

The Department of Commerce will continue to work with other Trade Promotion Coordinating Committee agencies, most notably the Department of Energy, as the Commercial Alliance evolves.

This article was written by John McPhee, Office of Computers and Business Equipment; Michael Whitner, Heidi Hijikata, and Clay Woods, Office of Trade Development; and Richard Harding and George Paine, India Desk, all of the U.S. Department of Commerce.

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