UK-India Trade

Stephen Hammond Excerpts

Wednesday 25th January 2012 Westminster Hall

[Mr Charles Walker (in the Chair)]

Colleagues, I am afraid that an enormous number of hon. Members want to speak in this hour-and-a-half debate. Even if you limited yourself to six minutes each, it is unlikely that we will get everybody in. If you want to try to limit yourselves for the sake of other colleagues, that is fine.

[Stephen Hammond (Wimbledon) (Con)]

Good morning, Mr Walker. It is a pleasure to serve under your chairmanship. It is an honour to initiate this debate, and I am grateful to Mr Speaker for selecting it.

First, I declare an interest: I chair the Conservative parliamentary friends of India group and had the pleasure of travelling to India on official visits in 2009 and 2011, and I begin the debate in that light. I am an unashamed friend of India and believe in the need to strengthen, deepen and improve the United Kingdom-Indian relationship on matters of geopolitical importance, culture, education and particularly trade.

Hon. Members who are historians will know that the UK-Indian trade relationship stretches back some 400 years, with the UK initially being a huge importer of spices, textiles and food items. By the 1850s, the relationship was such that the percentage of total UK trade in goods with India was 8.5% of our trade. Throughout the early decades of the 20th century, the UK enjoyed a huge, growing surplus in bilateral trade, but with independence came caution on the part of India and a distrust of international trade and capital. That was witnessed by the fall of India’s share of world exports, from 6% to 2%. Consequently, by the 1970s, UK-India trade had fallen to just under 2% of total UK trade in goods.

Today, of course, it is a different environment. India is now one of the world’s fastest-growing economies. In respect of UK trade, our imports from India have risen by 250% in the decade 2000 to 2010 and our exports to India have risen by 140%. However, our relative position with this fastest of all fast-growing economies is revealing and shows the harsh reality. In 2000, the UK was the fourth most important location for Indian exports, but it was the seventh most important by 2010. In 2000, the UK was the third most important importer to India, but we had slipped to 22nd place by 2010. That dramatic decline may have many causes, but it is worth dwelling on, or at least making some observations about, why that happened.

First, our shared past and shared language can be both an opportunity and a barrier. I sense from a number of discussions that such familiarity caused an expectation on one side that contracts might be won, but the expectation on another side was that contracts had to be worked for. I suspect that the UK was perceived, in respect of many bids, as not having done the research into the bid process done by many European competitors striving to gain a foothold in that market.

Secondly, the UK was slow to exploit some of its traditional strengths, despite having those clearly signposted. A mark of a fast-growing economy is the need for infrastructure. The UK has been for many years one of the world’s leaders in world civil engineering and infrastructure, yet we were slow to embrace that and were often beaten to contracts by others. The same is true of higher education.

Thirdly, from 2000 to 2010, the UK appeared to concentrate more on European markets, with exporters regarding that as their overriding priority to the exclusion almost of other opportunities, whereas others saw Europe as one market and the world as their oyster.

I hope that the Minister says something about the Government’s position in ensuring that the mistakes of 2000 to 2010 will not be replicated in their policy of encouraging trade.

Latterly, there has been a complete refocusing. I am sure that every hon. Member in this Chamber welcomed the Queen’s Speech of 2010, which explicitly cited India as a destination for the UK to concentrate on in respect of trade. The Prime Minister’s visit in July 2010, with many senior industrialists, has set the tone, which I hope will continue for many years.

[Mark Pritchard (The Wrekin) (Con)]

On the importance of bilateral trade, does my hon. Friend agree that it is important that British companies are confident when doing business in India? Therefore, ahead of the Indian Prime Minister’s visit in June, it would be good if all outstanding matters surrounding the Commonwealth games were dealt with. Outstanding bills for companies, such as SIS LIVE—the British company that is the world’s largest satellite broadcasting company— need to be paid if British companies are to have confidence in doing business in India.

[Stephen Hammond]

My hon. Friend is known for his clear-sighted view of the future. He pre-empts remarks that I will make in the very near future. I share his sentiments. As he rightly says, we look forward to welcoming Dr Singh to the UK. I hope that his visit will be seen as a further expression of our shared values and common interests, but much more importantly, with regard to economics and trade, I hope that it will be regarded as a reiteration of the target of at least doubling bilateral trade in the next 10 years. I hope that my right hon. Friend the Minister will be able to say something about the plans in the business arena that he expects to see from Her Majesty’s Government in June.

[David Simpson (Upper Bann) (DUP)]

The Foreign Secretary made an interesting statement in December last year, saying that Asian consumer spending will reach a high of approximately £42 trillion by 2030. I am sure that the hon. Member for Wimbledon (Stephen Hammond) agrees that the Indian and Asian market is a vast one for British companies. However, the onus is on the British Government to make it easier for companies to export into Asian countries, by helping to remove a lot of the bureaucracy and paperwork that is tied up in relation to that.

--- Later in debate ---

[Stephen Hammond]

I thank the hon. Gentleman for that remark. I will deal with that point specifically in a few minutes. It is the job of government to ensure that there is an environment in which business can thrive. The onus is on both the British and Indian Governments, particularly with regard to some of the bureaucracy.

My hon. Friend the Member for The Wrekin (Mark Pritchard) mentioned SIS—Satellite Information Services. I declare that I have already spent a day in Delhi, meeting local journalists and local people, trying to ensure that that company receives the correct treatment that it deserves from the Indian Government. The contract was awarded to SIS to cover the Commonwealth games, against a difficult backdrop, including late access to the stadiums, and it was generally accepted that an outstanding job of coverage was completed. The troubles began at that stage, but the company has enjoyed the support of the UK Government, with interventions from Ministers in the Department for Business, Innovation and Skills and the Foreign and Commonwealth Office, and from the high commissioner in Delhi.

In essence, for hon. Members who are not aware of this story, allegations of impropriety in the awarding of a number of contracts were made. Why such allegations arose may be speculated on: whether to do with domestic Indian politics or disappointed companies. None the less, in response to Opposition and media pressure, the Indian Government commissioned a high-level report, known as the Shunglu report, which has now concluded.

The issue is that SIS has not really been given a chance to state its case: it was not given the chance to submit evidence or to be questioned by the Shunglu Committee. Moreover, the company has still only received 60% of the contractual payment due to it, with 40% remaining unpaid, and it has had to pay a 10% subcontract, so 50% in terms of monetary value remains unpaid. It is a matter of regret that the committee failed to check and to verify some of the information in its report. It is a matter of even greater concern that the second report by the Comptroller and Auditor General failed to pick that up. SIS sought to resolve the matter, correctly, through diplomatic and commercial channels, but it is disappointing that the efforts by her Majesty’s Government and high commissioners from the United Kingdom and many other nations have not had success. I sincerely hope that the legal proceedings in India will not be involved.

On the point made by the hon. Member for Upper Bann (David Simpson) about some of the issues facing companies that trade with other nations, to many in the commercial world, the failure to settle a contract that was set up in good faith by an internationally respected organisation will be of concern, because it will show that if a company becomes involved in a long-running domestic political dispute, non-payment of funds could threaten its economic operation. In the sporting world, where the Commonwealth games were a success, India is scoring an own goal post those games, and there is a chance, as my hon. Friend the Member for The Wrekin said, that the visit by the Indian Prime Minister will be overshadowed by this matter. It is important to put that on the record.

[Mr Laurence Robertson (Tewkesbury) (Con)]

I know the company very well from my activities in the House. It is very strong in charitable work and many other aspects, and it is indeed bad that the matter remains outstanding after so long.

[Stephen Hammond]

My hon. Friend is, of course, correct. We can only hope that the Indian high commission in London will make that point to its Government. I know that my right hon. Friend the Minister has already made the point.

I return to the issues surrounding Dr Singh’s visit and the matters that we must reiterate to the Indian Government for doubling bilateral trade. We all accept the need to rebalance our economy, but we must exploit those areas of competitive advantage, and clearly a major one is and will remain financial services. The City of London corporation has been working actively in India for some time to build the City as the partner of first choice for the provision of financial services and to highlight the UK as a location of choice for overseas investment. The opening of the Mumbai office, and the lord mayor’s regular visits allow a continuing dialogue on the issuance of capital, insurance, asset management, infrastructure finance, consultancy, London exchanges, and legal matters. I could go on.

Our ability to expand trade in financial services would benefit from the removal of some of the restrictions that are in place on foreign institutions. There has been some liberalisation of the rules for foreign banks, which are now allowed to open 12 new branches a year, but there is a huge appetite among many international banks and particularly UK banks for a much greater allowance for branches in India. There is also countervailing pressure on UK banks that want to become established in India, not to open branches, but to form wholly owned subsidiaries, thereby receiving national treatment. They receive only partial national treatment, and that does not equate to the same treatment received by Indian banks that are trying to set up. I hope that the Indian Government will listen to the need for further liberalisation.

The same is true for both legal services and the accountancy profession. Broadly speaking, restrictions are such that internationally respected firms of lawyers and accountants are unable to practise on the Indian subcontinent.

[Priti Patel (Witham) (Con)]

India’s economic liberalisation has been taking place over the past 20 years, and things are moving fast. Does my hon. Friend agree that India must concentrate on sorting out business practices and ethics to ensure that all businesses in India and those in the UK that choose to go to India are not affected reputationally, as SIS has been?

[Stephen Hammond]

My hon. Friend is absolutely right. One of the greatest encouragements to international trade is certainty in the business environment, whether political, legal, accountancy or business ethics. She makes an outstanding point, which is absolutely correct.

I have touched on the financial services industry, and I hope that the Minister will outline what the Government are doing to ensure that pressure is maintained for further liberalisation of the area. There are other industries in which the relationship between the United Kingdom and India is growing and could be pivotal to us if we accept the opportunities. In the telecoms world, the UK has traditionally enjoyed, and still does, a competitive advantage over many countries in Europe and the world. It has been a leader in the development of mobile and tele-optic fibre technology and policy.

India suffers from a highly fragmented mobile technology market and might benefit if it were slightly less fragmented, but it is undeniably true that the market is dynamic. In one of the past six months, 18 million new mobile connections were made, and there is significant demand from the Government for the enhancement and expansion of broadband and some machine solutions to manage logistics. There is an opportunity for the UK telecoms industry, and it could become pivotal to our future.

The same is true of the higher education sector. One of the last high commissioners, His Excellency Nalin Surie, expressed disappointment that the UK had failed to grasp the opportunities that India thought that it was opening up to UK academic institutions and at its inability to open faculties in India. At last, over the past two or three years, there has been reversal of that. There are immense opportunities for new faculties and collaboration on high tech and pharmaceuticals, particularly in some areas of post-doctoral research. The UK higher education sector would do well to grab them.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Member on bringing this debate to the Chamber. He referred to education and the adoption of cultural links. In my constituency, Orange district lodge No. 4 has been actively involved in raising money to build a school for orphan children and for their health. Comber rotary club has been raising money for polio vaccination. Business opportunities come through health links, church links and human rights links. Does the hon. Gentleman believe that such links are overlooked by the Government and should be encouraged?

[Stephen Hammond]

I agree entirely that there are huge opportunities outside the industries that I am talking about. Owing to pressure of time, I shall conclude my comments in the near future, but I am sure that colleagues will want to talk about opportunities and other industries. The hon. Gentleman is correct. I had the opportunity of seeing one of the major Indian health care providers and what it is offering to the UK. There is collaboration with UK pharmaceutical firms on drugs to the Indian generic market. There are huge opportunities.

The Indian economy will grow less slowly this year than in previous years, but at 9% it will still be one of the fastest growing economies in the world. That will inevitably bring pressure for further infrastructure development. The new five-year plan suggests that it wants $1 trillion added to its infrastructure budget for capacity in power, roads, rail, ports, aviation, housing, office and social infrastructure. The UK has not only civil engineering expertise and project management ability, but acknowledged skill in project finance. I hope that the UK infrastructure industry, in the widest sense, will embrace the opportunity of that size of development.

[Jeremy Lefroy (Stafford) (Con)]

Does my hon. Friend agree that one of the key drivers of bilateral trade is inward and outward investment? In my constituency, Perkins has just announced the building of a factory in India, and there is inward investment in the constituency of my neighbour, my hon. Friend the Member for South Staffordshire (Gavin Williamson), by Tata through Jaguar Land Rover.

[Stephen Hammond]

I thank my hon. Friend for his intervention. Indeed, I thank all the hon. Members who are intervening; they are helping me along with my speech. I was about to deal with inward investment. My hon. Friend is, of course, right. India may well be setting the pace at the forefront of the global economy. Indian companies’ entrepreneurship and management techniques are certainly influencing business practices across the world. However, let us be clear: the UK must not only welcome Indian investment into the UK, but be hungry for it and go out and seek it.

As my hon. Friend pointed out, there are huge advantages to investing in this country. They include the skilled work force and the certainty on law, politics and accountancy. Tata’s investment in steel production and car manufacturing is an example. Other Indian businesses have chosen to base themselves in London or elsewhere in the United Kingdom, partly because of the expertise and skills on offer. We must make certain that other Indian firms looking to invest know that Her Majesty’s Government stand ready to welcome Indian businesses. I hope that the Minister will echo the remarks of his colleague, Lord Green, who has said that

“those days of complacency on the British side are over.”

Britain is open for business.

[Mr Virendra Sharma (Ealing, Southall) (Lab)]

I congratulate the hon. Member for Wimbledon (Stephen Hammond) on obtaining this important debate. This issue is close to the heart of many members of the all-party group on India, as well as hon. Members more generally. Does the hon. Gentleman recognise the value of the state-based schemes to promote UK-India trade? I have worked closely with, for example, the UK Kerala Business Forum and the UK Telugu Association, both of which are making great progress in building links for investment going in both directions.

[Stephen Hammond]

The hon. Gentleman is, of course, right. I am sure that the Minister will want to refer to his remarks. As I said, it is the job of government to encourage and to provide the environment in which business can thrive. It is for business to grasp that opportunity. Dr Singh visits this country later this year. I hope that the tone and the tenor of the debate will ring out today and send the message that Britain is open for business and particularly for Indian business.

[Several hon. Members]

rose—