FASTEST GROWING FREE MARKET DEMOCRACY IN A GLOBAL ECONOMY

1. INDIA FASTEST GROWING FREE MARKET DEMOCRACY IN A GLOBAL ECONOMY Presentation by: Kamal Meattle, CEO, PBC-STIP, New Delhi, India www.pbcnet.com meattle@pbcnet.com

2. CONTENTS • THE INDIA STORY • INDIAN SUCCESS STORIES • INTERNATIONAL SUCCESS STORIES • INDIA ADVANTAGE • BUSINESS OPPORTUNITIES • BUSINESS OPPORTUNITES FOR PHILIPPINES • SME : ADDING VALUE • WINNING ATTITUDE • ACKNOWLEDGEMENT

3. THE INDIA STORY

4. 1947 : Year of Indian Independence Today’s India is one of the fastest growing Democratic Market Economy, well on it’s way to be integrated with the world economy The famous Goldman Sachs report ( Dreaming with BRICs: The Path to 2050 ) states that, among Brazil, Russia, India and China, India will grow the fastest over the next 30 to 50 years by leveraging its demographic advantages and through continued development India’s GDP will exceed Italy’s in 2016, France’s in 2019, Germany’s in 2023 and Japan’s in 2032 INDIA TO BECOME THE 3RD LARGEST ECONOMY IN THE WORLD BY 2032 AND… THE STORY BEGAN IN 1947

5. India Pre - Liberalization • Planned Industrial Development • Industry Licensing and Quotas • Dominance of Public Sector • Restriction on Private Investment • Socialism • Mixed Economy

6. The New Industrial Policy for liberalization-1991 De-licensing De-control De-regulation Broad banding Abolition of registration • Liberalization of • Industrial Licensing • FERA Liberalization Liberalization of foreign investment Liberalization of Technology Import

7. The New Industrial Policy for liberalization - 1991 Abolition of threshold assets limit No MRTP clearance needed for expansions, mergers • MRTP Liberalization Several industries hitherto reserved for public sector opened up to private sector Only eight core industries remain reserved for the public sector Purview of Board for Industrial and Financial Reconstruction (BIFR) extended to Public sector • Curtailment of Public • Sector

8. India Liberalization Stage - Strategies Developed • Government’s role changed to Regulator from Licensor • All Licenses Rationalized • Active participation of private sector • FDI being Welcomed (100%) - Automatic Route • Barriers Dismantled & Procedures Simplified • Indian Industries Actively Investing Abroad • Bureaucracy - Less Government is Good Governance • Allowing Market Forces to Govern the Efficient Allocation of Resources with Minimum State Intervention • Reducing and rationalising foreign trade barriers

9. Economic Scenario : Post Liberalisation • India - One of the fastest growing economies in the world • Average GDP growth (1995 -2005) : 6.2 % per annum • Average annual growth (1995 - 2005) Agriculture & Allied : + 2.1 % per annum Industry : + 6.6 % per annum Services : + 7.8 % per annum • Average Per Capita Income growth (1995 - 2005): 3.8 % per annum • Inflation down to a single digit level continuously for the last ten years • Foreign exchange reserves increased from US$ 2 b (March 1991) • to US$ 145 b (September 2005) • Merchandise Exports : +20 % average rate of growth in last three years • Booming Services Exports from US $ 4.6 b in 1990-91 to US $ 51.3 b in • 2004-05

10. Economic Scenario : Post Liberalization • Balance of Payments surplus (US $ 26 b in 2004 - 05) • External Debt Service Ratio down from 26.2 % in 1995 to 6.2 % in 2005 • Foreign Direct Investment (FDI) : Average +US $ 5 b pa in the last • five years. • Foreign Portfolio Investment : US $ 11.4 b in 2003-04 and • US $ 8.9 b in 2004-05 • Reforms continuing and have unleashed dynamic forces – • putting theeconomy on a trajectory of unparalleled economic • growth in the future • The Indian Government is working in close co-operation with • industry and trade to mitigate the remaining problems and • constraints • Broad consensus across the political spectrum on the need for • and direction of the reforms. Some issues still need to be resolved

11. Share Of Services Sector In GDP On The Rise (%)

12. Agriculture • India • the world’s most irrigated land mass • world’s 2nd largest exporter of rice & 5th largest exporter of wheat • Food production: India’s Ranking in the World • 1st Tea, Milk • 2nd Rice, wheat, sugar

13. Manufacturing • Rate of growth • 2003-04 7 % • 2004-05 9.2 % • Diversified base of world class capabilities • State-of-the-art technologies • TQM,TPM, Six Sigma & Lean Manufacturing - part of • everyday practice • Diversified industrial base with supporting ancillary industries • Overseas acquisitions worth US$ 500 m

14. Services • Consistent growth • 2003-04 9.1 % • 2004-05 8.9 % • Sectors Driving Growth • - ITES • - Healthcare • - Financial Services • - Education Source:Economic survey, 2004 - 05

15. Average GDP growth - India & the World Average GDP Growth (1990-2001) 9.4 9.5 8.5 7.5 6.2 6.5 5.5 4.9 4.7 5.5 Growth (%) 4.5 3.3 2.9 2.9 3.5 2.0 2.5 1.5 India USA China Brazil Mexico Thailand S.Korea Indonesia Philippines Source: WDI, World Bank, 2003

16. Rising share of India’s external trade in GDP Target : To double share of exports from 0.7 % to 1.5 % of world trade

17. Macro Economic Indicators (2004 - 05) • Land Area: 3.29 m sq. km. • Population: 1.09 b • GDP: US$ 630 b • Real GDP Growth: 6.9 % • Gross Domestic Savings: 28.1 % (2003 - 04) • Gross Domestic Investment: 26.3% (2003 - 04) • Per Capita Income: US$ 580 • Inflation Rate: 6.4 %

18. Macro Economic Indicators (2004-05) • Exchange Rate: US $ 1 = 43.75 • Merchandise Exports: US$ 80b • Merchandise Imports: US$ 106b • Services Exports: US $ 51b • Foreign Direct Investment:US$ 5.5b • Foreign Portfolio Investment: US $ 8.9b • Direct Investment Abroad: US $ 1.5b

19. INDIAN SUCCESS STORIES

20. Indian MNCs - On a global buying spree • Number of foreign firms acquired 120 • by Indian companies during • 2001 - 03 • Total worth US $ 1.6 b • India - 8th largest investor in the UK • No of investments 440 • No of Indian companies with 1,441 • operations in Singapore

21. India – Leading The World • Hero Honda - Largest producer of motorbikes in the world • Moser Baer - World’s 3rd largest producer of optical media • Hero Cycles - World’s largest bicycle producer • Bharat Forge - Amongst the world’s top 3 forgings manufacturers • UB Group - World’s 2nd largest producer of alcoholic beverages • Paharpur Cooling Towers - World’s 2nd largest manufacturer of • Cooling Towers

22. India – Leading The World • Apollo Hospitals - Single largest hospital chain in South Asia • TISCO - world’s cheapest producer of steel • Reliance Industries - World’s largest producer of PTA, a chemical • used in textile production • Mahindra & Mahindra - Amongst top 3 tractor manufacturers in the • world • Telco - Amongst top 3 truck manufacturers in the world • Welspun - World’s largest producer of terry-towels • Gujarat Ambuja - Amongst top 5 cement producers in the world

23. Some Indian Examples Benchmarked with the Best In The World

24. The Reliance Group founded in 1932, is India's largest business house with total revenues of over US $ 22.6 b and exports of US $ 3.6 b It began as a an SME The Group's activities span exploration and production of oil and gas, refining and marketing, petrochemicals, textiles, financial services, insurance, power, telecom and infocom initiatives The Group exports its products to more than 100 countries the world over Reliance Group revenue is equivalent to about 3.5 % of India's GDP The Group contributes nearly 10 % of the country's indirect tax revenues and over 6% of India's exports Today, the Reliance Group has one of the largest family of shareholders in the world Success Story of RELIANCE

25. Success Story of WIPRO Wipro was set up in the backdrop of the small town of Amalner in Maharashtra in 1945 An SME and primarily an oil factory, the chief products were Sunflower Vanaspati and 787 laundry soap It was in the early eighties that Wipro made its foray into the Infotech arena With this began the Wipro Infotech story Today, Wipro stands at the firmament, as a trusted and experienced provider of a comprehensive range of IT services, solutions and products, worldwide

26. Bharti Enterprises has successfully focused its strategy on telecom while straddling diverse fields of business It all began as a Small Industry Bharti Tele-Ventures is today acknowledged as one of India's finest companies, and its flagship brand 'Airtel', has over 12 million customers across India Recently, Bharti has successfully launched an international venture with EL Rothschild Group owned ELRO Holdings India Ltd., to export fresh Agri- products exclusively to markets in Europe and USA Success Story of BHARTI

27. Dr.Reddy’s Laboratories was founded in 1984, with a capital of US $40,000 in cash and US $120,000 in bank loan In fact, it is this spirit of entrepreneurship that has shaped the company to become what it is today Today, the company with revenues of US $446 m, in fiscal year 2005, is India’s second largest pharmaceutical company and the youngest among its peer group Dr. Reddy’s started its drug discovery programme in 1993 and within three years it achieved its first breakthrough by out licensing an anti-diabetes molecule to Novo Nordisk in March 1997 With this very small but significant step, the Indian industry went through a paradigm shift in its image from being known as just ‘copycats’ to ‘innovators’! Through its success, Dr. Reddy’s pioneered drug discovery in India Today, the company manufactures and markets API (Bulk Actives), Finished Dosages and Biologics in over 100 countries worldwide, in addition to having a very promising Drug Discovery Pipeline Success Story of DR.REDDY’S

28. Biocon is India's leading biotechnology enterprise Over the past 25 years, they have evolved from an small enzyme manufacturing company to a fully integrated biopharmaceutical enterprise, focused on healthcare At Biocon, success has been their ability to develop innovative technologies and products and to rapidly leverage them to adjacent domains This unique "integrated innovation" approach has yielded a host of patented products and technologies that have enabled multi-level relationships with their global clientele As India's first and leading biotechnology company, Biocon extends its support to numerous community outreach and corporate citizenship initiatives with special concentration in the areas of healthcare, education and environment The Biocon Foundation, set up in 2004 has recently launched Arogya Raksha Yojana, a unique health initiative for rural India Success Story of BIOCON

29. In its over four decades of existence, Paharpur has come to be acknowledged as the pioneer in the Indian cooling tower industry It all began as a small industry with a capital of US $ 11,000 At today's selling prices, Paharpur has sold cooling towers valued at over US$ 1 b If these cooling towers were all working together, they would be able to cool more than 265 million liters of water every minute or 382 b liters in 24 hours The Paharpur team consists of highly qualified engineers & professionals with over 1,000 man years of experience in the field of cooling tower application engineering, designing, erection and trouble shooting Paharpur has pioneered several improvements in cooling tower design and operation and has emerged as one of the largest cooling tower manufacturers in the world, with exports to more than 40 countries Success Story of Paharpur Cooling Towers

30. Success Story of Standipack A successful SSI unit set up in 1980, in NCR, Delhi • It is the largest lube oil flexible packaging company in India producing • packaging materials, machinery and systems and doing contract packaging • Produces /contract packages over 300 m packages a year, for the oil • majors in Delhi, Kolkata, Chennai and Mumbai • Patents in most countries of the World

31. Success Story of Paharpur Business Centre & Software Technology Incubator Park • Began operations in 1990 in New Delhi, with an equity capital of Less than • US $ 15,000 • Current net worth of US $ 10 m • Provides a suite of 28 services, employing 450 persons • Has Fortune 500 companies, MNC's and corporate, as clients • Has five international certifications, ISO 9001, ISO 14001, SA 8000, OHSAS • 18001 and HACCP • Commitment to UN Global Compact

32. Success Story of Paharpur Business Centre & Software Technology Incubator Park • Publishes its annual Sustainability Report following the GRI system • Reports its triple bottom line - relating to profit, environment and • sustainability • Now providing technical support to setting up of a 1.7 m ft2 Software Park • near Delhi that has been given the SEZ status by the GOI – • ‘The Haryana Technology Park’ • Company showcased by CII at the World Summit on Sustainable • Development in Johannesburg in 2002 for its sustainability initiatives • Its USP is the Clean Indoor Air in its Center in Delhi - Certified Mountain • Quality Air using biotechnology developed by NASA, USA to clean air

33. INTERNATIONAL SUCCESS STORIES

34. Preferred Destination For Foreign Equity Investors India attracts second highest private equity investment in Asia Total equity flow to India between 1999 and 2004 doubled from US $ 5.12 b to US $ 11.50 b Source: NASSCOM

35. MNCs leveraging the India Advantage

36. FDI INFLOWS TO INDIA *

37. International Brands Utilizing The Indian Knowledge Base • More than 100 global companies outsource R&D facilities from India • GE John F Welch Technology Centre – Company’s largest research outfit outside the USA • GE Medical Systems – India as sole sourcing base for its portable ultrasound scanner • Monsanto – First non-US research facility • Eli Lilly – largest research facility in Asia and 3rd largest in the world • Texas Instruments – Digital Signal Processor developed in India – controls 50% of the world market • AVL, Austria – India as base to do R&D for the company’s Japan centre

38. Case Study of Selected German Companiesin India • Beiersdorf • Problems at beginning: • Existence of rival company (Nivea) in the market (personal hygiene market) • Reason for success: • Relative name recognition • Adaptable Indian staff • Suppliers who are willing to cooperate • Immense support in form of technology and know-how transfer from side of Germans • Great market potential • What is important for business-collaboration with India? • Patience and endurance • Local manager who knows mother company • Collection of experience through business connections

39. Case Study of Selected German Companiesin India • Daimler Benz • Decentralized research was quite essential • Achievement of local representation to assess market specified interests • Why India? • Great resources of highly qualified scientists as staff • Availability of human capital with low labor costs • Internationality: • English language and understanding of European culture (due to British history, existence of numerous institutions, administrations, school etc) • Economic Policy

40. India – A Preferred Destination “India's highly educated workforce, management talent, rule of law, transparency, cultural affinity and regulator environment are more favorable than China's.”  A T Kearney, FDI Index 2004 "India has the potential to deliver the fastest growth over the next 50 years with an average rate of more than 5 per cent a year for the entire period” Dominic Wilson, Senior Global Economist and Vice President, Goldman Sachs 2005 “Quite simply, I was blown away by what I saw on my first trip to India” Stephen Roach, Managing Director & Global Chief Economist, Morgan Stanley 2004 "We want to bring to the world various facets of this extraordinary country, its people and progress"  Chris Cramer, International Managing Director, CNN2004

41. INDIA ADVANTAGE

42. The India Advantage Excellent network of research laboratories Well-developed base industries Pro active policy framework Proficiency in English Extensive clinical trial opportunities Rich biodiversity Low manpower costs Trained manpower and knowledge base

43. Demographics: A strong demand driver

44. Growing Knowledge Pool Source: UN, Morgan Stanley Source:IMD Competitiveness Yearbook 2003

45. The Cost Advantage Costs for offshore work 30 - 50 % lower than in USA / Europe

46. Low Wages Source: IMD Competitiveness yearbook, 2003

47. Import duty Reductions

48. India - Economic Enablers • 10th largest economy in the world - 4th in terms of PPP • Will overtake Japan in PPP terms by 2010, to be 3rd largest in the world • Large entrepreneurial base and diversified manufacturing structure • Large reservoir of skilled labour at internationally competitive cost • Vast pool of scientifically and technically qualified manpower of 20m • A large domestic market - 300 m + strong middle class population • having substantial purchasing power • Largest democratic set - up • A broad based and transparent legal framework including arbitration

49. India - Economic Enablers • Vast network of bank branches, financial institutions and well-organized • capital and money markets • A network of technical and management institutes of highest • international standards for development of human resources • India has a record of meeting its international financial obligations as • per schedule and has never been a defaulter • No communication barrier, as English is the most prevalent business • language • Strong and vibrant small scale sector that is keen to establish • strategic alliances with their foreign counterparts

50. India - Economic Enablers • Supportive infrastructure base • Strategic location for third country markets, particularly in the rapidly • growing south and south-east Asian countries • The strategic location of India and its easy and efficient access to the Middle East, East European countries, CIS countries, Africa, South East Asia and Asia-Pacific countries places it in a unique position as a sourcing ground for entering into strategic alliances in export-oriented industries • Foreign companies can take advantage of India’s strategic location and tap the markets of these countries. • India is slowly but surely emerging as an attractive destination for foreign investment • Liberalized industrial and foreign investment policies