The State Government's massively hyped investment promotion event, Emerging Kerala, recently concluded leaving behind a plethora of questions about its success and likely impact on the State's future development. While reactions to the event have been passionate and in some cases furious, both partisan and non-partisan, here's my take on it both as a (self-styled) development activist and a participant of the event.
The Event
Ever since it was first proposed in 2011, Emerging Kerala has been igniting passions, for and against it. That much is clear. The Government had initially portrayed it as a sort of one-shot-fixes-all solution to what is widely perceived as a lack of interest among investors to put their money into the State. The first memory that came to the mind of most observers of the event would have been that of the Global Investor Meet, held by the previous UDF-led Government in 2003, that ultimately was a washout in terms of converting its lofty promises of investment into actual projects. Although "Emerging Kerala" was first proposed as an investor meet to solicit investments in the State, the Government later distanced itself from the concept and re-labelled it as an investment promotion event that would build awareness of Kerala among investors and also bring together thought leaders and business stakeholders to generate ideas about how to build the State's economy. Call it a climb down or expectation management, but that's the official line.
The event itself would be spread across 3 days and would include a series of plenary sessions that would discuss key concepts in the development of the State such as Public Private Partnership (PPP) and the Kerala Development Model, sectoral presentations for each major sector such as Ports and IT and a large number of Business-to-Business (B2B) and Business-to-Government (B2G) meetings intended to promote investment activity. Oh yes, an exhibition and "cultural programs" thrown along with the all-important free lunches and dinners.
So how did it go down?
The Good
Given my standard left-of-center leanings and generally critical attitude of how the development agenda of the State has been run over the past couple of years, you'd forgiven for expecting a harsh appraisal of the goings-on from September 12 to 14, but that's not the intention here. There have been some genuinely positive developments that should not be lost in the sea of (often deserved) criticism.
First of all, there are a couple of interesting developments that I would like to call out and appreciate. The first is the promise to expedite the establishment of a Kerala Maritime Board and to promote water transportation via coastal shipping and inland waterways. With over 600 Km of coast line, two major ports (Ernakulam and Vizhinjam) and over a dozen minor ports, not to mention the unique geography which places most of the population within 50 Km of the coast, Kerala is a perfect case study for water transportation. So, to say this move is long overdue, is an understatement.
The other is the proposal to have a Kerala Investment Board, which would be sort of a single window clearance mechanism for major projects. Kerala's had a checkered history with the single window process, with some notable success in the case of Technopark, but generally precious little else, giving rise to a popular joke that this only helps in hearing "NO" from one window as opposed to many! That said, instead of having Clearance Boards for each sector, it'd make sense to concentrate resources and expertise into one entity, making things that little bit easier for investors. The Board should also be a pro-active investment promotion agency as opposed to a passive approval mechanism. And it should be nimble while still retaining authority to grant sweeping approvals.
The number and diversity of speakers, ranging from Adi Godrej to Som Mittal to our very own Kris (Gopalakrishnan), and diplomats that attended the meeting was not only very impressive (thanks in no small measure to CII, that was the event's co-organizer, no doubt!) but could also pay long term dividends if at least a few of these luminaries took home a favorable impression of the State, as was the case with the NASSCOM summit organized in Trivandrum last year, where the attendees were so impressed by the Capital city that some came up with firm investment proposals in Technopark.
An aside, but let me spend a minute on the remarks by the Deputy Chairman of the Planning Commission of India, Dr Montek Singh Ahluwalia, which I had the opportunity to hear with my own ears. He opined that keeping in mind Kerala's evolution as an economy, that is now far more concentrated in the Service sector than in Agriculture, it may make sense for us to stop clutching only at inherently paddy cultivation and to embrace higher-value crops that make better economic sense from the point of view of Kerala's high cost of cultivation and scarcity of land. He got duly roasted at the spit and nearly burnt at the stake for that heretical suggestion. Reading the collective onslaught detailed in the press the next day, I wonder why it's so offensive to suggest that an activity that's clearly no longer economically viable in Kerala should be prolonged for mere sentiments' sake? Without employing cheaper labor from other States, the only option is mechanized farming but even that seems doomed unless the necessary scales of economy can be reached which is difficult considering the paucity of arable land in the State. Maybe it does make sense to concentrate on our strengths, which in the case of agriculture could be high-value crops and value-addition in the food supply chain. Kerala's already a leader in this, with exports in sea food, spices and tea. There's no reason that the State should force its farmers to struggle with a product that cannot pencil out with our cost base. In an open market, the most economical producers are the natural choice. In the case of rice, that's not Kerala. This is already the case for the vast majority of our food supply. While it's disconcerting to note that a lorry strike or tiff with our neighboring States could literally put sand in the soup (or cockroach in rice gruel, as the local version goes!), it wouldn't be extraordinarily naive to expect reasonable security within a reasonably functional Indian Union! Imagine if the folks in Chattisgarh or Rajasthan wanted security in their seafood supplies!
Last, but not the least, I believe that the dozens of B2B and B2G meetings that happened will generate some tangible investment proposals for the State and will pave the way for a more institutionalized B2B and B2G "market" in the State, which can be a continuing dialogue rather than a one-off event.
There was one particular meeting on the sidelines of Day One, of which I had the privilege was part of, with Dr Tharoor chairing it and the attendees being the senior management of VISL and a top representative of AECOM, the master plan and project management consultant for the Vizhinjam project. More on that later, stay tuned!
And Now...the Bad
Emerging Kerala's legacy has already been cast in a seemingly never ending series of criticisms or gaffes, ranging from suspicions of land grabbing, to environmental degradation, plagiarism of the event's logo (or "creative inspiration" as Anu Malik would call it!) and down right falsification of investment proposals, the most notorious of which is the Rs 2000 Crore VW plant that never was. But I don't want to talk about those, the media and the social networks having quite comprehensively highlighted the cases of the Emperor's new clothes.
My first and major grouse lies with the purpose of the Meet, or rather the lack of an evident one. If one espouses the "Investment Meet" angle, I'd start with the three key factors necessary for active investment in any markets.
A) Attractive Projects: Let's make it short, projects that provide an attractive return (KSIDC, please note: an Internal Rate of Return (IRR) of 3% will NOT attract investors!!!), are relatively straightforward to execute and provide some competitive advantage.
B) Capable Investors: With expertise in the field concerned, a proven track record and preferably, well capitalized with a serious interest in the projects on offer.
C) Conducive Investment Climate: An often abused term, I would define this to include among other things, a supportive public policy framework - which encompasses everything from regulatory support to financial and non-financial incentives, a favorable impression amongst investors and adequate resources - intellectual and monetary - on the public sector side necessary to act as an equal partner with private sector giants.
It would be instructive to score Emerging Kerala on these parameters and see how it stands on each.
On the matter of projects, one cannot fault the organizers for having too few. In fact, it was quite the opposite, with everything under the Sun from comparatively tiny "agro processing projects" to the Rs 1,50,000 Crore bullet train on offer side by side. Quantity comprehensively won over quality, with few if any projects being well laid out. Even the biggest projects on offer - the Trivandrum and Calicut monorails, the bullet train, the Life Sciences Park, Technocity and so on - had no promotional material or project reports available online - either at the Emerging Kerala website or in their host departments (whatever those be!). Except for that copy-paste DPR for the bullet train, that is! VISL did come come up with a compact brochure, but that was at the Event itself by when it was too late to attract any potential investors to attend it. I got the impression that the actual implementing agencies, such as VISL, were being kept at arm's length by the nodal agencies of the meet and hence there was a pronounced lack of clarity about the projects in question. Some projects were lucky to have a few slides or pages uploaded about them, most had none. All in all, the meet should get a F for homework!
Some of the best management consultants out there had been roped in to prepare presentations for each of the sectoral presentations (I attended four - Ports, IT, Energy and Infrastructure) and none did a sterling job of selling the respective sector, with most of the slides being rambling descriptions drawn from other studies and tired management frameworks. Maybe they weren't well paid or may be the folks in high places didn't want their thunder being stolen by the hired help. Pity, either ways! If at all, these presentations and studies should have been made available BEFORE the event not during it, in order to stoke interest among potential customers.
Even the comparatively few private project proposals that were available in advance were very short on details. And while this cannot be directly attributed to the organizers, it would have made a lot of sense for them to do a sanity check on each proposal before it was made available to potential investors, or better still, have provided a project proposal template that each proponent should adhere to, to ensure quality and uniformity. This creates a sense of professionalism and seriousness as far as potential investors are concerned. The multiple private investment proposals that I received, despite their sincerity of purpose, left much to be desired in terms of their content and focus.
In the end, out of the 40-odd investment proposals that the Government received at the end of the event, none were for the projects that were proposed at the beginning of the event. Most of the incoming proposals were real estate related, a fair number already floating around before the meet and very few, if any, were from non-Keralite/non-NRI entities. For example, out of the 32 projects proposed in Trivandrum district, none found investors, while the 5 major proposals including a Rs 400 Crore pharma plant by Terumo Penpol that were put forward by investors were not on the initial list at all.
Moving on to the question of investors, anecdotal experience doesn't paint a very rosy picture either. Out of the 2500 odd "delegates" at Emerging Kerala, reviewing a small, random sample of profiles showed that the majority were individuals, "consultants", teachers and even management students. Without disparaging the importance of small entrepreneurs to the economy, one would feel underwhelmed at the attendance and the potential for investment therein. It may have been a better strategy for the organizers to vet each prospective delegate, in terms of their background and intent, before officially registering him or her. The surge of attendance just before lunch and dinner and the crush at the doors (reminiscent of the surge towards the dining hall at weddings!) when lunch was announced at the end of the inaugural session make one suspect that the priority for not a few of the delegates was not investment but culinary in nature. Even where corporate delegates were present (most likely thanks in large part to CII and NASSCOM), they were far more interested in business opportunities related to contracts likely to be handed out by the State Government, than in investing in the State via PPP channels. Case in point, the interest shown by UK firms in the Vizhinjam project was in the area of the construction contract not the operations of the project where PPP is envisaged. I spoke to the representatives of one of these firms, a leading global engineering and construction company, and they confirmed that their interest was in the Rs 4000 Crore EPC contract, not in the port itself, despite the fact that they have a large BOT/BOOT portfolio. Right project but the right type of investors were missing.
Once again, it's the lack of focus evident across the event that comes to the fore here. A glaring example is that the Rs 8000 Crore Vizhinjam deep sea port and container transshipment terminal gets the same one page on the Ports department's brochure as a comparatively tiny houseboat project! While each sector of the economy deserves its share of attention and the appropriate set of investors, combining all types of investors in the G2G, B2B and B2G arenas in one event makes no sense at all. In typical Pareto fashion, a small number of key projects will account for the bulk of the investments in the State. Similarly, only a small number of investors are appropriate for such projects. These large projects not only create significant impact through the direct effects of investment in them, they typically also have an outsize effect through indirect systemic benefits (as in the case of Vizhinjam) or by promoting a better image of the investment climate (as in the case of Technocity/MRTS). When the main aim of Emerging Kerala is to foster an positive image of investment and growth in the State, the success of a few key projects will go a lot further than a plethora of minor ones. We can have dozens of small and medium-scale real estate projects coming together, but their impact will not even be close to that of a deep water port, as far as prospective investors are concerned because the latter makes a strong statement on how investment friendly the State is. With all its road shows and Crores in ad-spend, it seems that Emerging Kerala was not very successful in bringing in investors relevant to the State's flagship projects. Wherever a key decision maker such as the head of an industrial conglomerate such the Godrej or GVK Groups attended the event, the reason was to make a speech (usually as an office-bearer of CII) than to pay any serious attention to the investment opportunities in Kerala. It'd have worked out much better, if the State had identified a small number of key projects, worked out who could be the best set of potential investors for each and then engaged at a top management level with each. Instead of fancy roadshows at expensive hotels which are little better than photo-ops, one-on-one discussions with investors at their offices would have yielded much more tangible results. Why? Because it's our need, not theirs, and we have to go the extra mile! That's why!
In the end, out of the 40-odd investment proposals that the Government received at the end of the event, none were for the projects that were proposed at the beginning of the event. Most of the incoming proposals were real estate related, a fair number already floating around before the meet and very few, if any, were from non-Keralite/non-NRI entities. For example, out of the 32 projects proposed in Trivandrum district, none found investors, while the 5 major proposals including a Rs 400 Crore pharma plant by Terumo Penpol that were put forward by investors were not on the initial list at all.
Moving on to the question of investors, anecdotal experience doesn't paint a very rosy picture either. Out of the 2500 odd "delegates" at Emerging Kerala, reviewing a small, random sample of profiles showed that the majority were individuals, "consultants", teachers and even management students. Without disparaging the importance of small entrepreneurs to the economy, one would feel underwhelmed at the attendance and the potential for investment therein. It may have been a better strategy for the organizers to vet each prospective delegate, in terms of their background and intent, before officially registering him or her. The surge of attendance just before lunch and dinner and the crush at the doors (reminiscent of the surge towards the dining hall at weddings!) when lunch was announced at the end of the inaugural session make one suspect that the priority for not a few of the delegates was not investment but culinary in nature. Even where corporate delegates were present (most likely thanks in large part to CII and NASSCOM), they were far more interested in business opportunities related to contracts likely to be handed out by the State Government, than in investing in the State via PPP channels. Case in point, the interest shown by UK firms in the Vizhinjam project was in the area of the construction contract not the operations of the project where PPP is envisaged. I spoke to the representatives of one of these firms, a leading global engineering and construction company, and they confirmed that their interest was in the Rs 4000 Crore EPC contract, not in the port itself, despite the fact that they have a large BOT/BOOT portfolio. Right project but the right type of investors were missing.
Once again, it's the lack of focus evident across the event that comes to the fore here. A glaring example is that the Rs 8000 Crore Vizhinjam deep sea port and container transshipment terminal gets the same one page on the Ports department's brochure as a comparatively tiny houseboat project! While each sector of the economy deserves its share of attention and the appropriate set of investors, combining all types of investors in the G2G, B2B and B2G arenas in one event makes no sense at all. In typical Pareto fashion, a small number of key projects will account for the bulk of the investments in the State. Similarly, only a small number of investors are appropriate for such projects. These large projects not only create significant impact through the direct effects of investment in them, they typically also have an outsize effect through indirect systemic benefits (as in the case of Vizhinjam) or by promoting a better image of the investment climate (as in the case of Technocity/MRTS). When the main aim of Emerging Kerala is to foster an positive image of investment and growth in the State, the success of a few key projects will go a lot further than a plethora of minor ones. We can have dozens of small and medium-scale real estate projects coming together, but their impact will not even be close to that of a deep water port, as far as prospective investors are concerned because the latter makes a strong statement on how investment friendly the State is. With all its road shows and Crores in ad-spend, it seems that Emerging Kerala was not very successful in bringing in investors relevant to the State's flagship projects. Wherever a key decision maker such as the head of an industrial conglomerate such the Godrej or GVK Groups attended the event, the reason was to make a speech (usually as an office-bearer of CII) than to pay any serious attention to the investment opportunities in Kerala. It'd have worked out much better, if the State had identified a small number of key projects, worked out who could be the best set of potential investors for each and then engaged at a top management level with each. Instead of fancy roadshows at expensive hotels which are little better than photo-ops, one-on-one discussions with investors at their offices would have yielded much more tangible results. Why? Because it's our need, not theirs, and we have to go the extra mile! That's why!
And last but not the least, how about the conducive investment climate score? The "hartal" on the day after the event closed notwithstanding, the fact that the State's Industrial, IT and Labor policies were gathering dust even as the event went ahead is a pretty damning indictment of the lack of a policy support for the investment promotion initiative. Add to that the fact, the Kerala Maritime Board and a slew of other support initiatives were given lip-service at the event rather than being put in place in advance.It'd have generated a lot more confidence amongst investors if the State had checked those boxes in advances and was able to say that "we have done our bit, now's your chance" rather have each Minister promise to do a lot but have precious little to show till date. As the ol' saying goes, talk's cheap and actions speak a lot, lot louder than words, especially when those words in question concern policy promises from a shaky coalition Government. I have one more pending action to add to the list of "will-dos", putting into practice the lengthy recommendations of the High Power Committee to Expedite Major Projects, that was set up by the previous Government to study reasons for delays encountered by major projects like Vizhinjam and to suggest policy initiatives to avoid these going forward. Sadly, those have been gathering dust too, for the last two years.
With the vast majority of the investment proposals received in the real estate development sector, there are a couple of other issues clouding up the investment climate (pun intended) - the fact that the State has been sitting on a proposal to amend the Kerala Municipal Building Rules (KMBR) to include changes such as a higher FAR (Floor Area Ratio - a measure of density, it governs how much area can be constructed per square foot of land area) and that none of the urban areas of the States, including Trivandrum, Ernakulam and Calicut, have a proper urban area level master plan that is necessary to shape and foster sustainable and inclusive growth. While there are proposals in place at least for Trivandrum and Ernakulam, it's uncertain whether state-of-the-art urban design and regional planning paradigms have been used in their preparation, given that the exercises have been all-Government affairs involving various departments of the State Government and the concerned local bodies but no external experts, academic or industry, as far as I know. Moreover, it's very doubtful whether they encompass the entire current and future urban agglomeration in each city's case and it's very likely that they will be made out-of-date by the rapid urban growth in Kerala even before they are notified and made "official". After all, the current plan for Trivandrum dates from the 80s or the 60s, don't remember which, but way before there was ever a Technopark or a Vizhinjam!! The combination of uncertainty at a urban design policy level and at a master plan level will significantly slow down the pace of real estate development, a sector that could be central to economic growth in Kerala.
The one bright spot at the end of this entire....ahem...circus... is the fact that it may not be a one-off like its failure of a predecessor, but may be held as a biennial event. While it'll be unrealistic for much to evolve out of this edition, other than a bunch of real estate projects that were anyway in some sort of motion before the event, I'd hope that if nothing else, the learnings from what didn't go right will be incorporated into the next edition, if there's one. Since 2014 will be the fag end of this Ministry, it'd be dicey to see if the momentum built up now will still be around, especially after what is shaping up to be a brutal General Election that year. But if things do shape up for one more go at an event of this type, a few key things could help the organizers pull off something better than they did this time - fewer investment proposals with far more robust pitches for each, a better screened and selected set of investors and a clear policy framework for investment promotion put in place well before the event. In fact, if the Government does its homework between now and then, there may be no need for a fancy event at all, the investments will flow in without any ado.
But then who doesn't like a free lunch and few photos on the front page?!
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Thanks for your comment, I will take a look at it and put it up at the earliest.