By: S R Nair, Director, MentoGuru
23 Nov 2013

It is very good to hear about the Kerala Government’s plans to launch the Emerging Kerala Program in order to attract big investments into the state. One must complement the Government for taking the initiative to bring in large investment to the State. The biggest plus of such initiatives is the visibility that it can give to the state and the impact that it would make in the mind of potential investors located all around the world about the state. To be seen in the radar of investors, the state needs to continuously make noise. Emerging Kerala must be a program and not an event. The program must run longitudinally; at least during the tenure of the present Government.

The worry is when the changing Governments are trying to undo each other’s policies and programs every alternative tenure and the lack of continuity and the resultant non-commitment from the part of successive Governments on matters of industrialization and investment stand out as a scar- crow. Similar initiative from the part of the UDF Government in its last tenure (GIM), which though was announced with a big bang, whimpered away later. That should stand in good stead as learning in the conduct of the new Emerging Kerala Program.

At the outset, it would be better if the UDF Govt. takes a clear cut view on the investment model that it wants to have in the state of Kerala. During the last LDF regime, we had seen that the focus of the policy makers was heavily tilted in favour of investing in public sector undertakings and it went about rejuvenating those semi dead and ICU based PSUs of belonging to the state Government. Industry majors in defense sector located outside the state like HAL, BEML etc. were roped in to join up with local PSUs in setting up their manufacturing activities here. Another example is the Coach factory at Kanjikode. Now that the UDF has come to power, does it want to continue the policy of industrialising Kerala through the PSUs or does it want private investment to come in? No specific policy guidelines are heard from the present government in this front. Setting foot in two boats simultaneously to go forward will only leads to mishaps and definitely, will not result in progress.

However, if one has to read from the Emerging Kerala plans, one will realise that it thru this, the government will want to have large private investments to come in to Kerala. But what model is this? Is it PPP model or is it purely private play? Huge projects such as Metro Rail, High Speed Rail Infrastructure etc. is conceived as governmental or government controlled projects only. Infrastructure is probably an area where the PPP model is being sought. Kerala completely lacks good infrastructure within. I am not speaking about the need for roads and bridges alone, I am also speaking about ports, transportation (road, rail and water), solid waste management, industrial centres, logistic parks, shopping and entertainment infrastructure etc.

Going through the KSIDC document on Emerging Kerala, one feels that the state had identified the core areas in Kerala which need investment. Which are the industries for which Kerala has an ideal ecosystem? Predominantly, it is in Tertiary area of services. In this, Tourism, IT/ITES, Banking & Finance Services (particularly NBFC), Healthcare, Construction etc. comes to the forefront. What about manufacturing? Large scale manufacturing is still a no-no for Kerala. If it is manufacturing, it has to be in SME sector that too, predominantly in the area of Food processing, Ayurveda Products, Paint, Seafood and Rubber based industries such as Footwear and related things.

For a State whose laity is focussed on white collar employment, tertiary sector gives them more hope. Looking at the shortage of local manpower in the constructions industry for semi-skilled and unskilled labour, it is not sure how manual labour based industries in Kerala will thrive?

What are the elements that can help Emerging Kerala Program succeed?
A well-known senior businessman was recently telling from his experience that when the then Government wanted the BMW to invest in Kerala, the company did not do so because the opinion of industrialists and businessmen inside Kerala did not encourage them to set foot here. Of course, there is truth in it. If anyone wants to invest in Kerala, he would first talk to the local industry community and not to a minister or bureaucrat. This home truth is always forgotten by people in power (both the executives & the bureaucrats). If any big ticket investment has to happen in Kerala, it must involve the local industry fraternity. One sees a change in this trend and hears that decision makers are consulting the local business fraternity and trade and commerce bodies that they belong to. It is a welcome mind-set change on the part of our leaders. Please continue to involve the local players and the trade bodies in the process of bringing in major investment into the State.

One major impediment that we need to be concerned is whether our state has enough resource bandwidth in the government to manage the large investment that come in here. When I say resource bandwidth, I would like to include the personnel in industries and related departments, their behaviour, their approach and attitude towards the investors. I also include the systems and the processes to give clearance and to monitor these investments. These resources need to be very proactive in their approach and management. I do not think that such a resource system exist in the government. What we have here is a system based on the messy ‘red tapism’ of both executive and bureaucracy and that will never help in matters related to huge investments that we want to welcome in the State.

While huge investments are wanted here, which may happen in PPP model, what we need to be always looking out is the genesis and existence of adequate SME organisations within the state. SME plays a major role in the economy of India either in terms of the products/services or in terms of the employment generation capacity and under all circumstances; we must preserve and grow them. These SMEs also will become the back-up in the event of recession or calamities affecting huge industrial segments. Strong economies such as Germany has always ensured the existence of very strong SME companies inside their system as the buffer and taking cue from that we must treat the SMEs in a special way and continue to encourage them in Kerala. This calls for SME friendly long term policies, rules, financing system, marketing system and training system. Kerala Government must take the lead here to become a model state to the nation in the matters of SME industries. With the special focus of Central Government in MSME, this can easily be achieved and all that Kerala leaders need is focus and willpower to get it done.

Another mind-set that we need to have is the creation and celebration of entrepreneurship with in the state. For a state that is totally depended upon remittance which is spent not for creating wealth but on the consuming the same, we need to understand that the mind-set of entrepreneurship is that of creation. Creation means production and not consumption. Whereas consumption blows the wealth, production creates the same. Decades of thinking in extreme socialistic pattern and the impact of remittance economy had combined to make the state take very dim view of entrepreneurship. The present stake holders; be it the citizen, the executive or the bureaucracy; all look at entrepreneurs as tax evaders, labour exploiters and profit makers. What needs to be understood is that it is from the profit that wealth is generated that can be distributed. If that is understood by all in the state’s stake holding systems, then the encouragement and celebration of entrepreneurship will happen. And that is exactly happening in leading industrialised states such as Gujarat, Tamil Nadu and Maharashtra. These states continue to flourish with entrepreneurship being the key ingredient of economic growth there.

So, it may clearly be understood that Emerging Kerala as a program and the first event that is planned out to happen on 12th September 2012, may only be considered as the beginning point of our endeavours in industrialising the state, for bringing in investment to the state through the able means of building solid entrepreneurship within the state. We would then have changed our culture, a culture that encourages and celebrates wealth creation and distribution.