Newsletter for May 13, 2008

A weekly sampling of news, analysis and opinion on economic issues of India, China and the U.S. Articles and opinion pieces are from a variety of sources and viewpoints and do not necessarily reflect those of ICA Institute. Access to some articles may require free registration to the site or may not be cited to the original source.

In this issue
  • Retail Revolution: The battle for the next 1 billion consumers
  • Emerging Telecom Market Forums: BRIC Opportunities
  • Free Trial Access: Indian Growth & Development Review
  • Free Book Offer for ICA Members
  • Headlines
  • Energy
  • Information & Communications Technology
  • Agriculture
  • Industrial Resources | Manufacturing
  • Environment | Climate Change
  • Corporate Social Responsibility
  • Innovation
  • Health | Medicine
  • Logistics | Transportation
  • Education | Workforce Development
  • Newsletter staff

  • Retail Revolution: The battle for the next 1 billion consumers

    Join us for the India, China & America (ICA) Institute's Global Virtual Seminar Series Tu, June 10 at 11am EDT.

    In 2007, the Chinese and Indian retail markets together were worth about $1 trillion. By 2012, that figure will jump to $1.7 trillion as increased prosperity delivers greater spending power, creating hundreds of millions of new consumers in the process.

    But the two big Asian markets are at different stages of development. "Modern" or "organized" retail has 20% of the total retail spent in China, while in India, the figure is just 4%. The comparable figure for the United States is 85%.

    The world's two biggest international retailers, Wal-Mart and Carrefour, have been operating in China for years, but are yet to gain much traction in India. Both retailers plan to have Indian wholesale operations by 2008-09.

    India's modern retail sector is growing much faster than traditional retail. But because it is starting from such a small base, it will not match the size of traditional retail for perhaps 20 years. Even so, the Indian opportunity is luring many new entrants. They include such big Indian names as Reliance, Bharti and Birla, who are gearing up for battle against incumbents in India's store wars.

    Like their counterparts in China, Indian retailers face big challenges. There is a global war for talent, a desperate need for efficient supply chains, and both China and India must deal with the political sensitivities of vast rural hinterlands.

    Business journalist Geoff Hiscock, author of "India's Global Wealth Club" (2007) and a forthcoming book on the Indian retail scene, will present this webinar exploring this retail revolution.

    The only cost may be your long distance charge to dial in.

    Date: Tuesday, June 10, 2008
    Time: 11:00 AM - 12:00 PM EDT

    Space is limited.
    Reserve your Webinar seat now at:

    Emerging Telecom Market Forums: BRIC Opportunities

    June 5-6, 2008 Washington, D.C.

    Information Gatekeepers Inc. (IGI), in cooperation with Paul, Hastings, Janofsky & Walker LLP, will organize the Emerging Telecom Market Forums: BRIC Opportunities on June 5-6, 2008 at the offices of Paul Hastings in Washington, D.C.

    The Forums will focus on the opportunities and challenges in four of the largest telecom markets in the world - Brazil, Russia, India and China (BRIC).

    For more information or to register, please visit www.etmforums.com or contact: Dr. Hui Pan Information Gatekeepers Inc. 320 Washington Street, Suite 302 Boston, MA 02135 Toll-free: 1-800-323-1088 Tel: 617-782-5033, Fax: 617-782-5735 hpan@igigroup.com

    Free Trial Access: Indian Growth & Development Review

    Emerald Publishing is happy to offer members of the ICA Institute free trial access to the recently launched journal, Indian Growth & Development Review . This journal offers new insights in the field of growth and development economics. It aims not only to further contemporary debate on growth and development issues in India, but also to impact directly on decision-making processes in the area.
    You can access the journal at:

    Username: ICAmember
    Password: IGDRlaunch

    Want to share thoughts about these articles? E-mail your reflections to chindiabiz@icainstitute.org for consideration to be posted on our ChindiaBiz Blog.

    Free access will run from May 12-May 26

    Free Book Offer for ICA Members

    DVD: Doing a Deal in India
    Free Book Offer for ICA newsletter recipients

    A fifteen minute movie on Doing a Deal in India is available for $49.95 from Amritt. It features the challenges faced by a Texas businessman and his wife on their first trip to India. Old India hands will find it useful to share the movie with their colleagues. People not familiar with India will enjoy the visual examples of cross cultural difficulties.

    By special arrangement with the creator, Gunjan Bagla, ICA newsletter recipients who order this movie will also receive a free copy of Bagla's upcoming book, Doing Business in 21st Century India - How to Profit Today from Tomorrow's most Exciting Market. Set for release on July 31 by Hachette Book Group USA, the title also features interviews of top executives such as Mike Ducker President of Fedex International, R Gopalakrsihnan, Tata Sons board member, and Scot Bayman, former head of General Electric India.

    To order the DVD along with the free book click here: http://www.amritt.com/Book-offer-with-video.html


    Xinhua Coverage of China Quake (Xinhua News Agency, May 14)
    The earthquake death toll across China rose to 14,866 by 2:00 p.m. Wednesday, Xinhua learnt from authoritative sources. Saving lives should be taken as the top priority during the quake relief after nearly 15,000 confirmed dead, a high profile meeting of the CPC Central Committee was told Wednesday.

    FTA with China: 'Let the courtship begin' (New Zealand Herald, May 14)
    New Zealand Trade & Enterprise's "Navigating China" report on the website www.nzte.govt.nz is perhaps the most practical guide to doing business in China. It contains little of the recent political hype associated with the free trade agreement but much practical information including step-by-step guidance on conducting day-to-day business and many warnings about what can go wrong.

    Indian Stocks Advance; Infosys Gains as Oil & Natural Declines (Bloomberg, May 14)
    India's Sensitive Index rose. Infosys Technologies Ltd. led software exporters higher after the rupee fell to its lowest level against the dollar in 13 months, boosting the value of their exports. ``With the rupee's decline, the outlook for the software industry is positive,'' said Sandeep Sabharwal, chief investment officer at Mumbai-based J.M. Financial Mutual Fund, which oversees $1.3 billion in equities. Oil & Natural Gas Corp. declined after the government said it will compensate 50 percent of the company's losses from selling fuel at below cost, less than what the Oil Ministry is seeking and raising concern the oil producer may have to bear a higher subsidy. The Bombay Stock Exchange's Sensitive Index, or Sensex, rose 179.61, or 1.1 percent, to 16,932.47 as of 1:35 p.m. local time. The S&P CNX Nifty Index on the National Stock Exchange added 35.75, or 0.7 percent, to 4,993.55. The rupee weakened 0.6 percent to 42.36 per dollar as of 12:15 p.m. in Mumbai, according to data compiled by Bloomberg.

    Comparing the Incomparable (Business Standard, May 14)
    It is widely believed that India is a distant second to China; in fact it is considered a poor cousin of China. It is a favourite pastime of economists and journalists to compare India and China across various parameters like FDI, exports, the number of cell-phone users, etc. and, without any doubt, China appears to be on top in terms of all these rankings. Hence, the judgment is invariably passed in favour of China almost unanimously. But the situation is not as simple as it appears to be. There were 87,000 protests (official figures) in China in 2006 alone, which highlights the fact that not everything is right with China and the picture is not as rosy as it appears. Though India and China are considered "twins", they are as different as two nations can get.


    Focusing on Solar's Cost (MIT Technology Review, May 7)
    Sunrgi, which emerged out of stealth mode last week, has created a concentrated photovoltaic system that uses a lens to focus sunlight up to 2,000 times onto tiny solar cells that can convert 37.5 percent of the sun's energy into electricity. Stronger concentrations of sunlight allow engineers to use much smaller solar cells, making it more economical to use higher-efficiency--but higher-cost--cells. Sunrgi, for example, will use cells based on gallium arsenside and germanium substrates. Sunrgi estimates that its system will be capable of producing electricity at a wholesale cost of five cents per kilowatt-hour. Prototypes have been built and tested both in the laboratory and in the field, and the company expects to start commercial production in 12 to 15 months. "It's quite an aggressive claim," says Daniel Friedman, a solar-energy researcher at the U.S. National Renewable Energy Laboratory (NREL). He says that most others in the space are still working toward seven or eight cents per kilowatt-hour. "I can't say Sunrgi won't achieve what it's claiming, but right now, it's just on paper, and costs like that are only going to be a reality at the large manufacturing level," he says. "Even then, the five-cent figure sounds really optimistic."

    PM's visit to Bhutan will boost energy ties (Thaindian News, May 14)
    Prime Minister Manmohan Singh's two-day visit to Bhutan beginning Friday is expected to give an impetus to one of India's major imports - electricity. He will dedicate the 1,020 MW Tala hydroelectric project, built with India's assistance, and lay the foundation of the 1,095 MW Punatsangchhu hydroelectric project. "Mutually beneficial development of water resources, particularly hydro-electric power, in Bhutan have been an important element in our bilateral relations," said foreign secretary Shivshankar Menon ahead of the prime minister's visit.

    Will earthquake slow dam-building spree in China? (Mongabay.com, May 14)
    With China's hydroelectric projects already facing criticism for their social and environmental impact, the damage to China's dams from the earthquake renews the question of whether China's dam-building spree is the best path to meet surging energy demand in the country. China has ambitious plans to expand hydropower capacity, including more than a dozen power plants on the upper reaches of the Yangtze and Mekong rivers, but there are signs that the government may be having second thoughts at some sites.

    China's energy security moves it closer to the Middle East (The Daily Star, May 14)
    Energy consumption in China is growing as fast as the rapidly growing Chinese economy. China has changed from a net oil exporter to a net oil importer. In recent years, 40 to 50 percent of the oil that China consumes is imported. Of that, 60 percent comes from the Middle East. Saudi Arabia, Iran, Qatar and Sudan are the main suppliers.

    Information & Communications Technology

    Can Indian telcos succeed overseas? (The Economic Times, May 13)
    That Bharti Airtel is in exploratory talks with MTN of South Africa for the possible acquisition has aroused considerable interest amongst investors, constituents of telecom industry and public at large. Reactions from industry analysts and media have been sanguine to hagiographic where as the reactions from investors appears lacklustre in light of incomplete information. The genesis of the two contrary viewpoints can be best coalesced as follows: when the going is so good in the domestic market, should Indian players expand overseas? If yes, is there a value in transmuting the Indian business model to Africa?

    Microsoft's Southeast Asia Boost (Business Week, May 9)
    It's nice to play elder statesman. While Microsoft (MSFT) Chief Executive Officer Steve Ballmer is coping with the aftermath of his failed bid for Yahoo (YHOO) (BusinessWeek, 5/8/08), Bill Gates is far, far away and focusing on loftier subjects. The outgoing Microsoft executive chairman is in Asia, where he met with South Korean President Lee Myung-bak on May 7 and then jetted down to Jakarta to hobnob with Indonesian President Susilo Bambang Yudhoyono and other top Southeast Asian officials at a Microsoft-sponsored conference on May 8 and 9. Dominating the agenda in Jakarta: noncontroversial talk about narrowing the digital divide and using information technology to improve education and government services in developing countries.


    Indians bristle at U.S. criticism on food prices (International Herald Tribune, May 13)
    Instead of blaming India and other developing nations for the rise in food prices, Americans should rethink their energy policy and go on a diet, say a growing number of politicians, economists and academics here. Criticism of the United States has ballooned in India recently, particularly after the Bush administration seemed to blame India's increasing middle class and prosperity for rising food prices. Critics from India seem to be asking one underlying question: "Why do Americans think they deserve to eat more than Indians?" The food problem has "clearly" been created by Americans, who are eating 50 percent more calories than the average person in India, said Pradeep Mehta, the secretary general of CUTS Center for International Trade, Economics and Environment, a private economic research organization based in India with offices in Kenya, Zambia, Vietnam and Britain.

    Government to open 30 mega food parks (Silicon India, May 14)
    The government is setting up 30 mega food parks, complete with cold chains, to enable integration of the agriculture sector from farm gate to the retail outlet to prevent large scale waste, Food Processing Industries Minister Subodh Kant Sahai said Tuesday. "The ministry will soon announce the setting up of 30 mega food parks in all the states so that cold chain facilities are available in catchment areas comprising not more than three to four districts", Sahai said.

    Industrial Resources | Manufacturing

    China Stocks Advance, Led by Smelters, as Metal Prices Rise (Bloomberg, May 14)
    China's stocks rose the most this month, led by commodities producers, on speculation this week's earthquake in Sichuan province disrupted the supply of metals, spurring prices. Zhuzhou Smelter Group Co., China's biggest zinc producer, surged by the daily 10 percent limit. Chongqing Iron & Steel Co. also jumped by the daily cap as it resumed trading, saying operations hadn't been affected by the quake. ``The earthquake has caused concerns about the supply of commodities, which has boosted some buying of metal shares,'' said Wu Kan, a fund manager in Shanghai at Dazhong Insurance Co., which oversees the equivalent of $285 million. The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, gained 124.09, or 3.2 percent, to 3,975.78 at the close, the steepest increase since April 30.

    Safety fears to push up manufacturing costs (Guardian, May 14)
    A renewed emphasis on product quality after a slew of high-profile safety recalls is likely to mean higher prices for manufacturers who get products from low-cost countries like China, according to a new study. The study by Deloitte Consulting LLP, which was obtained exclusively by Reuters, found 41 percent of executives in developed markets like the United States and Europe consider cost increases very likely. Among executives in emerging markets, 59 percent said so. "You'll see a fairly rapid increase in cost structure in the next five years," said Craig Giffi, Deloitte's U.S. leader for consumer and industrial products. "(Manufacturers are) going to get a direct cost hit in those current emerging markets they're sourcing from." The vast majority of manufacturers surveyed said product quality and safety as well as environmental standards, have become more important over the last 12 months when choosing a supplier, according to the survey.

    Environment | Climate Change

    McCain warns India, China over warming (The Times of India, May 14)
    Any expectations that a John McCain presidency will mean a seamless transition in US-India ties with a revival of the Bush-driven civilian nuclear deal will have to be tempered by a tough warning he issued on Monday that India and China will be held to "international standards" on emissions with a possible risk of sanctions if they did not meet them. In a speech that marked a significant departure from the Bush line on global warming and also contained the seeds of a potential showdown with China and India, McCain described the two countries as "among the greatest contributors to global warming today" and said they would have to share the burden with the industrialized countries in reducing emission.

    Seed giants see gold in climate change (Asia Times, May 15)
    First the biotech industry promised that its genetically engineered seeds would clean up the environment. Then they told us biotech crops would feed the world. Neither came to pass. Soon we'll hear that genetically engineered climate-hardy seeds are the essential adaptation strategy for crops to withstand drought, heat, cold, saline soils and more. After failing to convince an unwilling public to accept genetically engineered foods, biotech companies see a silver lining in climate change. They are now asserting that farmers cannot win the war against climate change without genetic engineering. According to a new report from ETC Group, the world's largest seed and agrochemical corporations such as Monsanto, BASF, DuPont, Syngenta, Bayer and Dow, along with biotech partners such as Mendel, Ceres and Evogene, are stockpiling hundreds of patents and patent applications on crop genes related to environmental stress tolerance at patent offices around the world. They have acquired a total of 55 patent families corresponding to 532 patents and patent applications.

    Corporate Social Responsibility

    Quake disaster tests corporate social responsibility (China Daily, May 14)
    "This rare natural disaster is a test of the benevolence and responsibility of every Chinese citizen," said Chen Bufeng, a professor of economics with the Peking University and a researcher with the China Corporate Culture Institute. "As corporate citizens, enterprises should also go all out to help their host country weather huge events and natural disasters," Chen said. Should enterprises donate? The answer is not a uniform "Yes".


    Student develops promising new alternative to silicon chip (SiliconIndia News, May 14)
    A new generation of transistors will soon replace one of the world's most ubiquitous technologies - the silicon chip. And these transistors will not only slash energy consumption but also operate under extreme conditions. The transistor, designed by doctoral student Weixiao Huang, uses a compound material known as gallium nitride (GaN). It would help electronics systems to operate in extremely hot, harsh, and high-power environments - even those that produce radiation.

    Where Are India's Innovative Companies, Products and Solutions? (Seeking Alpha, May 9)
    Fields requiring immediate and large scale innovation run the gamut from clean energy (energy independence), housing the burgeoning middle class, providing affordable housing for the vast pool of have-nots, elementary, primary and secondary education, health-care, national infrastructure (water, power, transportation) and finally, equality of opportunity. Solutions developed by India will be uniquely Indian, but potentially applicable to the huge swath of global population mired in poverty and living limited lives, with little or no hope. India can lead the way because it now knows how to develop global solutions that work on a very large scale, especially those that are technology intensive (witness India's response to Y2K).

    Health | Medicine

    Herbal medicine seeks fusion of Eastern, Western approaches (China View, May 14)
    Naysayers might call it voodoo. Skeptics question how it works, feeling much safer to keep it at arm's length. Proponents laud its efficacy, although they can't explain its mysterious ways in scientific language that appeals to Western ears. Traditional Chinese medicine (TCM), often a complex mixture of herbs and animal products, has found it tough to enter the territory dominated by Western pharmaceuticals, despite its 2,000-year-old strength on its home turf. But there is a glimmer of hope from this northern Chinese port city. One drug has dispelled at least a bit of the foreign stereotype that Chinese herbs are basically dietary supplements, by consolidating its position in the African market in just five years. Fufang Danshen Diwan, a cardiotonic pill totally composed of herbal extracts, is available in some 16 African countries. It is used for the emergency treatment of coronary disease, and sales were 80 million U.S. dollars last year, compared with less than 100,000 U.S. dollars in 2002.

    India health insurance seen rising, but concerns stay (Reuters, May 9)
    Rising medical costs and life expectancy are seen attracting a lot of players to the Indian health insurance sector, even as a high claims ratio remains a concern, industry experts said on Friday. As many as three to four firms are keen to launch standalone health insurance companies if they find an Indian partner, said C.S. Rao, chairman of Insurance Regulatory and Development Authority (IRDA), the country's insurance regulator. Under current Indian regulations, foreign firms cannot own more than 26 percent in an Indian insurance company.

    Logistics | Transportation

    Can China Take On Boeing and Airbus? (Business Week, May 12)
    China hasn't had a good track record building big airplanes. The first Made-in-China big jet was the Shanghai Y-10, which had its maiden flight on Sept. 26, 1980. The 150-seat jet was as big as a Boeing 707 and bore a striking similarity to the American plane. The Y-10 flew 130 times, but the Chinese retired it in 1985 because local airlines refused to purchase it, preferring to buy the more fuel-efficient planes from Boeing (BA) and McDonnell Douglas instead. Two decades later, the Chinese government is hoping for better luck. At a ceremony in Shanghai on May 11, China unveiled its latest attempt to build a larger jet-or literally "big airplane" in Mandarin-with the launch of the Commercial Aircraft Corp. of China (CACC). The company's mandate: assemble jets at home to reduce the nation's reliance on Western-made planes. There's no shortage of demand. The aviation industry conservatively predicts the country will buy 2,800 new airplanes worth $329 billion over the next 20 years to keep up with China's scorching air travel growth (BusinessWeek.com, 12/6/05). "Obviously, China wants to be part of this perceived profitable airplane making business," says Martin Lin, head of the American Chamber of Commerce in China's aerospace group. "But profits will come only when China will be able successfully to capture international markets."

    India and France sign MoU on Railways (Silicon India, May 14)
    India and France here Wednesday signed a Memorandum of Understanding (MoU) to promote bilateral cooperation in the Railways sector. The MoU was signed by R.K. Goel, Additional Member (Planning) in the Indian Railway Board, and Jean-Pierre Loubinoux, chairman and managing director of SNFC International (French Railways). The MoU envisages cooperation in line capacity, safety, maintenance and upgrading of tracks, signalling, telecommunications, power supply, electric and diesel traction stock, information technology, training and high speed rail projects.

    Education | Workforce Development

    News Analysis: India's Regulators Won't Agree on Single Accreditor (The Chronicle of Higher Education, May 8)
    India's 16 higher-education regulatory bodies are notorious, many here say, for mistaking regulation for governance. Every move to change a course, add more faculty members, or alter the examination format is stubbornly resisted while the system as a whole stagnates for want of leadership. Now it appears that the latest effort to better coordinate higher-education oversight has fallen victim to the beast that is Indian bureaucracy. The four largest regulators, which oversee India's national universities, technical colleges, and law and medical schools, have refused to agree to the creation of a single, independent higher-education regulator, a junior minister in charge of higher education reportedly told Parliament last month. According to a local newspaper, D. Purandeswari said the ministry had washed its hands of the matter after the regulators termed an independent body "nonfeasible." The Chronicle's calls to Ms. Purandeswari for comment were not returned. The problems facing India's higher-education system are staggering. They include poor academic quality at many institutions, a severe shortage of seats at public universities, tremendous challenges for private players especially foreign institutions trying to enter the system, and a vast gap between what universities offer and what the market actually needs.

    New Study Reveals Exploding 'Culture of Connectivity' Forcing Enterprises to Change the Way They Do Business or Be Passed By (CNN Money, May 13)
    An exploding 'Culture of Connectivity' is forcing enterprises around the world to change the way they do business faster than ever before or risk the opportunities of Hyperconnectivity passing them by. A new global IDC study(i) sponsored by Nortel(1) (TSX: NT)(NYSE: NT) found that not only is the speed of technology adoption accelerating - impacting business policy and IT investment - but the global workforce is increasingly expecting employers to provide similar levels of "everywhere, all the time" connectivity.
    - Asia Pacific is leading the way The largest percentage of hyperconnected are in the Asia Pacific region. And, while hyperconnected workers can be found in all countries, they are higher than average in the U.S. and China, lowest in Canada and the United Arab Emirates.

    Why high-flyers are unwilling to flock to emerging markets (TimesOnline, May 14)
    Would your next career move be to a job in Europe, America or the emerging markets? If you are attracted to working for a new player on the world business scene then you are in a minority. The reputations of key emerging markets, including Russia, Eastern Europe and Asia, discourage the best talent from working there, according to Hill & Knowlton's annual Corporate Reputation Watch, a survey of MBA candidates at leading business schools. Paul Taaffe, chairman and chief executive of Hill & Knowlton, says: "MBAs graduating in a postEnron world have a strong preference for the companies and countries with the best reputations. Some 86 per cent of our sample rated corporate culture and the working environment as extremely important and just 18 per cent were interested in working in Russia or Eastern Europe." Pick your emerging market with care, advises Giovanni Calimani, plant manager at Prysmian Cables & Systems in China. The Italian would not jump at a job offer in Russia or India. "Their reputation, particularly in manufacturing, is not as good as that of China, which has worked on making itself attractive to Western businesses."

    Newsletter staff

    Publisher: L. Roxanne Russell
    Editor of Academic Resources: Dr. S.V. Char
    Co-Editor: Abhijit Agrawal
    Co-Editor: RJ Paulsick


    ICA Institute, founded by Dr. Jagdish Sheth, is a non-profit research institute working to foster research and dissemination of knowledge on the rise of China and India and their impact on global markets, global resources and geopolitics of the world. The ICA Institute's mission is to generate new perspectives on the role of market and resource driven economic development. ICA Institute fosters interaction and dialogue between academic scholars, industry leaders and policy makers on the impact of emerging economies in general and China and India in particular. Specifically, ICA Institute is positioned to be a catalyst between faculty and students in International Business and industry leaders and managers.

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