Feb 1, 1999
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DESTINATION BENGAL Speedbreakers Ahead Potential investors remain wary of the state's reputation. By Sumit Mitra
An audience of over 200 businessmen and several leaders of the state, including Chief Minister Jyoti Basu, listened as McKinsey's principal Ashwin Adarkar read out the 55-page presentation. The text of the report is secret but at an open session later Adarkar stated that though Bengal can claim several strengths, these were "overshadowed by its past problems". The adverse perception of investors about the state is therefore not merely an "image problem" but one founded on current realities. Adarkar also spoke about the Government's lack of a time-table on projects, unending red-tape and workers' meddling in executive matters. In 1995, the last year of compilation, West Bengal lost four-and-a-half times more mandays than Gujarat. And though the Government promises single-window clearance of projects, everyone knows "behind the window there are several doors". The McKinsey message? West Bengal must benchmark its achievements not against the other states in the country but against successful Southeast Asian economies like Singapore and Taiwan. It also advocated a government-business-labour coalition so that at least a few mega-projects (like Haldia Petrochemicals) stay on schedule. The irony was striking. The presentation concluded by urging West Bengal's leftist leaders to undertake a change programme that is "revolutionary, not evolutionary". Basu and his ministers tried their best to hide their red faces. The 85-year-old chief minister, whose speech was altered minutes after the presentation, brushed aside the critical observations as "shadows of the negative image" but promised to be "more pro-active and investor-friendly". But the state's promise to alter its public perception is easier said than done and it was obvious from the response of Finance Minister Ashim Dasgupta that its remedy was anything but "revolutionary". Dasgupta unveiled a new package of incentives, effective April 1, which is nothing but the opening of a "rate war" on sales tax. The new sales tax rates in West Bengal are only a shade different from those offered by Andhra Pradesh, Orissa and Madhya Pradesh. A few investment crumbs were offered by the assembled industrialists. ITC Chairman Y. Deveshwar announced a new cigarette factory in the state; Videocon's V.N. Dhoot offered to set up a Rs 200-crore electronics unit; Sanjay Singhal of Bhushan Steel reiterated his commitment to a cold-rolling mill complex. And Subhash Chandra of Zee Telefilms offered a kitty of Rs 100 crore to make television programmes and to set up an amusement park on the model of his Esselworld in Mumbai. That's a small gain for a state that has attracted only 3 per cent of the country's direct and on-the-ground private investment since 1991 against 19 per cent by Gujarat and 16.5 per cent by Maharashtra.But it's already inspiring other leftists: Kerala, too, is contemplating wooing multinational investors to the state. The Marxists have been in power in West Bengal for 22 years now. But their rule still falls below investors' comfort level. As a delegate at Raichak said: "Investment requires good roads and low taxes of course, but, above all, it needs well-laid policies guaranteed by rulers who will not buckle under political pressure." West Bengal's Marxists need to shed more ideological baggage before they earn the confidence of investors. |
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They called it "Destination West Bengal", hard sell from
an investment-starved state held in a star hotel at Raichak outside Calcutta. But it was
clear that the delegates' confidence in the state was perhaps as brittle as the 60 km road
from the city to Raichak. What shook their confidence even further was an embarrassingly
candid presentation by management consultancy firm McKinsey & Co on the state's
investment-readiness. 
