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Jewel

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Date: Tues, Dec 28 2004 7:39 am

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http://www.globes.co.il/serveEN/globes/docView.asp?did=865839&fid=1724

Jewel in India's crown

Israel's business delegation to India felt admiration mixed with


apprehension, but agreed cooperation is best for both.

Hadas Manor 20 Dec 04 18:49

When Mumbai wakes up, the confusion is terrible. The same is true of
New Delhi, the capital of India, in the high-tech capital Bangalore,
and a four-hour trip to Agra, where the beautiful Taj Mahal is located.
Uneducated poor people are not counted in India's unemployment rate,
a local guide tells us. Indians are proud of being the world's
largest democracy and one of the world's most exciting economies.
Following economic reform, which began in 1991, India has enjoyed very
rapid economic growth, 6-8% a year, in recent years. The main cause has
been a revolution in information services and technologies, which has
led to 40% annual growth in technological industries.
The pace at which India is turning out engineers poses a threat to the
entire Western world, as well as Israel. Cooperating with India and
participating in its revolution is clearly worthwhile. Indian software
engineers earn less than half as much as Israeli software engineers,
who average $100,000 a year.

Arranging benefits

The delegation that left for India Sunday night last week returned
early, so that Minister of Industry, Trade, and Labor Ehud Olmert could
vote at the last minute at the Likud convention on Thursday night.
Minister of Finance Benjamin Netanyahu canceled his participation in
the delegation at the last minute because of the political crisis. It
seems that Indians are well aware of the situation in Israel. Olmert
met with seven Indian government ministers over three days, including
the ministers of agriculture, communications, industry, finance, and
political affairs (in the prime minister's office). All the Indian
ministers mentioned opposition leader MK Shimon Peres (Labor), and
expressed interest in a future coalition, and in the probability that
disengagement would be carried out.

15% of India's population is Muslim. Furthermore, the Indian


government that took office in May 2004 (headed by the Congress Party,
which has a socialist orientation, in coalition with the Communist
Party) is considered more pro-Arab than its predecessor. The expected
disengagement in the Gaza Strip, and the warming of relations between
Jerusalem and Cairo, certainly added to the warm and enthusiastic
reception that met Olmert and the delegation.

Both during the delegation's stay in India last week, as well as this
week, it was reported that a number of Israeli companies were setting
up factories in India (Delta Galil Industries (Nasdaq: DELT; TASE:
DELT) and Soltam Systems) or moving their headquarters there (LID,
owned by David Elishayov, brother-in-law of Lev Leviev). The Israeli
investments demonstrate India's potential, but also its threat.
Israeli manufacturers say that the threat cannot be stopped; all that
can be done is to deal with it, and try to benefit from its results.

Olmert and Chief Scientist Dr. Eli Opper noted that the limitations of
the R&D budget were jeopardizing the fulfillment of Israel's R&D
potential. According to Olmert, India "is an example of the danger
that threatens us. It is therefore important to sign a bilateral
agreement with India, and to cooperate with it." During his visit, he
agreed with Indian Minister of Commerce and Industry Shri Kamal Nath to
begin negotiations for economic cooperation between Israel and India.
The negotiations, scheduled for mid-2005, are expected to include more
intensive economic cooperation, R&D cooperation, and possibly also
reduced customs duties on categories of Israeli products. Israel will
specifically ask for a cut in the current 5% customs duties on Israeli
diamond exports. Nath predicted that the agreement would boost
bilateral trade between the two countries to $5 billion within three
years.

A number of deals were also closed during the visit, including


upgrading of rockets for the Indian army by Israel Military Industries
(IMI). IMI chairman Brig.-Gen. (Ret.) Arie Mizrachi said that the
initial $30-40 million value of the deal could grow to $1 billion
within five years. Ministry of Defense director-general Amos Yaron
closed the first Israeli-Indian space cooperation agreement, and
Tadiran Communications president and CEO Hezi Hermoni is cooking up
additional deals, and considering the acquisition of Indian companies.

An Indian company is considering the purchase of Israeli technology for


power production from waste recycling. Shekel Technologies is
negotiating with Indian conglomerate Tata for a joint venture to build
solar power stations in India. India wants to open the Commercial Bank
of India's first branch at the Israel Diamond Exchange.

Irrigation and plastics companies are negotiating various deals, as are


individual businesspeople, including Adv. Yehuda Raveh. Raveh wants to
be the Israeli representative of infrastructure company Larsen &
Toubro, which is likely to bid in the tender for the land-based natural
gas pipeline in Israel.

Fear of relocation

On the other hand, quite a few high-tech companies fear that


development projects and R&D centers will be relocated from Israel to
India. Israel Venture Association chairman and Pitango cofounder and
managing director Nechemia (Chemi) J. Peres said recently that a number
of Pitango's portfolio companies would open development centers in
India in the next few months. "An entrepreneur starting a company in
Silicon Valley now will also plan to open a development center in
India, because it's impossible to compete with the low cost of
software engineers in India. These trends are a step late in reaching
Israel; the development is unavoidable," Peres said.

A number of large companies, including Amdocs (NYSE:DOX), have


recently
opened development centers in India. Ness Technologies (Nasdaq: NSTC)
has thousands of employees in India, after acquiring IT company Apar
Infotech. Other companies reported likely to hop on the Indian
bandwagon include Comverse Technology (Nasdaq: CMVT), Ulticom
(Nasdaq:
ULCM), and ECI Telecom (Nasdaq: ECIL). Sphera, a start-up, opened a
development center in Pune early this year.

One major obstacle faced by Israeli civilian companies in the Indian


market is financing for projects and tenders. No financial protocol
exists between Israel and India's constituent states. Before the
business delegation left for India, when Netanyahu still planned to
head it together with Olmert, he said that the number one objective of
his visit to India was to promote a joint financial protocol agreement,
and that negotiations had already begun. This problem was discussed in
Olmert's meeting with the Indian minister, who responded favorably to
the idea of an agreement. It is unclear, however, if and when such an
agreement will actually be signed.

Summarizing the four-day visit, involving 30 hours of flight time,


Olmert said, "Business negotiations in India were a success. There
were no real expectations that deals would be signed within one week,
but we wanted to do the spadework for increased trade between the
sides."

Fewer diamonds, more high tech

Israel Export and International Cooperation Institute chairman Shraga


Brosh, who also played a leading role in the delegation, said, "The
potential in India is very great. Most exports today are in
communications and chemicals, but we visualize a long list of sectors
with good opportunities for growth, including computers and software,
communications (expected to double in India every year), infrastructure
and construction, health services, environmental technologies, safety
and security, and even biotechnology."

Bilateral trade between Israel and India totaled $1.61 billion in


January-September 2004. Israeli exports to India totaled $759 million,
compared with $495 million in the corresponding period last year, a 53%
increase. Israel's main exports were diamonds and precious stones
69%, machinery and equipment 17%, and chemical products 10%. The
proportion of diamond exports fell, while the proportion of high-tech
exports rose.

Israeli imports from India totaled $853 million in January-September,


compared with $678 million in the corresponding period last year, a 26%
rise. Total bilateral trade between the countries is expected to reach
$2 billion in 2004.

The 5% Indian customs duty on diamonds constitutes a barrier to access


to the Indian market, which is estimated at $1 billion a year in
diamonds and $12 billion in jewelry. Brosh says that since 10% of
Indians are fluent in English, mostly in the upper income brackets, and
India's banking and law systems are Western, it is much easier for
Israeli companies to penetrate India than other Far Eastern countries,
including China.

"I'm astounded at the willingness of Indian businesspeople to do


business with Israel," says Hermoni. "Representatives of over ten
companies cane to meet me, merely because it was reported that an
Israeli delegation was visiting India." In view of the response,
Tadiran Communications is considering founding or acquiring an Indian
company, and plans to sell products in the Indian market with added
value from Indian companies, or including components manufactured them.

Proposals include a command and control center, computers for the


Indian Army, and location systems.

Hermoni adds, "These deals are now easier than in the past, following
the rapid change in the Indian environment and economic structure.
There is now less cronyism, and more openness to foreign companies."

The Export Institute recently submitted to Olmert and Netanyahu a $1.2


million plan for developing markets in India. The government is being
asked to contribute $500,000 of the sum, with exporters furnishing the
rest. The state will now have to decide how much aid to give in order
to leverage the momentum created by the visit, and turn it into
concrete accomplishments.

Published by Globes [online], Israel business news - www.globes.co.il -


on December 20, 2004

Dr. Manmohan Singh- The quiet Sardarji-


Father of Economic Reforms
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From: pund kamath - view profile
Date: Fri, May 14 2004 4:55 pm

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Priya Ganapati | May 14, 2004. See
www.Indiaabroad.com, May13th, 2004

DR. MANMOHAN SINGH. - the former


Finance Minister.
In the last five years, somewhere in the
haze of India's rapid
economic growth and the glowing corporate
performance, the spotlight
turned away from one man who years ago
had changed the way India's
economy moved.
Dr Manmohan Singh:

As finance minister in Narasimha Rao's


government of the nineties,
Manmohan Singh was the man who ushered
in the reforms that liberalized
India's economy, changing the fundamental
way that in corporate India
thinks and with it the lives of millions of
middle class Indians.

Singh is an accomplished economist and


had spent much of his career as
a bureaucrat -- he was even the Governor of
Reserve Bank of India from
1982-85 -- before he got inducted into
politics and into Rao's cabinet
as the finance minister.

Baptism by fire

In the 1991, when Singh became the


finance minister, India's economy
was in a shambles. The country had an
unsustainable fiscal deficit of
close to 8.5 per cent of the gross domestic
product -- almost double
of what it is currently.

There was a huge balance of payments


deficit. The current account
deficit was close to 3.5 per cent of GDP and
there were no foreign
lenders who were willing to finance it.

India had barely a billion dollars in terms of


foreign exchange
reserves -- roughly equal to two weeks'
imports (today forex reserves
stand at over $118 billion).

In short the country was on the verge of


bankruptcy.

The healing process begins

Singh slowly started the process of


restructuring the economy.

By 1994, when he presented his historic


budget, the economy was well
on its way to recovery. Yet he ploughed
ahead instituting deep changes
in the institutions of the country.

He went to Prime Minister Narasimha Rao


and told him that India needed
a strong vision to take it forward.
"I said to him it is possible that we will still
collapse, but there
is a chance that if we take bold measures
we may turn around, and
that, I said, is an opportunity. We must
convert this crisis into an
opportunity to build a new India, to do things
which many people
before us have thought and said should be
done, but somehow were never
done," said Singh in an interview to PBS in
2001.

Rao backed Manmohan Singh to the hilt and


India embarked on a path of
reforms.

Under Singh, that year, the government of


India entered into an
understanding with the Reserve Bank of
India to deny itself the right
to 'draw' on the RBI to fund its deficit. This
put paid to the
unlimited monetisation of fiscal deficit, and
was a historic step.

Looking back, Singh says that when he


stood up in Parliament stating
the case for reforms his argument was that
in the midst of an
unprecedented crisis, it was time to think big
rather than 'tighten
the belt.'

"We could, in a traditional way, tighten our


belt, and we did that,
tighten and tighten. But persistence on that
path would have led to
more misery, more unemployment, and I
said there is an alternative
path. Stabilisation plus a credible structural
adjustment programme
would shorten the period of misery. It would
release the innovative
spirit, [the] entrepreneurial spirits which were
always there in India
in [such] a manner that our economy would
grow at a much faster pace,
sooner than most people believed. That's
exactly what happened," says
Singh in that interview.

During his speech in Parliament while


presenting the Budget in
1994-95, he quoted Victor Hugo: "No power
on earth can stop an idea
whose time has come."

His dream was that in a crisis India should


undertake basic structural
changes, which would lead to the
emergence of a new country that would
become a major global player in the world
economy.

Singh started the process of simplification


and rationalisation of the
tax system. Many controls and regulation on
the industry were removed,
which meant the death of the Permit Raj and
a free rein to
entrepreneurs.

The result was that productivity in the Indian


industry grew like
never before.

An unassuming personality

After the Congress was voted out of power,


Singh kept a rather low
profile, though he was the leader of the
opposition in the Rajya
Sabha.

Always a quiet, unassuming personality, out


of the spotlight Singh
faded into the background.

Except when his name began to be tossed


around as an alternative to
the position of the prime minister to those
who could not accept Sonia
Gandhi.

Singh himself never said a word about his


ambitions or aspirations and
has pretty much been a loyal supporter of
the Gandhi family.

On matters political, Singh has always


remained quiet -- both during
his stint as finance minister and out of
power. His only indulgence in
the last two years has been to comment on
the Budget.

Last year's budget (2003-04) put forth by


Jaswant Singh came under
severe criticism by Singh who termed it a
budget of 'tokenisms.'

Manmohan Singh felt that Jaswant Singh,


the finance minister, had
refused to address the basic problems
facing the economy in terms of
eradication of poverty, infrastructure
development, agriculture
development and fiscal consolidation.

He holds an M.A., D.Phil. (Oxford), D.Litt.


(Honoris Causa);
I.N.C.(Assam).

He was born in Gah, West Punjab, on


September 26, 1932 to Mr Gurmukh
Singh and Mrs Gursharan Kaur.

If he comes back as the finance minister,


Singh faces a very different
economy from what he inherited about 10
years ago.

Far from being close to defaulting on its


international debts, this
time the economy is sizzling, having posted
10.4 per cent GDP growth
last quarter. There is also a national
consensus on the need for
economic reforms, liberalisation and
corporate-friendly policies.

While Singh has never elucidated on his


vision of how to take India
ahead, there cannot be any doubts that the
economy will be safe in his
hands.

Dr Manmohan Singh is the 'father of the


reform process' in India and
his return to North Block and the chair of the
finance minister will
only bring the original visionary back to the
throne.