India’s economy is booming, thanks to services, which accounts for 60% of the country’s GDP, and massive growth in disposable income. The only real threat to the country’s future growth also offers the greatest opportunity for civil engineering: infrastructure.
Tushar Prabu is a director of Pell Frischmann
Car registration is rising at 10% per annum and air travel at 25%; 12M homes, 600 shopping malls, 8,000 offices and 200 townships Đ not to mention hotels, hospitals and schools Đ are slated for construction by 2010. Overall, GDP growth is 6% over the past five years and rising.
Infrastructure in India is like the country’s weather according to Mark Twain: “Everybody complains but no one does anything about it.” Transport is congested, power is erratic, water is unavailable and pollution is intense.
But much is being done: 6,000km of road building is under way, as is the construction of three metro systems; 13 seaports; two upgraded airports; 22,000km of oil/gas pipelines; 80,000 MW of thermal/hydro/nuclear power...but it’s happening too slowly. The dead hand (and fingers) of the Indian government are typically involved in the procurement process and years get lost.
Nonetheless, infrastructure construction will continue as the government struggles to increase supply Đ typically, now through PPP-style contracts Đ in order not to throttle the larger economic picture. It’s not too late, therefore, for new firms to enter.
Many entry strategies involve local joint venture (JV) partners; after all, who would enter a new country without a local guide? Ironically, the received wisdom often doesn’t bear out: many exits are caused by the same local partners. Poor due diligence, lack of shared culture, breakdown of trust are the usual culprits. Indeed, all the UK consultants who have succeeded in India Đ Pell Frischmann, Atkins, Jacobs, Scotts and Motts all have more than 350 staff Đ have bought and/or grown 100%-controlled subsidiaries.
Making money is not easy either. Indian engineering is well established and the market is fiercely competitive. Some clients recognize the need to import certain skills, however, and opportunities do exist for international firms on projects that are specialist (airports, retail, biotech), large (townships), or involve international clients (developers/operators). To succeed, however, requires patience and cultural flexibility. Even among Indian clients who aspire to be world-class, their behaviour and contracts are generally anything but.
Moreover, given much lower local fee levels, few clients are prepared to pay for a full international service. International firms, therefore, must team up with local firms to be competitive Đ typically, the international firm provides the world-class concept and the local firm the rest.
The difficulties of this arrangement can be underestimated Đ for a start, Indian clients are demanding and expect frequent interaction with their designers. Moreover, locals are suspicious of the value added by international firms, particularly when they successfully fulfilled their client’s requirements on their own in the past. No wonder then that so many JVs break down.
Indeed, the trend is in the opposite direction. Local fee levels are rising and the leading “local” firms Đ both Indian and international subsidiaries Đ are upgrading skills and competitive advantage. Some are even venturing abroad. The challenge, therefore, for those wishing to enter India is to establish brand identity and local presence. Only then will they find clients who pay promptly, treat them right and make them money over the long term.