Swe­den has no cap on FDI in de­fence

Lars-Olof Lind­gren, Chair­man Saab In­dia Tech­nolo­gies Pvt Ltd


SP’s M.A.I. (SP’s): What do you think about the 49 per cent FDI limit in­creased from 26 per cent re­cently? Lars-Olof Lind­gren (Lind­gren):

It is an im­por­tant step to­wards the goal of mak­ing In­dia self-re­liant in de­fense pro­duc­tion. An even higher ceil­ing for FDI would have been bet­ter since that would have given stronger in­cen­tives to com­pa­nies to bring in new tech­nolo­gies. In many coun­tries, in­clud­ing in Swe­den, there is no limit for FDI in the de­fence sec­tor.

Hav­ing said that, what is likely to change with a 49 per cent stake is that global de­fence com­pa­nies and their share­hold­ers will be look­ing at in­vest­ing in the coun­try as a business in­vest­ment decision rather than sim­ply a decision to fa­cil­i­tate par­tic­i­pa­tion in a con­tract.

A 26 per cent stake in a company in­vari­ably car­ried a num­ber of business risks in a sec­tor such as de­fence where pro­pri­eto­rial in­for­ma­tion, re­search and de­vel­op­ment and sen­si­tive tech­nol­ogy are closely guarded. De­fence com­pa­nies seek the as­sur­ance of be­ing the largest share­hold­ers in or­der to en­sure that their in­ter­ests and tech­nol­ogy are ap­pro­pri­ate.

Fur­ther, com­pa­nies need to be as­sured of long-term business in­vest­ments in a sec­tor where there is a sin­gle cus­tomer and or­ders are few and far be­tween. Be­ing a mi­nor­ity part­ner in com­pa­nies where other do­mes­tic part­ners may not have the in­vest­ment ca­pac­ity or have other pri­or­i­ties would un­nec­es­sar­ily cre­ate sit­u­a­tions where for­eign part­ners are trapped in un­der-funded com­pa­nies.

Lind­gren: SP’s: What all can your company of­fer to our coun­try with this change now ver­sus the past limit? Lind­gren:

For us, In­dia is more than a mar­ket. The fo­cus is not sim­ply on win­ning bids but on build­ing business in part­ner­ship with re­li­able In­dian part­ners across the en­tire hi­er­ar­chy of man­u­fac­tur­ers, all the way from strate­gic part­ners to sub-com­po­nent sup­pli­ers. Saab is look­ing at the In­dian In­dus­try as their po­ten­tial part­ner in prod­uct de­vel­op­ment for the world mar­ket. We be­lieve that the In­dian in­dus­try has the nec­es­sary ca­pa­bil­ity and can ab­sorb sta­teof-the-art tech­nol­ogy for man­u­fac­tur­ing world-class prod­ucts.

That said, we do not see any sig­nif­i­cant change in the way we col­lab­o­rate with In­dian com­pa­nies at this junc­ture.

SP’s: As on date can you brief us about your joint ac­tiv­i­ties with In­dian in­dus­try? And the business ar­range­ments in­volved in th­ese joint ac­tiv­i­ties?

We work closely with part­ners such as BEL, HAL and Pi­pavav. Saab has a part­ner­ship with In­di­an­eye Se­cu­rity Pvt Ltd for sup­ply­ing Ag­ile Tac­ti­cal En­gage­ment Sim­u­la­tion (ATES) equip­ment to In­dian armed forces, para­mil­i­tary, spe­cial forces and po­lice.

Saab and Bharat Forge Limited have signed an agree­ment to work to­gether on the In­dian Army Air De­fence projects VSHORAD. Also, Saab and Ashok Ley­land have en­tered into an agree­ment to work to­gether as part­ner for the In­dian Army Air De­fence project for the short-range sur­face-to-air mis­sile (SRSAM) based on the Saab BAMSE sys­tem. Ashok Ley­land will de­liver high mo­bil­ity ve­hi­cles for the BAMSE SRSAM so­lu­tion.

Saab is an eq­uity in­vestor in Pi­pavav Off­shore and De­fence En­gi­neer­ing Ltd (Pi­pavav). Fur­ther, Saab and Pi­pavav have jointly formed the Com­bat Sys­tem En­gi­neer­ing Group (CSEG) in In­dia.

In 2012, Saab, in col­lab­o­ra­tion with Elcome Marine Ser­vices, im­ple­mented the Na­tional Au­to­matic Iden­ti­fi­ca­tion Sys­tem on the In­dian coast­line for In­dia’s Direc­torate Gen­eral of Light­houses and Light­ships (DGLL). The project in­volved set up of sen­sors and equip­ment to help se­cure the en­tire In­dian coast­line.

Saab is also work­ing with many sup­pli­ers of ma­chin­ery and com­pos­ite parts in In­dia, in­clud­ing CIM Tools, Tata Ad­vanced Ma­te­rial Limited and Ae­gus (for­mer QUEST Global Man­u­fac­tur­ing). Th­ese com­pa­nies play a very valu­able role in help­ing Saab de­velop, in­dus­tri­alise and man­u­fac­ture com­plex air­frame as­sem­blies for Air­bus and Boe­ing. Our joint ven­ture with Ae­gus man­u­fac­tures and sup­plies as­sem­blies for the global com­mer­cial aero struc­tures mar­ket.

Saab In­dia Tech­nolo­gies has set up the Saab In­dia Tech­nol­ogy Cen­tre, a Re­search and De­vel­op­ment Cen­tre, in part­ner­ship with Tech Mahin­dra in Hy­der­abad. This cen­tre forms an im­por­tant bridge for the trans­fer of the lat­est in de­fence tech­nolo­gies be­tween In­dia and Swe­den.

Th­ese al­liances will go a long way in help­ing Saab ful­fil its vi­sion – of be­com­ing a true and gen­uine part­ner to In­dia’s de­fence in­dus­try. We are com­mit­ted to true trans­fer of tech­nol­ogy and in­vest­ing in the fu­ture of In­dian de­fence in­dus­try and here to stay for the long haul to build an in­dige­nous de­fence in­dus­try in In­dia.

SP’s: Why there seems to be a de­mand for 51 per cent FDI limit still? Is that jus­ti­fied? Lind­gren:

Yes, a higher ceil­ing for FDI would give stronger in­cen­tives to com­pa­nies to bring in new tech­nol­ogy. All com­pa­nies with pro­pri­eto­rial tech­nol­ogy in any do­main seek to re­tain con­trol over ac­cess to the tech­nol­ogy.

In­dia has many lessons from its own his­tory of eco­nomic re­forms. Almost all the multi­na­tional com­pa­nies en­ter­ing In­dia – as au­to­mo­tive in­dus­try from Ja­pan or Korea or Amer­i­can bev­er­age com­pa­nies or Ja­panese con­sumer elec­tron­ics com­pa­nies – came into In­dia in a fullfledged fash­ion only after they were able to set up fully-owned sub­sidiaries. In­deed, the ex­pe­ri­ence of joint ven­tures on the other hand has been quite trou­bled and needs to be kept in mind.

In­dia has ben­e­fited clearly from that change in the regime. It is quite clear that all tech­nol­ogy de­pen­dent com­pa­nies will shy away from any sit­u­a­tion where their tech­nol­ogy or business process is in dan­ger of be­ing out­side their con­trol.

In many coun­tries, in­clud­ing in Swe­den, there is no limit for FDI in the de­fence sec­tor. As a first step, an in­crease to a min­i­mum thresh­old of 51 per cent is ur­gently called for.

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