WILL YOU INVEST IN KERALA?

Here is an example of how Communism has killed enterprise and harmed its own people.

I was born in Kerala and have, at many times, found it difficult to say with pride that I was from that soil. Not because I did not want to, but because I had seen a work ethic with which I was simply unable to reconcile myself to. As a businessperson, I should have perhaps wanted to provide employment opportunities in the state that I was born in and hailed from, but I found myself gravitating to other States, when a decision had to be made on deciding locations for expansion or setting up new operations. Some of the factors that influenced me not to think of investing in Kerala were the slow pace of work, work to rule, union militancy, frequent strikes/ hartals, governmental interference, then power cuts, general hatred to those who invested etc. My mind, heart and logic always pushed me to set up operations in Tamizhnad, Maharashtra and Gujarat, which offered amazing conditions for entrepreneurial activity.

Over a period of time, I thought things may have changed. I recently visited the website of Trivandrum Technopark and the language surprised me. This park is 30 years old. In this day and age, their approach was ‘applying to use’ for office space, and we shall put you in a queue. There was no mention of efficiency of operations or ease of doing business. It seemed like a statement from the days of rationing and licensing. The campus of Technopark is about 600 acres with about 100 lakh square feet developed, estimated turnover of Rs. 8,500 crores per annum or USD 1.2 bn with 450 entities and 52,000 people working out of it. Contrast that with Gujarat International Fin-Tec City (GIFT) City, Gujarat. It is just five years post operationalization, 800 acres, 66 units operationalized, daily turnover USD 1.8 bn and has around 9,000 employees with a total business generated of more than USD 58 bn. The scale is vastly different. I have experienced the seamless ease of operations in GIFT. It is smooth and no nonsense.

Kerala is a service sector economy. I do not argue with Kerala’s model of no major polluting Industry, be it tourism or other nonpolluting ones. I do not argue with probably the highest wage in the country, because that is the price they want. They import labor, in spite of paying the highest wage for labor- a paradox! I do not argue with them, on happiness index, being important. I do not argue with the healthcare approach of Kerala. Their social indicators are among the best in the country. They are ahead of Tamizhnad, Maharashtra and Gujarat on Per Capita Income (before you reduce the money flow from money order economy). Some of these measures yield results, some may not. However, how long will you borrow to spend? 35% of the Kerala GSDP is leveraged as against the national average of 25% with Maharashtra, Gujarat and Tamizhnad well below the average. To top it all these states, have hard capex investments.

Today I read an article, which stated that communist party sponsored labor unions demanded a gawking wage or a Nooku Kooli for unloading giant pipes for an elephant sanctuary in Kerala. The contractor says that these giant pipes can be downloaded using cranes only, yet the union wants the money to permit the contractor to use the cranes. The report states that negotiations took place on whether the amount should be Rs. 25,000 or Rs. 30,000. This is a pathetic state of affairs.

And let us not think that this is a Kerala concept alone. I saw this Nooku Kooli concept in a San Francisco convention too. I remember the host of the convention told me that a gawking wage had to be paid to electricians and labour @ USD 150 per hour whether or not one hired them. I was astounded, for this was the USA. I researched Californian labour laws to find if this was state mandated, but found none, so I guess it must be the practise of the local guild. Instead I found 24 ordinances for Labor. It almost seemed that you had to be lucky to hire workers from there and you were blessed. Today California is partly suffering because of such high costs.

This should be an eye opener for us. The same malaise affects Kerala. It is not that no businesses exist, however what exists is crony capitalism, for the few. These are part of vote bank politics. The former CEO of Trivandrum Technopark is on record to say how belligerent trade unionism resulted in BMW, hard disk manufacturers and BPO ejecting out of the state. With this kind of approach, Kerala may well find itself getting out of the list of preferred destinations for businessmen. For example, Uttar Pradesh is moving at a breakneck pace and with its labour force back in the State, it is all set to give other Indian states a run for their money. Not only are they welcoming migrants from Mumbai, Bengaluru, Chennai, but mapping their skills and training them while pitching for investments.

Businesses cannot take unreasonable increases in costs anywhere. Will anyone invest in such a location? It is time to ponder.

And let me be objective about this whole piece? It is not that I am biased against Kerala and totally negative despite my past reasons to think so. I can see that for every Apollo Tyres experience, there is also a Lulu Hypermarket or other businesses in the tourism space who have invested in Kerala and stayed invested. Hospitality is big business in Kerala with its ecofriendly villages and resorts. Similarly, some very stable banks and other services too have dug in their heels and been operating for a long time. Kalyan Jewellers records a turnover in excess of USD 1 billion, international operations and a large workforce. Other large jewellery firms operate too with their headquarters in Kerala. In the NBFC space, Kochi headquartered Muthoot Finance, one of the leading players in the loan-against-gold space, among other things, has a market capitalisation close to Rs. 40,000 crores and employs over 30,000 people. Surely, the owners and management of these entities have seen and experienced something different for them to stay invested and continue. I am trying to put my finger on the positives that they have bet on and made a success off. I invite your thoughts.

Jai Hind!

CA.Aditya Sesh