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Will Mumbai
attacks drive away foreign investors?
WSN Network
LONDON: Will
last week's terror attacks in Mumbai push up
India's
geopolitical risk perception and drive away foreign investors and
business travellers? Will India be clubbed with the likes of
Afghanistan or Pakistan in the minds of overseas investors?
While the
massacre, which killed around 200 people, has understandbly led to
such fears being expressed in some quarters, the view among
international risk assessment companies, security experts and
overseas businesses of such things happening is a resounding no.
"We don't agree
with that view," says Jake Stratton of Brussels-based Control Risks
Group. The Brussels-based group advises companies on political and
security risks of doing business in various markets.
Some short-term
flows into the country's stockmarkets, already under stress because
of global credit crunch, may dwindle further, but last week's
attacks are unlikely to hit
India's
long-term risk perception or foreign investment flows - unless such
attacks happen on a regular basis.
The rationale
behind this thinking is clear - first, terrorism and security risks
are a given across the world today. Next, given the recession in
most western markets, foreign investment will still seek out
India. Despite
facing an economic slowdown,
India
remains an attractive emerging market with an economy forecast to
grow nearly 7% this year, making it hard for investors to ignore.
The view among
experts is that
India is a large
country, and given its history, there exists confidence globally in
its resilience and ability to overcome such setbacks.
"We assess this
(Mumbai attacks) as a fairly short-term shock. It will not actually
deter business travel or strategic business intent. We have seen
that as long as there is a strong business case, large MNCs don't
change their investment plans. Businesses don't have knee jerk
reactions to situations like this," said Mr Stratton.
But
India does not
have a blank cheque. "If we see it as a recurring pattern of
continuous targeting of western companies, like we have seen in
Pakistan or Saudi Arabia, then companies rethink their strategic
plans," he added.
Rahul Roy-Chaudhury,
a senior fellow at the London-based International Institute of
Strategic Studies, said the government needed to "clearly
demonstrate that it is taking steps to try and minimize this
happening again".
"This was a
catastrophic event, like 9/11. Naturally it will take time for scars
to heal. I don't think foreign confidence in
India as a
destination will be damaged in the long run. The sense I'm getting
is that people will go back, even to Mumbai," Mr Roy-Chaudhury said.
3
December 2008
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