US to help address India’s energy security concerns: official
US to help address India’s energy security concerns: official
New Delhi | December 22, 2005
Ahead of US President George W Bush’s visit to Delhi in early 2006, a senior US Embassy official today said Washington was committed to help address India’s energy security concerns and keen on putting in place a framework that would enable the transfer of sensitive technology and joint production of F-16 aircraft.
He also indicated that the two sides were working actively on the proposal mooted by business leaders in both countries for a Free Trade Area (FTA) agreement between India and the US.
On the whole, he felt Indo-US economic relations were "on a roll," with business confidence on both sides higher than ever before, thanks to the many steps taken by the governments of the two countries to strategically engage each other in the areas of economy and trade.
"Things are happening. Business leaders in the US are convinced that there is something new and serious about India now," the official told a group of senior journalists here at a briefing on the economic relationship between the two countries.
According to the official, this was not the case even three years ago when there was a perception among US businessmen that it was very difficult to do business with India, thanks to a host of issues related to contract disputes, such as the one involving the Dabhol power project, intellectual property rights (IPR) and bureaucratic hassles.
In sharp contrast, there was at that time a very positive perception about China, with all major US companies convinced that they had to be there, though they were not all making money on their projects in that country.
"There were so many US companies, like Citibank, that had been in India for decades and making money, but they were not happy. On the other hand, there were so many companies doing business in China, losing money and yet they were happy," he pointed out.
US officials, who analysed this phenomenon, came to the conclusion that the problem lay with the way India was packaged and with factors such as the lack of confidence and trust.
According to the official, a series of elections in India and the US did not allow the two governments to focus on the steps needed to be taken to correct such perceptions.
But, he felt, the situation had vastly improved since President Bush began his second term in office early 2004 and Dr Manmohan Singh took over as Prime Minister of India in May last year. With no elections on the horizon in both countries for four years, both governments began working on the medium-term issues which were hampering greater economic interaction between the two largest democracies, he said.
The official said the US had identified some issues such as IPR, an open skies agreement, the role of India in the World Trade Organisation and the resolution of legacy issues, including Dabhol, as key to the whole process.
According to him, relations between the two countries took a dramatic turn for the better with US Secretary of State Condoleezza Rice’s visit to India in January this year, when she declared that the US felt India was fast emerging as a major power and that Washington would facilitate that process in every way it could.
He said Dr Singh’s historic state visit to Washington in July this year, when the two countries signed a series of agreements, including one on civil nuclear energy cooperation, was a landmark event in this regard.
Washington is now hoping that President Bush’s visit to India, expected to take place in the second half of February or early March, would take the process even further.
The official said the US was convinced that it was important for the global economy to ensure that the Indian economy was able to grow at a rate of between eight and ten per cent over the next decade or so.
He said the two countries would continue to address issues that could block India’s growth. Energy security, vital for a growing economy such as India’s, was one such issue and the US was committed to helping India on this front, he said, pointing out that the agreement on civil nuclear energy cooperation was aimed precisely at this.
"The civil nuclear energy cooperation agreement was driven as much by economic factors as by political ones," he stressed.
According to the official, the recent report by an international management consultancy firm, which ranked India as the second most attractive business location after China and ahead of the US, was an indicator of how the world was changing the way it saw India.
An UNCTAD report had placed India as the third most attractive business location in 2004 after China and the US.
According to official US data, global Foreign Direct Investment (FDI) inflows in 2004 were 648 billion dollars, of which 106.8 billion went to the US alone.
In the Asia Pacific region, the top economies for FDI inflows last year were China (61 billion dollars), Hong Kong (34 billion dollars), Singapore (16 billion), Korea (7.5 billion) and India (5.3 billion).
He said India would have to pay a lot more attention in the coming months to IPR issues, particularly because the two countries were moving fast on cooperation in the areas of high technology, knowledge industries and defence.
In this context, he pointed out that the US had already offered to sell F-16 fighter aircraft to India and was also open to the idea of joint production of the aircraft in India.
He said issues related to the Nuclear Suppliers Group and proliferation needed to be sorted out in this regard.
"If we are able to create a framework between India and the US along the lines of the ones that exist between the US and its closest partners, it would allow technology to be shared," he emphasised.
According to him, the offer to jointly produce the F-16s in India, at a time when the US was facing keen competition from other countries in the matter of defence equipment sales, was driven by economic factors.
"If the aircraft is produced wholly or partly in India, it will help lower costs and determine if the F-16s remain in production or not in the long run," he pointed out.
In reply to a question, the official said the private sector in both countries had been pushing for a Free Trade Area (FTA) agreement between India and the US.
He said the private sector had been advised to come up with suggestions on what such an agreement should look like and whether it should be a bilateral agreement or something that could be integrated into the WTO framework.
While US companies want greater access to India’s financial markets, India is looking at freer movement of labour to the US. The official said that, given its existing laws, it might be difficult for the US to integrate immigration issues into a trade agreement.
"The Bush administration is looking at the entire immigration issue to make it more open and equitable. It has to be primarily dealt with in the US Congress," he explained.
All the same, the US missions in India accorded the highest priority to business and student visas, believing strongly that greater people-to-people interaction was essential for bringing about more investment flows, he said.
The official said the US would continue to work with India for the development of the country’s financial sector to improve regulation and establish international standard systems and procedures in the securities sector, to strengthen the regulator and improve industry standards for professionals in the insurance sector and to strengthen regulation to keep up with the growing future market in commodities.
He was confident that fora such as the India-US Energy Dialogue, the Economic Dialogue and the CEOs Forum, set up during Dr Singh’s visit to Washington, would help to strengthen the economic relationship between the two countries even further in the coming years.
