India isn’t one of WA’s major trading partners, but trade liberalisation and diplomatic efforts are smoothing the way for increased trade while India’s growing middle class fuels consumer demand. Alison Birrane, Jim Hawtin and Chris Leitch look at some of
INDIAN business has recently splurged on multi-million dollar investments in Western Australia’s North West, throwing the spotlight on economic and diplomatic relations between the two countries.
The New Delhi-based Oswal Group is spending $630 million on the world’s largest ammonia plant on the Burrup Peninsula, while Birla Copper bought the Nifty Copper Mine for almost $160 million and, recently paid $21 million for the Mount Gibson Mine in Queensland from ailing WA-based Western Metals.
This is serious business, reflecting an increasing two-way trade and investment between Australia and India, mainly driven by Indian economic and trade reform, which appears to be marking a new era in bilateral relations.
Of course the traffic is not restricted to big Indian investment in resources.
Many Western Australian companies are already reaping the benefits of doing business with India as they push into emerging areas of India’s economy – an economy growing at 6 per cent a year since opening its doors to increased international trade in 1991.
This growth has made way for new opportunities driven by a growing upper-middle class of an estimated 300 million people with a taste for high-end consumer goods.
But barriers to trade such as high tariffs on some goods and an under-developed infrastructure, particularly in the energy sector, continue to hamper some trade efforts with India.
Exports from WA to India increased by 50 per cent in the past few years, the bulk of which is made up of gold, wool and pulses.
Several WA exports increased in the past financial year including fresh fruit, which increased to around $800,000 (mainly apples, since the market was opened in 1999).
Pulse exports increased by 50 per cent to about $8 million, titanium dioxide experienced a three-fold increase to $11 million, industrial machinery increased 10-fold to $2.1 million and total wool imports had a $10 million dollar increase over the previous year, bringing it to $51 million.
As new areas of trade emerge, tentative steps by some WA companies are being made in other fruit varieties, wine, spas and sandalwood, and mining services.
WA-based wineries, Sandalford Wines and Leeuwin Estate are exporting premium wine to India despite wine imports attracting substantial duty, which can be as high as 149.6 to 264 per cent.
Worse hit by tariffs are wheat exports to India, which fell from more than $A300 million in 1997-1998 to nil in 2002-2003 due to the increased subsidisation of domestic production and the implementation of an import tariff of 50 per cent.
But there’s some good news for WA industry, with the Federal Government pursuing lower tariffs on some wines, including fortified wines and vermouth, among other exports.
WA companies involved in construction and building industries include Clough Engineering, which is involved in India’s burgeoning oil and gas sector, and JV Global. Clough’s Offshore Division was awarded a contract for the Hazira Gas Project, located in the Bay of Cambay on the west coast of India for Canadian operator Niko Resources and Gujarat State Petroleum Corporation Ltd.
The contract includes engineering, procurement, construction, installation and commissioning of a six-leg offshore drilling platform.
Another player setting its sights across the Indian Ocean is JV Global, which signed a $4 million agreement with multi-billion dollar Indian construction and engineering firm Larsen and Toubro Limited. Under the agreement the joint-venture partners established a production facility in Chennai to manufacture steel doors and window frames.
The State and Federal governments, along with the Department of Foreign Affairs and Trade and Austrade, have been encouraging Australian business to enter the Indian markets and have been urging the Indian Government to decrease barriers to trade.
Several reciprocal diplomatic and business visits between Australia and India in the past 12 months have smoothed the way for these discussions.
State Development Minister Clive Brown and Federal Trade Minister Mark Vaile visited India in November 2002 and February 2003 respectively.
Then, earlier this year, a high-level Indian delegation that included the Indian Federal Minister for Petroleum and Gas Ram Naik, visited Perth to meet with major players from Australia’s oil and gas sector in a bid to drum up exploration and investment interest in India’s oil and gas sector.
Mr Naik also met with Premier Geoff Gallop to discuss linkages between India and WA in the energy sector.
India is Australia’s 11th largest export market and 17th largest trading partner and Australian exports to India continue to grow, reaching $2.576 billion in 2002-2003.
Australia is India’s eighth largest investor with current Australian investment in India estimated at around $A1 billion, and involving around 100 joint ventures. And this relationship is reciprocated, particularly in Western Australia, with Indian investment in Australia increasingly markedly in the past 12 months.
In December 2002 an agreement was reached between the Western Australian Government and the New Delhi-based Oswal Group to build a $630 million ammonia plant – the world’s largest – on the Burrup Peninsula.
Oswal is one of India’s largest companies and supplies four million tonnes of fertiliser a year to the Indian market.
The project is expected to employ 500 people during construction and 60 during operation.
When operational, the plant is expected to produce up to 2,200 tonnes of liquid ammonia from natural gas each day over a minimum 25-year period, generating $A190 million a year in export income.
In January 2003 Birla Copper paid $158.8 million for the Nifty Copper Mine in Western Australia, the third-largest copper resource in Australia and ranked in the world’s top 25 copper deposits.
Birla Copper plans to expand the mine to produce copper concentrate to feed its smelter at Dahej in Gujarat State. The company is part of the Aditya Birla Group, which employs 72,000 people and turns over $US6 billion a year.
The acquisition, which was completed through a wholly-owned Australian subsidiary, is significant because it marks the second largest foreign investment by an Indian company.
But some areas of new investment, such as ICT and biotechnology, are flourishing in Australia and are emerging as new growth areas for Indian interests in Australia. WA is yet to enjoy any significant developments with India in these industries, however.