Czech Ambassador sets heart at USD 2 billion trade target

Although Czech Ambassador Milan Hovorka is new to New Delhi, he has been fast enough in winning over friends czech 2with his affable nature and warm smile. Be it the first meeting with him, he makes one feel as if he is known to you for many years. THE BLUE MOON Editor Amit Mittal managed to get this interview with him in spite of the one hour delay in arrival at the Embassy due to Delhi’s notorious traffic jams. The Ambassador obliged with a smile as if saying, “I don’t mind.” Here are the excerpts from his interview :

Are the two-way trade figures between India and the Czech Republic encouraging for the past two years?

The economic relations between the Czech Republic and India are built upon traditional ties in the past when the Czech engineering companies took part in industrialization of India and some of the most important Indian companies like BHEL or HEC have been in big part equipped with Czech machine tools.

Given the great potential based on the dynamic growth of the Indian economy, the bilateral economic co-operation with India has always been in the centre of our attention in both – trade and investment.

In 2011, the volume of trade exchange reached the record level of USD1.5 billion after it had increased tenfold in a decade. Then the trade between the Czech Republic and India suffered from the global economic slowdown. However, during the last three years the trade volume kept the level above USD 1.2 billion.

Our immediate objective, as I see it, is to pave the way for a new and sustainable growth trajectory. I am personally convinced that USD 2 billion mark should be within our reach in next five or six years.

I base this working hypothesis on the capacity and potential of both countries’ economies as well as on the fact, that there are companies on both sides which care and are ready to build mutually advantageous partnerships.

How can the trade be increased keeping in mind that there are no trade barriers between the two countries? Are there any trade barriers in your opinion? How can they be removed?

To facilitate the effort of companies and increase awareness of existing trade and investment opportunities, we got meaningful expansion of our staff at the Embassy of the Czech Republic in Delhi. We engaged in organizing several business missions last year and we plan visits of business delegations this year too.

There will be trade fairs, business conferences and shows this year in India that can play a vital role in boosting the trade. To name just a few of them where we expect the Czech companies come and present their state-of-the-art technologies — DEFEXPO, India Aviation or Smart Cities.

Although you mentioned that there are no trade barriers between the two countries I must remind you that there are still existing tariffs which may be increasing the price of certain products to become too high for import to India. One such example could be beer. Pilsner beer which originates from Pilsen in the Czech Republic is famous in the world but the original Pilsner Urquel or other Czech beers are difficult to find in India. One reason behind that could be also considerably high import duties. Of course, for this kind of product with relatively low value and high content of water it is also costly to arrange transport for a long distance. However, I believe that the role of the Embassy is to facilitate and assist exporters to reach Indian market. New technologies and transport solutions open interesting opportunities in many sectors.

When do you see the Free Trade Agreement (FTA) between India and European Union coming; it has been a topic of discussion for long?

It is difficult to estimate the result and the end of quite complex and difficult negotiations. Although the EU represents a single common market, please do not forget that it is based on 28- member countries with different opinions, culture, language and political situation. In some areas the integration of the EU is not finished for example in energy sector. I can see that also on the Indian side there will be serious constraints with respect to the current level of regulation of certain sectors of the Indian economy. So given these complexities and the size of the Indian market as well as the EU market of more than half a billion population any target to finish the negotiations soon will be simply very ambitious. At the same time I can say that on the EU side we are keen on negotiating a comprehensive and ambitious agreement because we see a huge potential of promoting the economic relations between the EU and India to higher level. The EU is the second biggest export market for India after the USA, but there is still enormous space for improvement and hopefully there is a similar motivation on Indian side to gain better access to the EU market and work together with the EU partners for further development of the economic relations.

Will the FTA with EU benefit the trade with Czech Republic or it will hardly make any impact?

I mentioned some of the existing trade barriers when I spoke about the difficulties to introduce the Czech beer to Indian market. But you have to be aware that the import duties in combination of the transport costs are considerably affecting the competitiveness in various other sectors. Respond to that is partly in manufacturing in India. But we should bear in mind that in the globalized economy, the value chains are spreading across countries. To produce a car you have to import various components and the trade barriers may represent a significant obstacle for efficient production. There are several Czech companies that decided to invest in India but some of the components of their products they still need to import from the Czech Republic. Gradual decrease of tariffs and reduction in other non-tariff barriers will help even the Czech companies with their own production capacities in India. In other words FTA will help in increasing the will of foreign companies to invest in India. Not speaking about the companies relying only on export of products to India without manufacturing base here. They will be naturally mostly appreciating dismantling or decrease of tariff barriers.

Where do Indian investments in Czech Republic stand? Are they much more than Czech investments in India?

There are big Indian investors such as Tata Group in beverage industry, Infosys in IT services and Mittal Steel in metallurgy present in the Czech Republic. Other Indian investors focused in the Czech Republic on sectors like automotive, Pharmaceuticals and textile industry among others. India is, no doubt, important source of FDI for the Czech Republic and we appreciate the fact that our bilateral economic relations rely on such a robust investment presence of Indian companies in our country.

Indian investors take advantage of strong industrial base in the country with expanding automotive production that creates substantial demand for steel products and automotive parts.

At the same time companies like Infosys find in the Czech Republic highly qualified work force at competitive cost. Geographical position of the Czech Republic in the heart of Europe makes it very attractive investment destination for foreign investment projects. According to the available statistics, the volume of Indian investment in the Czech Republic is higher than the volume of investment coming from the Czech Republic to India. However, in the globalized economy the flow of investment is often rather complicated. Multinational companies use, for various reasons, selected branches in third countries to carry their investment projects abroad. In that case, the investment statistics may be a bit misleading.

Which is the largest Czech investment in India at present? How do potential investors from Czech see the change in Indian economic policies in the past 18 months?

We are definitely glad that the volume of investment in both countries is increasing. The production plant of Škoda Auto in Aurangabad is still the biggest investment of a Czech company in India. Nevertheless, the Home Credit company, which is active in micro financing expands its network of branches all over India. Another Czech company Bonatrans which is producing wheels and wheel-sets for railway vehicles decided to establish a production plant in Aurangabad.

Regarding your question about the Indian economic policies in the past 18 months, I would prefer to express my opinion rather than try to sum up opinions of potential Czech investors. It seems that the economic policies in India are taking right direction and their implementation should increase the overall competitiveness of India on the global scale. The potential of the Indian economy, given by size of the population, is enormous and initiatives like Make in India, Skill India or Start up India, may in the long term, significantly spur the economic growth through the increased efficiency and broadening manufacturing base here.

Foreign investors reply positively to the Make-in-India campaign and last year we saw how keen are they to announce new investment projects in India. Attracting the foreign direct investment to India is one of the most visible achievements of the economic policy for the last year.

Investors’ sentiment abroad is positive and this will help the Indian economy in the future to advance in introduction of modern technologies through foreign direct investment inflow. We have seen similar development in the Czech Republic where the arrival of foreign investors happened hand- in- hand with introduction of the cutting edge technologies in areas such as injection moulding of plastic products for automotive sector. I also believe that the partial liberalization of some economic sectors with regards to the entry of foreign direct investment that was announced at the end of the last year by the Indian government is definitely another important step in the right direction.

With steps in India to curtail pollution, how do you think will SKODA be affected in its sales?

In my opinion, the effort to counter air pollution in Indian cities is necessary. Indian citizens should not be deprived of clean air and water. These are essential requirements for human beings to live. Cars are, no doubt, one of the biggest sources of air pollution and I think car makers are constantly working to tackle this problem while introducing alternative sources of engines such as CNG or electrical engines. We know that there is a long way to go, but new engines in the recently introduced models are usually much less polluting with respect to the older cars. So I believe that gradual change in use of modern cars with technologically advanced engines will help. Car producers who are offering environmentally friendly solutions, and for sure Skoda Auto is one of them, can only be a natural positive part of such a change.

 

How strongly would you support ‘Make in India’. Does it benefit Czech investors? Can India be a strong hub for Czech manufacturers?

The Make-in-India initiative is timely and it is the right tool for boosting economic growth. Fast growing economy will support the demand and thus export of products from the Czech Republic to India. I could see that during the past years, the Czech exports were relying significantly on companies with manufacturing presence in India. I mentioned some of them already, but I can add Tatra Trucks company which is exporting to India parts that are assembled here. It is evident that trade increase can be also a result of previous investment which is in line with Make-in-India initiative. Supporting further development of the economic relations is my task in the role of Ambassador and this initiative is helping me in my efforts, so it is natural that I am supporter of it as well. Czech investors are aware of the initiative and they welcome it.

Of course, it is not the only factor in their decision making process when they consider investment in India. Czech investors are interested not only in manufacturing but also in service sector, for example the Home Credit company is active in micro financing.

Indian Prime Minister Modi has visited all countries he considers are of vital importance to his policies in the past 20 months; why has he missed Czech Republic? Are there any plans this summer for him to visit Prague?

Both, Czech Prime Minister Bohuslav Sobotka and Indian Prime Minister Narendra Modi participated in the Leaders’ Summit on Peacekeeping in New York on 28th September 2014. The idea to organize an official visit on the level of Prime Minister is actively promoted by us.

Till 1971 there was a direct air link between the two countries. However, there is none now in spite of the Bilateral Air Service Agreement signed in 1997. What is holding the two back from re-launching direct air links? Is there paucity of traffic?

I must say that the accessibility to the Czech Republic should be a lot easier for Indian citizens desiring to travel to Central Europe. Therefore, one of my priorities is exploring the option to resume direct air connectivity between the two countries. It is for me a critical missing link that should be making travel easier in both directions. The direct flight between Delhi and Prague had existed until 1991 (run by Air India in co-operation with the Czechoslovak Airlines).

When we consider the growing bilateral trade and increase in tourist flow in both directions, it seems that it is the right time to re-introduce the service. We have noticed a significant growth in the arrival of Indian tourists 30 per cent up during the last year. We expect over 10,000 Indian travellers to visit the Czech Republic this year. The proportion of Indian tourists is still relatively small, if we compare it to 8 million tourists coming to the Czech Republic every year from all over the world. There is no doubt that there is a high potential to increase the number of tourists coming from India and I believe that establishing the direct flight connection between the two countries will help a lot in this respect. In the recent years, South Korea and China have emerged as the major contributors of tourists from Asia and both countries are directly connected through air transport with the Czech Republic. Let me also add that we have recently opened two visa centres in Mumbai and Delhi and we are working on opening of several new centres in other Indian cities because we want to make the visa application process better accessible in such a big country like India.