Summit Notebook
Exclusive outtakes from industry leaders
from Sakthi Prasad:
Old business in New bottle
When the term “real estate” is mentioned, people immediately get images of bricks, cement, sand, gravel, dusty construction sites and so on. And the business is rightfully termed as “brick-and-mortar” or categorized as “old economy.”
Many youngsters nowadays would prefer to work in swanky offices of a software company or an investment bank instead of sweating it out in dust and heat at construction locations.
But for J.C. Sharma, managing director of Bangalore-based real estate firm Sobha Developers, it makes business sense to combine the selling power of “new economy” Internet and “old economy” real estate.
While speaking to Journalists at Reuters India Investment Summit in Bangalore, Sharma said the Non-Resident Indian (NRI) demand has gone up to 17 percent this year compared to less than 10 percent of demand last year -- thanks to the power of Internet.
Maybe, Internet would after all help a homesick Indian toiling in faraway foreign lands to find a home in India. And as J.C. Sharma would have it, one could always find a Sobha home on the cyber highway.
from Sakthi Prasad:
India Investment Summit comes to Bangalore
Executives of real estate, technology and pharmaceutical firms will be exclusively talking to Reuters journalists about their companies’ growth plans, challenges they face and business opportunities that are available within the wider context of India investment story.
Stay tuned.
Infrastructure still top-of-mind in India
On Monday, we kick-off the 2010 India Investment Summit. We’ll have exclusive interviews in Mumbai and Bangalore. In 2006 we held the first Reuters India Investment Summit. It was my first time in India. I’ve had the privilege to return every year. How time flies. Here we are four years later. Some of the key players may have changed but the big, over-arching theme is still the same: Infrastructure. It’s the key to realizing the country’s potential but bureaucracy, tough financing and hesitant overseas investment have slowed development in the sector, calling into question the future of India as a powerhouse.
India has had only mixed success in its efforts to accelerate construction of roads, bridges and power plants. The statistics are mind-blowing…the country is growing at 8.5% and has a population of 1.2 billion that is making a mad-dash from the countryside to sprawling cities. Call them growing pains…in India’s expanding cities there is an acute need to speed project approvals, implement new financing models and attract overseas investment for much needed infrastructure. But, while the business opportunity is tremendous investors looking to India as a way to play the emerging markets are wary given the history of missed deadlines and red tape that makes getting projects completed a challenge.
Is red tape getting better or worse? Which sectors are attracting most interest? How do returns compare with similar projects globally? How do sector companies attract foreign investment in large projects? Are the challenges forcing investors and developers to look overseas instead?
These topics and more will be the key points of discussion at the Reuters India Investment Summit in Mumbai and Bangalore September 27-29.
To read our exclusive stories and analysis starting September 27 copy and paste the link below to your browser: www.reuters.com/summit/IndiaInvestment10
The Reuters India Summit comes to Bangalore
On Wednesday, the Reuters India Investment Summit comes to the information technology hub of Bangalore.
The city has become synonymous in the West with outsourcing and “cheap labor” but is rapidly emerging as a hot spot for research and development. Bangalore is also marching ahead in the information technology value chain. Some companies like Wipro actually outsource work from India to Egypt.
However, the city poses several challenges for the multinational companies. Infrastructure growth in the city hasn’t kept pace with population growth and economic development. Power cuts are frequent, and it isn’t uncommon to see pothole-filled roads clogged with traffic against a backdrop of modern glass and steel buildings.
Other challenges for the outsourcing industry include pressure from populist U.S. politicians, who point out that the economic recovery hasn’t been able to curb unemployment. Buffalo, though, is unlikely to take away any jobs from Bangalore in the foreseeable future.
The Bangalore leg of the Summit will feature senior executives from the information technology giants including Infosys, Wipro, Mphasis, Mahindra Satyam and SAP.
Hyderabad is a better place to do business. It has better roads, better infrastructure and is cost effective.
A “cash cow”
By Don Durfee
Safe havens have been few and far between during the global economic crisis, but one has been fairly reliable: infrastructure. So it’s not surprising that many companies are betting on the biggest infrastructure opportunity of them all, China’s $585 billion spending package.
One of those is NWS Holdings, a subsidiary of Hong Kong’s New World Development. Speaking at the Reuters China Investment Summit, executive director Tsang Yam Pui spoke glowingly about the company’s investment in a project to develop 18 rail container terminals around the country.
Rail looks like a promising area. China’s crumbling rail network is due for an upgrade and only 3 percent of domestic cargo is shipped in containers, compared with 20-30 percent in developed markets. Beijing will pour 700 billion yuan into the sector over the next three years and everyone from those laying the tracks to those making the train’s braking systems are hoping to cash in.
The company certainly needs a boost. Many of its other businesses, which range from stock broking to running Hong Kong’s convention centre, have suffered during the economic slowdown. It posted a 64 percent drop in six-month profit.
NWS also sees itself gaining from the country’s push to develop water projects — both treatment and supply — and expressways. In addition to its rail projects, to which its committing $1.76 billion, the company plans to commit another $146 million annually to these areas, Tsang said.
With any luck, China’s stimulus will perk up NWS’s own profit. Or, as Tsang described China’s rail investments: “For the MOR (Ministry of Railway), this project is a national mission and for us it is a future cash cow.”
AUDIO – Wait a minute, we have to pay for all this stuff?
All the infrastructure projects in the world sound great! They look awesome on paper, they’ll make people’s lives better and they’ll let us go visit our friends and families in about half the time it used to take.
It’ll be a dream world!!
Well, unfortunately, we are going to have to pay for all these projects at some point and all of the guests at this year’s Reuters Infrastructure Summit acknowledge that the paying is the hardest part.
But Professor Richard Little, from the Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California, started off with the problem of paying and suggested a few different methods to be considered.
Little, one of those great guests who actually speaks in full thoughts and complete sentences, said that ideas of the moment that might be in vogue (like the public-private partnerships) are all well and good, but are only part of what the country is going to need to do to actually fix its many needs.
Little is an advocate for putting much of the pension, Social Security and defined benefit money to work for the nation’s infrastructure needs. Will it work? Well, for sure there’s a lot of money that can be used and he thinks the American investor would be more willing to buy bonds if they knew they were helping build a bridge or a school or improving rails.
Any questions for the MTA?
With New York subway riders and motorists bracing for the second round of fare and toll hikes this year, we imagine some of you may have questions for Lee Sander. The chief executive of the Metropolitan Transportation Authority, the nation’s biggest public transit system, speaks at the Reuters Infrastructure Summit early Thursday. Post your questions for Sander below. Our MTA-commuting reporters will add a selection of them to their own long list and publish the answers on this blog.
What i find amazing is that in the “3rd world” countries, these very same superior subway systems are very affordable. I have lived in 4 of them and they are not just better but also more affordable. So, why is it that ours is both terrible and unaffordable? There truly must be a correlation for affordability and good management at play here and so I would get rid of the management and bring in a fresh set of eyes. If we are to keep paying and paying and being held hostage, lets do one of:
1. nationalize it and run it down
2. take control of it by bringing in fresh set of eyes and fresh thinking
3. let apathy prevail
I am sure the board wants (3) as they are operating in a standard way. Why else would they vote to increase the fare substantially when people are losing their jobs and the economy is souring?
Cut the expenses and let a separate body decide that. Then and only then should we talk about fare increases in this economy.
AUDIO – Everything has a cost
There’s no such thing as a free lunch.
Or bridge. Or turnpike.
Every project we’re talking about at Reuters first-ever Reuters Infrastructure Summit has an enormous cost — sometimes in the hundreds of billions of dollars. And governments are looking for ways to pay for it all.
Enter public-private partnerships (or P3s as we cool, infrastructure types like to say these days). In these deals, governments will lease or sell an asset to a group of investors for a certain big up-front fee and then they will pay the government a certain per-year fee for the right.
For Ambassador Felix Rohatyn, former executive at Lazard Freres and crafter of the New York City economic rescue in the mid-1970s, these are good ideas, but they don’t come without a cost.
Rohatyn, one of the featured guests at this year’s summit and author of a new book on big U.S. infrastructure projects called “Bold Endeavors“, said that in general P3s are a good thing as they should give governments more flexibility to do the things they need to do. But like everything, they carry some risk and officials should go into these deals with their eyes open.
The Reuters Infrastructure Summit continues through the end of this week in New York, San Francisco and Washington.
AUDIO – Finding a model; then build, baby, build!
Infrastructure spending. Public-private partnerships. Government buildouts.
This week, all of these kinds of phrases are much on the mind of our guests at the first ever Reuters Infrastructure Summit held in New York, San Francisco and Washington.
While infrastructure means different things to almost all of our guests (schools, roads, bridges, etc) — one of our first guests, Petra Todorovich, talked at length about the need for high speed rails.
Todorovich, the director of the Regional Plan Association’s America 2050 project, told Reuters that buiding the high-speed rails makes a great deal of sense for travel, business and infrastructure.
What model would she use? Try the airlines. While equity investors might feel a cold wind blowing through their portfolios at the mention of the perpetually difficult-to-predict sector, Todorovich likes the way the industry melds its private side with its public financing.
Todorovich also spoke about other models for infrastructure spending that different locales have used.
Todorovich was one of the first speakers at this year’s summit, which runs through the end of this week.
We are going to have to pay for all these projects sooner or later. I don’t think at this point we even know the true costs of these project and as it always happens, the price tag will dramatically increase by the time these infrastructure and other projects will be completed. Look at Boston’s Big Dig. This is a perfect example of government failure and miscalculation, the project costs were dramatically underestimated (maybe even voluntarily, to make it easy to sell to the public) and by the end the expenses and costs had ballooned. I think all the new projects that had been on the discussion plate, you could easily multiply it by 2 or 3 and that will be your true cost, and if not 100% correct, the number is very close to reality. How to pay for these? That’s a good question…
Audio – For best M&A results? Don’t forget the fish and the booze!
There is an entire industry out there about what to do to make a merger a success. Many of us know bankers or lawyers who work for weeks and hours on end just to make sure their deals are perfectly done with all the t’s crossed and the i’s dotted.
Millions of dollars are spent on just teaching people the best way to get a transaction from idea to completion.
In fact, we found out this week that sometimes the key to a good deal is a plate full of small, pickled fish.
Well, at least if you’re negotiating with Alcoa’s Chief Executive Klaus Kleinfeld.
Kleinfeld, speaking at the annual Reuters Global Mining and Steel Summit described how he and his counterpart recently structured a deal and decided that it was the best thing for both companies. His thoughts were instructive to dealmakers who right now might have a little more time on their hands and might be looking for new ways to seal a deal.
Anyway, even if the deal doesn’t get done, it sounds like it was a pretty fun night.
Kleinfeld was one of the featured speakers at the summit, which continues through Thursday in New York, London and Sydney. The Summit program is in its fifth year, and in 2009 will include top-level executives from industries and sectors including everything from Infrastructure; to Global technology; to Investing in India, China, Japan and Russia; to Islamic Banking.
