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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

A CONCRETE PLANE

India's airlines lose a chance to modernize with foreign help


FIRST THE GOOD NEWS: on Jan. 24, the government of India announced measures to liberalize the country's aviation industry. The new rules now allow overseas investors to own up to 40% of India's domestic airlines. The bad news? Foreign carriers are excluded from the arrangement. For non-Indian airlines to enter the domestic scene, special permission is required from the Ministry of Civil Aviation and Tourism, headed by Mr. C. M. Ibrahim.

The minister has made it clear that he will dole out any such permits very sparingly. Almost immediately after the new rules were unveiled, Mr. Ibrahim reiterated his pledge to block a $708-million joint venture between the Tata group and Singapore Airlines to form a new air service. "I am not against foreign investment," he asserted. "I would welcome 100% foreign investment in airport development and our infrastructure facilities."

On Mr. Ibrahim's position, two points need to be made. First, those with the greatest stake and interest in the aviation sector are, naturally, airline companies. Leaving them out while inviting corporations from other industries to invest in Indian domestic carriers makes little sense. As the Calcutta-based Business Standard daily said in an editorial: "If airline companies can't invest in airlines, perhaps a global cement company will. On the same lines, foreign entry in Indian media should be banned only for media companies; perhaps foreign shipping companies could be invited to invest in Indian media."

The second point: to welcome investment in airports but not in airlines is a bit like saying, "Please build a football stadium for us. But you can't play in it." Overseas investors are not likely to get excited about India's domestic aviation sector if they are denied access to the industry's most important component. The Indians will lose out too. They may end up with a state-of-the-art football ground -- but how will they improve their game?

In fact, more funds for airport facilities and other infrastructure needs will become available if foreign airlines are allowed to fly planes in India. Once they have a stake in serving travelers better, they will want to spend money sprucing up their transit lounges or building an extra terminal.

Advocates of limitations have pointed out that many other countries -- including the United States -- are not much more liberal than India when it comes to allowing overseas participation in domestic aviation. Said Mr. Ibrahim: "Will Singapore or Indonesia allow any of our airlines in their domestic sector? I, as an Indian, should not allow foreign airlines in our domestic skies." Putting aside the fact that Singapore does not have a domestic sector, the response to that must be: So what -- and who cares? The aviation policy of any other nation is its own affair. For India, the overriding factor should be the reality that it has much to gain from allowing overseas carriers into its market.

One clear benefit will be a much-needed boost in aviation standards. Besides investment funds, foreign airlines offer expertise and technology that can modernize India's antiquated system and make domestic air travel better and safer. Also, the added competition generated by something like the Tata-Singapore Airlines venture will force other home-grown carriers to raise their levels of service and efficiency, perhaps through their own overseas tie-ups. Indian travelers will be the ultimate winners.

Another gain is increased economic activity. In today's world, air travel is an essential tool of business. Efficiency, safety, better service and more extensive air networks brought about by the increased competition will enable and encourage more business executives -- both foreign and local -- to travel around the country. The result? More deals signed and more business generated in underdeveloped areas, helping them grow. Some Indians may be concerned, perhaps justifiably, that giving foreign airlines too much free rein would enable them to milk their country. But legislation could be passed to require that the firms reinvest a portion of the profits in the industry.

The current arrangement has one other major demerit: adding an extra bureaucratic procedure leaves the door open for corruption. History shows that neither big-name companies nor Indian officials are above giving and accepting kickbacks, and the requirement that joint ventures be approved on an individual basis surely creates a temptation for the exchange of "lubricating" money to facilitate a green light. And that is something a country with enough graft problems can do without -- and just one more reason New Delhi authorities should reconsider their policy on foreign airlines' involvement in domestic aviation. India's present and future travelers deserve better.


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