* Related post : China vs India : who has a better chance for economic growth
In the article Jim Rogers Talks About Inflation, China, Commodities, Unrest and India, Jim Rogers was enthusiastic about China boom as ever, while being pessimistic about India :
Q. What do you make of India?
A (Jim Rogers). I am not optimistic. I’m short India, as a matter of fact. I can go on and on about the shortcomings of India and how people don’t understand India, but the one fact is that India now has now a 90% debt to GDP ratio, which, for some reason, the bulls either don’t know or ignore. As you probably know, the studies show that when a country gets to 90% to GDP it’s very difficult to grow very rapidly because everything you’re doing is paying off the debts of the past. So no matter how productive and dynamic you are, you’ve still got a big burden. So for that and all the other reasons, I’m less optimistic about India then most people. It’s a phenomenal country to visit, but boy, it’s tough to do business there. Even for Indians, it’s tough to do business there.
India's high debt/GDP ratio came as a surprise for me, and Jim certainly has a good point on that.
What might surprise many is that he found tough to do business in India, not only tough for himself, but also for Indians. And he did not mention this problem when speaking of China. The ironic thing is that Indian constitution declares that India is a democracy and that instantly convinces many westerners (for example many of my western friends) that it's easier to do business in India than in China, as democracy equals rule of law, doesn't it. Does it really?
Well, Jim Rogers' comments are really not surprising for me. I've heard Indians talking about the lack of rule of law in India. I am still not in a position to make this call due to my lack of research. However, I know how not difficult to start business in Shanghai as I worked on starting up a company there. I remember about 10 years ago before I came to US, Pudong (the east part of Shanghai, the newly developed hi-tech industrial area) promised a simple registration procedure for start-ups which would take no more than 2 weeks. Things might be more complicated for foreigners, due to currency exchange issue and potentially local industry protectionism too, and one would have to find a Chinese partner.
China is surely facing sundry challenges as well, among which corruption seems particularly a pain in the neck. Corruption no doubt indicates weak rule of law. When being limited by a regulation, a Chinese is more likely to endeavor to circumvent it than to try to create the necessary conditions to conform to it. Well, China is certainly not alone when it comes to having a culture of corruption. A few months ago I heard on a radio show about an interesting study on "cultures of corruption" (table on page 20) of how likely foreign diplomats, grouped by nations, are to pay parking tickets in NYC, thousands of miles' away from home. In terms of average unpaid violation per diplomat per year from 1997-2002, China ranks 65 out of 146 nations studied, and India is slightly better, 79.
In my old "China vs India" post, I already mentioned that whether democracy necessarily helps economic development is debatable. Hans Hoppe's book - democracy the god that failed - claims that democracies can be a worse form of government because people will elect those who will redistribute the wealth and make the country impossible to do business. (Thanks Jeff for the reference)
On a different note, India does not seem to have the most harmonious relationship among people : different languages, religious divide, and legacy caste system. This could be worrisome and even get escalated to be a political risk.
In the article Jim Rogers Talks About Inflation, China, Commodities, Unrest and India, Jim Rogers was enthusiastic about China boom as ever, while being pessimistic about India :
Q. What do you make of India?
A (Jim Rogers). I am not optimistic. I’m short India, as a matter of fact. I can go on and on about the shortcomings of India and how people don’t understand India, but the one fact is that India now has now a 90% debt to GDP ratio, which, for some reason, the bulls either don’t know or ignore. As you probably know, the studies show that when a country gets to 90% to GDP it’s very difficult to grow very rapidly because everything you’re doing is paying off the debts of the past. So no matter how productive and dynamic you are, you’ve still got a big burden. So for that and all the other reasons, I’m less optimistic about India then most people. It’s a phenomenal country to visit, but boy, it’s tough to do business there. Even for Indians, it’s tough to do business there.
India's high debt/GDP ratio came as a surprise for me, and Jim certainly has a good point on that.
What might surprise many is that he found tough to do business in India, not only tough for himself, but also for Indians. And he did not mention this problem when speaking of China. The ironic thing is that Indian constitution declares that India is a democracy and that instantly convinces many westerners (for example many of my western friends) that it's easier to do business in India than in China, as democracy equals rule of law, doesn't it. Does it really?
Well, Jim Rogers' comments are really not surprising for me. I've heard Indians talking about the lack of rule of law in India. I am still not in a position to make this call due to my lack of research. However, I know how not difficult to start business in Shanghai as I worked on starting up a company there. I remember about 10 years ago before I came to US, Pudong (the east part of Shanghai, the newly developed hi-tech industrial area) promised a simple registration procedure for start-ups which would take no more than 2 weeks. Things might be more complicated for foreigners, due to currency exchange issue and potentially local industry protectionism too, and one would have to find a Chinese partner.
China is surely facing sundry challenges as well, among which corruption seems particularly a pain in the neck. Corruption no doubt indicates weak rule of law. When being limited by a regulation, a Chinese is more likely to endeavor to circumvent it than to try to create the necessary conditions to conform to it. Well, China is certainly not alone when it comes to having a culture of corruption. A few months ago I heard on a radio show about an interesting study on "cultures of corruption" (table on page 20) of how likely foreign diplomats, grouped by nations, are to pay parking tickets in NYC, thousands of miles' away from home. In terms of average unpaid violation per diplomat per year from 1997-2002, China ranks 65 out of 146 nations studied, and India is slightly better, 79.
In my old "China vs India" post, I already mentioned that whether democracy necessarily helps economic development is debatable. Hans Hoppe's book - democracy the god that failed - claims that democracies can be a worse form of government because people will elect those who will redistribute the wealth and make the country impossible to do business. (Thanks Jeff for the reference)
On a different note, India does not seem to have the most harmonious relationship among people : different languages, religious divide, and legacy caste system. This could be worrisome and even get escalated to be a political risk.
No comments:
Post a Comment