India Chem 2000
October 6-8,2000

Vision statement by Mr. Mukesh D. Ambani, Reliance Industries

Future of the Chemical and Petrochemical Sector in the New Millennium; Indian Prespective

Distinguished Guests :

It is a great honour for me to present to this distinguished gathering the vision statement on the future of the Indian Chemical and Petrochemical Industry.

I speak to you against a dynamic and somewhat tumultous backdrop. The world is presently experiencing changes of momentous magnitude. The chemical industry is no exception. Information revolution has swept all aspects of our lives. Physical and financial boundaries have virtually collapsed. Skills, capital and markets have become global ; transcending earlier barriers. Customer's demands are becoming increasingly exacting and invertors acutely conscious of their power, are unsparing towards managements and uncomprosinsing in their expectations of return. Both Customers and Shareholders are ready to punish inefficiency mercilessly and unhesitatingly. To this volatile, atmosphere, scientific and technological innovation add exciting opportunities and inevitabely incredible unpredictability too.

The Chemical industry is the second biggest contributor of the world GDP. The total chemical world trade at 400 B US$ is close to 10% of global world trade. Global Chemical Industry growth has consistently been outpacing GDP growth by a factor of 1.5. With more than 70,000 commercial products, few other industries approach its degree of complexity and diversity. Chemical industry in the developed world is adapting strategies which are centred around a global market place. The biggest challenge it faces is value creation. In its quest for volume creation, will bring it's full force into play in terms of organisation, technology, finance, synergy and specialisation. This will result in fewer large companies-we many have less than half the companies we have today in the next decade.

Global Chemical industry has been changing via consolidation, mergers and acquistion and restructuring. In the US, there are 12,000 firms contributing 24% of global chemical production. In Japan, there are 4,500 firms producing 16% of global output. In India we have a very fragmented chemical industry. For only 1.5% of global production we have 6,600 firms, Indian chemical industry will have to restructure to become globally competetive.

In terms of size, the global chemical industry is five times the size of the Indian economy. So far, the Indian chemical industry has been a marginal player is the global arena with 22 B USD in iterms of output, it firms only 1.5% of global chemical industry. India, however, the 2nd largest producer of pesticides after Japan, ranks 12th in pharmaceutical production and is emerging as top 5 players in selected petrochemicals ; like PTA, PX and PP. In my view, the chemical industry in India is likely to be on a high growth phase in next few decades.

My confidence in a bright future for the Indian chemical industry springs fron the revolution of rising aspirations sweeping the hearts and minds of our people. The current per capita consumption of products of chemical industry in India is about 1/10th of the world average. Increasing proportion of our people, specially the young, have rising earnings and growing aspirations for a better quality of size. They will not accept the prevailing dispartly. Globalisation and liberal policies of the government will unplug latent demand. We could be looking at several hundreds of billion dollars of chemical indsutry market size 15 to 20 years from now.

Can the Indian Chemical industry sieze this great opportunity and achieve its rightful place in the world ? In the coming millennium, we have two choices, either, we build a next generation chemical industry ourselves or surrender the great Indian opportunity to the world. I beleive there are no soft choices.

We all need to put our creative forces together and develop an India strategy for the chemical Industry. We need a new mindset to match the dynamic environment. We need to plan for world class initiatives-in technology, business and customer service functions. We need to benchmark ourselves with the best in the world and leave our cottage industry mindset behind, if we are to succeed in our mission fo building a sustainable globally competitive Indian Chemical Industry.

Traditionally, chemical companies were orgainsed along commodity and speciality chemical lines with some hybrid companies in between. The emergence of Life science is creating new business opportunities. Many chemical companies are reinventing themselves as life science companies. The industry will also see many companies changing character from commodity players to service providers working very closely with their customers to serve the final end user. In any case, we have to recoginse that the character of chemical industry will be very differnet in the next decade. The challenge will be inflexible attitudes, concentration as core skills, assimilation of new skill sets and capabilities and working with customers in a partnership made. I beleive that the chemical industry is at the doorsteps of a new technology revolution that will dwarf earlier information technology revolution, the world has seen. The chemical industry adapted physics in the 20th century. It will embrace biology in the 21st century. The most exciting opportunity for the chemical industry is in life sciences-notably biotechnology and molecular science. Chemical industry has the opportunity of using the biotechnology platform to bring about new products, energy efficient and pollution free processes and alternative bio routes to conventional products

Greater development of aerospace,telecommunications equiment, miniaturised devices and automation products will demand new materials. These will range from advanced engineering plastics, polymer alloys and blends, electronic chemicals and speciality fibres. I urge you to look at the sweep of technological revolution beyond the dazzling view of IT. It is true IT makes communication and transactions more efficient but itdoes not change the concept of raw materials, biotechnology does. The double helical structure of DNA, admired for its intellectual simplicity, holds enomous power to change human civilisation. Biotechnology will enable human kind to do with plants, animals and human beings, things that were unimaginable till recently. The advent of artificial human limbs and organs will be facilitated by technological breakthrough in life science and material science. At that juncture, chemical industry will step in as a major ally as the next phase of technology revolution. Chemical industry in alliance with biology will usher in a new era of human well being. Thus, the chemical industry has the opportunity of reinventing itself at the interface of biological and material sciences in creating new value domains. I am of the conviction that India has the opportunity to create history in the next few decades. The large domestic market opportunity, its inherent strength in intellectual captial, access to global financial markets, strong knowledge of science, strength in software engineering and its rich bio diversity provide us this great opportunity to make India a global force in the chemicals industry.

Indians are talented as evidenced by their success in competitive foreign environment. They are harworking and can be inspired to a "will do" mind frame to compete for the industry, compete for themselves and for the country for realising the great Indian potential which is rightfully theirs. Industry has to nurture organisations, raise the bar higher to inspire, achieve global competitiveness in whatever they do, partner with institutions and government to implement an India strategy for the chemical industry with the ultimate objective of improving the quality of life of 1 billion people who can hold their head high in tomorrow's new world.