Interactive Business Meeting with H E Mr Ehud Olmert, Hon'ble Deputy Prime Minister of Industry, Trade & Labour of Israel
December 8, 2004, New Delhi

Mr Kamal Nath, Hon'ble Minister of Commerce & Industry, Govt of India

HE. Mr. Ehud Olmert, Vice Prime Minister and Minister of Industry, Trade, Labour and Communications of Israel,

Ambassador David Danieli,

Shri Y.K. Modi, President of FICCI,

Mr. Shraga Brosh, head of the Israeli business delegation,

Honoured guests, Ladies and Gentlemen: 

As ancient civilizations, we are often tempted to delve into history for lessons and parallels. Historians believe that nearly 3000 years ago ships of King Solomon carried things whose names can be traced to Sanskrit and Tamil. Ancient Hebrew texts mention trade with India in goods such as ginger and iron, and there are records of Jewish merchants actively trading between our two regions over millenia. West Asia, as part of our extended neighbourhood, has always been a natural trading partner for us from great antiquity. That reasoning holds as good today as it did many centuries ago.

If trade between India and Israel has catapulted to a figure of nearly 2 billion dollars annually, there must be an inherent logic and dynamic for it. In itself, it is a rich tribute to the drive of industry and business circles of both countries; but there are clearly deeper reasons for this achievement that constitute the true fundamentals of our relationship. It is these that we must jointly identify and exploit to our mutual advantage.

The fact that the Vice Prime Minister and Finance Minister of Israel along with two Knesset members has come to India with such a formidable business delegation could give rise to the question: what is it about India that has brought them here together? This is something that I believe is not only unusual but unprecedented. The India that you have arrived in Mr. Olmert is part of the great Asian economic miracle. In addition, it offers the advantage of an open democracy, the rule of law, a tradition of scientific and technological excellence, a rich and skilled human resource base and a finely developed entrepreneurial spirit. There are also sufficient vegetarian restaurants to cater to kosher food habits. It is time for Israel to look east, and the first stop on this eastbound journey is India.

It was Prime Minister Manmohan Singh who started the economic reforms in 1991 when he was Finance Minister. Our programme is based on broad political consensus and public endorsement. As part of this process direct and indirect taxes have been progressively brought down, with only three basic rates. Industrial controls have been virtually abolished. There are few restrictions on imports, and trade policy is very liberal. India now has one of the most liberal policy frameworks for foreign direct investment and foreign technology transfer. FDI up to 100% is permitted on the automatic route in most sectors. There is no restriction on repatriation of original investment and returns on investment. In the last decade the approved FDI was in excess of 66 billion dollars, with actual inflows touching 40 billion dollars. In the first six months of the current year, FDI grew by almost 70% over last year.

In terms of approved investments, Israel is among the top 15 partners of India. But the actual realization is far from satisfactory. As the agreements and MOUs for joint ventures and collaborations were signed by the business community but not implemented, it is for the business communities of our two countries to analyse in-depth the causes for it, which they should help address, with the assistance of the two governments, where required.

The results of our economic reforms are there for all to see. At over 3 trillion dollars, the Indian economy is now the 4th largest in the world in terms of purchasing powers parity. The average annual GDP growth rate over the last decade has been 6%, which has few parallels among large economies. From 1 billion dollars in 1991, India's foreign exchange reserves have reached almost 125 billion dollars and now comfortably exceed our foreign debt. In the current financial year, despite a poor monsoon and an appreciating rupee, both the manufacturing and services sectors are performing well. India's total exports are poised to cross 75 billion dollars this year. Within 5 years we hope to double our percentage share of world trade, growing as we are at a compounded rate of over 20% per annum.

India and Israel bilateral trade has shown healthy growth. In 1991, the trade was a mere 142 million dollars. In 2004, it should comfortably cross 2 billion dollars. The volume of bilateral trade has set a new record every year. India is Israel's second largest trading partner in Asia and the 9th largest globally. Happily, the basket of products is expanding, even though diamonds is the most important item. We expect this positive trend to continue, as India expands the range of its goods and as its appetite for hitech products grows. Let us target a bilateral trade of 5 billion dollars in 3 years. It is not impossible to achieve.

There is much promise in the future of our economic relations, which can be realized, with focused and concerted effort. There is a huge business opportunity represented by the 'bottom' 5 billion people of the world, the section that is called 'the bottom of the pyramid'. This, of course, would require thinking outside the box - a fresh look at products, cost-structure, pricing, distribution, financing, marketing and advertisement. India has a large number of such customers in its multi-layered market, which require custom-made solutions. Success here would open doors to the huge "bottom of the pyramid" market around the world. As the Israeli business community is known for finding creative solutions "chikchak' (which I understand is the Hebrew word for doing things quickly!), I thought I would throw this challenge at you and the Indian business community, which is equally fleet-footed: Come up with appropriate products and services for this huge untapped market.

A word about the diamond trade between the two countries: I believe it should inspire other sectors. Neither India nor Israel are producers of rough diamonds. It is the intelligent use of the synergy and the business acumen of the diamond communities of the two countries that have given them a dominant position in the world. This creative leveraging of mutual strengths should be replicated in other sectors.

Let me turn to some conventional sectors where opportunity beckons:

Development of world-class infrastructure is the highest priority of our Government. 100% Foreign Direct Investment is permitted in areas such as the development of integrated townships, airports, ports, power generation, and mass rapid transit systems. Your companies have good experiences in areas like toll roads and non-conventional sources of energies. We welcome your participation.

Our telecom sector is amongst the fastest growing in the world today. We are adding an average of 1.5 million new mobile subscribers every month. This is roughly 3 times the number of total subscribers in Israel. A number of Israeli telecom sector companies have established their presence in India. This sector offers vast opportunities for investments and collaborations, including in equipment manufacturing, R&D, and software development. I welcome you to be a part of our success story. 

Israel is considered the second Silicon Valley with a large number of IT and software companies which are world leaders in their fields. But India is now poised to overtake the Silicon Valley itself. You were in Bangalore yesterday and would have seen for your self the flourishing IT sector of India. Indian software and services exports, which were 164 million dollars twelve years ago, have grown exponentially to over 13 billion dollars in the last financial year. And this is just the beginning. Collaboration between India and Israel could be mutually beneficial; our complementarities in this sector should be leveraged for mutual benefit. An Indian IT delegation had visited Israel two months ago. Such exchanges should become a regular feature.

Israel has remarkable technologies in the entire gamut of agriculture and food processing for which there is keen interest in India. We admire how you have literally made the desert bloom. We must find ways to make these technologies affordable and cost-effective for small farmers in India. This is a prime example of the market at the "bottom of the pyramid" that I referred to a little while earlier, which could benefit us both.

Improvements in infrastructure, abundant raw materials, low-cost skilled manpower and a business-friendly policy framework is helping India fast emerge as a low-cost manufacturing centre for international markets. To give you an example, during the first seven months of the current financial year, India's vehicle exports grew by over 40% and recorded exports of over 3,50,000 units. I would request you to consider making India your manufacturing base for not just the markets in the East but for global markets. It would be good business, I assure you.

Israel is well known for its research and development skills. I take this opportunity to congratulate Israel on winning the Nobel prize in science this year. Your track record in filing international patents should make you proud. India too is making rapid advances in this sector, and we are on our way to becoming the knowledge capital of the world. Multinationals are now doing R&D work in India in a broad range of fields such as software, biotech, automobiles, telecom, and pharmaceuticals. R&D centres in India could help Israeli companies reduce development costs and time. To support and promote joint R&D by our companies, I am happy that an India-Israel MOU on Industrial R&D Initiative will be signed later today. Please make full use of this facility and jointly develop products for international markets.

I am happy to note that a number of Indian business delegations representing diverse sectors have visited Israel. Besides, a number of Israeli delegations have also visited India. This process needs to be continued unabated. In addition, I would also recommend participation at Indian trade exhibitions regularly. Business and trade promotion organizations like FICCI and CII as well as the Israel Export and International Cooperation Institute have done remarkable work in promoting bilateral relations. Carry on the good work. You have our support.

There is intense global competition to attract the interest of investors, traders and entrepreneurs. Mere availability of opportunities or investor friendly policies are not enough. It is important that businessmen feel wanted and respected at every stage, right from getting visas until the point they return to their country. To give them a sense of warm welcome should be our common endeavour.

Excellencies, Ladies and Gentlemen:

We firmly believe in the future of the India-Israel partnership, and are committed to realize this in close cooperation with you. I wish you all a very productive and enjoyable stay in India and assure you of my personal attention and support for your projects.

Shalom and Namaste.