ASIAN AFFAIRS INTERVIEW WITH RAJ SITAL Chairman of the Indian Chamber of Commerce of Hong Kong WHY DIASPORAS SUCCEED Serge Berthier.-There has been many studies done by scholars about the impact of diasporas on their home countries. It is said for example that without the Chinese diaspora, China's open door policy would not have been the success it is. In India, the government points out that the overseas Indian community is rich and powerful which implies that the country could one day be rich and powerful if only its own overseas diaspora does as much as the Chinese one did. Is it right to think that overseas communities play or can play a big role in the development of their country of origin and to think that they have a political impact on the world scene? Raj Sital. - We have there many issues linked to history, to culture, to religion, to economics. Maybe the first thing we should ask is why we are where we are, which is the most basic concept we need to look at. For the Indian community that lives in Hong Kong, the answer is that we have settled here because there was a lot of opportunities. Our trading network with the Middle East has been there for long. The traditions are there. The community has been there since the day the British flag was raised. The British brought with them some Indian traders that were already trading with China. You could say that the Indians came to Hong Kong to set up a base because they were part of the British empire. The Indians of Hong Kong have been there for generations. But not all of them have been there physically since the nineteenth century. Other factors came into play. My father was born in India then came to Hong Kong because of the partition of India, yet the Indian business community in Hong Kong was already prominent. Many families have the same history. So what does that mean towards India? My loyalties to India are just confined to the cultural and religious aspects of India. I am an Hindu and I practice my religion. The Indian community celebrates its cultural activities and festivals and that is where we meet. SB.- In that, your community is not different from any other overseas community. RS.- We certainly share that with many others. I have a friend in Antwerp in Belgium who is Jewish. He tells me that their community is so particular about their cultural and religious practices that they consider a place like Tel-Aviv as a loose city. Yet, it is in Israel and they don't feel Israel is their country. Another of my friends is a Lebanese. He has the same feeling towards Beyrouth. He does not want his children to go there too often, because he feels there are many liberties with the tradition. So, maybe we all share a sense of strong traditions, a belonging to a culture, but certainly not a belonging to any particular country. SB.- Then, it certainly implies that when we look at the economic strength of an overseas diaspora, we should look at it as a self-contained unit with selfish ends rather than as a natural reservoir of strength for the home country. RS.- First let me say that people tend to overstate the importance of diasporas. For instance, as far as the Indian community is concerned, we are seen bigger than we are because we have this habit to concentrate in particular areas, like in Hong Kong, the Tsim Tsa Tsui area, with shops and restaurants or in the trading business, in which case most of our offices are located in buildings in the vicinity of Wyndham Street and Lan Kwai Fong (in Central Hong Kong). SB.- How many are you in Hong Kong? RS.- About 28 000 which in relation to over 6.8 million is very little. SB.- That 6.8 million number is rather deceptive in a way, because the Indian community has a revenue per capita which puts it among the top-earners of Hong Kong, which number no more than probably 200,000 people. RS.- I admit it. Although we are only 28,000 people, according to the Hong Kong government, we generate about 8 to 10% of the trade of Hong Kong, which is considerable in view of the size of Hong Kong trade. In fact most of the trade with West Africa, the Middle-East, and South America has been in our hands since the beginning.. SB.- It seems also that the Indian community is a big landowner, which in Hong Kong is a considerable source of wealth. RS.- That is because we, Indians, always have this mentality that where we project our roots, we must have our place. So the first thing the Indians do is generally to buy their home and their offices. In Hong Kong, in view of the particularities of the place, it means that the Indian community became at an early stage property owners, for its own use. This is the mentality from generation to generation, anywhere, but here it meant also that people did extremely well, buying at rock-bottom prices. You can see nearby (Wyndham Street) many buildings with Indian names. All these buildings were bought for a song in the 1940s and 1950s. One of my friends was offered a lot of money, in the hundreds of millions for a building the family bought for 300,000 dollars in 1954. SB.- There are a lot of commonalities between diasporas: the strong link with cultural and religious traditions, the fact that they tend to be generally well established and well connected. Do you think they all share the view towards their country of origin? Many scholars consider that the overseas Chinese have a strong sentimental link with their country. Do you think in that respect that it is different from your own feelings about India? RS.- I know there are many comparisons made between one diaspora and another, and that some people are putting somewhere some sort of nationalistic feeling along the way to differentiate one or the other. But really when you look at the Chinese diaspora, it is very clear that if they did not have the opportunity, if they did not have the guanxi (connection) that will bring more opportunities to make a profit in China, they certainly would not be going in and investing as they did and do. SB.- You think there is absolutely no feeling involved. It is just business. RS.- No, I am not saying that. There is no doubt that there is a certain amount of feeling for your homeland, for people that are from your same blood and culture, but that does not extend further than to charities and donations. Investments are another matter. You are not going to spend your time to invest in infrastructure, in factories unless you see an opportunity to make money. This is where the difference lies between China for the Chinese and India for the Indians. SB.- Why then are the overseas Indians shying away from investing in India? RS.- Up to relatively recently, we were not very happy with the Indian business people and the industrialists. They had the feeling that the foreigners, including us, were in fact granted opportunities that they did not have. There was this underlying conflict between the government and the local business community on how to treat us. It is only relatively recently that the government policies have changed, specially in the software and dot-com industries. Now, they have moved to open the textile and garment industries and a foreigner can own a factory. This is giving us an opportunity because we do things ourselves rather than to have a domestic partner. SB.- Then, we can say that we are deluding ourselves when we believe that a diaspora tends to behave in a different way than any other foreign investor. Except opportunistic advantages, such as the knowledge of the language or some business connections, both the diasporas and the foreign investors use the same benchmark in their business dealings. RS.- Look at it this way, and we all think the same. If there were two investment opportunities and the return were the same, say one in Vietnam and the other in India. Say that the return on equity and the profit would be exactly the same, then India will be the place in which we would invest, because of this tiny difference of being the mother land. Say that there is a 1% difference in favor of Vietnam on the return, then we would go to Vietnam. So the attraction to the motherland does not actually come into the picture. SB.- If the diasporas' business habits are not really different from anybody else, what makes them special? What makes then the Indian diaspora a force for example? RS.- There is an important element we have not mentioned, and that is where there is a difference, where the asset is. That important element in a diaspora is its creditworthiness, or rather its way to handle the means of payment. A local Chinese of Hong Kong would not go to Nigeria for instance, except probably with a cast-iron letter of credit, and even so, he will be worried. He would probably rather go through us. The result is that over 90% of the Chinese products sold in Nigeria are handled by the Indian community. SB.- Would you say that a diaspora is a more reliable banking network than the official institutions and all the technologies surrounding them? RS.- We are talking about a banking network. It is a question of trust and family. Say that today, for instance, if for whatever reason you are in downtown Lagos (Nigeria) and you are just robbed of every dollar in your pocket, which is not unusual in Nigeria, and you are a personal friend of mine and you call me, I can make sure that cash will be delivered to you within twenty minutes of our talk, calling my contact. SB.- You mean a friend of yours. RS.- Not a personal one. A contact does not mean a personal contact, it could be anyone in the Indian community of Lagos. Such sense of kinship is probably the strength of any diaspora. The connection is there because you belong to the same group. SB.- Don't you think that over time this connection gets weaker within the community? RS.- Probably. But in our case, in Hong Kong, the trading community has always been the Sindhi community (1). They have always been known as traders, which means they have been all over the world to trade. The connection has been somewhat reinforced after the partition of India in 1947. Because the Sindhis are not Muslims, they are Hindus, and because Pakistan became a Muslim country, they had to go abroad. Instead of moving to India, most chose to go further. That is how my father moved to Hong Kong. A lot of people ask the question, why did they choose Hong Kong, Singapore and Nigeria, or all these other places? Because they were British colonies with no barrier to entry. We could move freely to places like Fiji, Ghana, Nigeria, Dubai, Uganda, Tanzania and Singapore, Malaysia and Hong Kong. SB.- With the mergers of banks into truly worldwide banks and the progress of electronic cash machines, don't you think that such people-to-people networking will become irrelevant? RS.- In the first world, the reply is yes. We all rely on the international banking system with all its technologies, with cash machines at the corner of a street and wired transfers. But that is not where we work. We are traders in the third world, where such systems are not really there. Yet payment and credit are the wheel of commerce. This is where the diaspora and its community come into play. People in such systems do matter. Maybe one day, they won't matter anymore, but as long as they matter, that is where a diaspora thrives. SB.-The first world relies more and more on systems, the third world is still at the people's stage. What would you choose if you had the choice, a system without people or a people-to-people system, which is what a diaspora seems to be? RS.- If I had the choice between a system and the people, I will rely on the people. Unfortunately, what we see slowly changing is the level of trust that was there before. Nowadays, people get more westernized as they get more into the western concept of what is right and what is wrong, and the level of trust is also slowly shifting. In my father's generation, say twenty, thirty years ago, your word was your bond, literally. That's it. Now the values of people have changed. Yet, you still need to have in some places, Africa in particular, somebody, not an anonymous document stating your creditworthiness on a piece of paper, but a physical person that will vouch for you, or that you can trust, to whom you can remit the money back to. Again, the circulation of money is at the heart of any trade and that is one of the strengths of our community. SB.- We tend to consider that we are heading towards a global world, which means a world ruled by a system and a free flow of goods and money. Don't you think that such a system, if it works, will weaken the role of the diasporas? RS.- Ultimately what will happen depends on the value attached to money that will remain. If the countries trade in the US dollar or the Euro, if there is a common ground with a freedom of entry in each country, no exchange rate or lack of foreign exchange for a currency that the people would accept, then the Western approach would definitely win out because there would be no question of where the money goes or what it is worth. However as soon as there is an exchange control and a lack of freedom of entry to the market because of currency restrictions or other reasons, then the concept of credit remains a question of trust. You have to entrust somebody with your goods who will repay you later. Nothing would have changed then. And that is the likely scenario. SB.- How did the Indian diaspora survive the Asian crisis? RS.- During the Asian crisis, what was obvious was that the currencies were going down. Take the rupiah in Indonesia. The traders knew that it was going to go down and down, so what they did was to borrow and borrow again and put the money out. When they had to reapy their loans, they had to pay back less than what they had borrowed. It is always the same. It happened many times before.. Over time, what you learn is that unless you are dealing in a free-floating currency, and remember that we only work with the third world, you know that currencies will always get weaker, not stronger. There is no rule about that, but in the trading community we know it as a fact, tested many times. We do not know of one exception. Take Nigeria, when I was younger I used to spend a lot of time in Lagos. Straight out of university, my father put me there to start from the bottom, so I was in charge of sales in Africa, along the Cotonou and Lome corridor in the early eighties. The naira, the local currency was then stronger than the dollar. Today the exchange rate is 110 nairas for one dollar. No matter where, it is the same. Even for the CFA which was pegged to the Franc for so many years. Ultimately, it was devalued by 50%. The local currencies always go down against the major ones, no matter what. In the history books, we can't find one example whereby a fixed exchange rate, which is not fully convertible, strengthens against the major currencies of the world. It just does not happen. So if you work on that concept, you always keep borrowing in your local currency and whenever you take money out, you do it as fast as possible. In the long run, one never loses. SB.- The IMF is of the opinion that it can provide a package of policies that can help countries to sustain their currency exchange rates. A diaspora is basically a multi-currency group of people. How, as a group, does a diaspora manage its basket of currencies? RS.- Simple. The whole community is looking at the problem the same way. Never sit on the local currency. Only borrow to invest, no matter what is the interest. Look at another strong diaspora, the Lebanese one. They went to borrow to build factories on the right assumption that once they have repaid the loans the factory will still produce goods paid for in hard currency, while the local currency will have depreciated, no matter what are the interest rates of the country. SB.- In a way, what you say gives support to the opinion of policy-makers that distrust diasporas as a group, as they are selfish in their end and as a result can undermine the economic policies of the country they live in. RS.- There is some truth in that, since in essence it means that we have a total lack of trust in the policy-makers of the countries where we happen to live. But if it may sound harsh, the reality is that we are firm believers and firm practitioners of the free market principle. Everything must find its own equilibrium. If you don't allow that to happen and try to pent-up the currency, you end up with a black market. Ultimately, there will be a price. India is a good case in point. During the eighties and the early nineties, the difference between the official bank exchange rate and the black market rate was between 20 to 30%. With a rapid development, more economic growth, more trade, and the increase in the use of credit cards, in other words an increasing in and outflow of currency, such a difference can only go down, and in India it went down to 2/3% in the late nineties. So everything is working to the point whereby ultimately we evolve towards a free market. And in a free market, totally free, you have equilibrium. SB.- Were you taken by surprise at the speed the crisis unfolded in 1997? RS.- The crisis, as a financial crisis in a country, did not came as a surprise, but what we did not expect, was how quickly it became contagious. We always expected a crisis to happen on an individual basis. For example, we can see that the Philippines today have problems, so we expect the peso to go down to 51 or 52 to the dollar. In 1997, we could see that Thailand was heading for trouble, but none of us, although we are everywhere, expected the whole region to collapse. SB.- In a way, trading in the third world, the Indian traders know how things are precarious and they always expect some sort of crisis along the way as a normal cycle of the economic life of a third world country. RS.- Probably, but in Asia, don't forget that the crisis was not really started by a developing country but by Korea, a developed country by every international standard. SB.- Do you think that it could have been better managed, that the contagion effect could have been stopped with a little more common sense among the bankers and the financiers? RS.- People tend to be irrational. To adhere to their own self-fulfilling prophecy, people become irrational, that's for sure, and the irony is that a lot of people made a lot of money out of the crisis. SB.- The hedge funds made some money, then ended up losing everything in the panic they created. RS.- Well, I am talking about the people who were already heavily in debt with many foreign banks. What happened is that the foreign banks started to panic quickly. In that situation, if you have a clear mind, you can negotiate very good deals on the settlements of your debts. That is what some members of our community, some of them quite close to me actually, did. They went to banks, playing their own game, that is toeing the official line with comments like: "Things are falling apart, currencies are crashing, would you take thirty cents to the dollar now and call it quits, because later on we might be wiped out". In any other circumstances, it would not work, but during the Asian crisis, it worked and they got the deal. Then you had government interventions changing the rules, while you were sitting on a much reduced debt. SB.- In your own view, being one of the leaders of an important and powerful diaspora in Asia, don't you think that are policy-makers and scholars overstating the importance of diasporas? RS.- The importance placed on the diasporas in general is far greater than what they actually deserve. Their role depends solely on the receptiveness of the local environment. Many policy-makers or scholars are making a case of the difference between the level of investment in their homeland between the Chinese and the Indians. Why is there so much investment in China from overseas Chinese, and so little in India from overseas Indians? Really, there is nothing special about the difference that will tell you something. The difference lies in the difference in the economic environment. SB.- You mean that China offers more opportunities, more tax incentive, better comparative advantages, and so on? RS.- Not only that, but a more open environment. In India, the local business community has always been around. Such a community tends naturally to be very protective of its environment. It is not looking for competition from outsiders. They did not want anyone to come into their businesses, so the government has to accommodate them. In China, such protective communities did not survive the communist regime of the past. Therefore when it went straight from a communist regime to a socialist system, what China needed was a business community that did not exist on top of of the physical infrastructure it was lacking. It was their diaspora who had the technologies. Of course, other foreigners had the technologies too but they would rather trust their own people. How can you then compare one country to another, one diaspora with another? Ultimately it has to be the bottom line that matters. SB.- Listening to what you say, I have the feeling then that a diaspora is a bit of an illusion. It is just a part of the successful business community of Asia, and hardly different from any other member of that social group. RS.- Let's put it that way. We have billionaires in real estate, in high-tech businesses, in trading and in many other businesses, some here, some there, but what you say can be summarized with a case I have in mind. There is an Indian gentleman who I ran into in Chicago during a business convention who owns 600 gas-stations in the US. He is from Punjab and nobody has ever heard of him. My next point is that he is not going to buy a gas-station in Punjab. He told me that when a Minister from Punjab or from India comes and sees him and mentions to him that he could invest in India, he has to explain to him that his roots are where he has his business and where he knows how the business works. He does not know anything about the Punjab business environment, so what he agrees is to build a school or a community building for his home town as a charity. That is all. He is never going to set up business in India. SB.- So what is really left is the sense of kinship, of culture, but for how long can it survive many generations without losing its strength? RS.- We all have the sense of culture and religion that we are ingrained with when we grew up. For us, we are Hindus, not Indians from India. Our feelings are not towards a nation or a country but towards a culture. SB.- How many times a year do you go to India? RS.- My father has to go back to India every few months, not to any board meeting or to take care of any business but just to see his old friends he grew up with, But it does not bother me if I don't go for five years. My family is not there, my friends are not there. Am I any less an Indian, or rather an Hindu than my father? No, we practice all the same and in fact we celebrate all festivals more religiously than the people of India. Socially the conservatism that goes with dating and marriage, the rules that are regulated in our community in Hong Kong or in Asia are far more severe than they are in India where young people can go out and do whatever they want. Here, you can't. In a way we are the keepers of the tradition, as are other diasporas throughout the world, such as the Jewish one or the Lebanese one where I have many friends. SB.- Is the Indian government trying to entice the overseas Indians to come back in India, to be part of the nation? RS.- The Indian government passed a law in Congress two or three years ago regarding our rights in India. They did not want the overseas Indians to have a dual nationality for security reasons (2), so they came up with what they thought would be the perfect solution to ease the plight of an Indian overseas coming to India and being treated as a complete stranger. They called it the PIO card, meaning a Person of Indian Origin, which could be considered as a sort of green card. A PIO holder could go in without a visa, stay as long as he or she likes, purchase properties, with every right of an Indian except for voting and some tax arrangements. A PIO holder is almost an Indian national. The overseas community said it was a good idea. So what happened? Somebody in the Indian civil service came up with the ludicrous idea that if the government could sell the PIO for one thousand dollars, it would replenish the coffers of the State, and it was passed as a law. So recently I asked an official: "How many PIO documents have you issued in Hong Kong?" He said: "maybe five!" It is not that we cannot afford the price, but why should we pay? What for? In my father's case, he is Indian, he was born on the continent, but today it is not even India. He feels he wants to go back to his hometown, where he was born and raised, but it is in Pakistan. In my case, I was born in Hong Kong, raised here. I speak Cantonese. It is my home. Winter 2001 1.- Sindhi Hindus and Muslims had lived in harmony side by side for hundreds of years with hardly any animosity between them. Sindhi Muslims were 70 per cent of the population and a big majority in the Assembly. This harmony between Muslims and Hindus came to an end a few months before the Partition, during which the “Muhajirs”, who were a politically extreme Muslim organization, migrated from India and forcibly took over the properties of Sindhi Hindus. The Sind Government then declared that any land owned by Muslims before 1907 would return back to them, whether or not it was owned by Hindus after this time. Sindhis feared that after 1947 there would be a lot of bloodshed and rioting. On December 21st, 1947, a raid took place in every house of Hindus in Hyderabad. People were thrown into camps awaiting deportation to India. Similar action was organized by Muslims on January 6th 1948 in Karachi and all the Hindus were gathered at the exit camps, for moving to India by road, rail and sea. Hindu Sindhis did not resist their extradition. Riots and violence erupted in Sind. One million Sindhis migrated to India and elsewhere, trying to find a place to settle down. The government of India set up refugee camps to provide shelter, schooling, medical care, markets, hospitals and other amenities. The rivalry between Punjab and Sindhi is at the heart of the Pakistan domestic political instability. Punjab has an area of 55,000 square miles — and Sindhi 54,000 square miles. In 1947, Punjab had a population density of 300 as against 80 in Sindh, 150 in NWFP, and 18 in Baluchistan. But in 1979, while the Punjab density had increased by only 33 per cent to 400, in Sindh it had more than trebled to 260 per square mile. This extraordinary increase represented the influx of the Punjabis and the refugees in Sindh. The Bhutto family who gave two Prime Ministers to Pakistan is Sindhi. 2.- Mostly because of the large Sikh community living in Canada that were opposed to the policies of Indira Gandhi. To understand the strain between different communities, read the focus on India released in Winter 2000. A website on Indian Diaspora was inaugurated by Mr. Promod Mahajan, Minister for Parliamentary Affairs & Information Technology on 19th December, 2000. Dr. L.M. Singhvi, M.P, Chairman, High Level Committee on Indian Diaspora and Mr. U.V. Krishnamraju, Minister of State for External Affairs were also present. The address of the website is http://indiandiaspora.nic.in. The website has been created in order to invite comments and suggestions from the general public and NRIs/PIOs on different aspects for consideration by the High Level Committee on Indian Diaspora. In due course the website will also give relevant and useful information to NRIs/PIOs. The Committee was constituted by the Government of India with effect from September 1, 2000 and is headed by Dr. L.M. Singhvi, Member of Parliament and formerly High Commissioner of India to UK, with the rank of Cabinet Minister. The other members of the Committee are Mr. R.L. Bhatia, MP and formerly Minister of State for External Affairs, Mr. J.R. Hiremath, IFS(Retd) and Mr. Baleshwar Agrawal, Secretary General, Antar-Rashtria Sahyog Parishad, New Delhi. Mr. J.C. Sharma, Additional Secretary(NRI&PV), Ministry of External Affairs is the Member Secretary of the Committee. The terms of reference of the Committee are as follows: (a) Review the status of Persons of Indian origin (PIOs) and Non-Resident Indians (NRIs) in the context of constitutional provisions, laws and rules applicable to them both in India and the countries of their residence; (b) Study the characteristics, aspirations, attitudes, requirements, strengths and weaknesses of Indian Diaspora and their expectations from India; (c) Study the role that the PIOs and NRIs may play in the economic and social and technological development of India; (d) Examine the current regime that governs the travel and stay of PIOs in India and investments by PIOs in India, and recommend measures to resolve the problems faced by NRIs in these areas; (e) Recommend a broad but flexible policy framework and country specific plans for forging a mutually beneficial relationship with the region or PIOs and NRIs, and for facilitating their interaction with India and their participation in India’s economic development. | |||
 | | | |