Walmart divorce highlights pitfalls of business in India

October 14, 2013 Leave a comment

Updated: Monday October 14, 2013 MYT 6:50:20 AM

Walmart divorce highlights pitfalls of business in India

NEW DELHI: The divorce between US giant Walmart and its Indian partner, the latest in a string of foreign corporate alliances to founder, will have a further “chill effect” on vitally needed foreign investment, analysts say. Citing restrictive foreign investment rules, the world’s biggest retailer scrapped a partnership last week with Indian telecom heavyweight Bharti Enterprises and suspended plans to open supermarkets which could have tapped a potential market of 1.2 billion shoppers.Foreign investors are already spooked by worries over a number of issues: pervasive corruption, red tape, stop-start efforts to open up Asia’s third-largest economy, tax battles, decade-low growth and a weak currency, analysts say.

Strict regulations for outside firms include a requirement to source 30% of goods from small industry – a deal-breaker for Walmart, which said the goal was impossible to meet.

“This will have more of a chill effect,” Saloni Nangia, president of management consultancy firm Technopak, said.

“From a destination perspective, foreign firms want to be in India. But from a policy and doing-business perspective, it’s different,” she said.

“The government needs to make this country investment-friendly. So far it’s been pure posturing.”

The Walmart-Bharti breakup was one of a long saga of unhappy endings to marriages between foreign and Indian partners, Nangia noted.

“It can be mismatched expectations to blame, disappointing returns, government vacillation on implementing policies, legal and regulatory concerns, ambiguities about what can be achieved – sometimes a mix of elements,” she said.

Walmart president Scott Price said the company would “continue to advocate for investment conditions” that would allow it to invest in multi-brand retail while it focused on its wholesale operations in India.

Many foreign firms had high hopes of India’s liberalisation drive and voiced strong interest in entering the country.

But those plans have soured in the face of failure to improve infrastructure, long approval delays, bureaucratic hurdles and graft – which has its tentacles in all sectors of the economy. – AFP

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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