Tamil Nadu has become so successful at attracting industry that rival Indian states are reportedly coming into its own backyard looking for companies they can persuade to invest elsewhere. There is something almost indecently competitive about it. Sri Lanka should probably take notes.
Investment promotion can sound terribly dignified in Sri Lanka. There are conferences, presentations, delegations, memoranda of understanding and carefully arranged photographs in which everybody looks suitably pleased about something that may or may not happen several years later.
India’s states appear to have discovered a rather more direct approach.
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They compete. Tamil Nadu has become one of the country’s great industrial centres, building formidable positions in automobiles, textiles, electronics, engineering and increasingly advanced manufacturing. That success has created something else worth pursuing: companies already operating there which may be planning their next factory.
Rival Indian states are reportedly establishing a presence in Tamil Nadu and approaching businesses with precisely that opportunity in mind. The proposition is straightforward. You have succeeded here; now let us show you why your next investment should be with us.
There is nothing particularly polite about this form of economic competition, but there is nothing improper about it either. A government seeking employment and investment for its people has every reason to pursue businesses capable of providing both.
Tamil Nadu itself understands the game because it plays it extremely well. Its political leaders and investment agencies travel abroad, meet companies, offer industrial locations and attempt to secure projects before competitors do. When the investor finally makes an announcement, much of the work may already have taken place quietly over months or even years.
Sri Lanka tends to become excited rather later in the process.
We celebrate when an international company announces an investment here and become concerned when somebody announces one elsewhere. What is less visible is the machinery identifying investments before those decisions have been made.
That is where the real competition takes place.
A multinational does not wake up on Monday and decide to build a US$100 million factory by Friday. Expansion plans are developed, markets studied, locations shortlisted and costs compared. Governments with serious investment-promotion systems attempt to enter that conversation before the shortlist becomes a decision.
Sri Lanka should be doing exactly the same thing.
If an electronics manufacturer in Tamil Nadu is reaching capacity, why should somebody from Sri Lanka not be sitting across the table explaining what Colombo, Hambantota or another industrial zone can offer? If an Indian company wants access to different export markets, why are we waiting for it to telephone the Board of Investment?
This does not mean Sri Lanka can simply copy an Indian state. Tamil Nadu operates inside an economy of more than a billion people, benefits from India’s enormous internal market and possesses industrial clusters built over decades. Those are advantages Sri Lanka cannot reproduce.
But we can compete where our own advantages matter.
Sri Lanka sits beside major shipping routes, possesses established ports, has preferential access to some markets and remains geographically close to one of the fastest-growing economic regions in the world. A smaller country can also make decisions faster than a giant federation if it chooses to.
That last qualification is important.
There is little point sending investment teams around the world if the company they persuade to come here subsequently spends months moving files between ministries. Aggressive investment promotion only works when the salesman and the state machinery are selling the same product.
The MAS investment in Tamil Nadu makes the issue particularly relevant. One of Sri Lanka’s most successful companies has demonstrated that capital created here can move towards a jurisdiction it finds commercially attractive. Other companies can make exactly the same calculation in reverse if Sri Lanka gives them sufficient reason.
Perhaps our investment agencies therefore require a slightly different scorecard. Instead of measuring how many meetings were held or agreements signed, publish how many companies were actively pursued, how many investment decisions Sri Lanka reached the final shortlist for, how many we won and, perhaps most importantly, why we lost the others.
That final category could teach us more than the successes.
If Vietnam repeatedly beats Sri Lanka because electricity is cheaper, address electricity. If Tamil Nadu wins because approvals are faster, fix approvals. If Malaysia wins because investors trust its policy environment more, understand why.
Economic competition becomes useful when losing hurts enough to make you improve.
There is something wonderfully revealing about rival Indian states apparently looking for investors inside Tamil Nadu. Nobody seems embarrassed about pursuing somebody else’s potential factory because they understand that the factory represents jobs, taxes, exports and economic activity for their own people.
Sri Lanka wants those things too.
Perhaps it is time we became a little less dignified about going after them.
Be that as it may.
