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Cablegate: Indian Consul General Optimistic About Growing Economic

VZCZCXRO2072
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSA #1320/01 1700902
ZNR UUUUU ZZH
R 180902Z JUN 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 4803
INFO RUCPDC/DEPT OF COMMERCE WASHDC
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHNE/AMEMBASSY NEW DELHI 0495
RUEHJO/AMCONSUL JOHANNESBURG 8113

UNCLAS SECTION 01 OF 02 PRETORIA 001320

SENSITIVE BUT UNCLASSIFIED
SIPDIS

DEPT PLEASE PASS TO USTR FOR P. COLEMAN
DEPT OF COMMERCE FOR J. DIEMOND
STATE FOR AF/S

E.O. 12958: N/A
TAGS: ECON EINV ETRD CASC IN SF
SUBJECT: INDIAN CONSUL GENERAL OPTIMISTIC ABOUT GROWING ECONOMIC
TIES, BUT WORRIED ABOUT SA INVESTMENT CLIMATE

REF: A. PRETORIA 00589

B. PRETORIA 001288

PRETORIA 00001320 001.2 OF 002


1. (SBU) SUMMARY: Indian Consul General Navdeep Suri spoke to the
South African Chamber of Commerce and Industry (SACCI) on June 11
about the increase in economic ties between South Africa and India.
Suri described opportunities for the two countries to increase trade
and investment including the acceleration of preferential trade
talks. He was positive in his long-term outlook for growth in the
Indian market for South African goods, but expressed concern about
the investment climate in South Africa due to the negative impact of
power shortages. End Summary.

---------------------------------
Growing Momentum in Economic Ties
---------------------------------

2. (SBU) Indian Consul General to Johannesburg Navdeep Suri spoke
to the South African Chamber of Commerce and Industry (SACCI) on
June 11 about the increase in economic ties between South Africa and
India. Suri noted that the two countries were making up for lost
time in re-establishing economic relations since 1995 (Reftel A),
effectively starting from a zero base since the end of the
long-standing sanctions established during apartheid. In the first
quarter of fiscal year 2007-2008 (April-June 2007), bilateral trade
reached $1.75 billion. Talks regarding a preferential trade
agreement with the Southern African Customs Union (SACU) are still
ongoing. Suri called for accelerated negotiations for the
preferential trade agreement to boost bilateral trade volumes.

3. (U) Suri announced that his government is also promoting a "Doing
Business in India" conference to encourage increased bilateral
trade. The conference will take place in Johanneburg in September
2008. He also noted that many Indian companies are already present
in South Africa and the Indian Government has established an India
Business Forum to promote them. Thirty-seven Indian companies have
already joined the Forum and there is growing interest among
additional Indians companies.

-------------------------------------
Trade Balance Favors SA, But There is
Still Room for Greater SA Exports
-------------------------------------

4. (U) Suri explained that the trade balance between the two nations
has always been in South Africa's favor. He noted that despite the
growth in trade, India was still not one of South Africa's top-ten
trade partners. Suri emphasized that South African companies have
not taken full advantage of the export opportunities to India. He
outlined India's growing economic prowess and noted that unlike
China it was a net importer and still derived most of its economic
growth from domestic market demand. According to Suri, South
African exports to India are dominated by a few products and he
called for increased diversification if South African companies hope
to increase their market share in India. In contrast, India
exported a diverse basket of goods to South Africa.

5. (U) Suri said South African companies could obtain a larger share
of India's infrastructure projects. Specifically, he pointed to the
example of the Airports Company of South Africa (ACSA), which is
currently leading the expansion project for Mumbai International
Airport. Suri stated that there are at least 30 other domestic and
international airports in India that need upgrading and identified
Qinternational airports in India that need upgrading and identified
airport infrastructure projects as an area where South African
expertise could be utilized.


6. (SBU) Suri noted that there was a huge potential for skills
transfer from India that was thwarted by South African visa
policies. Suri pointed to the difficulty in obtaining South African
work visas/permits for Indian IT workers as one factor that was
limiting skills transfer between the two countries. He commented
that it was more difficult to obtain a South African visa than a
U.S. one. Indian companies have faced difficulty in both recruiting
skilled personnel in South Africa and in transferring Indian
personnel to South Africa.

7. (U) Tourism between the two countries has also shown an upward
trend, but it is still below potential. Suri called for improved
air and shipping connections to facilitate increased trade and
tourism. The Indian Consulate's figures show a steady growth of
both inbound and outbound tourists.

South Africa/India Tourism Trend

PRETORIA 00001320 002.2 OF 002


Year 2002 2003 2004 2005
SA to India 18,238 23,873 32,148 39,234
India to SA 34,062 41,018 36,172 36,045


(Comment. The Assistant Director for India Tourism Johannesburg
told Transport Officer that there has been increased demand from
Indian clients for safari-based tours in South Africa in the last
year. As a result, the organization is sponsoring orientation trips
to South Africa for India-based tour operators. End Comment).

----------------------------
Power Is a Cause for Concern
----------------------------

8. (SBU) Suri said that Indian companies have been attracted to
South Africa by its relatively good infrastructure (in comparison to
domestic Indian infrastructure) and access to neighboring markets,
but are beginning to hesitate due to concerns about the effects of
power shortages. State-owned power company Eskom has not been able
to guarantee a steady power supply to existing industries.
Connections to new customers were suspended and have recently
resumed on a case-by-case basis (Reftel B). There has been a rise
in the number of Indian companies that have approached the Consulate
and have expressed frustration in obtaining power for new projects
or fear of a general economic downturn due to powers shortages.
Suri said Indian companies were prepared to deal with the security
costs associated with high crime in South Africa in the past, but
the additional concern regarding the availability of power for new
projects is leading Indian companies to reevaluate investment.


9. (SBU) COMMENT: Suri highlighted a trend in increased bilateral
trade in his presentation. However, he noted that the countries
were still not optimizing the potential for growth in trade,
investment, and tourism. He pointed to the acceleration of
preferential trade agreement negotiations, increasing air/sea
transport links, and the easing of work visa requirements as
prerequisites to increased bilateral trade and investment. Power
shortages, the latest and most critical obstacle to Indian foreign
investment in South Africa raised by Suri, has been mentioned in the
press and to the Embassy by other international investors.

BOST

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