Will Foreign Investors Pressure Modi’s Government to Protect Muslims
In recent years, Indians in Persian Gulf countries have been punished for making hateful comments about Muslims. In 2018, for instance, Atul Kochhar’s contract to run the Rang Mahal restaurant, at the Marriott Marquis Hotel in Dubai, was terminated after he tweeted that followers of Islam had “terrorised” Hindus for 2,000 years. The next day, after a public campaign began to boycott the hotel, Kochhar deleted the tweet and repeatedly apologized, also saying he was wrong since “Islam was founded around 1,400 years ago.”
Earlier in 2007, Kochhar became only the second Indian chef to get a star rating from the prestigious Michelin guide for his Benares restaurant in London. Even so, as The Guardian reported, the Marriott, which is part of an American chain, cancelled Kochhar’s contract stating “…we pride ourselves on creating a culture of diversity and inclusion for our guests and associates.”
Indians tweeting extremist views lose jobs in the UAE
Since COVID-19 cases emerged in India early this year, some officials of the ruling Bharatiya Janata Party and other Hindu extremists falsely blame it on Muslims and ask Hindus to boycott businesses and services run by Muslims. Hindu extremists outside India echo these views. So far, manager Rakesh B Kitturmath, chef Rawat Rohit, storekeeper Sachin Kinnigoli and Brajkishore Gupta are among a dozen Indians sacked for their extremist views by employers in Dubai and other parts of the United Arab Emirates.
Gupta worked for Stevin Rock, a mining firm in Ras Al Khaimah. On his Facebook page, blaming Muslims for spreading COVID-19 in India, he said that the violence in Delhi in February, in which over 50, mostly Muslims, were killed, was “divine justice.” Gupta and the others have also either been deported to India or await being sent back, according to Gulf News..
Fear of public pressure in foreign countries
In the Persian Gulf countries, besides employers, members of royal families, the human rights commission of the Organization of Islamic Cooperation, lawyers and journalists condemn what some of them call the violence of Hindutva fascists in India. On April 19, after weeks of silence on the demonizing of Muslims, Prime Minister Narendra Modi tweeted that “COVID-19 does not see race, religion, colour, caste, creed, language or borders before striking.”
Apparently, Modi’s tweet was prompted by two fears. First, that employers in the Persian Gulf countries will lay off mostly Indians and that too Hindus – fewer Pakistanis, Bangladeshis and Egyptians - depriving millions of Indian families of their incomes. Such job losses will also sharply reduce the supply of dollars that India needs to cover its foreign trade deficit, which in fiscal year ended March 2020 was $153 billion.
Money sent home by about nine million Indian workers in the Persian Gulf have helped the country accumulate about $480 billion in foreign currency reserves. That safety cushion will deplete if millions of Indians lose their jobs in the gulf countries and if crude oil prices climb back up, given that India imports about 80% of the commodity.
The economies of the Persian Gulf countries, being dependent on oil exports, have been hit by the recent sudden collapse in oil prices. Demand slumped following the post COVID-19 global lockdown. In these countries, jobs are being aggressively slashed to cut costs. Already, Kerala alone has registered about 400,000 people seeking flights to return to the state, after losing their jobs abroad, mainly in the gulf.
Private investors unwilling to invest in infrastructure
Second, Modi apparently also fears that companies and funds in the Persian Gulf and other countries, facing rising domestic public pressure over attacks on Muslims and civil liberties in India, could reduce their investments or even avoid investing in the country.
In 2014, after he first became Prime Minister, Modi laid out ambitious plans to transform India into a major global economic power by 2025. The plans require over $1.2 trillion in equity and debt investments, mostly from foreign funds, including about $800 billion for expanding and modernizing the infrastructure. So far Modi has attracted very few major foreign infrastructure investments, one of the reasons for the weakening economy and rising unemployment during Modi’s first 2014-19 term.
Private foreign equity investors, especially American and Chinese companies, can provide large amounts of capital. But they have only funded internet, consumer goods and services and media businesses like Flipkart, Paytm and Xiaomi smart phones. They are attracted by India’s demographics, with those below 35 comprising two-thirds of the 1.4 billion population. They want to profit by selling directly to this big market of young consumers, whose purchasing power also keeps rising.
Major private western companies and funds have no interest in investing billions of dollars in infrastructure projects since the profits are dependent on government policies and shifts in political power. They fear repeating the experience of Enron, the giant American energy company. In 2001, it was forced to take a big loss on its natural gas based Dabhol electric power project, near Mumbai.
Saudi Arabia seeks to sell more oil and gas to India
Saudi Arabia and the other Persian Gulf countries, being major oil and gas exporters, say they want to invest in India’s energy and related infrastructure. In February 2019, during a visit to India, Saudi Arabia’s Crown Prince Mohammed bin Salman said he expects Saudi companies to invest more than $100 billion in India by 2021. The investments would mainly be in oil and gas, infrastructure, agriculture, minerals and mining businesses.
In August last year, as part of such investments, Saudi Aramco said it would pay $15 billion in cash for a 20% stake in the refining, petrochemicals and fuels marketing businesses of Mukesh Ambani’s Reliance Industry. But the first half of the investment was not invested by the deadline of March 31. No official reason was given for the delay. Aramco is now expected to make the payment by the end of this year. There is no news about when the remaining $7.5 billion will be invested in Reliance.
Major foreign investors could face pressure to abandon India
Aramco says it is also teaming up with the Abu Dhabi National Oil Company to jointly own 50% of a planned $70 billion refinery and petrochemical complex on India’s west coast. Government-owned Indian oil companies will own the remaining half of the venture.
So far in the gulf countries, critics of Hindu extremist in India are not pressuring their governments to stop investing in India, at least in public. But members of the royal families and other prominent people are likely pushing for such measures in private meetings with kings and ministers. Some of the critics are already pointing out India’s economic dependence on the Persian Gulf nations.
For instance, Abdur Rahman Nassar, a Kuwait-based intellectual, tweeted that "Every year, more than $55bn are transferred to India from the Gulf countries, and more than 120 billion annually from all Muslim countries. Indians (mostly Hindus) are treated well in these countries. In return, how are Muslims treated in India?" Meanwhile similar public pressure could mount on the big funds in western countries to avoid investing in India until Modi’s government protects minorities and upholds civil liberties.
Public pressure against hate in Canada
In Canada early this month, public pressure led to Ravi Hooda losing his job at ReMax, a real estate broker. After a rule change allowed mosques to broadcast their daily call for prayers, he tweeted, "What's next? Separate lanes for camel & goat riders…bylaw requiring all women to cover themselves from head to toe in tents." Hooda was also removed from the executive council of the Macville Public School in Bolton City, north of Toronto, for his “disturbing, Islamophobic tweet.”
The major pension plans in western countries typically invest with time horizons of ten or more years and hence seek big infrastructure investment opportunities. The Canadian Pension Plan Investment Board (CPP), for instance, has so far invested over C$10 billion in India. In 2019, the fund invested $225 million in a credit fund and $115 million in Delhivery, a logistics company. In 2015, the fund opened an office in Mumbai. Created by an act of the Canadian Parliament in 1997, CPP manages over C$400 billion, providing retirement benefits to about 20 million Canadians and their families, more than half the country’s 38 million population.
Women and minorities on Canadian pension fund boards
In 2019, the Ontario Teachers’ Pension Plan (OTP) and AustralianSuper, Australia’s largest pension fund, announced they are each investing $250 million in a fund managed by India’s National Investment and Infrastructure Fund (NIIF.) Also, they each plan to invest an additional $750 million in specific transportation, energy and urban infrastructure projects alongside NIIF.
The Ontario Teachers’, with over C$200 billion in assets, pays pensions and manages investments for 329,000 working and retired teachers in the Canadian province. It is jointly sponsored by the government and the teachers’ federation in the province.
The Canadian Pension and Ontario Teachers’, like other pension funds in western countries, are governed by a board with independent directors, with representation for minorities and women. There are seven women directors on the eleven member CPP board and, at OTP, five of the nine directors are women.
The funds are also expected to follow strict guidelines. For instance, the CPP’s objective is to “at all times meet or exceed the high ethical standards expected of us by the… beneficiaries.” Also, as part of its strategy, CPP believes “that organizations that manage environmental, social and governance factors effectively are more likely to endure and create more value over the long term than those that do not.”
Two major risks of funding infrastructure in India
Surely the CPP guidelines on social governance must apply to India, especially since it views the country as one single investment in its emerging markets portfolio. CPP “has been active…in India for nearly a decade and we continue to pursue opportunities…as part of our focus on emerging markets,” Alain Carrier, head of international for the fund said last year.
So, anti-hate groups in Canada have strong grounds to petition the CPP, OTP and other pension boards that their investments in India, while Muslims are being demonized and lynched, contradicts their guidelines of effective social governance. This appeal will likely get a sympathetic hearing, especially given the presence of minorities and women on the pension boards.
The pension boards may also recognize that investing in India’s infrastructure is financially risky. There are around 200 million Muslims in India, the second largest after Indonesia and roughly the same as in Pakistan. The boycott of businesses and violence against Muslims, organized by the ruling BJP and other Hindu extremists, could spark widespread social unrest which will deepen India’s current economic slump.
In 2001, Enron suffered more than $3 billion in losses on its Dabhol energy plant. But today, unlike with Enron, foreign investors in Indian infrastructure face two major set of risks: policy risks such as government mandated cuts in prices charged to consumers which partly sank Enron in India; and a governing party which is trying to transform India into a Hindu nation and deliberately alienating 14% of its population. The managers of the Canadian pension funds – and Saudi Aramco - may assume that they are smarter investors than the executives of Enron. If they are wrong, the savings of Canada’s teachers and other retirees will suffer big losses.