JOINT COMMITTEE ON ENTERPRISE AND SMALL BUSINESS díospóireacht -
Tuesday, 23 May 2006

Small and Medium-Sized Enterprises: Presentation.

Chairman

The joint committee meets to discuss small and medium-sized businesses. I welcome the delegation from the Indian Business Forum. I welcome Ambassador Kumar who was extremely helpful to the committee, particularly when the Taoiseach, our three Ministers and I, as Chairman of the committee, visited his country. I also welcome Dr. Kulkarni, Indian country director of the Asia Trade Forum of the Irish Exporters Association; Mr. Prakash, Erin Consultants, Bangalore, and Mr. Cliff Anderson, Astec Consulting. We enjoyed our visit to Bangalore.

I draw the attention of witnesses to the fact that while members of the committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.

I invite Ambassador Kumar to make his introductory comments, following which Dr. Kulkarni will make his presentation. As it is a Powerpoint presentation, we will be able to view it on screen.

His Excellency Saurabh Kumar

I am honoured to be before this august committee and thank it for giving us the opportunity to make a presentation on the possibilities for co-operation between India and Ireland in the SME sector. My colleague at the embassy, Minister Naithani, and I deeply appreciate this honour. With me are Dr. Kulkarni, Mr. Sai Prakash and Mr. CliffAnderson, whom the Chairman introduced. Dr. Kulkarni who looks deceptively Indian but is known to be Irish — more Irish than Indian — is a chemist by training who set up his own firm in the field of solar energy after retirement. He also very kindly devotes time to further the activities of the Asia Trade Forum of the Irish Exporters Association as the honorary country director for India. In that capacity, he has kindly agreed to give a brief overview of the overall Indian economic scenario, as seen from the vantage point of Ireland.

Mr. Sai Prakash, a business consultant from Bangalore, better known as the Silicon Valley of India, is also not without long-standing connections with Ireland. He received an MBA from Trinity College's business school soon after the MBA programme began at about the time of the first oil crisis. He has long and varied experience in a number of business areas. During the Taoiseach's visit to India in January this year he signed an MoU for a joint venture with Astec Consulting, whose owner, Mr. Cliff Anderson, has very kindly agreed to join us today. He was in college with Mr. Prakash who will make a presentation on the possibilities for co-operation between India and Ireland in the SME sector.

As we are very conscious of the demands on the time of committee members, the presentations will be limited to ten minutes each. Dr. Kulkarni will make his presentation first, to be followed by Mr. Prakash. This should leave time to respond to questions which we will try to address as best as we can.

I wish to share with the joint committee the rationale underlying today's presentation. It was a privilege for me as the Indian ambassador to have the Taoiseach, the topmost leader of Ireland, visit my country. In the course of preparations for his visit we naturally took a good hard look at possible areas of collaboration and, together with colleagues on the Irish and Indian sides, came up with a number of possibilities. Members may have heard that in Delhi the metro runs underground as well as overground. In that context, there was a possibility of collaboration on plans for the Dublin metro. The Taoiseach very kindly visited the Delhi metro, on which both he and Deputy Cassidy travelled for a short journey.

We hope in the years to come that Indian hospitals will set up in Ireland or that Irish patients will go to hospitals in India. There is the possibility of an Indian super computer being supplied to Ireland. India is among the few countries able to make super computers. While these and other big projects are being looked into — we hope they will come to fruition — we have not lost touch with ground level and the possibilities of servicing the needs of ordinary businesses in a day-to-day manner. In this context, the SME sector which forms the backbone of indigenous industry in Ireland comes to mind.

There is considerable concern in the media at the declining competitiveness of Irish exports. A number of high level reports, including the report of the enterprise strategy group, Ahead of the Curve, stressed the need for all possible steps to be taken to enable Irish businesses, especially small and medium enterprises, to raise their productivity, enhance competitiveness and move up the value added chain. This has been stressed cogently in the report of the Small Business Forum which was released last week.

Having read many reports, I was struck by the thought that Indian firms could easily meet the training and consultancy services needs identified. Many of the requirements listed in the Small Business Forum report are routine and standard — simple tasks in the fields of IT services, management consultancy and training that are at the lower end of the value added chain. I asked why many of these gaps had been identified in these high level reports? The obvious answer was that the supply was not there in requisite numbers. If that is the case, why not think of India? In India several top level firms with a turnover of billion of dollars are engaged in the major jobs but there are also very large numbers of firms at the next level with first rate professionals and expertise which would be happy to take up these tasks as short-term projects. The companies identified in the report are distributed regionally. This can be addressed by flexible small firms in India which are willing to send staff all over Ireland on short-term assignments.

In short, it seems there may be very good prospects for Indian firms meeting the needs of Irish SMEs. That is what this presentation is all about. There is a great opportunity for collaboration between India and Ireland in the business field. In making this presentation, we hope members will find it worth recommending Indian companies.

Dr. Prabhu Kulkarni

Mar bhall de Chomhaltas Ceolteoirí Éireann le 25 bliain, tá mé chun cúpla focal inár dteanga dhúchas a rá. Mar eolaí agus mar fhear gnó, tá an-áthas orm caint libh faoi mo thír dhúchas. As a member of Ceoltas for 25 years, let me show off my cúpla focal. As a scientist and businessman, it is my pleasure to make a presentation to the joint committee on my country of origin. This is an exciting time for both countries which have a reputation for excellence in education, high technology industries and parliamentary democracy.

I will outline some of the basic facts of India and the potential Irish businesses can exploit in India. As a member of the Asia Trade Forum of the Irish Exporters Association, it my responsibility to encourage Irish small and medium-scale industries to export to India. During a recent visit to Washington the former US ambassador to India, Mr. Blackwell, stated the rise of India and China was more important than the disintegration of the Soviet Union or the unification of Germany.

India is the largest liberal democracy in the world. It is a thriving economic power, a multicultural and multilingual society that offers equal opportunities to every citizen based on merit. It is a stable country politically, in spite of its diversity, abject poverty and lack of education services in many areas. In the past 60 years, for example, Italy has had 47 governments, while India has had 12. Like many European countries, including Ireland, the days of single party government, with single parties gaining an absolute majority, are over. Coalition governments are now the norm. In India coalition governments comprise 16 to 18 parties. The last government which lasted for five years comprised 21 parties. However, no Indian Government has ever reversed the policies of the previous administration. As a result, there is continuity of the political establishment. All political parties share a common view of the need for economic liberalisation and the requirement for foreign exchange and investment from all over the world.

After China, India is the second largest country in Asia. I have been here for 40 years and still meet people who compare Ireland with India. I met a lady who wanted a timetable for all of India's railways; she thought there would be only 18 or 20 trains running throughout the country. India covers an area of 3 million sq. m. and is considerably bigger than Ireland which covers an area of 68,000 sq. m. If we superimpose a map of India over a map of Europe, we will see India is approximately three times the size of the combined member states of the European Union. The level of diversity within it is twice that in the European Union.

India is divided into 28 states on linguistic grounds. A governor, appointed by the federal government, is the head of each state. The responsibilities of the federal and state governments are clearly defined — there are some common areas but responsibilities are clearly distinguished. As a result, they do not tread on one another. It is a democratic system. If two political parties run a state, it can create problems but it still functions very well. In each state there is a legislative assembly like the Dáil and a legislative council like the Seanad. If India had as many TDs as Ireland, we would need 6 million Members of Parliament.

Chairman

India could be as successful then.

Dr. Kulkarni

If one counts the state governments, we have 10,000 to 12,000. The 28 states are of various sizes. Ireland is of similar size to the states of Punjab and Haryana which each cover an area about of 60,000 to 70,000 sq. m.

Central state governments compete to offer the best incentives for foreign direct investment in all sectors. New sectors have recently been opened to foreign direct investment. When one considers all of the incentives available, India looks like paradise for investors. However, there are also significant challenges. A lack of infrastructure particularly hinders India's progress and is likely to do so for some years to come.

The population of India is 1.1 billion. It has a per capita gross national product of $610. Total GNP is $670 billion. By way of comparison, the latest economic statistics show that GNP per capita in Ireland is the second highest in the world at around $57,000. In terms of size of economy and purchasing power parity, India is fourth in the world next to the USA, Japan and China — bigger than any EU member state. It has the seventh largest gross domestic product total in the world.

If one considers the studies of Asia conducted by the Government and the Irish Exporters Association, one will see that the trend in international trade is shifting. The next century will be Asia's. Even the figures for the last ten years of international trade indicate the trade figures for Asia are growing significantly, although western Europe still dominates. China and India will always be compared against each other. However, in terms of competition, India was 20 years behind China but is catching up rapidly. The difficulty is that democracy is not as industry friendly; it takes time. In China decisions are instantaneous; in India legal processes must be adhered to. On property rights, especially intellectual property rights, judicial independence and freedom of the press, India ranks significantly above many countries, including China.

Why invest in India? Not because it is a big country and a potentially prosperous one but because it has one of the youngest populations in the world. Some 60% of its population is under the age of 30 years. Compared to Europe, one can see how the demographics are changing. In 2050 the proportion of people under the age of 65 years will be significantly lower in India than anywhere else in the world.

Labour costs influence economic competitiveness. Ireland is not included in this comparison.

Chairman

Compared to the United Kingdom.

Dr. Kulkarni

Average labour costs per hour in Ireland are slightly higher than in the United Kingdom. The average wage in Ireland is around $20 per hour when one includes benefits. The figure in India is considerably lower.

Chairman

Your labour costs are one twentieth of ours. My goodness.

Dr. Kulkarni

Yes, that is correct. As I am Irish, they are their costs. I am based in Dublin.

Between 1991 and 2002 the Indian economy grew at a rate of 6% per annum. This may be compared to a growth rate in industrial European countries of 2.5% to 3% in the same period. Between 2003 and 2005 the rate of economic growth in India was 7.5%. During the first quarter of this year it grew by 8%. The Indian Prime Minister stated recently that in the next ten years the Indian economy was likely to grow at a rate of 10% or more, the same rate at which the Chinese economy grew during its expansion phase.

Annual trade is also increasing. India's export figures are growing at the rate of 25% to 30% per annum. Import figures are growing by 35% to 40% per annum. Therefore, India is importing far more than it is exporting and will continue to do so, mainly to meet the demands of the middle class. This presents opportunities to Irish export businesses in every field.

Export figures are growing very strongly and have nearly doubled in the past three years. Foreign exchange figures are also increasing significantly. The total in respect of foreign direct investment was less than $2 billion but now stands at $6 billion per annum. It is hoped this figure will reach $10 billion in 2006. Foreign institutions are investing on Indian stock exchanges, particularly the Bombay Stock Exchange. Last year the figure reached $10 billion to $12 billion. The largest contributors are non-resident Indians. Last year the Indian diaspora invested €26 billion in India.

The level of Irish exports to and imports from India is low. This means, however, it can grow more quickly. There is a large manufacturing base in India which has highly developed banking and financial institutions. Language will not present a problem to Irish businesses. There is also an unlimited supply of labour.

More than 400 of the Fortune 500 companies have put down roots in India. Apart from these 400 Fortune 500 companies the main strength of India is its small and medium-size businesses. There are a couple of million of these small-scale businesses such as Mr. Prakash is representing here. They are looking forward to collaborating with Europe and that is where our opportunities lie. That is the message the Asia Trade Forum is giving to Irish exporters.

The next slide shows the sectors the Asia Trade Forum has identified for business opportunities in India. Engineering, particularly high precision engineering, is at the top of the list. An interesting KPMG report compares China and India in terms of engineering. If one wants a small volume of extremely high precision equipment or engineering products, India can design, develop and build it. However, China is the place to go if one wants something manufactured in bulk quantities, the type of thing which if it does not work one can throw away and buy a new one.

Research and development is an interesting area because of the high level of technical education in India. Everybody knows about the IT industry. The two sectors which are of Irish interest are tourism and food processing. Engineering is a major sector in that India manufactures practically everything. It is planned to put the first Indian rocket on the moon in 2008. All the precision engineering for that project will be done in India. It is a centre of high precision industries for everything.

I represented the Irish Exporters Association at the EU-India business summit held last September. The engineering industry was selected by the EU as the main source of co-operation between India and Europe. High quality industries from Europe and India were represented at the summit.

Research and development is also much cheaper as India is a low cost economy with highly qualified people. Most of the major multinational corporations have put down roots in India for research and development. The 2002 science and technology agreement which the Irish Government ratified and signed in Delhi last January gives Indian researchers access to European databases. This offers a unique opportunity for us. I have case histories for some of the Irish companies involved there.

Over 300,000 English-speaking engineering and IT graduates qualify in India every year. This is practically equal to the combined total of the world output of engineers. Everybody knows about Indian IT industries and the computer sector so I will not go into that in detail. I will leave a copy of the Powerpoint presentation with the members of the committee.

India has the second largest education system in the world. The Government of India decided in its current five-year plan that, irrespective of the growth rate, 4.5% of GDP would be invested in education and half of that would go to primary education. There are over 1 million educational institutions and 600,000 primary schools with 3.2 million teachers. There are also 1,200 industrial research centres and over 5 million scientists and engineers.

The slide relating to programmers' salaries shows that the rate in Ireland is one of the highest at $28,000 compared to India at approximately $6,000. However, we must remember that when I started in my first job in Tallaght in 1977 my salary was way below $5,800, so it is comparable to the standard of living. Salaries here are very high compared to India but the cost of living is cheaper in India. We cannot compete with Indian industry on the basis of wages alone. We need to have something different and, fortunately, we are doing it.

Some 4.5 million tourists travel from India each year and almost 60% of these come to Europe. Various European cities are among the most popular destinations. With an imaginative approach we could get 10% of these tourists to visit Ireland. Like all tourists, Indian tourists are fun loving, high spending people. A popular period to get out of India is in May when the temperatures are around 45° Celsius. There is great potential in that business.

India is also a great country for agriculture. We are the largest producer of milk, tea and a number of other products. Practically all agricultural products, including fruit, are produced there. Unfortunately, a very small proportion of this goes into high valued added products because the post-harvesting facilities are poor. Throughout India, 40% of crops are lost to pest and vermin every year. Natural disasters also have an impact on agricultural production. Due to rising per capita incomes there is a tremendous demand for the value added and processed food products. This will provide one of the best opportunities we can exploit in India for manufacturing with Irish technology in India and also for exports from here.

I have been living in Ireland since 1967. Some committee members may have been in school at that time. I did my PhD in Trinity College Dublin. I am a research scientist working in multinational companies for 26 years. I have been the chairman of the international society of the chemical industry and the institution of occupational safety and health in Ireland.

The last slide relates to how my small Irish company hopes to contribute to reducing Irish greenhouse gas emissions. The first phase of the Kyoto Protocol is already in existence and we will have to pay a penalty of over €1 billion. The projects we are discussing in India can take 50% of those surplus emissions with much lower costs. I will skip the last few slides. I thank the committee. God bless.

Chairman

I congratulate Dr. Kulkarni on his presentation in which he has raised some key issues. We will ask questions on this later. I invite Mr. Prakash to make his presentation. I apologise for the air conditioning which appears to be very low. I have been told we must bear with it.

Mr. Sai Prakash

Good afternoon.

Chairman

Mr. Prakash may remain seated.

Mr. Prakash

If it is all right I thought I would stand for my introduction and then sit down. I am greatly obliged to Ireland as I did my MBA here, not just because of the course but because I got a kind of international exposure in Trinity College. The college had more than 8,000 students at the time who came from around the world. It is the kind of international experience few institutions in the world can offer.

In addition to that I made long-standing friendships. I lived in No. 424 Clontarf Road and used to walk along the road every day. I met Mr. Cliff Anderson's father and continued the friendship with his son, who is with the delegation. It is a great thing to build warm friendships with people. It is not just about doing business together. This is something great about Ireland, apart from the weather. I love Irish weather. I have been walking in the rain. Mr. Anderson has been asking me why I do not travel by car. I love being out in this weather because I used to enjoy it in college. It makes me feel very young to walk in the rain. I love all things about Ireland, except of course sometimes it seems to be a little laid back, like in India, and the world is moving very fast so both countries need to wake up and move faster.

The names of two organisations appear on the first slide. I am a director of Annex Consulting, which was formed at the time of the visit of the Taoiseach to Bangalore in the month of January. We hope to promote co-operation between the two countries. The problem for small and medium enterprises is basically that they cannot travel around the world to market themselves and make friendships with other companies because they really do not know what is out there. The larger companies can afford to hire the best people to travel internationally and forge relationships. Smaller companies need much more of that kind of support. That is the reason we set up this organisation. All one of the 250,000 Irish SMEs needs to do, to get to about 5 million SMEs in India, is to make a call to Mr. CliffAnderson and we can make the connection with India. That is the service we offer.

I will skip the slide on my background. I have 30 years of experience with SMEs. I was the deputy secretary of the state funding institution soon after I left Bangalore. Hardly anyone in Bangalore had MBAs in those days but now hundreds of people there have them. In those days it was a very good thing. I was the first person with an MBA to join the government. It was very interesting 30 years ago. I spent five years as secretary and served as an elected member of the board for a long time. I was elected to the board by a wide spectrum of private industries.

We are not simply discussing what India is offering to the rest of the world but co-operation between Ireland and India, specifically my state. Some areas must be pinpointed and work on them begun because Ireland is so small and India so enormous. Since Bangalore is the IT capital of south-east Asia and the IT sector has flourished in Ireland to a large degree, the two countries are natural partners.

In the past two days, during which I made a presentation with our ambassador, I have tried to pick up reports to find out more about Irish SMEs. One was the 2006 report produced by the Small Business Forum which identified four problem areas — competitiveness, raising standards of management capability in small businesses, the need to innovate and the information and communication technology, ICT, audit. In all these areas SMEs and larger companies in India have much to offer. In announcing the report on SME management development in Ireland produced by the expert group on future skills needs, chaired by Ms Anne Heraty, the Minister for Enterprise, Trade and Employment, Deputy Martin, acknowledged the importance of training for the future.

What are the three areas in which SMEs and larger companies in India can specifically meet the needs of Irish SMEs? One is cutting production costs through commissioned manufacturing of components, sub-assembly or final products in India. The second is upgrading IT usage to ensure greater efficiency and productivity through the short-term hiring of Indian SMEs on a project basis. I am not referring to long-term salaried jobs but to the hiring of a few software engineers to work on particular projects. The final area is raising management skills and competitiveness by training CEOs, managers and staff cost effectively by using Indian management institutions and consultants after studying Irish industry and export requirements.

In the first area, where can costs be reduced? In his presentation Dr. Kulkarni demonstrated that the wage rate in India was just under one dollar but it is not related solely to this. There are many factors at play, including lower input costs. India has large reserves of natural resources and produces more than 38 million tonnes of steel each year. It has reserves of coal, steel and energy, which reduces the cost of raw materials. It also has a lower wage rate owing to cheaper living costs. It is not a case of workers being paid less as living costs are far lower in India. Salaries and rent are probably one twentieth of those in Ireland.

Chairman

One fiftieth.

Mr. Prakash

One twentieth. It depends on the type of housing one is seeking. In 1974 I rented an apartment in Chelsea Gardens in London for £15 per month. The rent for that property today must be approximately £1,500 per month.

India also has lower unit costs owing to scales of production. One advantage possessed by India, the United States and China is that they have large internal markets. Whatever we produce, we produce for local industry. We can easily provide for a lower unit cost because of scales of production. Ireland can use this advantage by subcontracting work to Indian companies.

Another important factor is lower design and tool costs. Indian engineers produced within six months a particular design for the Suzuki Motor Corporation; their Japanese counterparts spent four years trying to figure out a solution. The Indians reduced the cost of a particular component by 15%. Producing a design in six months which reduces the cost of a component is an amazing achievement. This design expertise is widely available in India. There are thousands of Indians working for companies such as General Motors, General Electric and Mercedes-Benz. This is known as knowledge process outsourcing.

Another factor is lower supervision-management costs which are far lower than in Ireland. India also has lower inspection, quality assurance and legal costs, which is very important. Legal costs are quite low and certainly not as high as those in the United States and Ireland. One must factor in the cost of outsourcing, that is, additional transportation, which probably comes to 2% to 5%. However, owing to developments in IT and the Internet, the need for travel is reduced. One does not need to travel as much if one has access to the Internet and other communications technologies. There are higher costs associated with the Internet and other communications technologies but others are lower.

One of my slides details a engineering case study involving castings-base materials. The slide contains the Irish costs of a project which would produce a profit of 15%. If the project was subcontracted to India, the cost of castings-base materials would decrease from 15% to 10%, a reduction of one third, leading to a saving of5%. All of the savings add up to 25% and the cost of outsourcing comes to 10%, which leads to a doubling of profitability. This is why a company such as Siemens outsourced the production of compressor parts to India, thereby saving 25% of the cost of the total product. If an SME can achieve it, a smaller company can do even better.

It is possible to upgrade IT usage to ensure greater efficiency and productivity through short-term hiring of Indian SMEs on a project basis. The three large companies mentioned on the slide, TCS, Infosys and Wipro, are €2 billion dollar companies with a staff of between 40,000 and 50,000 working in enormous campuses encompassing hundreds of acres, one of which was visited by the Taoiseach.

Chairman

I accompanied him on that visit.

Mr. Prakash

These are enormous campuses.

Chairman

A total of 50,000 worked there.

Mr. Prakash

These are enormous companies. We also have many small companies with a staff of between 100 and 200, which are equally competent. Approximately 50% of all SME high level companies, the standard for IT production throughout the world, are located in Bangalore, a mind-boggling statistic.

Chairman

A total of 50%.

Mr. Prakash

Yes.

Chairman

Bangalore is the real Silicon Valley of the world.

Mr. Prakash

Indian IT service providers can place small project teams within weeks to months to provide hands-on training and ensure delivery of other pre-contracted services after studying requirements. These service providers will quickly produce a study and place a person with a project leader. The back team can work in India because of the availability of telecommunications facilities. Indian companies working in Bangalore can deliver services here, which leads to lower costs. We do not wish to send thousands of engineers to Ireland, thereby increasing Ireland's housing problem or costs. These engineers carry out their work in India.

Indian companies can offer customised solutions for between 25% and 75% of the cost. This reduction was originally noted as being between 40% and 60% but I checked with our office which informed me that the reduction was between 25% and 75%, depending on the company involved.

Indian companies can enhance productivity and competitiveness through improved management skills and competency. I acknowledge that Irish trainers are among the best in the world because I was trained here but perhaps Ireland does not possess the numbers needed to provide training. Indian trainers also have a good reputation. They have worked in the United States, Japan and other countries. Therefore, Irish companies could probably be helped by them also. India has world-class management-technical institutions which conduct short-term courses for managers. I am referring to institutions such as the Indian Institute of Technology and the Indian Institute of Management. Last year the starting salary for an Indian with a MBA was $200,000. Therefore, one can imagine the kind of companies which pick up such graduates. Obviously, the professors who train these students are well known internationally and highly skilled. Indian trainers could work alongside their Irish counterparts.

There are hundreds of consultancy organisations in India. The country also has internationally recognised management experts. Irish SME CEOs and managers could be sent to attend courses in India on a trial basis to see for themselves the training offered. Once confidence has been built, Indian experts could be invited to Ireland to train larger groups of managers. Irish experts are among the best in the world but the country needs a large number of such experts. One of my slides shows the number of experts required. Approximately 40% of the 250,000 CEOs must be trained. Ireland needs to train 100,000 CEOs. A ten-day course provided over one year — one or two days at a time for groups of 20 people — would require approximately 500 full-time trainers. We could provide support in this regard. If Enterprise Ireland and others wish to become involved in mentoring, then many more people will be needed.

A report published by the Small Business Forum identifies weaknesses in some owner-run enterprises in the marketing, finance and planning sectors, areas which could benefit from training using IT expertise. On the need for training at shop-floor level, India could offer a large number of trainers and human resource managers, on a temporary basis, to companies in order to complete the exercise in two to three years. We can supply the trainers required to train up to 250,000 CEOs.

On training, we have a large number of trained managers in MNCs and SMEs internationally. We also have a large number of management and technical trainers in world renowned management institutions and many of our management gurus are located internationally. One particular management guru, C. K. Prahlad, introduced the internationally recognised management term "core competence". In the past 30 years he has written many eminent books that are often used throughout the world by those in management. His latest book, Global Resource Leverage, deals with the issue we are discussing. India has a global resource and perhaps through it and Ireland’s connectivity to Europe we can work together to ensure the global resources of both countries are utilised for better mutual benefit.

Chairman

Mr. Prakash has one minute remaining before we take questions.

Mr. Prakash

There are many commonalities and complementary factors between Ireland and India. The commonalities are: the English language; strong legal systems based on common law; highly developed educational networks; similar open and liberal democratic political systems; and tremendous goodwill, especially following the January 2006 visit by the Taoiseach to India. The complementary factors are: abundant human resources in India as against limited numbers in Ireland; asymmetrical levels of affluence; comprehensive industrial base; and vast natural resources in India in contrast to specific industries as areas of strength in Ireland.

Looking to the future, perhaps we could have JVs in either country and a paradigm shift from the current low-volume, high-margin manufacturing to ensure that Irish products will reach Asian markets through cost-cutting measures based on mutually complementary roles.

Chairman

Perhaps Mr. Prakash will provide the committee with a copy of his presentation.

Mr. Prakash

Yes.

Chairman

We have heard a great deal of amazing statistical data. As the ambassador stated, our two countries can benefit from the visit by the Taoiseach, three Ministers and me earlier this year. I have two important questions before inviting members to pose theirs.

My first question relates to the environment. Environment-related technologies and any aspect of waste management-recycling, sourcing efficiencies and energy usage, renewable energy and other forms of cleaner carbon emissions-free power generation are of special interest to Ireland. The transfer of technology in which we are interested could be of mutual advantage, particularly in terms of the possible trading in carbon emission quotas under the CDMs of the Kyoto Protocol in light of the availability of quotas to India and Ireland's deficit in meeting its EU targets. Perhaps we can tease out those possibilities. Is this a real possibility? Our job as a committee is to be a conduit to Government as in the case of many other industries. The proposal made by the Indian delegation is of immense importance to Ireland. Perhaps a member of the delegation could elaborate on it.

Ambassador Kumar

I thank the Chairman and members for their patience. On the question of CDM mechanisms, we have requested the Department of the Environment, Heritage and Local Government and the bilateral economic relations division of the Department of Foreign Affairs to inform us if Ireland is interested in trading quotas with India. India is already doing so with a number of other countries. It is a mechanism provided for under the Kyoto Protocol.

Chairman

Is India trading quotas with any other EU country?

Ambassador Kumar

I believe we are doing so with some EU countries. It is a new mechanism that is not being used on a large-scale basis as yet. At least eight or ten countries are involved in the trading of carbon quotas under the CDM mechanisms. I will check which EU countries are involved. India presented a paper on this at the Gleneagles Summit last year. The paper was also forwarded to the Departments of Foreign Affairs and the Environment, Heritage and Local Government with a request that we be informed if Ireland is interested in the proposal. Dr.Kulkarni, the expert on this, will explain how it works. My understanding is that it requires private industry to draft a technical proposal regarding its emissions and its desire to trade quotas. When it is agreed between both countries, it is then submitted under the Kyoto Protocol.

Chairman

This is of enormous importance to Ireland, a small country which has always regarded EU regulations as of utmost importance. I believe we should tease out this proposal. Perhaps Dr. Kulkarni would elaborate on the ambassador's remarks.

Ambassador Kumar

This does not involve India providing assistance to Ireland, rather it relates to a trading of quotas that would be of advantage to both sides.

Chairman

It is a trading of quotas.

Ambassador Kumar

Yes. The margins for developing countries are higher but they are not yet reaching them and some industrialised and developed countries, such as Ireland, are exceeding their limits. This trading of quotas is mutually beneficial to all.

Chairman

India has capacity for trading quotas of which Ireland could avail. This proposal was made to the Department of Foreign Affairs and presented at the Gleneagles Summit last year.

Ambassador Kumar

Yes.

Dr. Kulkarni

There are approximately 90 different projects on CDM under discussion in India. However, the bureaucracy involved is quite significant. A number of these projects relate to energy saving and generation. Sweden recently received approval for a project on biomass co-generation with solar. It is a small project which will cost only €35 million per annum in terms of trading. There is potential for a solar-biomass project. The mechanism requires one to commence the process at planning stage. It then takes approximately 12 to 18 months to get approval from the international organisation. The projects under discussion in India are at the initial stage.

Chairman

We will contact the Department of Foreign Affairs and consult with the Minister to determine what progress has been made on the proposal. We will then communicate with the ambassador on the matter to see how we can progress it.

Mr. Prakash

I am also on the central committee of the local industry body. The Bangalore Chamber of Industry and Commerce has signed an MoU with the Dublin Chamber of Commerce. We are meeting later today. From the industry side, I would like to tell the committee that many industries in Bangalore would like to enter such an arrangement. Before I left for Ireland, one of my clients who makes electric vehicles was interested and asked me to check it out. There is, therefore, a very good possibility that we can make this happen.

Chairman

Is there an annual conference in Bangalore at which this committee could engage with another similar committee to pursue these matters?

Mr. Prakash

Instead of availing of conferences taking place, we could organise a conference particularly for this purpose, at which this committee would be welcome. We have three trade bodies in the state, all of which could come together. It would be an honour to host the committee if the ambassador can pursue the matter.

Chairman

Our members would very much like to engage. Unfortunately, there will be a general election in May next year. We can discuss the matter with the clerk to the committee and check members' diaries. Does Deputy Dempsey wish to speak on the Kyoto Protocol?

Deputy T. Dempsey

No.

Chairman

I have only one more question. The other presentation was related to the more ambitious possibility of setting up independent hospitals in Ireland that could avail of the medical expertise of consultants and other personnel from India on what is known as a turnkey basis to address the difficulties we face. What is the thinking on how India could assist us in the world of medicine in the context of the difficulties we face in accident and emergency units? I am aware the ambassador has an interest in this matter. Is there a way in which India could assist us as a nation?

Ambassador Kumar

We approached the Department of Health and Children to see whether this would be of interest. There are four or five dimensions to our proposal. The most ambitious is for India to establish a state-of-the-art hospital here with everything under one roof. A policy framework would be required for a foreign hospital to function. We have put this to the Department of Health and Children to consider. Depending on what the Government would prefer, it could be on a 100% owned basis if the Indian parties were willing or it could be a joint venture with an Irish party in charge of the real estate and an Indian medical hospital providing services on a turnkey basis.

Short of this, the second dimension would involve Irish patients travelling to India to utilise medical facilities there. It would be limited to those undergoing elective surgery or to sending pathology samples for testing or to telemedicine. The third dimension is recruitment of personnel to augment existing personnel. The fourth dimension is alternative medicine, in which we have found there is much interest in Ireland. It includes yoga, massage, Ayurveda. There is a fifth dimension, which I have forgotten for the moment. If the Department finds the proposals of interest, we would be glad to pursue them.

Chairman

Is this being done with any other country, to the ambassador's knowledge?

Ambassador Kumar

Private sector interests have set up hospitals.

Chairman

In America.

Ambassador Kumar

They have tied up with American interests. An Indian group which made a presentation to the Asia Trade Forum last week has a tie-up arrangement with American certification. It is the only hospital to be so certified. Hospitals have been established in Dubai and Singapore but not in the United States and, as far as I know, the European Union. There is not much demand in many countries because they are self-sufficient. We thought it might be required in Ireland to quickly upgrade and close the gap, about which I have read a lot in the media. It could be done with a policy framework facility.

Chairman

Did India make this offer to the Department of Health and Children last year?

Ambassador Kumar

It was just before the Taoiseach's visit.

Chairman

At the end of last year.

Ambassador Kumar

I am sorry. It was in January, soon after the visit.

Chairman

Has there been a reply from the Tánaiste and Minister for Health and Children yet?

Ambassador Kumar

The Department is considering the proposal. We have expressed readiness to bring over Indian parties, of which the group which presented to the Asia Trade Forum is one. We have several. I know Indian parties would be willing to consider Ireland as a possibility for investment in this area. However, it needs policy framework facilitation for a foreign hospital to function legally and for doctors to be registered. This must be sorted out first before the private parties talk to each other about the terms of agreement.

Chairman

Did India offer state-of-the-art facilities and professional medical expertise——

Ambassador Kumar

Everything would be under one roof.

Chairman

——to the Minister at the end of last year?

Ambassador Kumar

Yes. I will send the committee a DVD illustrating what we have in mind.

Chairman

We will follow up the matter to see what progress has been made and come back to the ambassador.

Deputy T. Dempsey

My question relates to what the Chairman asked. Is there potential for further development of educational and scientific programme exchanges between our two countries? Is the ambassador happy with the level of mutual recognition between our two countries on educational qualifications?

Deputy Callanan

I welcome the delegation, for which I have three questions. In regard to hospitals, if a group from India decided to set up a hospital here, would it be obliged to pay Irish wages? Would this affect the viability of the initiative?

India has a very high rate of imports. What does it import? The ambassador has mentioned that India is one of the largest producers of milk and that it does not have much in the way of added value products. Why is that and is there a gap Ireland could fill?

There is another question which I ask every delegation because I have a special interest in it. How does India handle its waste? Are there recycling facilities? Is there anything we could learn from India, given that our waste management costs have gone through the roof, by which I mean they are very high?

Ambassador Kumar

On educational and scientific exchanges, we signed an agreement during the visit of the Taoiseach and while it has not yet been implemented, it is hoped exchanges will begin very soon.

At present, there is no mechanism in place for the mutual recognition of third level degrees. That matter has not caught the attention of either side. I will, however, raise it.

Deputy T. Dempsey

For business to progress, there must be mutual recognition of third level qualifications in both countries.

Ambassador Kumar

I will take note of the matter and check it out. The private sector does not worry about the recognition of qualifications. The qualification of a graduate with an MBA from Trinity College is recognised because of the name of "Trinity College, Dublin". I have taken note of the issue of recognition of qualifications.

There is a suggestion that private hospitals in India could establish an operation in Ireland, if that is of interest. If such a hospital were to function, it would be under Irish law and would be like any other similar institution. The lower wage structure in India is a different issue. This is not predicated on that but on capacity to mobilise high quality personnel and on the management capacity to operate them in an efficient way. Conditions would be different and costs in Irish hospitals are higher than in India. However, Indian interests would be competent to run hospitals. If patients were to be sent to India, the costs would be lower.

India no longer imports food because it is in the happy position of being self-sufficient, barring in the area of edible oils. India now exports grain. With increased affluence, the importation of drinks is catching on and this should be of interest to Ireland. Items of high technology are the major imports to India. An area where Ireland would have the advantage is food technology. As Dr. Kulkarni stated, perishable items such as fruit, flowers and vegetables are destroyed in transit because immediate storage and processing in India is low. Investment in food processing is now a high priority and we are inviting investment in the sector. Ireland has a strong record in food processing and that expertise would be very welcome in India. Food processing is in its infancy. I visited the Kerry Group and invited its representatives to India. Bord Bia has been in contact with officials in India with a view to investment in the milk or dairy processing sector. We welcome investment in that area.

Waste management is in its infancy and India would welcome any investment or technology to recycle waste. Indian ambassadors have been charged with seeking environmentally-friendly technology. We welcome any information on such technology. I read very good accounts about the work of Repak in the recent days and Ireland is now 14% ahead of target compared to other EU countries. I am thinking of contacting Repak with a view to asking it to look at recycling in India.

Chairman

I thank His Excellency, Ambassador Kumar, Dr. Kulkarni, Mr. Prakash and Mr. Anderson for their contributions to what was a very interesting discussion. It has been a great pleasure and I look forward to working with them during the lifetime of this Government. His Excellency has been most helpful to the joint committee and, as Chairman, I thank him for his kindness, courtesy and great friendship and for the assistance extended to me in the business we were conducting.

The Prime Minister of Australia will address the Dáil in a few moments.

The joint committee adjourned at 4.15 p.m. until 9.30 a.m. on Wednesday, 31 May 2006.