Just a quick one for today and for a change something not particularly related to defence. While the main thrust of this blog will remain defence, I do want to pick up some non-defence issues now and again, like economics and politics, and one of those has cropped up unexpectedly in India.
As I'm sure everyone is aware by now major power cuts have crippled parts of India. This however is merely a case of large numbers of people being affected in one go. India has long had problems with its electricity generation and distribution, not least because of the amount of people that essentially steal power from the grid.
The supply is so unstable that many factories and offices in India have generators, not as back ups in case of disruption, but as their primary power supply. This is - understandably - quite expensive. And it serves to demonstrate one of the many considerations that businesses make before making the choice as to where to set up their offices or foreign manufacturing plants.
We are often told that British companies would run for the hills if corporation tax in the UK were increased. This is simply not true. There are a myriad of reasons completely unrelated to tax as to why companies choose to do business here in the UK. Reliable power supply for both places of work and public transport being just one of them.
The power cuts in India also serve as a reminder of the challenges that still face many developing economies in their bid to develop economically. Too rapid an expansion can place excessive demands on power supplies and logistic facilities such as ports, constraining growth and diverting investment elsewhere.
Low cost wages and an abundant labour supply are all very well and good, but without power to operate businesses and the logistic capacity to import raw materials and export finished goods, large quantities of low cost labour are of dubious value in a competitive global market place.
But how long does the UK have a reliable power supply for?
ReplyDeleteAnd its hardly a choice of India/England either.
To my mind.
A great many bloggers, of which I admit, I am one, have viewed India as "an ace in the hole" to be used to hammer a militaristic china back to the iron age.
I still believe China is deeply vulnerable to blockade and the bombing of electrical generating capacity, but India looks like it would buckle in seven minutes of pressure, never mind seven months.
Who is going to blockade China? Or bomb its electricity generating capacity? Someone with a death wish presumably.
ReplyDeleteHmmm . . . sounds like India's politicians are about the same as ours, eyes wide open for all the bright sparkly new toys like Hi-Tech consumer devices, big tower blocks, shopping malls and inward investment; but ignoring the basic foundations of a functioning nation-state, like roads, railways, water distribution and . . . oh, electricity.
ReplyDeleteProblem is, there's no point in having Ferrari's if you don't have pot-hole free roads! The infrastructure always gets ignored (even here) - and the politico's are constantly surprised by the consequences!
re: private commercial generators. Are we talking diesel generators? I would have though with India's climate, local solar generation would be a better bet (outside of Monsoon season anyway).
@ Dangerous Dave,
ReplyDeleteAye on the Diesel Generators. Trouble with solar is that it costs a fortune to install and the paybacks are very long term, which is considering high UK energy prices. They really don't generate that much power and in India it would probably take forever to see the pay off.
What's really needed with solar is some way of harnessing that power other than cells, for example the solar towers that are cropping up in certain places like Spain. Even those are of dubious value.
Hi Chris
ReplyDeleteWhile reliable power supply is a factor in locating a business, any successful business will look at all factors as well as personal interest of the CEO's etc. For example Japanese firms looking to invest in Europe, to get in the EU trading bloc, one reason they chose the UK was because of the great golf courses, though of course this was on top of other factors.
Thoroughly agree that the global market is very competitive. But I am more interested in the question, how can the UK make its self stand out from the rest to attract the investment and business to create jobs and get the economy going?
One other point I would like to make is that things such as this have an advantage to the UK as it reduces the Indian economy which means we are in relative terms better off than we would have been. Though on the flip side that means fewer exports from us being bought by Indians among other things.
@TrT Yes India does look like a rival to counter China but they first must sort out many infrastructure issues before hand. As to blockading China you would need Russia on aboard for that which I highly doubt is going to happen.
@Dangerous Dave
All forms of renewable energy are still in their infancy and fossil fuels are still cheaper. Plus not exactly sure on the climate but I don't think India has the most ideal climate for solar panels.
Hello Mick,
ReplyDelete"While reliable power supply is a factor in locating a business, any successful business will look at all factors as well as personal interest of the CEO's etc",
-- Indeed, which is why I mentioned; "There are a myriad of reasons completely unrelated to tax as to why companies choose to do business here in the UK. Reliable power supply for both places of work and public transport being just one of them."
There are a number of organisations like the World Bank that produce lists of "ease of doing business" factors etc, which are considered to create favourable conditions for starting and growing a business, though there is dispute as to how important some factors really are. For example, speed of setting up and winding down a corporation is of limited real value to companies looking to make substantial investments.
Some of the more important that I can think of off the top of my head, not necessarily in order and also somewhat dependent on the type of business are;
- Ease of travel access, both nationally and internationally,
- Energy and labour costs,
- Standard of living,
- Ease of access to adequately educated workforce,
- Infrastructure (road, rail and sea links)
- Complexity of legal environment,
- Corruption levels,
- Enforcement of intellectual and property rights,
- Enforcement of contract terms,
- Ease of acquiring estates,
- Planning laws for expansion,
- Proximity to end market place,
- Law and order environment,
- Broader economic environment (inflation, local parts suppliers, customers),
- Ease of obtaining additional local financing/credit,
In an ideal world the UK government would improve all of these areas, but alas there probably isn't the time or money to do so, not least because of how much time and money governments tend to waste!
"but alas there probably isn't the time or money to do so, not least because of how much time and money governments tend to waste!"
ReplyDeleteThere is the time and money, the state budget is soon to be £700bn and employs 6m people. Sometimes i wonder what they all do, but couldn't agree more with you about waste. While we're on this subject, what's your thoughts/opinion on the HS2 rail line? While I do feel the need for the UK to maintain a world class level of infrastructure and rail is one area the UK has fallen behind from being the world leader. I personally disagree with the taxpayer (i.e everyone) paying for something that only some people will benefit. Though of course in this case improved infrastructure will benefit more than just those that use the service directly. Though of course one then gets onto the argument on what percentage of the bill should be taken by the taxpayer and what by the people who use the service.
Hi Mick,
ReplyDeleteHS2 is - in my opinion - one of the most criminal wastes of money ever forced onto a population. Rail projects primarily reap a benefit when they significantly increase speed over relatively short distances, or increase capacity for freight traffic.
We've reached a point of diminishing returns with our rail system and HS2 will be an utter waste of time and money. It's a ridiculous vanity project, the funds of which could be far better spent maker improvements elsewhere or on a completely different project.
I'd agree that we have a large budget, but so much of it is just poured down the drain. I'm not a huge fan of the TaxPayers Alliance, but their site is good for uncovering some truly wasteful spending, often by councils.
Thanks will have a look at that site.
ReplyDelete