1

1. MARKET OVERVIEW

The market potential of India over

the medium- to long-term is second

only to China’s. Since 1991, the

Indian economy has been

transformed from its protectionist

“Licence Raj” system into a

competitive, open economy with

leadership in a wide variety of

sectors. When one thinks of India

today, one thinks of Information

Technology (IT). Indian IT and IT

Enabled Services (ITES) firms such

as Infosys, Wipro and Tata

Consultancy Services (TCS) are in

the vanguard of global innovators

that are revolutionizing how

information is used and processed

to create value for their clients

around the world.

With a GDP growth rate averaging

6.2% in the last 10 years, many

economists have argued that India’s

potential rate of GDP growth is in

the 6-7% range. We expect India to

maintain this potential rate of GDP

growth in the medium term with

some slowdown expected in the

next two years due primarily to a

global slowdown.

One of the most important features

of Indian policy-making is a

commitment on all sides of the

political spectrum on the need to

continue India’s economic reforms

begun in 1991. We have seen both

the Bharatiya Janata Party (BJP)-led

and Congress-led coalitions

accelerate economic reforms that

have seen a progressive liberalization

of India’s trade and investment

regimes. As India continues to

liberalize its economy, foreign direct

investment (FDI) and domestic

investment (especially in

infrastructure sectors) alone will

likely drive up India’s potential

growth rates to the 7-8% level in the

medium term.

India is also becoming an important

player in global trade. During the

1994-2003 period, Indian exports

grew on average by 12.8% annually

(in nominal terms). This compares

favourably with export growth rates

of 10.2% and 6.9% respectively

experienced by exporting

powerhouses like South Korea and

Malaysia. In its New Foreign Trade

Policy (NFTP), the Indian government

has set a target of more than

doubling India’s share in world trade

to about 2% by 2010. Instrumental

in this will be the IT/ITES sector.

According to the National

Association of Software and Service

Companies (NASSCOM), India’s IT-

ITES sector has experienced an

explosive 28% growth since 1998,

with revenues expected to reach

US$28 billion in 2005.

IN

DIA

Population 1,070 million

GDP (US$ billion) US$617.24

GDP per capita US$577

GDP Growth, 1993-2004 6.2%

BC Export Growth, 2000-2004 6.1%

TABLE 1 INDIA IN 2004

Source: International Monetary Fund, Ministry of Commerce (India) and Statistics Canada.

2

India’s stock of inward FDI was

US$30.8 billion in 2003 — a sharp

increase of 21.3% from the previous

year but still far below mainland

China’s inward FDI stock of

US$501.5 billion. While India has

not been a major destination of FDI

in Asia in the past, recent global

surveys have suggested that it is

increasingly becoming one of the

most attractive investment

destinations in the world. For

example, A.T. Kearney’s 2004 FDI

confidence index put India as the third

most attractive FDI destination (after

China and the United States). On

some factors such as India’s highly

educated workforce, management

talent, rule of law, transparency and

regulatory environment, India was

ranked more favourably than China.

Despite India’s sometimes difficult-

to-understand political landscape,

we view India’s internal political

outlook as being stable over the

medium-term, one factor in the

rising level of inward FDI. The one

issue that may arise from time to

time to disturb investor confidence

is India’s foreign relations with

neighbouring Pakistan and the two

countries’ dispute over Kashmir.

While the two countries have made

significant progress in furthering

peace talks in the recent past, it is

not clear what the end game in this

dispute could be. Positions of both

sides are deeply entrenched and as

frustrations in Pakistan grow with

the time that it is taking to resolve

the Kashmir dispute, we will likely

see a ramping up of tensions that

will affect overall investor

confidence in India, as happened in

1998 after tit-for-tat nuclear

explosions on the South Asian

subcontinent in 1998.

At US$913 million in 2003, India’s

stock of outward FDI is lower than

that of many other Asian

economies. However, recent

announcements in the oil and gas,

pharmaceuticals, biotechnology and

IT sectors are likely the beginning of

a trend that will see Indian

conglomerates make acquisitions,

greenfield investments, or sign

partnership agreements in markets

like Canada’s to take advantage of

the unique value propositions

offered by Canadian and British

Columbia firms and assets.

2. BRITISH COLUMBIA’S

RELATIONSHIP

WITH INDIA

British Columbia firms have benefited

from India’s IT advantage with firms

like Pivotal Corporation and

Momentum Technologies establishing

software development centres in

India. While BC firms are engaged in

India’s IT/ITES sector, there are other

sectors in which British Columbia

firms are playing an increasingly

prominent role. BC’s largest exports

to India have been in the forest

products sector with all of the large

BC forest companies — Abitibi-

Consolidated, Canfor Corporation,

Howe Sound Pulp & Paper, West

Fraser Timber Co. Ltd., and

Weyerhauser Canada — engaged in

the India market through agency

relationships. Other sectors in which

BC companies are increasingly

involved in the India market include

education services (e.g., University

College of the Fraser Valley,

Malaspina University College),

construction and real estate (e.g.,

The Kryton Group, Minaean

International Corporation, Royal

Indian Raj International

Corporation), and Oil & Gas (e.g.,

Terasen Inc. and Westcoast Drilling

Supplies, Inc.). Further, small and

large BC-based consulting firms are

also involved in the Indian market

with services ranging from export

market consulting (IPCS Project

Coordination Services) to consulting

engineering services (e.g., Lea

International Ltd.).

MERCHANDISE TRADE1

Raw material exports have

traditionally formed the vast

majority of BC exports to India. In

2004, the top-five exports from BC

to India accounted for 89% of all BC

exports to India (see Table 2). BC

exports represented 15.9% of

Canadian exports to India in 2004.

There are no significant structural

differences in BC exports to India

compared to other provinces. Like BC,

Canadian merchandise exports to India

also tend to be concentrated in raw

material exports. However, it is

significant that BC is the primary

Canadian source to India for three of

its top-five Canadian-sourced products

— 99.6% of ore, slag, and ash exports;

97.1% of mineral fuel, oils, and wax

exports and 43.6% of wood pulp.

BC’s top-five exports to India are

sectors of opportunity for BC, given

that they represent BC’s comparative

advantage in the Indian market. As

we outline below, India’s demand

for forest products, ores, mineral

fuels, and infrastructure (more

broadly) will increase substantially as

the country continues to grow. In

3

each of these sectors and in a wide

range of associated services sectors,

there will continue to be significant

opportunities for BC-based companies

to provide value-added services to

BC’s portfolio of exports to India.

Forest Products

Forest products, including rolled and

sheeted newsprint and wood pulp of

various types have traditionally been

the largest export from BC to India. In

2004, products in these two

categories accounted for 63.3% of BC

shipments to India.

Rolled and/or sheeted newsprint (HS

480100) was the largest export from

BC to India in 2004 at $46.3 million

(36.2% of BC exports to India). All of

the major BC forest products

companies have ongoing

relationships with partners in the

India market. Abitibi-Consolidated

Inc. is a major BC exporter of

newsprint to India with the Times of

India (India’s largest-selling English

language daily) printed on Abitibi

paper. Canfor Corporation has also

been engaged in the India market

with its Mumbai-based distributor,

Pratik Panels Ltd., which supplies

Canfor brand panel woods in the

Indian market. Howe Sound Pulp &

Paper Ltd. is represented by J.N.

Ravanuss (India) Pvt. Ltd. based out

of Gurgaon, Haryana where it has

sold bleached kraft pulp. West Fraser

Timber Co. Ltd. also has a liaison

office in India with Stora Enso India

out of Gurgaon near New Delhi.

Weyerhaeuser Canada has also been

engaged in the Indian market over

the years with contracts announced

for the sale of hemlock, Douglas-fir,

alder, western maple, western red

cedar, and white birch in the last

two years through its Agent in India,

LS Sundher Ltd.

Mining, Minerals and Fuels

Copper ore and concentrate has

traditionally been the second most

important export from BC to India. In

2004, BC exported $14.2 million of

copper ore and concentrates to India,

making up 11.1% of BC exports to

that market. Most of this ore and

concentrate is sourced from Teck-

Cominco’s copper and molybdenum

operations at Highland Valley.

Teck-Cominco has an interesting

history in India. Binani Zinc, which

is today the single largest private

sector manufacturer of high grade,

special high grade and super special

high grade zinc in India, was

actually formed as a joint venture

between Cominco Ltd. and Binani

Metals in 1962, with a capacity to

produce 14,000 tonnes of

electrolytic zinc per annum.

Cominco withdrew as financial

collaborators of the company in

1991 as part of its global strategy.

Mineral fuels and oils have not

traditionally been major exports

from BC to India. In 2004, however,

they formed the third-largest

category of exports from BC to

India with shipments of bituminous

coal accounting for $6.4 million

(5.0% of total BC exports to India)

with a further $6 million in calcined

petroleum coke (4.7% of BC exports

to India). Three BC coal mining

companies — Teck-Cominco,

Fording Coal, and Luscar — visited

India and presented technical

results to the Steel Authority of

India Ltd. (SAIL) in 2002-03. As a

result of those visits, the pilot

shipments of low ash content coal

took place in 2004 (although it has not

TABLE 2 BC’S MERCHANDISE TRADE WITH INDIA, 2004

BC IMPORTS FROM INDIA BC-ORIGIN EXPORTS TO INDIA

Rank Merchandise Classification ($M) % Rank Merchandise Classification ($M) %

1 Knitted or crocheted apparel 26.0 15 1 Paper and paperboard 46.4 36

2 Woven clothing and apparel 17.3 10 2 Wood pulp and other pulp 34.7 27

3 Other textile articles 13.1 7 3 Ores, slag and ash 14.6 11

4 Fish, crustaceans, molluscs 12.1 7 4 Mineral fuels, oils and waxes 12.4 10

5 Pearls, precious stones/metals, etc. 11.6 7 5 Electrical machinery and parts 5.6 4

Total BC Imports from India 177.2 100 Total BC Exports to India 128.1 100

Indian Imports as % of BC’s Total: 0.5 Indian Exports as % of BC’s Total: 0.4

Note: Canadian import statistics are collected in terms of the province of clearance, not province of final destination.

Source: Trade Data Online. Industry Canada. 24 August 2005. <http://strategis.ic.gc.ca/sc_mrkti/tdst/engdoc/tr_homep.html>.

4

each represented about 30% of

Canadian services exports to India

over the last decade (see Chart1).

The structure of Canadian services

exports to India is similar to Canadian

services exports to other emerging

markets. Analysis by APF Canada has

found that over the past decade, the

share of commercial services exports

to India was no different from its

share in other significant emerging

markets of importance to Canada like

China, Brazil, Mexico and Malaysia.

However, when we look at growth

rates of commercial services, India

stands out. In work done by APF

Canada for International Trade

Canada2, it was found that at 27.6%

average annual growth rates, India

was one of the fastest growing

markets for Canadian commercial

services exports to the world with

growth exceeding China and Russia

and at par with more advanced

markets like Singapore, Mexico and

Thailand. More significantly, the

variability of this growth of

commercial services to India was the

lowest among the ten emerging

markets studied. This finding is

significant because it means that

growth in commercial services exports

to India is certainly more stable than

in markets like Brazil, Malaysia,

Mexico, Thailand, Singapore, Russia

and Indonesia. It could also mean that

commercial services exports to India

were likely distributed more widely

than in other emerging markets.

Contrary to our findings on Canadian

and BC merchandise exports to India

(which tend to be concentrated), this

signals that a wide range of

commercial services form a solid base

of Canadian services exports to India.

It is widely recognized that even if

official data on BC’s services exports

been revealed which of these

companies exported coal to India

in 2004).

Advanced Manufacturing

Technologies

Advanced manufacturing

technologies encompass a wide

variety of goods (and services) with

several BC-based firms already

engaged in the India market. While

most activity may not register in the

official trade data, there is significant

evidence to indicate that BC-based

firms are providing a wide array of

goods and services in the Indian

market. In October 2004, Vancouver-

based Cummins Westport Inc. and

Cummins India Limited (CIL)

completed their licence and supply

agreement that grants CIL an exclusive

licence to manufacture, sell and

service Cummins Westport’s natural

gas engines. Manufacture of these

engines began in mid-2005. Applied

Microsystems Ltd., a Sidney-based

manufacturer of oceanographic

instruments, recently sold one of its

Argus II Geothermal heat probes to

India’s National Geophysical Research

Institute based out of Bangalore.

Saanichton-based Power

Measurement Ltd. is a leading

provider of enterprise energy

management systems for energy

suppliers and consumers. Through its

agents in Mumbai, CMS Computers

Ltd., Power Measurement provides

web-ready software, metering and

control devices that help manage

complex energy contracts, improve

power quality, reduce energy costs

and keep operations running

enterprise-wide. In 2003, Tata Power

Company Limited (TPCL), India’s

oldest and largest private generating

and distributing company, upgraded

its Jojobera Power Plant located in

Jamshedpur with an ION(R) enterprise

energy management system from

Power Measurement.

Other firms producing advanced

manufactured goods (and services) and

engaged in the India market include:

Langley-based Knelson Concentrators

(precious metals processing

technology); Mission-based Interwrap

Industries Corp. (packaging solutions);

Richmond-based ComNav Marine Ltd.

(marine navigation and automation

systems); Ebco Industries Ltd. (metal

fabrication), Minaean International Ltd.

(specialty construction and services);

Spectrum Signal Processing, Inc.

(wireless equipment and services); the

Kryton Group (construction materials);

and Syndel Laboratories, Inc.

(pharmaceutical and animal health

products).

SERVICES TRADE

It is in services trade that BC’s

relationship with India is most dynamic

and will see the greatest growth in the

medium- to long-term. Official

statistics for BC’s trade in services with

India are not available. The overall

Canadian data together with work

done on services by the Asia Pacific

Foundation of Canada (APF Canada)

provide an indicator of likely BC

services trade activity with India.

In 2003, total Canadian services

exports to India was $254 million,

down from $283 million in 2002 —

representing a –10.2% annual

decline. Commercial services formed

the most important component of

Canadian services exports to India.

For the 10-year period 1994-2003,

commercial services exports

represented 40% of Canadian

services exports to India. In 2003,

commercial services exports to India

were $116 million. Travel services and

government/transportation services

5

to India were to become available,

this data would continue to

underestimate both the scope and

volume of services transactions. There

are two important reasons for this.

First, unlike merchandise exports, a

BC services firm can deliver its

services from anywhere in the world.

Second, most service delivery can

only occur if there is close and

regular contact with customers that

in turn often requires some form of

physical presence and investment.

The implication of this services-

investment linkage is that BC services

firms may be very active in the Indian

market but most of it would not be

recorded in Canadian statistics.

An example will clarify this point.

Pivotal Corporation, a leading

customer relationship management

(CRM) software firm with a focus on

mid-sized enterprises, started

operations in Bangalore, India in

November 2002 with a development

centre. This development centre is

fully integrated with Pivotal’s global

operations and forms the base for

Pivotal’s sales strategy in not only

India but regionally as well. However,

internal transactions between Pivotal

(Vancouver) and Pivotal (Bangalore)

would go unrecorded in official

services data because they are internal

to a Canadian firm. However, such

transactions would be recorded in

official trade data had they occurred

between Pivotal (Vancouver) and an

outsourced service provider in India.

Further, transactions between Pivotal

(Bangalore) and a third-party in India

would go unrecorded in BC services

export data even though the actual

service is being performed by a

company beneficially owned in BC.

In an attempt to capture these types

of services transactions, APF Canada

was contracted by International Trade

Canada to provide estimates of total

commercial services sales by

Canadian firms in India. In that

study3 we found that in 2002,

Canadian firms sold $336 million in

commercial services in the Indian

market. This was about 2½ times

greater than commercial services

exports reported by Statistics Canada.

For this report, we have gone back

into our database to capture the

share of BC-based firms in Canadian

commercial services exports. As we

can see in Table 3, we estimate that

total BC commercial services exports

to India were about $27.8 million

with about 40% focused in two areas

— ICT services and consulting

services. In the consulting area, there

were a wide variety of firms engaged

in providing services including legal

services, engineering consulting

services, travel and immigration

services, and trade market consulting.

The other important sector was the

housing and building products sector

with firms engaged in areas ranging

from real estate development to

specialized construction services. This

sector made up a significant 11.2%

of total services transactions by BC

firms in the Indian market.

250

200

150

100

50

$M

CHART 1 CANADA’S SERVICES EXPORTS TO INDIA

Source: Adapted from Statistics Canada, Canada’s International Trade in Services with

Selected Countries, CANSIM Database Table 376-0036. 19 August 2005.

<http://www.dfait-maeci.gc.ca/eet/pdf/intern_trade_in_services_2005-en.pdf>,

<http://cansim2.statcan.ca>.

Transportation and Government Services

Commercial Services

Travel

0

300

1995 2000 2001 20021990 2003

(32)

(17)

(31)

(40)

(50)

(35)

(85)

(97)

(67)

(74)

(128)

(83)

(72)

(146)

(64)

(81)

(116)

(57)

Sector Value Share of total, %

Information & Communication Technology 11.9 42.8

Consulting Services 11.3 40.6

Mining, Minerals Equipment & Services 0.4 1.4

Housing & Building Products 3.1 11.2

Other 1.1 4.0

Total 27.8 100

TABLE 3 SERVICES SALES BY BC FIRMS IN INDIA, 2002 ($M, imputed)

Source: Asia Pacific Foundation of Canada

6

meter reading (AMR) systems in

several states in India. Wireless Nova

currently manufactures, distributes

and supplies a GSM-based AMR

solution for industrial utility

consumers and now has IntraCoastal’s

PLC AMR system to address the larger

market of residential consumers in

India. This followed a piloting of

IntraCoastal’s offering with the

Karnataka Power Transmission

Corporation of Bangalore in 2001.

Other BC-based ITC firms involved in

India-related activities include: Sierra

Systems Group (IT consulting), and

MidNet (Canada), Inc.

(communications). Several BC-based

software developers have been

successful at placing orders in the

Indian market. Vancouver-based

S.C.S. Solars Computing Systems

Inc., a provider of reservation

systems for the travel industry,

established its operations in India in

2001. Vancouver-based Datawest

Solutions Inc., a provider of banking

and payment technology solutions,

sold its ConCentre software system

to India Switch Company (ISC) and

HMA STARware Ltd. ConCentre is a

value-added product that is

designed to monitor applications

running on various platforms in a

transaction processing network.

Under the contract, Datawest

provided installation, project

management and training of

personnel during the on-site

implementation of ConCentre in

Mumbai and also monitors the 150

ATMs and the connections of ISC’s

10 member banks. Datawest

Solutions Inc. has also sold its

proprietary ATM network monitoring

system to IDBI Bank Ltd. in India. In

2002, Surrey-based Serebra Learning

Corporation, a provider of e-learning

software, signed a franchise

agreement with India-based Indata

Com Pvt Ltd. through which Serebra

will provide key e-learning solutions

to the Indian education sector.

Indata will use Serebra’s courses as

well as its Serebra.Net Hosted

Learning Management Solution in

order to produce teaching packages

on IT skills and improve training

offered to students in India.

Engineering Consulting Services

Engineering consulting services are

also an important element of

services activity by BC-based firms in

India. Surrey-based Aplin & Martin

Consultants Ltd. was contracted to

provide a master plan schematic

design and design development for

a new upscale, state-of-the-art

10,000 population township in

Haryana state. The firm was also

contracted to provide project

management and engineering

services for the town’s wastewater

treatment facility. In 2003,

Vancouver-based AldrichPears

Associates, along with its

consortium partners, received

funding from the Canadian

International Development Agency’s

Industrial Cooperation Program to

undertake a feasibility study to

provide professional services to

Pushpa Gujral Science City project in

Punjab. Vancouver-based IPCS

International, a project management

and marketing company, led the

Canadian consortium for an initial

concept-planning workshop in

Chandigarh to support the Punjab

government’s initiative to develop a

world-class Science Centre.

AldrichPears provides planning and

creative services for museums, science

centres and interpretive centres.

Vancouver-based CMC Engineering

and Management Ltd. has extensive

Information and

Communications Technology

There are several BC-based ICT firms

involved in India-related services

activities. On the outsourcing side,

Vancouver-based Pivotal Corporation

established its development centre in

Bangalore in 2002, as noted. Pivotal’s

first entré into the India market was in

partnership with GrapeCity Inc., a

Noida-based systems integrator.

Vancouver-based Momentum

Technologies, Inc. (recently acquired

by UK-based Newell & Budge)

established its development centre in

Noida in 2000.

In the wireless sector, Vancouver-

based Sierra Wireless, Inc. announced

in June 2004 that it had selected

Adino Telecom Limited, India’s

premier broadband solutions

company, to distribute the AirCard

750 wide area wireless PC Card and

the MP 750 GPS modem, for use on

GSM (Global System for Mobile

Communication) and GPRS (General

Packet Radio Services) networks, and

the new AirCard 775 PC Card for

EDGE (Enhanced Data rates for Global

Evolution) networks, to customers in

India. This agreement marked Sierra

Wireless’ first entry into the Indian

market. Subsequently, Sierra Wireless

also announced an agreement with

Tirumala Seven Hill Pvt Ltd. to

distribute its AirCard 555 wide area

wireless network card to enterprises in

remote areas in India. Richmond-

based Empower Technologies, Inc.

signed a distribution agreement with

India’s Experience Wireless Fidelity for

distribution of Empower’s PowerPlay

series of PDAs and upcoming mobile

smart communication devices. In

2002, Vancouver-based IntraCoastal

System Engineering Corporation

signed an agreement with Wireless

Nova of Mumbai to install automatic

7

experience in India dealing with

foodgrains production, storage,

handling, transport, distribution

and value-added processing. In

2003, the company signed a

Memorandum of Understanding

with India’s Central Ware Housing

Corporation (CWC) under the

Ministry of Consumer Affairs, Food

and Public Distribution for the

construction of modern cold

storages for various agricultural and

poultry products and studies and

design adaptations in technology

for the construction of a cold

corridor from Jammu and Kashmir

and Himachal Pradesh to Mumbai.

The cold corridor is part of the

Indian government’s plan to

preserve horticultural and

agricultural products for export.

Toronto-based Lea Consulting Ltd.

specializes in transportation and

urban infrastructure projects with

an emphasis on transportation

planning, traffic operations, and

highway, bridge and municipal

design. With a major office in

Vancouver, Lea Consulting Ltd.

established Lea Associates South

Asia Ltd. (LASA) in 1993. LASA has

won over 100 projects in various

disciplines across India and now

has 15 branch offices covering

almost every major city in India and

a total staff strength of 520

employees in India.

Another Vancouver-based firm that

has undertaken considerable

engineering consulting work in India

DELIVERING ENGINEERING SERVICES IN THE INDIAN MARKET:

EXPERIENCES OF LEA INTERNATIONAL, LTD.

Established in 1993, Lea Associates South Asia Pvt. Ltd. (LASA), part of the Canada-based LEA Group of

Companies, is an infrastructure development and management consultancy firm. LASA provides specialized

services in highway planning, engineering, design and supervision; traffic engineering and transportation

planning; bridge and structural engineering, design and supervision; environmental and social planning and

engineering; urban, regional and tourism development and planning; irrigation and water resource management;

and training and technology transfer.

LASA is headquartered in New Delhi and has branch offices in almost every major city in India. An example of

services delivered by LASA includes its recently completed Strategic Options Study (SOS) for the state of Gujarat.

As the result of the massive earthquake in Gujarat on January 6, 2001, LASA was awarded a contract, funded by

the World Bank, to carry out services such as assessment of existing bridges, ranking of bridges, detailed

topographical survey and sub-soil investigation, preparation of detail design/drawings, finalization of repair and

rehabilitation strategy, preparation of BOQ, specifications, cost estimation and bid documents. LASA has also

been actively involved in a complex tourism project in the state of Kerala, which required the balancing of the

development of tourism along with ecology, fishing and the environment.

LASA considers its entry into India in 1993 and its continued commitment to quality as its biggest strengths in the

market. Since India is a vast market and its infrastructure resources have been stretched to the limit, there is

considerable need for improvement. LASA foresees huge opportunities for itself in road infrastructure

development and it also expects opportunities in the railway and general infrastructure development sectors.

LASA considers its commitment to quality as its primary strategy for its future and current success. LASA invests

substantial time in evaluating a project to determine its feasibility and quality commitment from the client before

agreeing to work on a project. The firm’s project offices in India are the most important and critical avenue of

service delivery. LASA also undertakes numerous programs to train its customers by bringing them to Canada.

CASE STUDY 1

8

is ND Lea Consulting Ltd. With

offices in Kamloops and Williams

Lake, ND Lea specializes in

management, planning and design

of transportation infrastructure,

urban development and

environmental assessments. In India,

the firm has undertaken several

projects in the roads sector including

work for the Asian Development

Bank, the states of Gujarat and

Madhya Pradesh and a wide variety

of feasibility studies, particularly for

the key Faizabad-Noida-Ghaziabad

expressway.

Environmental Goods

and Services

An important sector for BC-based

SMEs in the India market will

continue to be environmental

services with several BC firms

engaged on a variety of projects in

India. Victoria-based Hydroxyl

Systems Inc. has provided its

offering of full spectrum wastewater

services including scientific

investigation, in-house treatability

testing, design and construction.

North Vancouver-based Aqua-Guard

Spill Response Inc. and Richmond-

based Versatech Products Inc.

provide a complete range of oil spill

containment and oil spill recovery

equipment. These offerings have

been sold in the Indian market.

There are also several BC-based

environmental consulting firms that

have engaged in contract work in

India. These include: EVS

Environment Consultants Ltd.

(engaged in environmental policy

consulting work with the

Confederation of Indian Industries as

part of a Canadian International

Development Agency project), and

PN Enterprises Ltd. (waste

management services).

There is also significant potential in

the India market in the area of clean

energy. As noted, Vancouver-based

Cummins Westport, Inc. has begun

manufacturing its natural gas engines

in India. Vancouver-based Palcan

Power Systems, a developer and

manufacturer of proton exchange

membrane fuel cell systems under 5

kilowatts, sold its hydrogen storage

systems in 2004 to Bharat Petroleum

Corp Ltd. to be tested by Bharat

Petroleum Corp. in three-wheel and

small vehicle configurations. Questair

Technologies, Inc. and Ballard Power

Systems are actively looking at

entering the Indian market with

distribution and joint venture

agreements. In 2000, BC Hydro

International entered into an alliance

with DSCL Energy Services Company

of India to work on energy

conservation projects. DSCL Energy is

a division of DCM Shriram

Consolidated. The alliance began with

projects in the building sectors,

specifically hotel, hospital, and

commercial complexes, and now

works on projects in the power-

intensive paper and sugar industries.

INVESTMENT

Like services data, there are no

official investment data at the

provincial level available. On a

Canada-wide basis, the total stock

of Canadian direct investment in

India in 2004 was $251 million

while the stock of Indian direct

investment in Canada was $62

million. Like statistics on trade in

services, these estimates of FDI

underestimate the total stock of

Canadian (and BC) investment in

India. By Indian accounts, total

approved FDI in India from Canada

from 1991 to 2003 was Rs. 28.8

billion or $834 million. Therefore,

the broadest estimates of Canadian

FDI in India are likely between $251

million and $834 million.

It is important here to provide some

context on FDI definitions used by

Statistics Canada and how these might

have an impact on recorded BC

investments in India. Statistics Canada

applies internationally accepted

definitions of FDI. There are two

significant elements to this definition.

First, is the 10% rule — if a Canadian

firm has ownership of at least 10% of

the voting equity in an Indian firm,

then the FDI relationship is recorded in

Canada’s balance of payments

statistics. The second element is the

book value rule — Canadian direct

investment abroad is measured from

the books of the associated firm and

not from the books of the Canadian

investing firm.

While these definitions are commonly

applied internationally, they do create

perverse FDI statistics. For example,

Canada’s FDI stock in Barbados in

2002 was $23.9 billion — 2½ times

Canada’s FDI stock in Germany and

Japan, 1½ times Canada’s FDI stock in

the entire continent of Asia, 36 times

Canada’s FDI stock in China and 166

times Canada’s FDI stock in India,

probably because of the 10% rule. On

the Indian side, proposed FDI

approvals from the Sub-Saharan

African country of Mauritius were four

times larger than approvals from

Germany, three times larger than

approvals from Japan, and 12 times

larger than approvals from Canada.

This is likely due to the book value

rule. In fact, if we go by Indian

approval data, Mauritius was the

second-largest source of FDI in India

by a wide margin!

To get at the current state of play,

APF Canada was contracted by

9

International Trade Canada to take a

closer look at Canadian Investments

in India. In that study, we estimated

that for a very limited sample of only

43 Canadian firms, total Canadian

FDI stock in India was $284 million. It

should be noted that our sample of

firms did not include some significant

Canadian investors, particularly in the

oil and gas, telecommunications and

health care sectors.

Further, we were able to obtain

Foreign Investment Promotion Bureau

data on the basis of approvals by

company for Canadian (and BC) firms

invested in India between 1999 and

2003. As can be seen from Table 4,

the total approved Canadian FDI in

India between 1999 and 2003 was

$216 million. Investments in the ICT

sector accounted for the largest

chunk at $121 million or 56% of

approved investments. It is interesting

to note that FDI approvals in the

health care and transportation sectors

were larger than in financial services.

This is likely because Indian FDI

approval data does not account for

reinvested earnings and short- and

long-term claims of foreign investors

that tend to be a large component of

investments by financial services firms.

Also noteworthy is that there were no

approvals of FDI in the oil and gas

sector which we believe from

anecdotal evidence is not accurate.

The one important conclusion from

this approval data is that Canada’s

FDI stock in India in the ITC sector is

likely much larger than indicated by

official Canadian statistics. The stock

of FDI in the IT sector was a tiny $4

million by official measures (in 2003).

However, the FDI approvals data

suggests that the likely figure is at

least an order of magnitude larger.

Table 5 shows investment approvals in

India by Canadian province. BC’s share

of Canadian investment was 12.9% or

$28 million in 2003. The top

destination of intended investments by

BC firms in India was New Delhi ($21.5

million by the Verus Group in the

transportation infrastructure and

services sector). This is followed by the

mining sector at $4.9 million. We note

that important investments by BC firms

that we know established operations in

India after 1999 are not included in

this FDI listing (e.g., Pivotal Corp.,

Momentum Technologies).

TABLE 4 CANADIAN FDI APPROVALS IN INDIA, 1999-2003 (IN 2003 $)*

Sector # of FDI Share of

suppliers ($M) total, %

Advanced Manufacturing Technologies 11 1.96 0.9

Aerospace & Defence 1 0.08 0.04

Agriculture & Food Products 3 0.27 0.1

Consulting Services 4 0.72 0.3

Consumer Products - - -

Drugs, Pharmaceuticals & Health Care 4 37.1 17.2

Electric Power Equipment & Services - - -

Environmental Goods & Services 3 0.08 0.04

Housing & Building Products 2 0.06 0.03

Information & Communications Technology 16 121 56.0

Insurance, Banking & Financial Services 3 18.8 8.7

Mining, Minerals Equipment & Services 8 10.2 4.7

Oil & Natural Gas - - -

Transportation Infrastructure & Services 2 21.6 10.0

Other 22 4.0 1.8

Total 79 215.9 100.0

* Figures are based on approval data only and do not include reinvested earnings, short-

and long-term claims and exits from the Indian market. Data includes FIPB approvals for

1998. Exchange rate: 1 Indian Rupee = $0.02863 as at December 30, 2003.

Source: Asia Pacific Foundation of Canada

TABLE 5 INDIAN FDI APPROVALS OF BC-BASED COMPANIES, 1999-2003 (2003 $)

Name of Firm Destination in India Sector $

Proam Explorations Private Ltd. Chennai Mining, Minerals

Equipment & Services $42,945

Can Achieve Consultings Ltd. New Delhi Consulting Services $715,750

S.C.S. Solar Computing Systems Inc., New Delhi ICT $35,215

M/S Meridian Peak Resources New Delhi Mining $2,175,880

Verus Group, Canada. New Delhi Transportation $21,544,075

Pebble Creek Resources Ltd., Canada Pithoragarh (Uttar Pradesh) Mining $254,807

Kryton Holdings Inc, Canada Rewari (Haryana) Other $239,919

BHP World Exploration Inc, Canada Mining $2,462,180

Source: Foreign Investment Promotion Bureau (FIPB), 1999 – 2003 data.

10

IMMIGRATION

According to the 2001 Census, India

was the third largest source of

immigrants to British Columbia after

the United Kingdom and Mainland

China. In 2001, BC was home to

92,430 immigrants from India or

about 29% of the 315,000

immigrants who had come to

Canada from India. It is significant

that 77% of these immigrants to BC

from India arrived after 1990.

Immigrants from the Punjab state

are the main source of Indian

immigrants to BC. In fact, British

Columbia is home to the largest

Punjabi-speaking community in the

country (see Chart 2). Punjabi-

speakers were the third-largest

community after English-speakers

and Chinese-speakers in the

province.

One of the important effects of the

high-level of immigrants from India to

BC is the significant development of

education services in BC catered to the

needs of Indo-Canadian students. In

the coming years, we expect to see a

number of university colleges and

other institutions actively establish

programs in India and/or recruit

Indian students to attend BC

institutions. Abbotsford-based

University College of the Fraser Valley

(UCFV) will be offering its Applied

Business Administration degrees at

Punjab University in Chandigarh

starting in September 2006. Students

enrolled in the Business

Administration program have the

option of completing the entire

program at Punjab University or

complete the first two years in

Chandigarh and finish the program at

UCFV or at other Canadian

institutions. UCFV also signed an

agreement with Punjab University in

November 2004 to establish a

Canadian Studies Centre where both

institutions would collaborate in

research and promote faculty

exchanges. In addition, Kwantlen

University College, the British Columbia

Institute of Technology (BCIT), and

Malaspina University College all have

active recruitment efforts in the India

market and undertake coursework for

students in India.

In 2001, the Vancouver Film School

(VFS) announced that it signed a

joint venture agreement with

India’s Modi Enterprises to open a

school in Mumbai. According to

that announcement, the nine full-

time programs and 60 part time

programs of VFS focus on

industries that use moving images,

graphics, sound and text as

fundamental components for

communicating information and

story. The Modi VFS Institute

planned to offer courses in new

media and 3D animation. It is not

clear whether this project is

currently underway.

It is also noteworthy that for the

immigrants from India who arrived

in BC in the last decade, more than

80% were in the Family Class (see

Chart 3). Skilled workers and

business category immigrants to BC

made up 15.3% and 0.8%

respectively of immigrants from

India to BC in the past decade

(1994-2004).

CHART 2 BC IS HOME TO THE LARGEST PUNJABI COMMUNITY IN CANADA

Source: Detailed Mother Tongue. Ottawa: Statistics Canada. 2001 Census of Canada.

Catalogue number 97F0007XCB01001. 11 December 2002.

<http://www12.statcan.ca/english/census01/products/standard/themes/index.cfm>.

40,000

0

80,000

120,000

160,000

Ontario Alberta Quebec ManitobaBC

(121,740)(110,545)

(22,540)(9,900) (5,415)

CHART 3 INDIAN IMMIGRANTS TO BC BY CATEGORY

Percent

80

60

40

20

0

Source: Citizenship and Immigration Canada (2005).

100

1994 1996 1998 2000 2002 2004

Other

Family Class

Business

Skilled Workers

11

3. SECTORALOPPORTUNITIESFOR BC BUSINESS

FOREST PRODUCTS

India’s per capita consumption of

paper is around 4.00 kg, which is

one of the lowest in the world. With

the expected increase in literacy rates

and continued growth of the

economy, an increase in per capita

consumption of paper is expected in

the medium- and long-term. The

demand for upstream market paper

products, like, tissue paper, tea bags,

filter paper, light weight online

coated paper, medical grade coated

paper, etc., is also growing rapidly.

Further, the associated services

related to the paper industry are

SECONDARY WOOD PRODUCTS MARKET IN INDIA: The role of BC Wood Specialty Group

BC Wood is a not-for-profit trade association dedicated to growing British Columbia’s secondary wood-products

manufacturing industry. Established in 1989 as a partnership between industry and government, BC Wood

provides marketing programs to over 600 registered value-added manufacturers, which includes cost-shared

participation in international tradeshows and events, out-going and incoming trade missions, lead generation

through the World Wide Inquiry System (WWIS) and networking opportunities.

BC Wood’s India program is focused on three major cities — Mumbai, Bangalore and Delhi. BC Wood’s business

strategy is to focus on making successful introductions of “Made in BC” finished wood products by supporting its

members in trade shows and by facilitating inquiries from Indian industry.

In 2003, as part of a project contracted to APF Canada, we interviewed Bill Downing — CEO at BC Wood — on the

opportunities and constraints faced by BC forest products firms in the India market. According to Mr. Downing, BC

firms wanting to engage in the secondary wood products market in India face stiff competition from low-value

Chinese producers and high value European manufacturers. On the regulatory side, India’s high import tariffs on

finished wood products and its multi-layered bureaucracy continue to remain a problem for BC-based firms. As an

example of this regulatory issue, the container carrying BC Wood’s Lifestyle Showcase, which was shipped to India

late 2002 was not released until mid-2003 — a significant delay for BC Wood’s marketing campaign in India.

In terms of business practices, brand familiarity with BC wood products was rated by Mr. Downing as the number

one factor restricting BC value-added wood exports into the Indian market. Finding reliable partners was also

rated high as a constraint to continued operations in India.

CASE STUDY 2

likely to see an upswing in India as

Indian manufacturers ramp up

production. Vancouver-based

Sandwell Engineering, Inc. is

currently performing a detailed study

for the planned expansion and

modernization of the Nagaon and

Cachar paper mills operated by

Hindustan Paper Corporation (HPC).

Despite these growing opportunities,

due to India’s high tariff rates for

value-added paper and wood

products, we expect that primary

wood products will continue to

dominate the BC merchandise

trading relationship with India in the

short- to medium- term. Further,

because of the high degree of

fragmentation and commoditization

in the global paper and pulp

industry, the highly cyclical nature of

supply and demand, and multiple

distribution steps in the supply chain,

almost all BC exporters rely on

representatives in the region that are

responsible for sourcing raw

materials and have extensive industry

contacts on the demand side.

Therefore, while we can expect

demand to be cyclical, the relative

ranking of BC wood product

exporters to India is not likely to

change dramatically.

Besides newsprint and wood pulp,

Canadian secondary forest product

firms are increasingly looking at the

Indian market for sales of various

types of value-added wood products.

12

The BC Wood Specialty Group — a

public-private partnership is a

dedicated resource to provide

market information and assistance

to BC wood products firms looking

to enter the lucrative but

competitive Indian wood products

sector. Cascadia Forest Products Ltd.

(which was established as a result of

Brascan Corporation’s May 2005

acquisition from Weyerhaeuser of

certain assets) and Coast Clear

Wood Ltd. (a division of the Probyn

Group which has Tom Sundher — a

principal at LS Sundher Ltd.— as its

general manager) are thought to

have sold value-added wood

products to India in the recent past.

Here too, however, interviews

revealed a number of constraints

facing BC value-added wood

exporters in the Indian market. As we

show in the Case Study on the

previous page, India’s high tariff

rates for value-added wood products,

the emphasis of BC industry on

softwood (rather than hardwood

which is popular in India), and lack of

brand equity are all important

constraints for BC value-added wood

exporters in the Indian market.

MINING, MINERALS AND FUELS

A review of recent mineral forecasts

by BC-based mining firms point to

the expectation that rising demand

for minerals from India (and China)

together with supply constraints will

continue to benefit BC firms engaged

in non-ferrous metal and mineral

mining in BC. However, the most

important positive impact will likely

be indirect price effects. More

significantly, there are some

structural constraints in the Indian

mining sector that spell opportunity

for BC-based firms. Most Indian

mines have very little automation and

this restricts the quantity and quality

of ore produced. Further, supportive

infrastructure for a growing metals

industry — such as roads, logistics,

ports, etc. — is sorely lacking.

A number of BC-based firms are

engaged in the mining sector in India

both on the exploration side and in

providing mining-related services. On

the exploration side, Pebble Creek

Resources, Ltd. has been long

engaged in the India market through

its Indian subsidiary, Adi Gold Mining

Private Limited, which holds 100% of

mineral rights covering the Askot

deposit of copper, gold, silver, zinc

and lead in Uttaranchal State in

Northern India. North Vancouver-

based Proam Explorations Corp. has

also invested in India, in Chennai, for

mineral exploration rights in Tamil

Nadu, Andhra Pradesh, Madhya

Pradesh and Kerala states. Other

firms involved in mining exploration

in India include Meridian Peak

Resources Corp. and BHP World

Explorations, Inc. (while BHP Billiton

is an Australian company, BHP’s

Indian venture is recorded in Indian

approval data as a Canadian

investment out of Vancouver).

Vancouver-based Golden Patriot

Mining Inc. announced the signing of

an agreement with Binani Industries

Ltd. and RBG Minerals Industries Ltd.,

for the development of the Ambaji

copper-zinc-lead project located in

the states of Rajasthan and Gujarat

in 2004. Under this agreement,

Golden Patriot will have the right to

earn a 32.5% interest in the Ambaji

project. Its equity contribution will

amount to US$3.7 million, and it must

identify and arrange US$11.6 million in

debt financing for the project.

In addition to these exploration

companies, BC-based firms have also

benefited from mining-related goods

and services demand from India.

Langley-based Knelson Concentrators

produces a wide array of precious

metals processing equipment that

has been sold in the Indian market.

Richmond-based Seabulk Systems

Inc. installed a self-unloading sea

bulk transhipper in Marmagao, Goa,

where it is being used to transfer iron

ore into cape size ocean-going

vessels. Delta-based Westcoast

Drilling Supplies Ltd. has also

supplied the Indian oil and gas

exploration market with drilling

fluids, equipment, and accessories.

13

4. CHALLENGES

AND PROSPECTS

India represents an increasingly

important market for BC and this

market is bound to grow in the

medium- to long-term. While BC

merchandise exports to India have

been dominated by forest products

and mineral ores, our past analyses

have shown that official trade data

do not effectively capture the

dynamic nature of Canadian business

activity in India. The same is the case

for commercial activity by BC-based

firms in India. In Annex 1 we provide

a listing of about 80 BC-based firms

and institutions that have been

involved in India-related trade and

investment, including some of BC’s

largest and most dynamic firms. The

implication of our analysis is that BC-

based firms are fully aware of India’s

market potential and have taken

steps to ensure that they tap into this

opportunity.

At the same time, an analysis of

current business activity may not

reveal future potential areas in which

BC-based firms can participate in

India’s growth. Here, we identify

three sectors in which we feel that

there may be further potential for

BC-based firms to engage in the

India market.

TELECOMMUNICATIONS

By 2010, India’s investment

requirement in its telecom sector is

estimated to be around US$ 70

billion. The stated objective of India’s

National Telecom Policy is to increase

India’s tele-density to 15% by 2010

(from the current 7% land-line

density and 3.5% mobile density).

This translates roughly into

infrastructure and service

requirements for an additional 90

million land-lines and mobile

subscribers in the next five years.

Growth in the mobile telephone

market and investments by India’s

business process outsourcing (BPO)

industry catered to the telecom

industry will be particularly rapid.

India will soon be the third-largest

mobile phone market in the world.

The total mobile subscriber base in

India touched 43.3 million in May

2005 according to the Cellular

Operators Association of India

(COAI) with 1.3-1.5 million new

subscribers signed up each month.

At present, the Indian market is

ranked sixth after US, Britain,

Germany, China and Japan.

Responding to this large investment

and demand requirements, India has

increased the FDI limit in the telecom

sector to 74% from 49%. Mergers

and acquisitions in

telecommunications are expected to

gather momentum after the

government’s decision to hike FDI

caps and the likely sale of Reliance

InfoComm, India’s largest GSM

operator. In practice, many telecom

operators actually have 74% overseas

equity since India already allowed

49% direct foreign stake and another

25% through a complex holding-

company route. Import duties

totaling 15% on mobile switching

centres were eliminated in last year’s

budget and specified items used in

the manufacture of mobile handsets

have also been exempted from

import duties.

Pending regulatory changes will

further encourage increasing

domestic and foreign investment in

this sector. On the demand side, the

telecom industry lobbied hard for the

recommendations of Telecom

Regulatory Authority of India (TRAI)

last year to reduce charges on

domestic leased lines by as much as

62%, in order to boost Internet and

broadband usage in India. On the

supply side, the telecom industry

welcomed the government’s move to

slash licence fees for national telecom

infrastructure providers to 6% of

their gross revenues from the

previous 15%. The hotly competitive

telecom sector is heavily taxed by the

government, which collects close to a

third of the industry’s revenue as

various taxes, including permit and

spectrum costs. These changes are

expected to boost demand for

telecom services.

As noted, there are several BC-based

firms engaged in this sector that will

likely see increased demand for their

goods and services, including Sierra

Wireless, Empower Technologies and

IntraCoastal System Engineering

Corporation. However, the sheer size

of demand and growth in India’s

telecom space provides significant

opportunities for firms ranging from

systems integrators to software

developers to hardware

manufacturers to invest in and supply

the Indian telecom market. Simply

put, the list of BC-firms engaged in

this sector needs to be much longer.

ENTERTAINMENT

When one thinks of India, Bollywood

is as much an icon of India’s image

overseas as the Taj Mahal or the

Bengal tiger. India leads the world in

the output of movies, with more

than 800 produced annually. These

films command a religious following

within India and are increasingly

becoming popular abroad,

particularly in West Asia, Europe and

North America. But the

entertainment sector in India is much

14

larger than just films and the highest

growth potential exists in emerging

sectors like television and animation

in which BC-based firms are

considered to be industry leaders.

In 2003, revenue of the Indian

entertainment industry grew by 15%

to an estimated US$4.3 billion.

According to a study by Ernst &

Young, revenues in India’s

entertainment sector are projected to

increase by over 120% by 2008 with

some of the largest increases

occurring in the film (124%) and

television (124%) segments.

Underlying this growth are some key

trends that bode well for BC

companies and institutions.

The way in which Bollywood films

and Indian television is funded has

changed significantly since the first

Indian movie was filmed in 1896.

Long the domain of India’s

underworld, there is a significant

trend toward new and transparent

sources of financing. These include

equity financing; financing by cable

and satellite television networks;

venture capital financing; financing

by foreign institutional investors

(including Canadian); and film

insurance. One of the first foreign

financing arrangements in the Indian

entertainment industry was the

Caisse de dépôt et placement du

Québec’s (CDPQ) 31% equity stake in

UTV two-and-a-half years ago valued

at US$ 9.4 million. UTV is considered

to be a leader in the Indian

entertainment sector and is involved

in TV content, movies, and

animation.

This move toward corporatization of

India’s film and television segments

has led to other important trends

that will continue to have an impact

on BC suppliers and investors. One of

these is the so-called “multiplex

phenomenon.” Starting with one

multiplex in Delhi in 1997, it is

estimated that there are now over

115 multiplexes in India today with

another 45 planned for the years to

come. Feeding into this trend is a

Canadian firm, the IMAX

Corporation, that expects six IMAX

theatres to be open in India by 2006.

In April 2003, IMAX signed an

agreement for three theatres which

represented the largest international

multiple theatre deal that IMAX has

made in the last three years.

Another trend that will have an

impact on BC firms is the advent of

digital technology for the projection

of films in theatres. In 2002, the

Indian government reduced the basic

duty on certain studio equipment

following which it is estimated that

roughly 90 cinemas have been

converted to digital projection. Digital

projection provides distributors faster

time to market, a wider release of

films, anti-piracy technology and

significantly lower costs.

A final trend that will have an impact

on Canadian firms and educational

institutions is in India’s high growth

animation sector. A recent survey by

India’s National Association of

Software and Service Companies

(NASSCOM) suggests that the size of

the Indian animation industry is only

about US$500 million with an

estimated 3,000 trained animators.

This can be compared to an estimated

40,000 trained animators in South

Korea and the Philippines and about

8,000 trained animators in China.

As Indian animation houses begin to

evolve from the traditional model of

low-value added outsourced

animation work to animation co-

production, they will be looking for

established international partners

and trained technicians capable of

delivering creative animation services

to international standards. Here

again, BC is at the leading edge. Not

only is Canada’s co-production

framework viewed as an opportunity

by Indian industry analysts; BC’s

animation educational institutions

are highly regarded in India and

around the world. Our industry

analysis suggests that a number of

educational institutions are actively

looking at establishing partnerships

with Indian institutions to deliver

animation training in India. An active

and sustained BC government-

industry-educational institution

collaboration in the animation sector

will yield significant dividends for

BC’s commercial ties in a fast-

growing sector of the Indian market.

BIOTECHNOLOGY

If trade shows, industry reports, and

newspaper articles are any indication

of growth prospects, India’s nascent

biotechnology sector is at the cusp of

what has been described by many as

India’s “gene revolution.” According

to a report published recently by

India’s Association of Biotechnology

Led Enterprises (ABLE), the

biotechnology sector in India

achieved a 39% growth rate in 2003-

04 with a turnover of US$700

million. This finding is confirmed by

Ernst & Young’s 2004 Global

Biotechnology Report in which

analysts expect India’s biotechnology

sector to register US$5 billion in

annual revenues by 2010.

The Indian biotech industry is

expected to cross the psychological

US$1 billion mark in 2004-05.

Biopharma continues to be the

15

largest sub-sector within India’s

biotech industry, with 76% of total

sales. Bio-services was the next

biggest segment (8%), followed by

bio-industrials (8%), bio-agriculture

(5.5%) and bio-informatics (2.5%).

Industry sources suggest that Indian

biotechnology firms have the

potential to follow in the footsteps

of India’s IT firms to become the

next growth engine for Indian

exports. For example, Indian firms

were responsible for submitting

nearly 21% (73 of 350) of all

abbreviated new drug application to

the US Food and Drug

Administration (FDA) last year.

Indian companies also accounted for

25% of submission to FDA’s Drug

Master File (DMF) in the fourth

quarter of 2003. DMF approval is a

prerequisite for exporting a drug to

the US, providing details about a

company’s facilities for

manufacturing, processing and

storing drugs. India also has 70

FDA-approved plants and 200

manufacturing facilities certified as

having good manufacturing

practices, more than any other

country outside the US.

To be sure, there are three

important secular trends taking

shape in India that point toward an

increasing role for the country in the

global biotechnology value chain.

First, India is gradually building the

critical mass in terms of the human

capital crucial for this sector. It has a

large scientific talent pool of some

15,000 bio-scientists employed in 40

National Research Laboratories.

Further, it has 300 college-level

institutes offering degrees and

diplomas in biotechnology, bio-

informatics and the biological

sciences.

Second, India has a relatively low

cost base. Salaries of skilled

professionals and PhDs are as much

as 90% lower in India than in the US.

This low cost base has a particularly

important impact on the cost of drug

development, which is largely

attributable to the expense of

conducting clinical trials and

research. Here, Indian Clinical

Research Organizations (CROs) have

been actively developing partnerships

with global pharmaceutical firms in

anticipation of policy changes that

will enable clinical trials to be carried

out in India on equivalent lines to

those conducted elsewhere.

Third, the Indian biotech sector is

poised to benefit from some

significant regulatory changes

currently underway in this sector. The

recently announced Foreign Trade

Policy provides for the setting up of

Biotechnology Parks (BTPs) across the

country. Firms located in these parks

would have the advantage of being

treated as Export-Oriented Units and

would be exempt from paying the

service tax (which was raised to 10%

in the most recent budget).

Biotechnology firms in these parks

would also be eligible to import

capital equipment on a self-

certification basis, and biotech

exporters with a minimum turnover

of about US$1 million and a good

track record are exempted from

showing bank guarantees. Further,

changes in clinical trial regulatory

policies are promoting, in one

executive’s words, a “clinical research

culture” in India. These include:

regulatory changes to promote Good

Clinical Practice training, removal of

India’s import duties for clinical-trial

related equipment, freeing of

restriction on simultaneous global

clinical trials, and speedy study start-

up times. To address lengthy study

approval times, India’s Drug

Controller General, a division of the

Ministry of Health is also streamlining

its trial approval process.

What this means for BC-based

biotech firms is that India offers not

only a market for exports of

pharmaceutical products but a

source to reduce costs involved in

drug research and development. Few

BC-based biotech firms have yet

looked at the Indian market in this

manner, and again, focusing on this

sector will be an important strategic

issue for the province in its efforts to

promote BC as a knowledge

economy.

16

ANNEX 1: BRITISH COLUMBIA COMPANIES ACTIVE IN INDIA

COMPANY NAME CORPORATE HQ LOCATION INDUSTRY SECTOR

� Global Fruits Inc. Davao City, Philippines Agriculture - Fruits

� Okanagan Similkameen Cooperative Growers Oliver Agriculture - Fruits

� Intrusion Prepakt BC Ltd. Mission AMT

� Kryton Holdings, Inc. Vancouver AMT

� Ram-Pac Industries Ltd New Berlin, Wisconsin AMT

� Power Measurement, Ltd. Saanichton AMT— Energy Management

� Cummins Westport, Inc. Vancouver AMT— Engines

� Ebco Industries Ltd. Richmond AMT— Equipment

� Minaean International Corporation Surrey AMT— Housing/Construction

� Applied Microsystems Ltd. Sidney AMT— Marine Instrumentation

� ComNav Marine Ltd. Richmond AMT— Marine Instrumentation

� Knelson Concentrators Langley AMT— Metal Processing Technology

� Interwrap Industries Corp. Mission AMT— Packaging Solutions

� Spectrum Signal Processing Inc. Burnaby AMT— Wireless Networks

� Cranberry Construction Services Ltd Powell River Construction

� Pacific Institute of Holistic Living Vancouver Consulting

� TTA Technology Training Associates Ltd Vancouver Consulting — Human Resources

� Campbell AgriBusiness Strategists Vancouver Consulting — Management

� Maradadi Pacific Powell River Diversified

� Canadian International College North Vancouver Education Services

� Kwantlen University College Surrey Education Services

� Malaspina University College Nanaimo Education Services

� School District #42 (Maple Ridge – Pitt Medows) Maple Ridge Education Services

� University College of the Fraser Valley Abbotsford Education Services

� Vancouver Community College Vancouver Education Services

� Terasen Inc. Vancouver Energy

� AldrichPears Associates Vancouver Engineering Consulting Services

� Aplin & Martin Consultants Ltd Surrey Engineering Consulting Services

� CMC Engineering Group Vancouver Engineering Consulting Services

� Lea International, Ltd. Toronto/Vancouver Engineering Consulting Services

� ND Lea Consulting Ltd. Vancouver Engineering Consulting Services

� Sandwell Engineering, Inc. Vancouver Engineering Consulting Services

� Seabulk Systems, Inc. Richmond Engineering Consulting Services

� Trow Consulting Engineering Ltd Burnaby Engineering Consulting Services

� Aqua-Guard Spill Response Inc. North Vancouver Environmental Goods & Services

� EVS Environment Consultants Ltd North Vancouver Environmental Goods & Services

� Hydroxyl Systems Inc. Victoria Environmental Goods & Services

� NORAM Engineering & Constructors Ltd. Vancouver Environmental Goods & Services

� PN Enterprises Ltd. Surrey Environmental Goods & Services

� Versatech Products Inc. Richmond Environmental Goods & Services

� Rogers Foods Ltd. Armstrong Food — Consumer Goods

� Abitibi-Consolidated Inc. Montreal Forest Products

� Canfor Corporation Vancouver Forest Products

� Cascadia Forest Products Ltd. Vancouver Forest Products

� Coast Clear Wood Ltd. New Westminster Forest Products

� Howe Sound Pulp & Paper Ltd. Port Mellon Forest Products

17

ANNEX 1:

� Norske Skog Lysaker, Norway Forest Products

� West Fraser Timber Co. Ltd. Vancouver Forest Products

� Weyerhaeuser Company Federal Way, Washington— USA Forest Products

� Ansatel Communications Inc. Vancouver ICT — Telecommunications

� Sierra Systems Group, Inc. Vancouver ICT— Consulting

� Momentum Technologies Vancouver ICT— Outsourcing

� Pivotal Corporation Vancouver ICT— Outsourcing

� Datawest Solutions Inc Vancouver ICT— Software

� S.C.S. Solars Computing Systems Inc. Portland, Oregon— USA / Vancouver ICT— Software

� Midnet (Canada), Inc. Reno, Nevada / Vancouver ICT— Telecommunications

� Empower Technologies, Inc. Richmond ICT— Wireless

� Sierra Wireless, Inc. Richmond ICT— Wireless

� Can Achieve Consultants Ltd. Vancouver Immigration Consulting

� Royal Indian Raj International Corp Vancouver Infrastructure Technology

� Borden Ladner Gervais Vancouver Legal Services

� BHP World Exploration Inc. Vancouver Mining

� Golden Patriot Mining, Inc. Vancouver Mining

� Meridian Peak Resources Corp. Vancouver Mining

� Proam Explorations Corporation North Vancouver Mining

� Teck-Cominco Vancouver Mining— Copper

� Pebble Creek Resources Ltd. Vancouver Mining— Exploration

� Westcoast Drilling Supplies Ltd. Delta Oil & Gas

� International Play Company, Inc. Langley Other (Play Structures)

� Singh, Abrahams and Joomratty (SAJ) Surrey Other Services (Legal)

� Syndel Laboratories, Inc. Vancouver Pharmaceuticals and Animal Health Products

� IPCS International Inc Surrey Project Management and Marketing

� Quester Tangent Sidney Transportation Infrastructure & Services

� Verus Group Vancouver Transportation Infrastructure & Services

� Uniglobe Travel (International) Inc. Vancouver Travel Services

ANNEX 2: BUSINESS-FOCUSED INDIA-CANADA ORGANIZATIONS IN BC

ASSOCIATION NAME CONTACT PHONE

� Canada India Business Council (BC Chapter) Valli Chettiar, President 604-661-1006

� Fraser Valley Indo-Canadian Business Association Andy Sidhu, President 604-852-2288

� Indo Canada Chamber of Commerce (BC) Ab Berar, President 604-266-8073

� Indo Canadian Business Chamber Vivek A. Savkur, Chairman 604-303- 0509

� Indo-Canadian Business Association Ken Dhillon, President 604-377-9015

� North American Association of Asian Professionals - Vancouver Bernard Seo, President 604-515-5771

� Punjabi Market Association Daljit Sidhum, President 604-324-5711

� Sino-Indo-Canadian Business Association Hardev Bal, Director 604-327-5696

� The Indus Entrepreneurs (Vancouver) Randy Garg, President 604-878-1843

� The Society of Punjabi Engineers And Technologists

of British Columbia Ted Singh, President 604-785-5023

18

NOTES

1. Merchandise trade statistics are adapted

from Trade Data Online. Industry

Canada. 24 August 2005.

<http://strategis.ic.gc.ca/sc_mrkti/tdst/

engdoc/tr_homep.html>.

2. Assanie, N. and Woo, Y.P. (2003).

Maturing Canada-India Services and

Investment Linkages. APF Canada:

Vancouver.

3. See Assanie, N. and Woo, Y.P. (2003).

What Works, What Doesn’t in the

Indian Market. APF Canada: Vancouver.