Political India: Engaging America

From The Hindu

CHENNAI: Highly placed sources in the State Industries Department on Monday confirmed that the planned Financial City in Chennai would most probably be housed in a 100-acre site of vacant government-owned land in Sholinganallur along the Old Mahabalipuram Road.
After the Deputy Chief Minister visited the site over the weekend, an Industries Department official said: “He is happy with the site.”

Probable site

“Although it is not yet finalised, this is most probably the site that we will go with,” the official said.

Labels: financial city, Old Mahabalipuram Road, Sholinganallur, Stalin

From The Hindu

CHENNAI: Front office functions will now be included within the gamut of services to be housed in the financial city planned here, sources close to the project authority have said.

With recent behind-the-scenes discussions suggesting it will be more than a back office hub, the financial services being considered for inclusion are a commodity exchange, a stock exchange, asset management, risk assessment services, banking services and insurance and reinsurance services.

Speaking to The Hindu, a State Industries Department senior official said: “Mumbai is a financial centre, Gujarat has announced GIFT, the Gujarat International Financial Tech-City, and Hyderabad is also making similar plans. So where do we position ourselves?”

While clearly ruling out direct competition with Mumbai as a financial hub, the official pointed out that the Chennai financial city would meet companies’ need for additional facilities given that concentrating major resources in one place was no longer an option for large financial institutions.

“Your nerve centre cannot be in only one place; this is basically risk management. So we would try to project the financial city essentially in terms of the following concept: whatever Mumbai can offer, we will also be able to offer,” the official said.

Attracting talent

However, to effectively provide an alternative to sophisticated financial hubs such as Mumbai by attracting world class talent, education services offered in Tamil Nadu would have to be ramped up.

The Ministry official explained: “While we have a strong presence in terms of number of Chartered Accountants, in some other areas we really need to improve. For example we need better management institutions, we need to have better risk assessing capabilities built into the system. In areas such as risk assessment, risk allocation and risk management there will be, in parallel, a need to improve the educational set-up as well.”

Among the options being considered is the possibility of bringing in business schools of repute through a tie-up with the University of Madras or Anna University. “Some of these universities can sign an MoU for creating such institutions. We don’t really need to bring an institution here if you can simply provide limited courses of three to six months for CAs and MBAs, tailored to a specific kind of role,” the official said.

While risk diversification would be an important differentiating factor for the Chennai financial city, cost competitiveness and overall product quality would be important for attracting global players.

There may be certain services for which it is possible to be equally effective whether you are in Mumbai or in Chennai and some things are location-neutral, the official explained.

“Suppose that you are in a particular niche where traders are important. You can have all the facilities, but if the traders are all elsewhere, then it will not click. That is the thinking that needs to go into our initial planning on what are the two or three things that we are going to do first,” he said.

However, in some areas the presence of traders can be neutralised by technology: “Today even in the stock exchanges technology can actually neutralise the presence of a trader and everybody is only sitting on his own terminal, isn’t he?”

Knowledge economy

The move to include front office functions and systemic improvements in education and healthcare services reflects a “bigger issue”: Tamil Nadu would be making a big leap in establishing the financial city, having already achieved a similar goal in the IT space. In the announcement made by the Deputy Chief Minister earlier, there was also a mention of an information and media city.

“The point we are trying to make is that Tamil Nadu should get into the knowledge-based economy more. We should stake a claim for everything that is based on that,” the Ministry official said.

Labels: asset management, banking, Chennai, commodity exchange, financial city, front office, GIFT, Gujarat, insurance, knowledge-based economy, Mumbai, risk management, stock exchange

From The Hindu

* Stalin to visit potential sites to indicate his view
* Group discussions with finance service firms on

CHENNAI: Discussions between the State Industries Ministry and industry representatives on plans for the Chennai financial city are gaining momentum: the location of the city is to be finalised in one month and a list of potential occupants and the nature of services are to be finalised in two months.

“The Deputy Chief Minister will visit several potential sites for the financial city and then indicate his view,” a senior official in the Ministry said, speaking to The Hindu. Group consultations with a number of financial service companies are under way, he added.

Outlining the next steps, he said, “What we would like to do is to identify maybe ten possible services we could offer and of those we can decide on two or three to offer at first. And for those two or three, we would try to identify a list of ten or twenty companies that we would like to target.” This would be followed by presentations to these target companies on the services that the financial city would offer.

The ongoing discussions are also looking into the question of what incentives the occupants of the city should be offered. Highlighting capital investment incentives and tax sops given in the manufacturing sector, the Ministry official said: “For the financial city we need to understand what incentives would excite them. There is no point in saying, ‘We will give you this’ if that does not change his decision and we still end up giving the incentive.” To avoid this situation, a brief survey would be undertaken to ask prospective occupants: “What are the five things which you think are most important?”

Foreign players coming in

Discussions are also focussed on the process of identifying the list of potential occupants.

The plan to offer the services of the financial city to foreign players could be traced back to the banking roadmap that the RBI had earlier given. According to the roadmap, foreign banks could grow organically in India by opening new branches.

In this context, there is an opportunity. “We need to determine which banks have aggressively tried to get branch licences – that shows their intentions. Also, some of those who have already started some kind of office presence in India, we could approach them as that could be one list,” the official said. The same would apply to insurance companies that have struck agreements with local players.

The initiative is being developed in coordination with the Confederation of Indian Industry, the official confirmed. “We believe that in Tamil Nadu we have very good responsible and responsive industry and we can work in tandem,” he said.

Outlining the CII’s role, he explained that they are also coming out with ideas and suggestions and are in touch with other financial centres. The immediate steps, however, are concerned with defining the “product” more clearly.

“What we are very clear on is that our approach would not be to announce something very big, very huge, to dazzle,” the official said. The aim would be to forge a strong partnership with the private sector and try and take local players along, including Tamil Nadu-based organisations and then, moving forward, organisations in other parts of the country.

Labels: CII, financial city, RBI, Stalin

From The Hindu

CHENNAI: Financial institutions (FIs) with operations in Tamil Nadu have welcomed the idea of creating a financial city near Chennai. Senior executives in leading companies saying the policy is a “commendable and thoughtful measure” and a “very positive outcome” for the State.

The plan was unveiled recently by Deputy Chief Minister M.K. Stalin. Subsequently, Industries Department officials confirmed that the initial phases of the project would focus on back office operations.

“The nexus between the prototypical Tamilian and the financial services industry is a strong one”, says Gopal Srinivasan, Chairman of TVS Capital Funds. The State’s workforce has an inherent propensity for hard work and intelligence and there is a sizeable pool of professionals such as chartered accountants.

“The financial city will position Tamil Nadu more competitively for attracting investment relative to other States,” says Sreeram Iyer, Chief Operating Officer of Standard Chartered Bank. SCB, working with Scope International, currently has back office operations in the State employing around 7,000 people.

Other banks with back office operations in Tamil Nadu include ABN Amro, BNP Paribas and the World Bank.

Lakshmi Narayanan, Vice-Chairman of Cognizant Technology Solutions, says given the imperatives of the global financial crisis and the requirements of the Basle II Accord, “The current focus is now on enterprise risk management. This was not given as much attention earlier. Additionally, as more regulation is rolled out across countries, there will be a greater need for reports generated by companies to meet regulatory requirements. This will lead to an emphasis on back office functions.”

However, there are several key attributes that the financial city project will have to possess in order to attain long-term success. Industry leaders emphasise the “ecosystem” architecture of the city, which will have to go beyond mere physical infrastructure provision to develop “soft” infrastructure. This could imply “attracting talent from other financial centres such as Mumbai.”

In particular, Mr. Iyer suggests: “One important step in attracting global talent, high up in the value chain may be getting more international schools for children.” Mr. Narayanan too emphasises technical and management-related education, building on existing institutions such as the Institute for Financial Management and Research (IFMR), the MBA programme at IIT-Madras and the Great Lakes Institute of Management.

Additionally “industry bodies will have to be created for the banking and insurance sectors,” Mr. Narayanan points out. Just as the National Association of Software and Services Companies (NASSCOM) played a key role in attracting foreign investment to the IT sector, an industry body for finance will be required to bring in funds to the financial city. While CII, FICCI and ASSOCHAM have financial arms, this is only one arm among the several, he explains.

At a broad level the financial city will have to be inclusive rather than exclusive, allowing banks in other regions, such as Punjab National Bank, access to its facilities. Strong communication links and partnership arrangements with other financial centres such as Mumbai, Singapore and Shanghai will be vital.

Ultimately it can even serve as “an opportunity for urban renewal,” Mr. Srinivasan argues. It can be viewed as a means to take forward the larger macro goals of “urban de-densification, re-purposing of land and dealing with the challenge of intra-city congestion.”

Labels: ABN Amro, Cognizant Technology Solutions, financial city, IFMR, IIT, Mumbai, Shanghai, Singapore, Standard Chartered Bank, TVS, World Bank

From The Hindu

CHENNAI: Plans for a financial city announced recently by Deputy Chief Minister M.K.Stalin will initially focus on back office functions, sources close to the project authority said.

The idea of a financial city is based on the fact that workforce in the State has a high level of skill in IT and accounting sectors, with some financial back office functions such as risk analysis for banks and hedge funds already being carried out here.

Speaking to The Hindu, a senior official of the State Industries Department explained that the financial city was initially planned keeping in mind the reforms roadmap for the banking sector that the Reserve Bank of India announced over three years ago. If these reforms progress, Tamil Nadu should be in a position to take advantage of the opportunities that emerge in this sector. While it was expected that the reforms would be revisited in March 2009, “due to the recession that has been put on hold,” the official said.

The official confirmed that the financial city project would nevertheless be taken forward in a “modular, gradual way.” In the first of several phases to be implemented, between 4 and 5 million square feet of workspace will be developed. In addition, work will commence on setting up 2000-3000 housing units. The first phase would also require the construction of “a convention centre, hotels, hospitals and a high-quality school, and subsequent phases would target scaling the project up 4-5 times,” according to the official.

The official suggested that South Chennai would be a likely site for the financial city. “The trade-off between the amount of land available for this project and the distance from the city is an issue,” the official said. The land required has not yet been acquired.

The next step in the project, to be implemented over 2-3 months, will be to conduct discussions with the relevant stakeholders, including banks, mutual funds and insurance companies. If government-owned land is available, then subsequent 3-4 months could see the implementing authority, the Tamil Nadu Industrial Development Corporation (TIDCO), bring on board a consultant to define the requirements and design of the financial city. A “networked” consultant such as Ernst and Young or KPMG may be hired, as this may lead to subsequent benefits in terms of the occupancy of the city.

The project would be structured as a public-private partnership similar to the Tidel Park venture, in which TIDCO owns 25%, the Electronics Corporation of Tamil Nadu owns 4% and banks and other financial institutions own around 50%.

Regarding the broader vision for this project the senior Industries Department officer said, “In the long term we want to position ourselves tactically as being strong in both the manufacturing and services sectors. We will certainly be in competition with other States that are promoting financial centres, but Tamil Nadu is well positioned to overtake states like Karnataka in this area.”

Labels: Chennai, Ernst and Young, financial city, Industries Department, KPMG, Tidel Park