We don’t Envisage signing an FTA with India any time soon August 2017 issue

We don’t Envisage signing an FTA with India any time soon

India’s diplomatic relations with Botswana – one of the few bright spots on the African economic horizon – have always been close and friendly. The Dollar Business catches up with H.E. Lesego Ethel Motsumi, High Commissioner of Botswana to India, to find out what the two governments are doing to strengthen bilateral trade and policy ties.

Deepak Kumar | January 2017 Issue | The Dollar Business

TDB: Botswana and India share a long history of cooperation. How are you planning to strengthen the bond?

Lesego Ethel Motsumi (LEM): When the Republic of Botswana was born 50 years ago, one of the first countries that established diplomatic relations with Botswana was India. We share a strong cultural heritage, common desires to develop our economies, eliminate poverty and diseases, and ultimately enter the ranks of the developed world.

Our long-term relationship is anchored around bilateral and multilateral platforms. Bilaterally, India continues to support Botswana through government assistance, facilitation of trade and investment through the private sector among more. At a multilateral level, Botswana and India continue to cooperate through SADC (Southern African Development Community), United Nations, and African Union-India Framework. At the India-African Union level, issues related to education, portable water, sanitation, food security, international migration, sustainable development, infrastructure development, post-2015 development agenda and climate change form the centre of the interactions.

TDB: Many Indians or people of Indian origin are settled in Botswana. What has been their contribution to Botswana’s economy?

LEM: We currently have thousands of people of Indian descent in Botswana. Historically, even before independence, Botswana has had people of Indian and Asian descent forming a part of the fabric of Botswana’s polity. They aligned themselves with the vision and mission of the country: Industrialising it and making it more competitive, both regionally and internationally. The economy of Botswana is strong. Its GDP per capita is far ahead of many Asian economies. The per capita GDP of the country, when adjusted for purchasing power parity, is currently more than $16,000. Botswana is a melting pot, an open society, that attracts investors and tourists alike. As always, there is potential to graduate from the current middle-class status into a developed country. As we celebrate the 50th anniversary of our independence, we look forward to taking the development of the country to the next level with strategic partners such as India.

"Botswana wants Indian companies to invest in the its domestic coal sector"

TDB: Botswana remains heavily dependent on diamonds for fiscal and export revenue. Are you looking to expand the export basket? What participation do you expect from India to help you diversify your trade portfolio?

LEM: India exports a wide range of products to Botswana. However, Botswana mainly exports diamonds to India. The export basket can be de-risked if more capacity can be created in Botswana – such as in the downstreaming of the diamond sector. With that said, Botswana also has the potential to export some agricultural products to India such as lentils and other such products that India imports from other countries.

Botswana continues to industrialise by using India-made technology for small and medium scale enterprises. And, this in the long-run could lead to better capacity and a more balanced trade relation. We, however, do not see the current trade balance in favour of Botswana as a zero-sum game.
In the short to medium term, FDI inflows from India to Botswana will create capacity for future exports – not only to India, but more importantly to regional markets such as South Africa, Zimbabwe, Zambia, Namibia and Congo.

TDB: What major bottlenecks does Botswana face while dealing with India?

LEM: There are always bottlenecks when two countries trade. But to counter any blockage, India and Botswana have  signed several agreements. In fact, more than a dozen agreements have been signed between the two countries to create predictability and understanding. While it is very easy for Indian companies to register a business in Botswana, it is not clear if a similar dispensation is available for Botswanan companies willing to enter the Indian market. Also, globalisation has shrunk the communication gap between continents, but it has not done the same to geographical distance between India and Botswana. For example, Botswana has to construct railway lines to seaports in neighbouring countries, from where Botswanan coal can be exported to India. With the current demand of coal, my preoccupation remains to attract Indian companies to invest in the coal sector in Botswana, with its proven coal reserve of over 200 billion metric tonne.

TDB: How do you view the Indian government’s ‘Make in India’ initiative? Is there any Botswanan investment planned to reap the benefits?

LEM: The signature initiative of Prime Minister Narendra Modi is good and tallies well with the industrial plan of Botswana. Industrialisation of India is good for humanity and for the global economy, and we all must support it. Presently there is no investment by Botswanan companies in India. However, Indian companies’ continuous investment in Botswana will not only help Botswana but also India, when profits are repatriated back to India.

TDB: How vibrant is the SME community in Botswana? Are you engaging with India in any way to improve the SME sector for mutual benefits?

LEM: SMEs need small-scale technologies for production of goods and services, which Botswana lacks. Thus, this has been our focus of discussions with India. India has the prowess, capacity and technology to help SMEs and it is willing to share the same with Botswana. Having said that, the future cannot be brighter for SMEs in our country, considering the incentives that Botswana continues to offer its SMEs in terms of training, market access and infrastructure development. And, in my opinion, there is a great potential for growth of SMEs in both economies.

TDB: India remains one of the leading FDI investors in Botswana. How lucrative is Botswana as an investment destination for Indian investors?

LEM: We are a strong English-speaking democracy with good macroeconomic stability. We also have a good credit rating. As a market economy, our country’s key objective is to provide a favourable investment climate to investors. For us, such an environment, coupled with the requisite institutional support, will nurture sustainable economic growth and diversification. In this regard, institutions such as Botswana Investment and Trade Centre (BITC) and our embassies across the globe continue to assist international investors to explore business opportunities across the economic spectrum of Botswana. There is no denying that Botswana has significant investment and trade opportunities that can be, rather should be, explored by India for the mutual benefit of our citizens. Pertinent to the business environment, Botswana is globally known for its sound legal system and adherence to the rule of law. The country also enjoys peaceful relations with its neighbours.

Further, Botswana is known for sustained periods of economic growth, sound macroeconomic discipline, labour market stability with a high literacy rate, the lowest level of corruption in Africa, no foreign exchange controls, allowance of 100% business ownership by foreign nationals, remittances and full repatriation of profits and dividends, etc. In fact, since independence, Botswana has had the highest average economic growth rate in the world, averaging 9% per year, from 1966 to 1999. Also, the country is centrally located in a region (with a population of 280 million consumers) that is expected to register an average annual GDP growth of 5% between 2015 and 2020. According to World Economic Forum’s Global Competitiveness Report (2016-2017), Botswana ranks 10th in the world and 1st in Sub-Saharan Africa in terms of macroeconomic environment, 36th in the world in terms of labour market efficiency and 37th in the world in terms of sound institutions. It is the 3rd most competitive economy in SADC (Southern African Development Community), after Mauritius and South Africa and the 5th most competitive in Africa.

TDB: Why is it so important for you to attract FDI?

LEM: In a global economy characterised by intense competition for FDI, our government continues to review policies geared not only towards attracting quality FDI, but also retaining investors and creating an environment conducive to expansion and reinvestment. This is critical for a young and fledgling economy competing for the same pool of FDI with advanced and emerging economies of the world. Furthermore, our government has put in place policies and strategies to support the export of locally produced goods and services to the regional and international markets, as well as to encourage the establishment of new industries that can help reduce our high import bill through import substitution.
Botswana currently imports up to 80% of the goods and services consumed in the country, which cost us more than $7 billion in CY2015. Thus, the government is now focusing on attracting companies that can produce these goods in the country while generating employment.

TDB: We have not heard of any free trade agreement being proposed between India and Botswana. How do plan to take bilateral relations forward?

LEM: Botswana and India are members of WTO and that is where our trading relations are defined. It is basis of all bilateral agreements that we have signed over the years. Provisions of the WTO call for free trade amongst member states and that works for big and small countries alike. Certainly, the Indian economy is huge compared to Botswana’s, in absolute terms. And given the Indian population size, which constitutes 17% of the world population, our competitive advantage is limited by our demographics in terms of consumers.
However, in relative terms, we compete at our level. Statistically, we are one of the most competitive countries in the world, especially in mining, transparency and literacy rates, protection of private property, etc. Our tourism sector attracted more than two million visitors last year, of which a large number were from the Indian subcontinent.

We, therefore, do not envisage signing an FTA with India any time soon, beyond the MFN (Most Favoured Nations) status already conferred on India by Botswana. Regionally, through SADC, we continue to engage with India, which has extended its line of credit to the region for multilateral infrastructure development. We also cooperate with India through African Union framework on security, migration and peace keeping.

"The current trade balance in favour of Botswana isn’t a zero-sum game"

TDB: India’s engagement with Botswana is at three levels: At African Union (AU) level, at Regional Economic Communities (RECs) level and at bilateral level. How do you look these current engagement levels? What more should we be doing to increase two-way trade?

LEM: As a small, dynamic and fast developing economy, Botswana strongly believes in multilateralism. Platforms, such as these, continue to give voice to all states, big or small, and continue to help solve inter-state conflicts, be it trade or politics. Taken together, these international organisations play a pivotal role in our foreign policy architecture and have historically helped in the liberation of the continent and currently are instrumental for the economic empowerment of our people.
Botswana will continue to intensify its engagements at SADC, AU and indeed at the UN level, presenting the aspirations of all African people. There is no alternative to a multilateral framework as the opposite is a zero-sum international relations where the rule of the jungle reigns. India has historically preferred the same route with the Non-Aligned Movement (NAM) formed at the behest of India and recently the Indian government rallied the world by forming the International Solar Alliance, where developing countries coordinate their responses to developing sustainable energy infrastructure for their economies.

TDB: Botswana, like India, is a commonwealth country. Do you think Brexit will have an impact on the country’s economy or trade?

LEM: It would be premature to predict how things would progress as far as trade between Botswana and UK is concerned. However, Brexit in the short-term will affect Botswana’s trade with UK as some of the agreements were negotiated through EU. This means, once UK leaves EU the existing agreements will have to be renegotiated, which may not be an overnight process. But, I should add that as a small developing country, Botswana prefers multilateral arrangements as countries pull their resources together for the common good rather than on country by country basis. Consequently, as part of the British heritage, Brexit means a country that spoke for the commonwealth countries would no longer represent ‘the us’ at the EU. This is the only short-term challenge for us.

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