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Rediff.com  » Business » Govt draws another LoC for higher FDI

Govt draws another LoC for higher FDI

July 12, 2013 12:56 IST

Govt draws another LoC for higher FDI

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Surajeet Das Gupta and Sounak Mitra in New Delhi

If you are an executive working in Pakistan and want to join a multinational company operating in one of India's strategic sectors, you might be disappointed.

It's hardly better if you are working for an MNC that's present in both India and Pakistan and merely want to shift internally from the latter to the former.

The Foreign Investment Promotion Board seems to have put a very unusual rider while clearing the proposal of Norwegian telecom major Telenor to increase stake in its Indian venture, Telewings Communications, from 49 per cent to 74 per cent: That officials who have worked in Pakistan "should not be allowed to work in India".

The contentious clause was added because the Ministry of Home Affairs and the Department of Telecommunications wanted such a restriction.

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Image: An investor talks on his mobile phone while sitting near an electronic board displaying stock prices at the Karachi Stock Exchange.
Photographs: Akhtar Soomro/Reuters

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In its deliberations, MHA had said it would give security clearance to the company only if it was incorporated in the licensing condition that ‘no person who has worked in Pakistan, including at Telenor Pakistan, shall be allowed to work in India’.

DoT, too, had said officials who had worked in Pakistan should not be allowed to work in India.

The decision by the government to put a stop on the movement of executives working in Pakistan is significant, as there are many strategic sectors in which MNCs are present or have equity stakes in both India and Pakistan.

For instance, in telecom, Axiata, which has a stake in India's Idea Cellular, also holds an 89 per cent stake in Multinet, which runs an optic-fibre cable network connecting major cities of Pakistan. Telenor SA has a 100 per cent fully-owned telecom services firm in Pakistan.

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Image: A paramilitary soldier stands guard as a truck carrying wheat crosses into Pakistan from India, at the Wagah border.
Photographs: Mohsin Raza/Reuters

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Singtel, which has a stake in India's Bharti Airtel, also had a 30 per cent stake in Pakistan's Warid Telecom, which it divested early this year.

The issue had come to the fore earlier, too, when the Norwegian firm's estranged Indian partner, Unitech, had raised it with the government, saying Telenor's managing director in India, Sigve Brekke, had in the past been part of its top management in Pakistan.

Responding to a Business Standard query, a Telenor spokesperson said in an emailed statement: "Brekke has never been employed by Telenor Pakistan.

“He has only held a non-executive position on the board for a brief period.

“His appointment as the Indian entity's MD followed a full security clearance process under the same rules that exist today."

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Image: A customer walks past Singtel logos after visiting a Hello shop at the company's headquarters in Singapore.
Photographs: Vivek Prakash/Reuters

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Brekke, however, has already stepped down as the company's India MD in May and Yogesh Malik became CEO. Brekke has now become head of Asian operations and he is based out of Singapore, from where he oversees operations in India and five other markets.

The company had sought regulatory approval to appoint him chairman of the Indian entity.

Application is pending.

"The reason for change in leadership is the company's transition into an operational phase and Brekke's focus on his role as the head of Asia operations, expanding Telenor's presence to new markets such as Myanmar," said the Telenor spokesperson.


Photographs: Reuters

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