China worried about India's economic growth: Trade expert

Interview with global trade expert Edward Siciliano

Edward Siciliano Edward Siciliano

Edward Siciliano is the founder of the Legion Finance Trade Limited (LFTL), a leading financial investment company in the European Union. He had also donned the hats of director at the London Stock Exchange and trade adviser to the Federal Trade Commission in the US during the terms of three US presidents—Ronald Reagan, George W. Bush (Senior) and Bill Clinton.

Known to be a trade and business expert, Siciliano's reform in the LSE remained historic as he was able to get the highest (AAA) rating from S&P's Credit Rating Agency beating other stock exchanges. The stringent watch dog role played by him as the chief regulatory officer of the stock exchange in post-Iraq war in the nineties helped him to gain the achievement.

Siciliano was the trade adviser and in-house board of trustee to the Egypt government.

Being the chief of LFTL, one of the biggest financial investment firms in the UK, Siciliano is heavily funding Malta island—a tax haven and has the largest population density in Europe—through Germany's Foreign Direct Investment. This has earned the wrath of several European Union Countries because Malta's low tax structure (as low as five per cent, while other countries imposes up to 25 per cent) and allowing the country to become another Panama.

But despite that, financial companies are completely committed to investment in the small island, which is connected to Libya and Egypt through the Suez Canal, because of the reforms carried out by the government of Malta.

The latest big venture happened this month when LFTL signed a loan agreement of 210 million Euro with Malta-based German auto major Oskal Imperiolizma Ltd. This the sixth such loan agreements signed by LFTL in Malta.

Interestingly, the small island was the launch pad for Allied Force against German-led Axis Force during the Second World War. The small meridian island country, which was under British rule and gained independence only in 1964, was used to destroy Germany completely during the Second World War. Today, of the 250 foreign companies functioning in Malta, 150 of them are from Germany.

Owing to the country's major affluence, it plays important roles in creating treaties and business alliances among the EU nations. Malta earns huge wrath from its competitors because of its huge success in attracting FDI.

With history forgotten, Siciliano feels India and China are also to forget their bitter history and bound to come together because of India's emergence as an economic growth injector in recent years. But that alone would not make India an economic superpower. Global investors believe that India would have to work in a massive way on social reform and governance.

Siciliano wants south Asian countries, including India, to learn from Malta on how to reduce its corporate taxes for foreign companies to allow FDI and boost the economy by proving jobs to all its citizens.

In a freewheeling chat with THE WEEK, Siciliano, among other things, speaks about how India is slowly becoming an economic threat to China. Edited excerpts:

Does LFTL have any plans for Asia and particularly, south Asian countries, including India?

Yes. LFTL has a plan for expansion into the Asia market by 2019. Through our special projects launched in the LFTL platform, operations would be extended to the Asian markets as well. However, I must say that we are known for global operations with strict political and legal jurisdiction because of which we may have to except some countries in the Asia.

What about India? How global investors see the country as?

The south Asian countries, including India, has posed a big threat for foreign investors in past few years due to the economic downfall in the region. However, LFTL will see this an opportunity for a great investment in the Indian market. This is because India has been spotted as the next growing market that might take over the Chinese market by 2025. Indian market is on the top of the watch list for investors.

Could you please explain a bit on how India could be a threat for FDI.

The Indian economy poses a threat for investors because it slows down on government decisions pertaining to political instability, adverse changes or unpredictability on foreign investments. There are unpredictability in import, ownership, pricing or tax issues, cultural problems, delays and legal disputes due to local partners and suppliers. India has labour unrest, disruption of normal business due to social and political unrest. There are corruption and bureaucratic inefficiency, unexpected delays and cost overruns due to overlapping government jurisdiction, fluctuation in interest rates, inflation and currency rates.

But India is striving to control inflation.

As I said, fluctuation in interest rates and inflation rates keeps happening in India. The increase in the oil price is a concerning factor that might lead to rise of inflation because India is among the world's largest oil importers.

What possibilities do you see about India overtaking China in terms of market capitalisation?

India is expected to grow at an annual rate of 7.4 per cent in 2018 and 7.8 per cent in 2019. This is the figure released by IMF. India's projected growth rates are well above China's 6.6 per cent in 2018 and 6.4 per cent in 2019. Things could get even worse for Chinese economic growth over the long term period due to continuous rise of the country's non-financial debt (thanks to high consumer debt and household debt).

Which sectors in India draw global interests?

The attractive sectors in India are technology, health care, consumer services, telecommunication, utilities and industrials. We will also be interested in oil and gas, and consumer goods.

So you believe the investors would be keen to invest in these sectors.

The above listed sectors are investors' target in the Indian market and by analysis these sectors contributes greatly to a country's economic growth and India is doing well in those sectors.

So you say these are the sectors which have been largely responsible for India's growth?

Yes. We also believe this growth might be the reason why the Chinese government is doing everything possible to fix the broken link between India and China so they can gain more ground into the Chinese economy.

So you feel China is worried about India's robust economic growth in these key sectors and would like to have a trade ties with India?

Yes, however, this alignment pose a big threat to South Asia because especially Japan which thinks they are next to China in terms of production growth.

The link between China and India will certainly give India the upper hand in the southern Asia, and if this happens India will be in a better position to take over South Asia, including the China market.

Do the Asian economies believe that India would be able to rule the continent's market in the years to come?

I am sharing a good information. The twice-a-year South Asia Economic Focus (SAEF) finds that the region (India) could even extend its lead over East Asia and the Pacific. Much of the progress, however, is driven by India's growth rebound and is not consistent across countries.

Why do you feel South Asia has passed through economic downfall in recent years? Where are the dangers lurking?

South Asia has experienced a high rate of jobless youth. Though India has helped in uplifting the growth rate in south Asia, growth is not enough to put the stability of the region's economy.

What should they do?

They should focus on creating a flexible governmental system which could help us to enable investors to invest in south Asia (including India) for profit. Only that would create job opportunities for individuals. If this is put in place, the entire south Asia will have a better growth record.

How many loan agreements have your company LFTL signed with German companies for investment in Malta?

Since 2016, LFTL has been able to handle five loan agreements with German companies for the purpose of investment in Malta island.

Why is Malta seen as a prospective destination for investment?

The Malta island is a small country but highly populated with great investment opportunity, especially in the property market that recorded a great price increase in 2015 and 2016. Its property market is in good shape as Malta recorded the highest quarterly increase in house prices in the EU which is 6.2 per cent in 2017-18.

How many German companies have their investments in Malta?

The country scores high in terms of FDI diversity; has been ranked third, after Sri Lanka and New Zealand, as one of the most economically diverse islands in 2016. Of 250 FDI companies operating in Malta, 150 of them are wholly German-owned manufacturing companies.

But why is that all companies in Europe are reaching out to this small island?

It is considered as the European Union's very own tax haven by FDI investors.