UPS faces protective challenges with India
By RAYMOND THIBODEAUX
For the Journal-Constitution
Published on: 07/22/07
New Delhi, India Namdan Kishore's trips to United Parcel Service's retail store in this sprawling business plaza of India's dusty capital have become routine. As an office assistant for a real estate developer, he spends most of his days copying paperwork, making copies of copies and sometimes express mailing them.
"I used to go to a small photocopy shop in this same plaza," Kishore said. "The copies here are better and here there is good air-conditioning," a competitive leg-up in New Delhi, which at an average temperature of 115 degrees feels like a furnace in the summer.
He's not exactly the big-spending corporate client that international express couriers dream about. But tapping into even a modest percentage of little spenders like Kishore adds up in a country like India, with 1.1 billion people.
With its Indian partner, Jetair Business Solutions, Sandy Springs-based UPS expanded business in India by a whopping 25 percent last year, representing a growing if deliberately undisclosed portion of UPS' $47.5 billion in revenue. The UPS Store in New Delhi, the company's fourth in India, is part of a rollout of 150 retail stores over the next four years.
With markets at home becoming saturated and with an economy appearing to slow down many American companies are looking toward the world's fastest-growing economies, India and China, to pick up the slack. India's economy is expanding at its fastest rate in nearly two decades: Its $771 billion economy grew by 9.4 percent in the last fiscal year, slightly higher than expected.
But India's postal service wants to rein in international express couriers doing business in India, in what many here see as a backward step in the liberalization of the country's economy.
A recent proposal to be reviewed by Parliament gives the postal service exclusive rights for express delivery of letters weighing up to 300 grams within the country, virtually shielding the government agency from competition.
The proposal also blocks foreign ownership of express couriers operating in India and requires large private courier services to fork over 10 percent of their profits to a fund that helps the government improve its delivery service to the country's rural areas.
"Until we resolve this issue, it's going to be difficult for foreign companies to expand their operations inside India," said John Fennerty, deputy economic counselor for the U.S. Embassy in India. "In this climate, it's difficult to make business judgments."
UPS Jetair's managing director, Pirojshaw Sarkari, said the express courier industry has banded together to fight the new proposal.
"We are working to show the Indian government international best practices with regard to the basic principles on which the express industry and national postal services should interact, such as by having an independent regulator for the industry [and] a level playing field in the competitive services market between the national post and the private sector," he said.
Protectionism tradition
India historically has favored trade measures that have protected its own markets from foreign competition, even as it decries unfair restrictions of its exports abroad. It wasn't until the early 1990s that India began a big push to open its markets to the West, resulting in a huge export boom that helped international couriers flourish.
Still, vestiges of those older trade policies persist. In the latest tiff, the United States and Europe point to India's high import duties for wine and liquor, which are more than three times the cap set by the World Trade Organization. Just off the heels of a decision to allow imports of Indian mangoes, the United States has chided India for not importing American wheat, which could help feed India's 400 million malnourished children.
"If the political and legislative climate wasn't good, we would not have so many companies coming to invest their money in India," said G.K. Pillai, India's commerce minister.
Foreign direct investment in India more than tripled last year to about $18 billion, according to government figures.
With more foreign money circulating in India's economy, the country's government can better afford infrastructure improvements such as more roads and more sea and airport facilities, Pillai said, adding that a $140 billion plan is in the pipeline for those projects.
In a recent UPS annual survey of 1,200 Asian business leaders, more than half of those polled said India's political and legislative environment was less-than-friendly to foreign companies. Weak transportation and power infrastructure were also cited as disadvantages to doing business in India.
In India's larger cities like New Delhi and Mumbai, formerly known as Bombay, the roads are often packed with city buses and rickshaw taxis battling for the least-clogged lanes and more importantly swerving to avoid the cows that wander aimlessly through the city's snarled rush-hour traffic.
"There are challenges in terms of infrastructure, the regulatory and tax environment, but those things are not uncommon when doing business in developing countries," said John Flick, UPS International spokesman. "All these things require a deep local understanding and we have a local UPS team working on those challenges."
Slowly building the brand
For now, UPS is hoping its retail stores bring more brand-name recognition in a country where many people still go to streetside letter-wallahs who type up their correspondence on manual typewriters.
Already, international express carriers are part of a new trade route as millions of Indian expatriates living in the U.S. and Canada use companies like UPS to send an endless stream of birthday and wedding gifts, as well as the latest technological gadgets that might be hard to find in India. In return, Indian families here send their relatives abroad hard-to-find Indian spices, textiles and other gifts from the homeland, turning international companies like UPS into the modern-day equivalent of ancient trade routes. The UPS Store chain offers packaging and express shipping, as well as digital printing, office supplies and ticketing services for Jet Airways, one of India's largest airlines.
"With some aspects of our retail store, we have to create demand," said Hauafreed Nasrwaingi, marketing director for India's UPS-Jetair joint venture. "When I tell them they can send stuff to the United States within 48 hours or less, they are happily surprised."
