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State of the Council Address
Ambassador Frank G. Wisner, Chairman, USIBC

27th Annual Meeting of the US-India Business Council
Washington, DC
June 17, 2002

Your Excellency Om Prakash Chautala, Ambassador Lalit Mansingh, Mr. Rajat Gupta, Dr. Michael Clark, Mr. Ashok Soota, Dr. A C Muthiah, Mr. R Veeramani, Mr. K. K. Nohria, Mr. Paul Shah, members of the U.S.-India Business Council, ladies and gentlemen:

SHADOW OF CRISIS

We meet today under the lingering shadow of crisis. The threat of terror emanating from Pakistan, and India's determined response, brought the region to the brink of war, a war of potentially catastrophic consequences. It seems now that diplomacy has succeeded and has created conditions to allow the armed forces of India and Pakistan to begin to stand down. Our best wishes go to America's leaders who have worked tirelessly to contain the crisis. Much hard work lies ahead. At heart, India and Pakistan must make the critical choices but the United States can play a role as the region's most important friend. For the peace of the region and the good of India and Pakistan, the government of Pakistan must end infiltration and close the camps which support it.

Establishing the basis for a more durable and stable regional peace is a work that is far from completed. We in the business community will have to continue to deal with the resulting uncertainty. Even more, we will have to develop strategies to restore business confidence not only in our corporate boardrooms, but also among our partners and clients across the U.S. We recognize that the crises of the past year, beginning with Afghanistan and especially the most recent events, have cost South Asia dearly, India in particular. The especially promising surge of interest in business process outsourcing has been sharply checked.

This Business Council is confident in India's future. We know that India presents a solid platform for U.S. trade and investment.

Looking just a few months ahead, I am also confident that we in business will benefit greatly, along with the people of South Asia, from the new patterns of relations that diplomacy has set in motion. Securing the Indo-Pakistan border, and establishing cooperation against the terrorism that has threatened every government of South Asia from Afghanistan to Sri Lanka, is a vitally important potential outcome of the present crisis. It will make investment, technology partnerships, and trade with India and its neighbors far more secure and reliable. A sustained American diplomatic role is vital. While that role should be discreet and in no way pretend to mediation, it must be planned to last for a long time and be bold enough to address the issues - Kashmir and nuclear threat management included.

THE CHANGING BUSINESS CLIMATE

The threat of war is not the only cloud hanging over our proceedings. In the last year, we have seen a major slowdown in the American economy and equally in the Indian economy. The tragic events in Gujarat were unsettling to Indians as much as to India's friends and partners abroad. All of us admire India's commitment to secular ideals. In fact, those ideals are am important part of the reasons we came to India as investors. Gujarat is a challenge to India's secularism. Restoring order and allowing those currently in camps to return to their homes and places of work are important objectives. There have also been particular disappointments in the performance of the Indian economy. The deteriorating fiscal balance, especially at the state level, is cause for genuine concern.

But not all economic news is gloomy. This year's annual general meeting aims to look at the steps India's industry is taking, often in partnership with government, to improve India's economic performance. Government continues to play and important macro economic role. In maintaining the stability of the currency, reducing interest rates and building reserves. This Indian government has reinforced some of the foundations of the economy and its future growth. It has taken, in addition, important steps in the field of privatization.

This spring the Government of India made a very important decision to allow the commercialization of genetically modified BT cotton, the first ever clearance provided by the Genetic Engineering Approval Committee of the Government of India. This was a challenging decision, perhaps made more difficult by the fact that the approval was given to an Indian firm partnered with a foreign company. But the decisive action of the Government of India sent a powerful signal that India intends to participate fully, and I think as a leader, in the global biotechnology revolution.

We have also seen continued strength, despite very difficult world market conditions, in the growth of technology partnerships between U.S. and Indian firms. In the area of IT and business process services, we have seen an important shift in business models. Where in recent years companies moved closed-end projects overseas, today U.S. firms are reaping far greater economic dividends by locating business processes in India. Call centers, customer support, forms processing, credit analysis, and a host of other vital business functions are being performed in India with exceptional benefits to U.S. businesses and consumers.

I am happy to report that the United States and India have also enjoyed some important achievements on the trade front. During the past year, U.S. Trade Representative Robert Zoellick and his team have made major efforts to engage India on both global and bilateral trade policy. Ambassador Zoellick has made trade cooperation with India a top priority, visiting New Delhi and increasing GSP benefits for India by $500 million in August 2001. The USIBC lobbied for this outcome. He also reached out to India in the run-up to the Doha Ministerial and worked to define an agenda at Doha that prioritized the concerns of developing countries, including India. Most important, India was exempted from the anti-dumping duties imposed on steel imports into the U.S. - a decision we at the USIBC worked at very hard to achieve.

On the Indian side, we have been impressed with the Government's commitment to reduce tariff levels to a two-tier 10-20% structure during the next two budget cycles. We have also been intrigued by the careful and thoughtful approach of the Government of India in developing the new Special Economic Zones. The new SEZs, if fully implemented in line with the concepts articulated by Minister of Commerce and Industry Maran, will offer an important new beginning for U.S. infrastructure investment and will encourage the growth of new partnerships and joint ventures with India's manufacturing sector.

We have also seen very important developments in the areas of sanctions relief, security and defense cooperation, and commercial defense sales - all USIBC objectives. The past twelve months have seen a decision to waive all Glenn Amendment sanctions against India, the development of a web of agreements and institutional mechanisms to support intelligence and technology sharing, joint training and military exercises, and the first decisive steps toward normalization of commercial defense sales.

RECENT COUNCIL ACCOMPLISHMENTS

Ladies and Gentlemen: In all of these areas - biotechnology, information services, the broader trade agenda, and defense & security cooperation - I am not only proud of the leadership that the U.S.-India Business Council has exercised. I am also proud that we have enjoyed the benefit of strong partnerships with a number of important India-based associations.

One of the most important objectives of my tenure as Chairman has been to strengthen our working relationships with Indian national industry associations. During the past year, with strong leadership from Mr. Dean O'Hare, Chairman and CEO of Chubb Corporation and immediate past Chairman of the USIBC, we completed with the Federation of Indian Chambers of Commerce and Industry, the Knowledge Trade Initiative with the release of the final report of the KTI in November of 2001. The KTI was, as far as I know, the first major joint report by an Indian and U.S. industry organization.

The KTI report offers a comprehensive view of the full gamut of policy issues affecting the growth of knowledge trade between India and the United States. It provides more than 100 recommendations for policy action, and it establishes an important basis for follow-up work in the Economic Dialogue. The report also provided very important guidance in calling attention to two important emerging opportunities for Indo-U.S. commercial collaboration - entertainment and biotechnology. I am delighted that we will be working with FICCI in the coming year on vital issues of infrastructure and technology trade under the aegis of the Economic Dialogue, and that we will be launching separate collaboration in the area of broadcast and entertainment in September 2002.

It is a special pleasure for me to welcome to these proceedings the strongest ever participation from the Confederation of Indian Industry. Your presence here today is the strongest testimony to the very deep cooperation that has begun to develop between our two associations.

Already this year, we have developed an intensive agenda to catalyze private sector participation from both our countries in the rapidly evolving U.S.-India defense and security relationship. We worked together in January to host a meeting with Defense Minister Fernandes; CII invited USIBC participation in DefExpo 2002 in New Delhi; we worked together to organize the first-ever U.S.-India Defense Industry Seminar with NDIA on May 13 and we supported the visit of a CII defense industry executive mission and we will work closely with CII as more and more U.S. defense companies seek to establish themselves and find partners in India.

Today and tomorrow we are also launching a major new bilateral initiative with CII in the area of biotechnology. Together with the Pharmaceutical Research and Manufacturers of America (PhRMA), and the Biotechnology Industry Organization (BIO), as well as similar organizations in India, we are forming a new U.S.-India Biotech Alliance, a private sector initiative, to foster the growth of the biotechnology industry in India, to support public and private collaborations of all kinds, and to develop world-class legal and administrative infrastructures in India to support India's integration into the global biotechnology industry. We will also work closely with CII in the Economic Dialogue to explore new approaches to energy and environment and to identify business opportunities.

In April of this year, we joined the National Association of Software and Services Companies (NASSCOM), U.S. Chamber of Commerce and the New York Stock Exchange in a special program in the Board Room of the Exchange in New York. Principal technology officers from 35 major U.S. companies met with top executives from 25 Indian IT and business process service companies to evaluate experiences, assess new opportunities, and identify best practices for managing operational risks in the wake of 9/11. We look forward to conducting a series of similar events in the coming year to promote greater U.S. business understanding of the value of technology partnerships with Indian firms.

A year ago we agreed to develop a working relationship with Assocham and I am delighted that Assocham's leadership is present with us today. We will also develop relationships with other organizations who share with us common interests and objectives. The Indo-American Chamber of Commerce, whose national leadership is here, is an important organization for broadening the base of participation in U.S.-India Trade.

I want to pay tribute to our relationship with the American Chamber of Commerce in India. We are sister organizations, with overlapping memberships and a single agenda to foster the strongest possible commercial and economic relationship with India. AMCHAM and the USIBC will work hand in glove on all matters of policy concern, will coordinate public statements so that the American business community speaks with a single voice, and will consult routinely on emerging issues and opportunities. We will endeavor to involve AMCHAM leaders in all of our undertakings, including meetings of the Board of Directors, working group conference calls and briefings, and interactions with senior government officials from both countries. We will work side by side with AMCHAM in our interactions with all Indian industry associations. We are also proud of our association with the Indo American Chamber of Commerce.

Finally, we have invested significant effort in developing effective working connections with the Indian American community in the United States, particularly that large section of the community that share our passion for India and our commitment to developing a human bridge to India through commerce. Organizations like TiE, the Indian-American Forum for Political Education, and the Indian American Chamber of Greater Houston have a vital role to play in both countries, and we will continue to form alliances whenever and wherever we find common interests and opportunities.

Our partnerships are not matters of convenience but of commitment. If we have been effective building support for change in India and in U.S.-Indian relations, it is only because we have been able to align ourselves with powerful and thoughtful organizations in India, and because together we have learned to do what is right for India and for ourselves. During my tenure we have made significant headway but this is only the start of something very big.

I want to take this moment to thank our partners in India for working closely with us to advance our common work. But I especially want to thank the member companies of the USIBC who have supported the Council in many different ways during a very challenging year.

Having CII, FICCI, ASSOCHAM and the Indo American Chamber of Commerce with us this year, despite the crisis, is a strong statement. Our friends from Indian industry have come to remind us that, India is hard at work and her industry and commerce are busy. In fact, I would note that it is the Indian private sector which is saving, investing, and introducing new technology. It is Indian business which is driving India's growth and her economy.

STATE OF THE COUNCIL

Ladies and Gentlemen: When we met last year, I had to comment on the state of the Council's finances. I am pleased to report that today our books are balanced, our finances are adequate to the ambitious agenda of the Council, and the Council's visibility and reputation among American business continues to strengthen. The Council continues to grow in numbers and quality of members. We look forward to new members active in biotechnology, commercial defense sales, engineering, venture capital finance, equipment sales, energy and environmental services, and infrastructure development. I must stress, however, that the responsibility is still with all of us to pay our dues, to participate in the Council's ongoing work, to draw upon our companies' intellectual resources and expertise, and to support the Council's growth.

It has been an honor to have been elected by all of you to serve as Chairman of the U.S.-India Business Council during the past two years. I have enjoyed the privilege of representing you to the Indian Government, to the U.S. Government and to many other institutions and individuals for whom the USIBC is the voice of the American business community. During my tenure, I have been ably supported by Michael Clark, Ingrid Belton and Rick Rossow - three dedicated professionals who are as deeply committed to building a new relationship with India as anyone in this room.

THE UNFINISHED AGENDA

Looking back, there are some commitments that we have not been able to fulfill during my tenure:

We have led the fight to remove sanctions imposed against India after May 1998, and we have enjoyed important success. But we have not removed the legislation that imposed sanctions in the first place. Nor have we gotten far in removing the myriad of export controls and other restrictions on technology transfer, cooperation on nuclear safety, and space research. Our defense cooperation remains mired in a tangle of exceptional reporting requirements and cross-cutting bureaucratic fiefdoms. We need to redouble our efforts to achieve, first, a fully normal relationship with India, then a special relationship that reflects our potential as natural allies.

We have not yet been successful in advancing India's accession to APEC, though I am pleased that CII will participate in the private sector elements. Involving India in the economic prospects of the Asian Pacific region must continue to be an objective of India's policy makers, to my way of thinking.

We have not opened offices in Silicon Valley or New York, though it is obvious interest in our growing business opportunity in India is quite strong. I am delighted to announce that in the very near future, the Council will join forces with the U.S. Council for International Business in New York to launch a Manhattan India Investment Roundtable. I am also pleased to report that during my recent visit to Palo Alto and San Francisco, it became clear that support for a California office is quite strong. We need only to make a commitment, support it, and the companies will come.

I would also have liked to have made more progress in studying the costs and benefits of a new trade agreement with India. I believe the idea has great merit and that the Council should take a lead in developing a U.S. and Indian collaborative study which I feel will clarify thinking about the wisdom of a trade agreement and identify areas that need work.

Two years ago, I made commitment that the Council would express its concern and would be active in the area of poverty alleviation. We have not, in the press of a very intensive schedule of activities made as much progress, as this important issue merits. I am delighted that this morning, U.S. and Indian business leaders, associations heads and social entrepreneurs, will begin an important conversation to establish best practices and identify creative new approaches to corporate social responsibility. We have much to learn from great Indian companies, and I look forward to regular exchanges and, more important, follow-up actions by our members, in the coming months.

Perhaps what I would have most wish to see was a solid increase in trade and investment flows. I also hope that our two governments can develop strong patterns of collaboration in the WTO negotiations and suggest the Council and Indian business have a continuing role to play in building bridges between our trade negotiators.

The conclusion I draw is that the Council must maintain its commitment to think through and discuss with India's government, the U.S. government, and our partners in India's business community policies in the fields of finance, taxation, infrastructure, trade and the numerous other areas that impede the development of ever-closer business ties. Our ability to continue to lead the process of commercial engagement with India, to create new business opportunities for both U.S. and Indian firms, and to foster U.S.-India cooperation in multilateral fora all depends on our ability to remain assiduously engaged with our two governments on policy.

As a new Chairman prepares to take office, I personally look forward to remaining fully engaged in the work of the Council and to leading the Council's participation in the U.S.-India Economic Dialogue. India's reform process is raucous, disputatious and untidy. But it works and I believe in it and the path of opportunity that it is opening up. The Economic Dialogue can be a vital mechanism for sustaining American business's participation in this boisterous process, and I am looking forward to working with everyone here - and many more who are not yet involved, but soon will be - to strengthen the ability of our two business communities and our two governments to work effectively together.

INTRODUCTION OF CHAIRMAN-ELECT

Friends: It is now my great pleasure to introduce my successor, the Chairman-elect of the U.S.-India Business Council, Mr. Rajat K. Gupta. Mr. Gupta is, as everyone knows, a native of India and a product of India's fine educational system. He is also, as Managing Director of McKinsey, a position he has held for eight years, the CEO of one of America's greatest business enterprises.

Mr. Gupta's election comes at an important moment in the life of our Council, when the U.S. and India have found common ground to an extent and in ways few of us ever dared dream. While there is far more to be done to consolidate the work of past years, the challenge for the Council must now be to build on the successes we have enjoyed and chart bold new directions - in business development, in organizational structure, and in outreach. Without forgetting our core mission in policy, which has made the USIBC the voice of the American business community on all matters related to India, the Council needs now to reach out beyond our core constituencies and build a truly national base of support. This will require the kind of extraordinary vision, acute business understanding, and subtle powers of persuasion in corporate boardrooms that Rajat brings to the Chairmanship of the USIBC.

Ladies and Gentlemen: Our Chairman-elect, Rajat Gupta.
Thank you very much.