US vice-president Biden urges India to open up to US companies

US Vice President Joe Biden addresses a gathering of Indian businessmen at the Bombay Stock Exchange (BSE) in Mumbai on Wednesday, July 24, 2013. Mr Biden urged India on Wednesday to improve investment conditions and remove obstacles faced by America
US Vice President Joe Biden addresses a gathering of Indian businessmen at the Bombay Stock Exchange (BSE) in Mumbai on Wednesday, July 24, 2013. Mr Biden urged India on Wednesday to improve investment conditions and remove obstacles faced by American companies which restrict trade between the world's biggest democracies. -- PHOTO: AFP

MUMBAI (AFP) - United States Vice President Joe Biden urged India on Wednesday to improve investment conditions and remove obstacles faced by American companies which restrict trade between the world's biggest democracies.

Mr Biden, the first US vice president to visit India in three decades, listed intellectual property concerns, requirements to buy local content and inconsistent tax treatment as worries for foreign investors.

"These are tough problems, but they have to be negotiated and worked through to meet the potential of this relationship," he said in a speech at the Bombay Stock Exchange focused on boosting annual trade from its current level of nearly US$100 billion (S$126 million).

He also noted that India's "instinct to protect your industries is understandable. But we need to be candid with each other about the obstacles which exist when economies do business".

Mr Biden is the most senior US official to visit India since President Barack Obama in 2010, and the four-day visit is designed to revive flagging momentum in relations.

Problems on both sides have soured ties, leading many analysts to conclude that a relationship described by Mr Obama as one of the "defining partnerships of the 21st century" is far from fulfilling its potential.

Mr Biden also alluded to looming friction at a meeting of the World Trade Organisation in Bali in December over India's highly protected farming industry.

"We need to find a way forward to address India's... legitimate concern about food security without distorting global trade. It is a difficult problem but it must be addressed," he said.

Despite a nuclear energy deal in 2008 championed by the US, Washington has been left embittered after its companies lost out to French and Russian competitors in the race to sell new reactors.

In the retail sector, US supermarket chain Walmart has been unable to open new stores because of local sourcing rules that require it to buy 30 per cent of its products from small-scale local industries.

Walmart, which said last year it wanted to launch its first supermarket within two years, has told the government it is unable to meet the demand, according to press reports on Tuesday.

Officials have pointed to Mr Biden's visit as a chance to improve the investment climate between the US and India, where the government has been trying to introduce pro-business reforms in a bid to boost the sluggish economy.

Ahead of Mr Biden's visit, a US official briefing journalists said there was no reason why bilateral trade "can't be five times (more). Over the last 13 years, it has quintupled, and it should quintuple again".

India's left-leaning government has already opened up or proposed opening up the banking and insurance, airline, energy and media sectors to foreign investors, but has imposed conditions.

Experts have said some of the conditions, designed to protect local industries and counter criticism India is "selling out" to foreign multinationals, are too restrictive.

In the US, pharmaceutical companies have been lobbying against India's backing of generic drugs, highlighted recently when Swiss giant Novartis lost a high-profile case to extend a patent on its leukaemia drug Glivec.

India in turn has been alarmed by proposals in the US Congress to curb visas for high-tech workers, which are feared to hit employees of the flagship Indian outsourcing industry who work for American firms in the US.

While red tape, weak infrastructure and regulatory uncertainty have deterred many companies, India's government is eager to attract foreign investors.

Both Finance Minister P. Chidambaram and Commerce Minister Anand Sharma were in Washington this month to pitch for greater investment and discuss India's readiness to open talks on a bilateral investment treaty.

Mr Biden arrived in Mumbai late Tuesday after holding talks with Prime Minister Manmohan Singh and other political leaders in the capital on economic issues and the security situation in Afghanistan.

On Thursday Biden will visit Mumbai's Indian Institute of Technology before leaving for Singapore, where officials say he will tackle tensions over the disputed South China Sea.