Huawei to withdraw proposal

Chinese telecom equipment manufacturer Huawei Technologies has sought withdrawal of its long-pending proposal with the Foreign Investment Promotion Board (FIPB).

Senior government officials told Business Standard that the Chinese company had recently written to the FIPB in this connection.

When contacted, Huawei officials did not comment.

The move comes on the heels of ZTE Telecom, another Chinese telecom equipment manufacturer, withdrawing its application from the FIPB and applying directly to the Reserve Bank of India.

According to rules, 100 per cent FDI is permitted in telecom manufacturing under the automatic route. It is likely that Huawei will follow ZTE and go in for this route to get its proposal cleared.

Huawei Technologies had proposed to invest $100 million through its Indian arm, Huawei Telecommunications (India) Company Pvt Ltd, to set up a manufacturing unit and a research and development centre in Bangalore. The proposal has pending for the past two years. The company has a major software development centre in Bangalore.

ZTE, which already has a subsidiary in India, had sought permission to enhance its equity capital and enter after-sales service and wholesale trading of telecom equipment. The proposal was rejected at an FIPB meeting held on June 13, 2006.

The issue relates to security concerns over Chinese investments in strategic sectors like telecom, shipping, and ports.

As a consequence of these concerns and some corporate developments, the government is veering round to the idea of introducing a national security exception law that will lay out clear guidelines on investments into sensitive sectors.

The national security establishment is pitching for such a legislation. Thus, a draft National Security Exception Act is in the offing. Sources said the draft Act might soon be sent for consultation within the government.