India may go slow on reforms: Malaysian firms

Concerned over the ouster of the Bharatiya Janata Party-led National Democratic Alliance government, Malaysian companies fear the new government may go slow on the economic reforms which will be a setback to their billion dollar infrastructure projects in India.

Malaysian companies are involved in the construction of more than 40 highways in India under contracts worth some $5.26 billion, and several more billion-dollar projects are being negotiated or have been tendered for by Malaysian firms, The Star daily reported on Friday.

According to the Construction Industry Development Board, some 1,000 Malaysian engineers are in India supervising projects ranging from road building to water supply, the paper said.

Currently, Malaysian companies such as IJM Corp Bhd, Binapuri Bhd and Bumi Hiway (M) Sdn Bhd have already secured some large projects in India, while others like Gamuda Bhd, UEM Builders Bhd, Road Builder Holdings Bhd and Ranhill Bhd are in the midst of negotiating deals.

The return to power after eight years of India's Congress party could put a damper on the efforts by the Malaysian companies to secure infrastructure projects in that country, the daily said quoting analysts.

They said the new Indian government could reverse some of the economic reforms started by Prime Minister Atal Bihari Vajpayee and, in the process, send some of the projects being tendered for by Malaysian companies back to the drawing board.

"There is certainly some concern for foreign contractors at this stage, particularly in relation to projects that have yet to be secured," Mayban Securities equity strategist Raja Indra Putra Ismail said, pointing to the different approaches of the Congress and BJP parties with regard to privatisation.

Most of the Malaysian companies that already have a presence in India are involved in infrastructure projects through various privatisation schemes. Hence, their fortunes could be tied closely to the future direction of the economic reforms planned by the new government, analysts said.

Analysts said Malaysian companies could face new problems in dealing with a new government, which would have its own views with regard to foreign investors.

"Now, we don't know whether the new government will be friendly to foreign investors. If it isn't, it could put to waste all the hard work done, said an economist with a local brokerage.

Ranhill chief operating officer Kamarulzaman Omar also voiced his concern, saying: "Of course business risks will increase when there is a change in government."

He told The Star that Ranhill was currently leading a consortium in negotiating for five Indian projects valued at over 4.5 billion ringit. The projects range from water supply and sewage treatment to road construction and port development in Tamil Nadu.

Kamarulzaman said that in general the Indian central government would have the final say on major projects, even if the state governments had approved them.