Why Kerala is a pariah state for investors

Image credit: Suneesh K

Amid some perfunctory attempts to attract investors to the state, Kerala continues to maintain its bad reputation for investor friendliness, as evidenced by its low-lying position on the Centre’s Ease of Doing Business (EoDB) rankings. Instead of commissioning any serious retrospection, the ruling dispensation passes the buck to others and resorts to favourable reports to claim its investor-friendliness is on a par with the best in the country.

Kerala ranks high on one such report on sustainable development goals by the NITI Aayog. But a fine reading reveals it doesn’t translate into investor-friendliness. We just witnessed how home-grown clothing brand Kitex had to choose Telangana, over Kerala where it already operates, to invest about Rs 3,500 crore to expand its business operations.

The state government orchestrated nearly a dozen raids in Kitex’s units, pulled up employees for random quizzing, and served notices even on issues pending court decision. Telangana, on the contrary, sent a charter flight to Kochi to bring the group chairman for talks, and struck a deal.

It’s time Kerala understood its issues and devised an approach to change things around.

Still Not Business-Ready

However modern it may try to appear, Kerala still possesses a core, hardened by an orthodox view on businesses. For a sizeable group of people, a government job is still superior to a private sector job, the disparity in benefits notwithstanding. Children are advised to focus on competitive exams and grades, in an effort to secure a government job. Business aspirations are discouraged with the dictum: ‘Not meant for us’. This is a reason why the very few who quit highly-paid jobs and venture out into businesses still make headlines as an ‘aberration’.

Communism Prejudice

Communism has become synonymous with Kerala—and because of this a businessman is always seen as a bourgeois and an exploiter waiting for the opportune moment to deny the working class its due. Literature and popular culture have immensely contributed to imprinting such images in one’s subconscious.

Kerala has an uncanny record of being apprehensive to investor-friendly reforms that include the introduction of farming equipment, computers, and even piped gas. Trade unions have their grasps on all matters related to labour, and the rancour between managements and unions have brought the curtain down on many industries in the state.

Archaic Socialist Economic Concepts

Although the country broke away from socialist economy in the early 1990s, its shadow lingers over Kerala. People still think the government must run businesses. Disinvestment and privatisation are still an anathema. The fight that ensued when the Centre broached the privatisation of the Thiruvananthapuram Airport hasn’t subdued yet. All along, Kerala vouched that airports must be run by the respective states, yet hypocritically, the State attempted to bid for the faraway Mangalore Airport in Karnataka. Though Kerala is conducive to further investments in IT, it would be futile without national and international connectivity. Unfortunately, the State is not willing to let go of the airport.

Gawking Fees, Risky Investment

Kerala claims to have a single-window system to speed up approvals and licensing, but it is often accused of ratting on its promises to investors. Kerala has the onlooker’s wages (nokkukooli), an infamous practice where militant trade unions would charge an extortionate sum for some strenuous work they just watch others do! In theory (or on paper) the menace is stamped out, but in reality, it continues to gawk at investors.

Officials often display stolidity, leaving investors to run behind them for evermore. To make matters worse, the few officials who take decisions aren’t backed by the government. Early this year, the KSINC, a state government enterprise, entered into an agreement with a private investor to construct deep-sea trawlers, but when a policy violation was flagged, the government quickly washed its hands of the deal and assigned the guilt to the bureaucrats.

Sub-Nationalism

Whenever criticism is levelled against a ‘policy’, the government springs into action and paints it a co-ordinated effort to inveigh against the ‘state’ and dishonour its image. During the Kitex controversy, the government brought this argument at will, even to the point that any further discussion on the matter would be against Kerala’s interests. Such devious attempts to evoke sub-nationalism give the government the leeway it needs to divert attention away from the core issues pending redress.

The ruling party heading the government may have political differences with businesspeople, but old scores must not be settled at the cost of investment in the state. If we choose not to wake up and smell the coffee, god forbid, we’ll soon see the handful of remaining investors too hurtling with their baggage to board private flights to other states. Often, the solution lies a phone call away.