Advanced search

New Delhi > News > Minister of Economy and Foreign Trade Jeannot Krecké addr... >

Minister of Economy and Foreign Trade Jeannot Krecké addresses audiences in Delhi, Kolkata and Mumbai

Published Wednesday January 20 2010

Thank you for joining me tonight in celebrating the ever stronger bonds between our two nations, India and Luxembourg. This is the fourth time since taking office in 2004 that I am travelling throughout your country in order to present the opportunities that lie ahead in an increased economic cooperation between our countries and let me tell you that each time it has been a completely different experience. Encountering India is a learning process and I venture the statement that, as a European, one will probably never fully understand Mother India. The country has been likened to a kaleidoscope: with every little turn, the image changes and new facets appear. Maybe it is this, this unpredictability that makes for this intertwining of fascination and fear that grips the stomachs of western businesspeople when they step out of the airport and explore India. You feel humbled. At least I do. I am not afraid to admit that I do not come to India with a colonial attitude, in order to give lessons. I come to learn. I come to understand.

In 2005, I led a business delegation to Delhi, Mumbai and Pune. It was the time of feverish globalisation, the year when Thomas Friedman’s acclaimed book “The World is Flat” was published in which he derives the unbreakable interconnection between economies from his practical experience on a visit to Bangalore. BPO was almost not considered a dirty synonym for job killers anymore, but portrayed as the way forward towards innovation and growth. Looking back, I remember two issues quite vividly – first, I had to present Luxembourg to our audience who was, I dare to say, quite clueless about this tiny little country somewhere in the middle of Europe. Most had not heard about our industrial excellence or the opportunities offered by Luxembourg’s financial centre. I had to explain that Arcelor was a child of our soil and I remember lobbying tirelessly to persuade the Indian Ministry of Finance to agree to the conclusion of a double taxation avoidance agreement. The most striking experience on this visit was nevertheless the factory visit of Bharat Forge in Pune. Listening to Baba Kalyani, it dawned on me that: “these guys are not the cheap labour producing low quality products, but these guys may one day be first class payers on the world’s markets or even take us over.”

Let me admit that I didn’t think that this day would come so soon. Less than a year later, a certain Lakshmi Mittal came knocking on our door. Suddenly, on my visit to Delhi in 2006, there was no need any more to explain where Luxembourg was or that Arcelor was headquartered there. I was followed by a throng of journalists wherever I went. I think I learned on this visit about the Indian state of mind, about passion, motivation and pride. A whole nation was supporting a man who, in fact, had left his motherland to make his fortune. All India looking at him as one of them, an example of entrepreneurship, somebody whose success they were most eager to emulate. I learned also about the value of friendship. During those days, when harsh words were spoken on all sides and accusations made, former Minister of Commerce Kamal Nath and myself became friends even though some media presented this take-over battle not as a business issue but as a clash of cultures, of civilisations. Today I am proud to count Kamal as a friend and I am certain that he will be a boon for India, working as tirelessly on improving the country’s transport infrastructure as he did in his former function on integrating India into world trade.

2007 took us to Bangalore and we could see for ourselves the fascinating development of India’s very own Silicon Valley. Together with our business delegation, I visited some of the leading players in the fields of software development and BPO services. What struck me nevertheless were the disparities: high-tech campuses developing cutting-edge technology but yet suffering from lacking infrastructure such as weak power supply. I took home the conviction that these suboptimal conditions were an important factor in shaping the Indian entrepreneur. His ability to overcome difficulty and adversity with determination and creativity make me want to borrow from Frank Sinatra’s song “New York, New York”: “if you made it here, you’ll make it everywhere”.

I am curious to see which facet of India I will discover during the present visit. 2010 is very different from 2005. We discovered that Thomas Friedman was right when he wrote that the world is flat. We are all interconnected. Our countries rely on each other in the system of global division of labour. It becomes harder and harder to say that “this company is Luxembourgish and that company is Indian” since investment moves globally and money travels around the globe. Even SMEs have understood that in order to develop sustainable growth they need to look beyond the borders of the country in which they were conceived.

Whereas I discovered the positive impact of globalisation during my previous visits to your country, the times that we lived from autumn 2008 to now have shown us the uglier face of globalisation. Being interconnected does not only count in the happy days of growth, but it also means sharing losses and taking blows collectively. When Lehman Brothers failed in late September 2008, there were not only ripples racing through the global financial markets, there were waves. They crashed not only on the shores of Manhattan Island, but also in major European economies such as France, Germany, Spain and Greece. The Thames barrier did not protect the City of London from the flood of fear racing to grip banks and other financial institutions. Former backwaters like Iceland were ruined. The artificial islands of Dubai came under threat. Even a landlocked country like Luxembourg was not safe.

I do not think that it is necessary to come back to the causes of the crisis whose effects we are still feeling very painfully. I am also going to pass on reflecting on the way in which the world dealt with what has been described as the worst recession since 1929. Different political and cultural realities dictated the way in which governments reacted. I believe it will be of utmost necessity to examine the reactions from around the world once we are in calmer waters again and check where we succeeded and where we failed. With hindsight one is always cleverer and I would only say that we, in Europe and in other parts of the world, succeeded in avoiding the meltdown of our financial system. Huge efforts by governments, in other words by every single taxpayer, were made to save ailing banks whose crash would have had a domino-effect on other sectors of our economies. These efforts were not policy choices though. There was no other alternative. To those who will study our actions of the past 14 months I can only say that, on the European level, there was not a choice between a German or a French way. What had to be done, needed to be done and it had to be done fast. I was intimately involved in the saving of two of the largest banks in Luxembourg who were brought to the brink of insolvency when credit markets froze in the post-Lehman panic. Believe me, when you receive a call and are told that the world as you know it might cease to exist if you don’t act within 48 hours, then there is no time for long debates. It’s the time when government needs to take responsibility and act. Frankly speaking, we did – and are still doing in this field – well in most European countries. We provided liquidity to the markets, at huge cost to the stability of our public finances, in order to avoid an even stronger contraction of our economies. We are doing whatever is in our power in order to stimulate private consumption and invest in infrastructure. We help propping up those companies who, through no fault of their own, were caught in the maelstrom of global recession.

I am less optimistic about what has been done, or rather not been done, in order to address the roots of the problem. A lot has been said and written about global concertation and action to avoid repeating the mistakes of the past. The G20 got together the world’s leaders deciding on ... declarations of intent. Looking at what is being done globally in real terms, I fail to see measures countering the reckless risk-taking and gambling real money on virtual financial products. I am disappointed to see that the only tangible effect of the G20 has been to launch a campaign against fiscal competition. It is unfortunate to see that quite a few governments who spent a great deal of money on countering the financial crisis and dealing with the effects of the recession are only thinking about getting back the money – and preferably from somebody else. Ideally, they would have to address the underlying reasons that got us all into this mess. Over the past weeks we have seen that there is not much that is being done. Stockmarkets have been bullish as never before due to the frenzy of speculation that has been going on with the cheap money provided by the central banks. Bubbles are being created again, waiting to burst and hit us in our faces just when the first delicate shoots of growth are being seen. It’s a very dangerous game that is currently being played.

India has done quite well in a situation where others fought for their lives. The Indian elephant is steady on its course, with GDP still showing impressive growth. It is hard for me to say, but maybe the protectionist relics that the government of India has not yet removed, sheltered its economy to a certain extent during those stormy months. The multinationals of course suffered and India’s IT & services sector struggles due to its international clients reducing orders. Visiting Dubai and talking to the people employed in ordinary jobs, I found nevertheless that India’s large expat community in the Middle East – sending home by itself over 40 billion USD - has taken quite a hit. In the state of Kerala, almost 20% of GDP is made up of remittances and I believe many families will face very severe problems in the coming months when their breadwinners are either going to return home or send less money. So whereas there are undoubtedly many tragedies on the micro level, the Indian government has acted wisely on the macro level.

Saying this, I would like to dwell a bit on the situation in Luxembourg. Fortunately, the Luxembourg government had over the past 20 years adopted a policy of fiscal prudency, avoiding spending excesses and keeping a balanced budget – even regularly producing surpluses. This put us in the lucky situation that financial means were available when needed for emergency measures and anti-cyclic intervention. Digesting the emergency measures necessary to keep Fortis and Dexia afloat as well as keeping investment in infrastructure high was not easy and forced us to increase the public debt. Although one could say that the current level is quite low in international comparison. This does nevertheless not mean that we are safe. Small countries are more vulnerable to quickly escalating levels of public debts than large ones who can sustain financial hardship much longer.

Naturally, I am not here to paint a gloomy picture though. Crisis brings opportunity. It forces you to reflect on what you have done in the past and about how you have done it. In politics, it can be an opportunity for much needed changes that would otherwise be hard to introduce. It wakes you up. Today, if you snooze, you lose. Luxembourg, I hope, has understood that its past business model needs overhauling. We need to innovate, to invest in order to bring out our strength, to explore new fields of activity. That’s what we were good at in the past. That’s what we need to do again.

150 years ago, after our newly-gained independence, my country was rural and poor. Subsistence-farming was the norm for most of the population and famine was a frequent occurrence. Almost one third of the population left for the promising shores of the United States of America, full of hope for a better future. Then, through a chance discovery, came the steel industry and through shrewd manoeuvring Luxembourg became one of the leading steel producers in the world. When the steel industry fell into a deep dark hole in the middle of the 1970ies, the entire population was not only showing an extraordinary solidarity in order to modernize and pull out of this crisis again, but supported also the government’s drive to latch on to a still nascent move towards developing a thoroughly modern services sector. Banking and investment funds, but also promising niches in industry were encouraged and actively developed. We rebuilt our fortune on this basis once. We will do so again.

The Luxembourg government is determined to support the country’s economy in its reform process. We will invest in education, in infrastructure and in innovation in order to help our companies gain markets at home and abroad. The first successes in the field of health technologies are already tangible, building on a coordinated effort between the government and the private sector, between players from Luxembourg and overseas. Green technology is not only a niche as some say, but a key to the world of tomorrow. Not only our big players are already fully engaged in this field, but also more and more SMEs are successfully marketing their skills and know-how to customers world-wide. The flat world we’re living in means that not everything we consume is made close to where we live, unlike in the world my great-grandfather lived in. Goods travel around the globe. This intercontinental supply chain needs highly-focused logistics combining the expertise of platforms for international trade. My country has a tradition of openness and mediation between countries and cultures. We never used all the steel we forged or spent all the money we managed. We import, we export, we add value – the business delegation that joined me on this trip is a perfect illustration of this fact. We are the masters of logistics, offering unparalleled access to the European markets and beyond. We are a gateway, serving as hubs for companies starting operations in Europe. Our stable social and regulatory environment makes for an ideal and predictable headquarter for your business. An encouraging tax system and a wide network of non-double taxation agreements make for efficient operation of multi-national activities.

I would understand if you would now think that this is all very well said, but that I have been elected to serve as my country’s Chief Business Propagandist. This is why I am happy to pass the microphone to one of Luxembourg’s most outstanding entrepreneurs, a true self-made man who is today leading the Luxembourg Business Federation. Mr Robert Dennewald will show you with very concrete business proposals how you and your companies can benefit from working with and in Luxembourg.

But first, let us take a few minutes and watch some images about Luxembourg. I hope they will convey our state of mind.