Success is the result of a systematic approach, patience and the ability to adapt to the specifics of the local market
The free trade agreement between the European Union (EU) and India represents a significant shift in global trade. After nearly two decades of negotiations, it creates a zone that covers some two billion people and 25 per cent of global GDP, one of the largest free trade areas in the world, and one that changes the terms of access to the Indian market. Slovak companies will gain new export opportunities and production capacity.
New business model
The agreement brings tariff reductions that India has not granted to any other partner. Reduced transaction costs and more predictable rules create a more stable framework for long-term investment and partnerships. India is one of the world’s largest economies, but the scale of domestic consumption and the need to meet internal demand is a decisive factor. “A thorough analysis of what the Indian market needs and is unable to produce in sufficient quantity, quality and quantity must play a role in the decision-making process of a Slovak exporter,” says Matúš Šársky, director of Eximbank’s international relations department. The market of more than 1.5 billion people is driven by domestic consumption and investment in infrastructure and industry. For exporters, this means the need for strategic planning and realistic capacity assessments. Entering even the Indian market requires preparation of a business model, knowledge of the regulatory environment and responsiveness to local specificities. Long-term presence and confidence building play an important role.
Sectors with potential
The greatest potential is in sectors where Slovakia has strong industrial know-how and where India is targeting higher value-added manufacturing as part of its “Make in India” strategy. These include the automotive industry and its supply chain, engineering and industrial technology, including automation, as well as IT and high-tech solutions. These sectors will benefit from tariff reductions and growing demand for sophisticated technologies. Space is also opening up for the chemical and pharmaceutical industries and partly for the agri-food sector. It is important for exporters to offer products and services with higher added value and technological complexity. As M. Sharsky emphasises, companies must be capacity and production ready to scale up production for the Indian customer. The key is to work with a proven local partner and to be sensitive to commercial and political risks. Eximbank plays an important role by combining export financing, risk insurance and bank guarantees. Its support is essential, especially in the initial market entry phase, in assessing the creditworthiness of the partner, setting up the contract structure and then in extending the cooperation to long-term projects.
Experience from practice
Eximbank is a key assistant for Slovak companies in India. It has already provided pre-export financing related to contract implementation costs and issued bank guarantees for clients in the defence and aerospace industries. However, the complexity and length of administrative and business processes should be borne in mind. “The weak point is communication with Indian banks, which responded only after personally contacting our representatives. This needs to be addressed at the outset, otherwise it can drag on for months,” warns Tatiana Harmady, director of Eximbank’s funding department. Eximbank has built a network of contacts in India through its partner institutions Export-Import Bank of India, Export Credit Guarantee Coorporation of India and State Bank of India. Cooperation with them allows for more efficient financing and guarantee solutions for projects for the government or large enterprises. The key is to reach out to Eximbank early so that partners in India have sufficient time to respond.
A successful example
An example of a successful entry into the Indian market is the creation of a joint venture between a Slovak agricultural equipment manufacturer and a local producer. The project combined Slovak know-how and design solutions with local production for Indian agriculture. As Tomáš Kuruc, Director of Structured Finance Department of Eximbanka, adds, the bank’s financing made it possible to implement the production project and to bridge the initial phase of the project from its establishment to the production period.
Source: TREND.sk
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