Thank you, Peter. Welcome to Mumbai Minister Bachand. I'm delighted that my visit to India coincides with your mission to this all-important market and that we are able to host you today as our guests, our partners and our clients. It was just over a year ago that EDC became involved in a prior Quebec mission to India, led by Premier Jean Charest. In addition to supporting its preparations, Mme Françoise Faverjon -Fortin from our Montreal office later joined the delegates in their visit to New Delhi, Kolkata and Mumbai.
India has long been a market of strategic interest to EDC. In fact, one of my first deals was in India and I've been with EDC for 27 years. It's a place where we have a lot of experience and where we've witnessed an incredible transformation, but it's still a challenging place to do business.
You've probably read or heard more about the importance of India in the last two years than ever before. We think India is important as well, and let me recap the reasons why.
The "India of old" has transformed itself since the early 1990's into an economy led by a succession of governments progressively more committed to liberalization and where significant reforms have been implemented. Sectors such as telecom, power, transportation, insurance, roads and ports have opened up to foreign competition. Corporate India has spawned multinationals that are dominating the global marketplace: entities like the Tata Group, Birla, Bharti and Reliance are becoming coveted buyers and partners to business world-wide.
There are other factors to consider:
An economy poised to grow 8.0% by the end of this year
Upgrades in ratings by credit agencies (currently Baa2 /Moody's)
Accumulated FX reserves of approximately US $160 billion
A skilled and diversified workforce (fluent in one of Canada's official languages)
A rapidly growing middle class (or consumer class)
A strong equity market and a mild interest climate
A developed, stable banking sector and developed capital markets
There is also a congruence of Canadian ability with India's needs, opening selling and partnering opportunities in many sectors. Top of mind are telecommunications, power, advanced technology and manufacturing, agriculture and environmental technology. Telecommunications and power are vital to modernizing India's infrastructure and these same sectors which were also key to Canada's and Quebec's own development. The same applies to other Indian infrastructure priorities such as aerospace, transportation, airports and water treatment. Other sectors such as plastics, biotech, and services are a natural fit for Canadian expertise. You're here because you see your own opportunities and I'd like to hear your views on what this market has to offer when we shift to questions and answers in a few minutes.
I told you the reasons why India is important to Canada. At the same time, I don't want to minimize the challenges of doing business here. Issues such as corruption, bureaucracy, regulation and the pace of reform can still frustrate the progress of companies operating here. EDC's experience is that India is a market to be cautiously approached, and where help from intermediaries can be extremely valuable.
It is a market which must be approached patiently and realistically. Doing business in India requires one to invest time in building relationships, to be selective and to be prepared to manage different levels of risk, be it credit, regulatory, judicial or political.
On the upside, EDC can help you manage the India challenge. We are committed to this market because it does offer good opportunities to Canadian companies. I doubt we would be meeting with you, in Mumbai, at the start of Quebec's second trade mission to India in less than one year, if that wasn't true.
Companies such as SNC Lavalin (with whom we've worked in India), CAE, Bombardier, RIM, Nortel, Sun Life Assurance Co., Scotiabank, Husky Injection Moldings, Sandwell are all examples of Canadian companies carving out a niche in India and investing a long-term presence in the market. Others, as we can see from the mix of companies represented today, are sure to follow.
While it isn't always easy to do business in India, it is a market that Canada cannot afford to ignore. We have much work left to reach our potential in this market.
Last year, Canadian goods exports to India exceeded $1 billion and Canadian direct investment equaled about one quarter of that. Conversely, India exported roughly $1.7 billion to Canada in 2005. The trade levels are clearly very modest and there is huge potential for growth as Canada and India engage more actively.
Can EDC help correct that kind of imbalance? Certainly. We can dedicate the full scope of our financing capacity and risk management expertise to helping Canadian companies which have factored India into their international growth strategy. We can be thoughtful, adaptive and innovative to not just respond to the changing needs of Canadian companies in India, but to anticipate them. We can take on more risk as the global economy slows and as more and more Canadian companies diversify into emerging markets like India.
We are growing the participation of Canadian companies in India by building stronger relationships with corporate India and our relatively short exposure to "India Inc." is showing results. EDC last year facilitated almost 40 percent of Canada's modest, but growing trade with India. By the end of October 2006, we engaged 132 Canadian companies in well over $500 million in business. We are on target to exceed $600 million in business generated by our entire service line-up, to date: financing ($260 million), credits insurance ($160 million) and contract insurance and bonding ($50 million).
Financing will account for the lion's share of our India service offering by the end of this year. There are many dimensions of EDC financing available to Canadian exporters and investors:
Direct buyer loans: Those are benefitting buyers of all sizes, including smaller players like Varun Beverages of New Delhi and Lunarmech of Mumbai which add to our list of Canadian sales to the Indian plastics & packaging sector.
Syndications: We recently closed deals with Tata Steel and Essar Steel to attract various Canadian suppliers to the advanced technology and manufacturing sector.
Project Finance: Since 1995, our Project Finance Team has generated over $ 8 billion in business over 143 projects. One of our largest financing transactions here in India, the 2005 transaction with Reliance InfoComm for US $ 250 million was a Structured Finance deal.
We cooperate with local financial institutions to facilitate buyer financing: We participated in several syndications with SREI Infrastructure Finance Ltd. to open up infrastructure opportunities to Canadian suppliers of all sizes. On Thursday, EDC and ICICI Bank will officially sign an MOU to collaborate on new financial solutions to Indian corporates and we are committed to putting a credit facility in place over the next quarter.
We also work with Canadian banks to offer solutions which free up working capital needed to close export sales. I'm talking about tools such as Pre-Shipment Financing, our Master Accounts Receivable Guarantee, Factoring, and Notes Purchases. I can expand on these later.
Facilitating Canadian foreign direct investment: We directly finance or even take equity positions in Canadian companies building global supply chains, reaching new customers and becoming more competitive. We also finance direct investment into Canada as a means of growing Canada-based businesses and enhancingCanadian export capacity. Case in point : the acquisition of Montreal-based Teleglobe by Tata subsidiary VSNL in 2005, for which we provided US $ 75 million, thus fitting a sophisticated Canadian telecom unit into Tata's telecom growth plans.
I've said a lot about financing, but insurance is just as critical to the success of Canadian companies coming to India. EDC credit insurance was instrumental to the introduction of RIM's Blackberry to India in 2004. We provide exporters and investors with a range of credit and contract insurance solutions that preserve receivables, increase working capital and protect foreign assets:
Accounts Receivable Insurance: Credits insurance creates access to Indian buyers. Most of the 132 Canadian companies we served over the course of the year are protecting their Indian receivables against non-payment.
Performance Security Insurance: We protect exporters against wrongful calls on bonding instruments issued as contract-performance security. Wrongful call coverage is a reality confronting Canadians in this market.
Contract Frustration Insurance covers Canadian companies against losses or costs incurred when the performance of an export contract is impeded - another risk of the market place.
Political Risk Insurance protects the foreign assets of Canadian investors. From simple assets to large projects, this tool covers a broad risk spectrum ranging from breach of contract, to expropriation and political violence. I'll be pleased to elaborate on these solutions in more detail in a few minutes.
In addition to acquiring the right financing and risk management tools, success in India requires a permanent physical presence. We need to be here on a permanent basis if we are to be seen as a competent, credible finance and insurance institution. Our credibility hinges on how well we understand a market, and our customers in that market, and the only we to demonstrate that understanding is by being here permanently. Relationships may be founded on transactions, but they are built and maintained by collaborating and developing meaningful business solutions. And that is something that can best be done face-to-face, on the ground.
In April 2005, we made the strategic decision to locate Peter Nesbitt in India as our first permanent representative to India. Peter's presence is generating contacts, raising profile, originating and helping to close deals. With the support of a EDC team composed of sector experts, strategic account managers and senior management who regularly visit India, we are gaining new knowledge and expertise, learning more about customer needs, and working closely with customers to develop business solutions. We are becoming more relevant to Canadian companies entering the market.
What does EDC ultimately have to say to Canadian companies coming to India? We have the risk capacity. We are flexible. We are recognized for our strong business ethics and environmental practices. Our track record shows that we stay and remain active in markets that others either quit or avoid. We are here because our mandate is to increase the capability of Canadian companies to engage in trade and, with the right tools- Canadian companies can do that from India.
I look forward to your questions and your comments. Thank you.
