Sunday, June 23, 2002

FDI Policy For Media

The public debate on foreign entry into print media largely treats it as a single, broad, undifferentiated sector, even though most discussants seem to be discussing the narrow issue of foreign entry into the newspaper business. A few discussants may perhaps also have newsweeklies in the back of their mind when expounding their views on this subject. The current article tries to put some new ideas into the public arena so that a differentiated FDI policy can be defined for various categories of media.
Ability to compete and to derive the maximum benefit from competition depends on the society’s knowledge base. A closed economy breeds lazy thinking and action. We can only compete at the frontiers of knowledge if we have access to that knowledge and have absorbed, adapted and incorporated into the knowledge base of our society and economy.
The Indian economy can become a Knowledge based economy by 2025 if we can attain universal access to primary and secondary education in the next decade or so and we open our minds to the best and latest knowledge from all over the world. A competitive, wisely regulated media, both print and electronic, has an important role to play in this process.
A couple of decades ago, most services were considered as non-tradable across frontiers as they had to be delivered at the point at which they are consumed/used. The technological transformation of the communication industry coupled with the developments in transport & travel has transformed the picture over the past decade or two. Even greater changes are in the offing in the next decade as previously non-tradable services become tradable.
What has not been fully realised, however, is that there are many services besides ITES where we have a comparative advantage or could create one, to become a significant exporter and player on the world stage. The common strengths that can underlie this success are:
• They are all dependent on communication facilities, even though the precise type of facility may differ. For instance Radio/TV broadcasting stations and telephone exchanges are both communication facilities, though the former is used for public communication and the latter for private communication. With the rapid pace of technology development we should not be surprised to see in the near future, radio/TV facilities being used for private communication and telephone exchanges for public communication (internet news station).
• The use of English in global commerce and trade in services.
• The advantages of free and open society, the freedom of information, thought and expression.

There are also some differences between different services. For instance Software is more dependent on analytical skills while media and entertainment is more culture and society dependent. Nevertheless, with globalisation, cultural diversity is itself an advantage that can be exploited to produce a unique product, if merged skilfully with the basic cultural & society specific characteristics of the target audience (artistic joint product/venture).
Automatic 100% FDI should be allowed in the following activities in the print media:
• Internet Publishing can be carried out from anywhere in the world and its content sent anywhere instantaneously. Any restrictions on this type of publishing are therefore futile.
• India is well placed to be a major exporter of publishing and printing services. It could replicate the success of Hong Kong by allowing free entry of foreign printing and publishing services into the country. This would cover printing facilities as well as associated services like layout design.
• The business of publishing for export on the same basis as the EOU/EPZ policy for industry and the Special Export Zone (SEZ) policy. Material allowed for domestic sale would (of course) be subject to the press and other laws applicable to imported material or incoming media.
• Publishing of commercial or private material such as stationary, brochures, pamphlets, leaflets, diaries, calendars, house magazines, journals & newsletters and all other published matter which is not explicitly restricted by a lower foreign equity limit.
We need to raise the educational and intellectual quality of our entire population and labor force. Foreign competition will reduce prices or increase quality (or both) and help extend the reach of publications to the entire educated population. Automatic 100% foreign approval should be given in areas, which are potentially of the highest benefit to the society and economy. Lower automatic limits could be set in areas in which the benefits are less clear-cut or there is demonstrated possibility of either cultural or nationalistic bias.
Science is universal and common heritage of mankind. It does not belong to any nation or culture. Automatic 100% foreign equity should therefore be allowed in the Publishing of Books and Journals in Science & Technology, Social Sciences, Professional areas (medicine, management, business, accounting, law etc.) and Humanities (Art, literature, geography). This would also apply to “self-help” or “do-it-yourself” books in these areas. It should also cover educational material and topical magazines (e.g. Scientific American, Psychology Today) in the same subjects, with the following proviso:
Possible Exceptions
The 100% automatic approval would not apply to publication of educational material in history, directed at children up to the level of high school. It would also not apply to any literary work that glorifies or justifies violence in any way or makes it attractive by mixing it with sexual titillation. Finally it would not apply to any material containing geographical maps that misrepresent the boundaries of India to show Indian Territory as belonging to another country (we can perhaps take a relaxed attitude if it were shown as Indian Territory which is disputed).
We should have no objection in principle to publications on Culture, Society and Entertainment being published and sold in India as long as this is not at the expense of Indian culture, social norms & practices. The basic touchstone for deciding on foreign equity should be a criterion of globalisation. Globalisation of culture must be a two way street, with the rest of the World having the same access to Indian culture as we do to theirs (reciprocity). This has two aspects:
C1 Exports
If a publisher is willing and able to use India as an export base whenever it finds that India is a competitive location we should freely permit foreign entry. The export criteria would be very simple. At least one copy of each book or journal in each language sold in India must be exported as proof of exports. If some language is not considered exportable the publisher must substitute another international language besides English (e.g. Japanese, Chinese), or a more explicit criteria for exports (e.g. 10% of production). If our reasoning that India is or will soon become a very competitive location is correct, the publisher will in due course himself find it profitable to export more from India.
The idea is therefore not motivated by foreign exchange earnings considerations at all but by informational considerations. That is the entrant must after entry seriously consider whether it would be profitable to export from India. If anyone comes to a negative conclusion there must not be any legal pressure to go against a well-informed commercial judgement.
C2: Content
Globalisation of media cannot merely mean that all the existing cultural (e.g. soap operas) and nationalistic (e.g. war news) content created in democratic USA, UK and other English speaking countries is merely transferred to India. Globalisation must also mean that the cultural and nationalistic content created by the 1/6th of humanity living in democratic India is brought to a global audience (in due course).
Two criteria which could define globalisation of publishing are;
C2a: Country Maximum
That content from the USA (22%), Japan (8%), China (11%), Germany (5%) and UK (3%) cannot exceed their respective shares in world GDP measured at PPP. The idea is to ensure cultural diversity and discourage a homogenisation of culture based on World media oligopoly.
Publishers should be allowed to offset any divergence from criterion C2a by a point for point increase in the share of Indian content. For instance if the publication has only 2% content on China, the remaining 11% can be substituted by Indian content.
C2b: India Minimum
That Indian content must be greater than India’s share in world GDP at PPP (about 4.5%) in the third year after entry and rise to India’s share in world population (17%) by the tenth year of production. The content referred to here can be interpreted liberally to include any non-Indian content provided by any author/writer of Indian origin (up to children of parents who once held Indian passports). Again the idea is to ensure cultural diversity and that the Indian cultural perspective is fully reflected in this diversity.
The reciprocity principle outlined above can also be applied to the areas of culture, society and entertainment. In the area of scholarly & semi-scholarly books & journals providing analysis & information, such as books and journals on food, popular music and films, automatic foreign equity up to 74% could be permitted subject to criterion C1 & C2b and up to 51% subject to C1 alone. Higher foreign equity could be considered by the FIPB depending on more formal export commitment or commitment to provide Indian content. In the case of popular novels, magazines & comic books with the primary purpose of entertainment, automatic foreign equity up to 74% could be granted subject to criterion C1 and C2 and up to 51% subject to C1 and C2b. FIPB route would apply if proposal cannot meet condition C2. This condition can be relaxed by substituting it by formal export commitment.
The globalisation criterion enunciated above can also be applied to foreign entrants in the field of current affairs and news programs, along with a third one relating specifically to India (C3). The need for this clause arises because reporting of international affairs is strongly influenced by Nationality, as demonstrated by reporting of the war in Afghanistan and related issues of Pakistani involvement in terrorism in the region.
C3: Editorial Control
Editorial control, in the sense of control over editorial policy and content must vest with Indian nationals. The business managers and those who control commercial decision can, however, be foreigners. There could also be a grace period during which editorial policy is completely under the control of foreign editors.
Foreign entry into publishing of newspapers and news magazines dealing with current affairs and news can be allowed subject to criteria C1, C2 and C3. This could be done through the FIPB route subject to a maximum of 49% foreign equity.

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