Remarks at Closing Session

Ascend Kerala 2020
10-Jan-2020

Honorable Chief Minister Shri Pinayari Vijayan
Honorable Industries, Sports and Youth Affairs Minister, Shri E P Jayarajan
Honorable Ports Minister, Shri Ramachandran Kadanappally
Shri Yusuf Ali
Shri Ravi Pillai
Chief Secretary Shri Tom Jose
Principal Secretary, Industries & NORKA, Dr Ellangovan

Friends from, and of Kerala,   

It is a great privilege for me to be here, and as always, a pleasure to return to my home state.

Congratulations to the Government of Kerala for this impactful two-day showcase, Ascend Kerala 2020.   

I want to compliment the Government and applaud the energy and focus that the Honorable Chief Minister has brought to the critical subject of investment attraction.

The Chief Minister made many important announcements and statements yesterday, including the vision of ending unemployment in the state in ten years.

I was struck by the ambitions that the Chief Minister and the Industries Minister laid out yesterday, a clear desire to have Kerala be one of the leading states in the country on economic parameters in addition to social ones.

I will share with you some perspectives based on my experience as, if I might say so, a global citizen as well as a proud Keralite who believes in the potential of the state.

In this era of global turbulence and uncertainty, among the factors that guide investment decisions are geo-political location and security, social stability, and general societal harmony. This was a point the Chief Minister made in his remarks yesterday.

Kerala’s maritime location, its cohesive and stable society, policy continuity, and law and order, are all going to be key drivers of inward investment decisions.  

History tells us that Kerala has been a ‘safe harbour’ from medieval times when it was a world-leading centre of trade and commerce. Amitava Ghosh’s book, In An Antique Land, captures that epoch well. Kerala is today poised to reclaim that role.  

With the evolution of technology, value-creation is becoming much more intellectual property-intense and less dependent on land-consuming, heavy support infrastructure.  Thus, many of the concerns that the State has had in the past regarding intensive land-use for industry, and environmental pollution, may no longer be relevant.

A new moment for Kerala is potentially here, and the State has the opportunity to build on its favourable socio-economic base to ‘Ascend’ to become the next economic powerhouse of India.

It is, thus, my belief that we could do much more collectively, not just the state government, but industrialists, entrepreneurs, and indeed all of us who have a stake in the State – to globally evangelise the benefits of investing in Kerala. This is what Mr. Yusuf Ali, Mr. Ravi Pillai and the successful industrialists who were on stage yesterday, have been doing through their actions.

What makes Kerala attractive to an investor?  

Most importantly, what are some of the unique, comparative advantages or deal definers in Kerala’s case?

Let me highlight some of them.

One, Kerala’s superb location – Located on the western seaboard, and a mere hop away from the global aviation hub, Dubai, Kerala boasts of good air connectivity to the Gulf, as well as the Far East, via Singapore.

With four airports functioning and a fifth on the anvil, the high airport density lends an envious advantage to the State.

In-state transit is set to become world-class, once the proposed High-Speed Rail running down the spine of the state is completed.

Kerala possesses the Kochi International Container Transhipment Terminal, at the Kochi Port, as well as 17 minor ports which are being upgraded.  

In the cities, Connected, Electric and Shared (CES) public transport systems are coming up, and Kerala is one of the pioneering Indian states to have an Electric Vehicles policy.

Two, ease of living –  Given the attractiveness of the setting – healthy and green, with a variety of ecosystems and micro-climates ranging from tropical beaches to alpine meadows in the Western Ghats, the State is a great location from a livability point of view. This is appealing not just to investors, but a key factor in employee retention, and makes for a great work-life balance.

Indeed, this is the reason why many iconic companies have chosen to set up their global training centres and back-end delivery centres in the State. However, a lot more can be done to develop recreation and leisure/sporting facilities for the young around the work-hub zones like Infoparks and Technoparks.

Three, the quality of workforce –  With high literacy, very high general awareness among the population, existence of world class institutions such as the IIM, IIT, NIT, IISER and CET, and with more than 60,000 engineering college graduates emerging each year, Kerala is a great venue for investing in facilities demanding high and complex value-added elements, such as space technology, biotechnology, and Industry 4.0 manufacturing.  

Four, vibrant entrepreneurship culture and start-up ecosystem – Backed by an enabling industrial policy, Kerala is fast transforming into a vibrant entrepreneurial society and an eminent start-up ecosystem.  Kerala is in fact, the first state in the country to formulate a policy for the development of the startup ecosystem.  Kochi and Trivandrum continue to attract the majority of the startup companies, and Calicut is also developing as a hub.

We heard yesterday from many successful entrepreneurs.

Their stories, of the IBS Group emerging as the largest software product company from India and dominating their market segment, Peekay Steel becoming a world leading manufacturer of specialty steels, Kitex Garments selling lakhs of infants and children’s clothing globally every day – and the stories of CGH Earth, VKC Footwear and others — these stories are nothing short of inspiring.

I could add to the list, Dentcare, Muvattupuzha, one of the leading manufacturers of dental prosthesis in the world.  Founded by John Kuriakose, Dentcare is today present across 7 countries.

And Terumo Penpol is the story of an R&D initiative in Trivandrum commercialized successfully.  Founded by former IAS officer, C. Balagopal, Terumo Penpol is today the world’s largest blood manufacturing and management plant.

The Kerala startup story is equally noteworthy. The Startup Village in Kochi has seeded more than 500 Startups, while the Maker Village is the most advanced incubation center for hardware Startups in India. There are more than 2200 Startups and 40 odd incubators and accelerators across the state.

We need to do more to propagate Kerala’s astonishing entrepreneurial success stories.  These are real examples of how to do business in Kerala and succeed globally.

Five, the improving ease of investing – Kerala has been ranked as the best-governed state among large states for the past four years running in the ranking by the Public Affairs Centre, which primarily measures, four parameters –  government effectiveness, rule of law, control of corruption, and regulatory quality.  

The Government has also made concerted efforts over the past two years to reduce procedural friction for investors.

The Kerala Investment Promotion and Facilitation Act of 2018,  as well as the web-based KSWIFT platform for online approvals, simplify the regulatory burden on investors, and have furthered the ease of doing business in the State.  Kerala has also liberated small and medium enterprises from most regulatory controls for the first three years by a special enactment.  The Chief Minister spoke yesterday of further measures aimed at enhancing ease of doing business.

Six, social equity and fairness – it is much easier, and more rewarding, to live, work, and add value in a society where social equity and fairness prevails, where everyone is educated and alive to trends and developments across the world, and all have reasonably equal access to quality-of-living systems- be it the justice system, the educational system, or the health system.

Kerala has been a pioneer state in creating universal social-protection systems and institutions, ranging from social welfare pensions to social housing for the poor, palliative care as well as one of the better public-healthcare systems in Asia.  The State has been the top ranked state in NITI Ayog’s Sustainable Development Goals index ranking in 2019, maintaining its position for a second year.

Investing in such a setting reduces the probability of exogenous risks and uncertainty.

The state has been repeatedly ranked as the least corrupt state in India. This is important to investors and industry – and Kerala needs to publicize this important feature more.

Being in an ecosystem where fairness is the prevailing mode would be a very important consideration for any international investor or local entrepreneur.

Kerala thus, has all the right ingredients and the cultural openness to become a theatre of significant investment.

Our own journey, at KPMG as a firm in Kerala, where we have been present since 2008, has been a fulfilling and rewarding one.  With a growing workforce of over 1200 people, our teams have partnered on the journeys of several Kerala based companies such as UST Global, Aster DM Healthcare, IBS Software and Federal Bank.  We have also advised several large Global Private Equity funds such as Blackstone, Warburg Pincus and Temasek on their investments in Kerala based companies.

As Kerala sets out on a course of reforms to make itself more competitive – let me discuss five key themes which should inform the direction and diversity of the inward investment going forward.

First, investment in public infrastructure – The recent flood calamities have awakened the state to the need to build resilient and sustainable infrastructure. The Rebuild Kerala Mission is a great opportunity born out of a great crisis; to reimagine land-use, to redo roads, other transportation infrastructure, in a more robust, and environmentally friendly fashion.

Rebuild Kerala offers a great opportunity to leapfrog to next-generation infrastructure that communicates with users, saving money on asset management, enhancing safety and efficiency, and combining multiple uses, by intelligent deployment of low-cost IOT sensor devices.

The completion of the infrastructure projects funded by the Kerala Infrastructure Investment Fund Board will go a considerable way towards enhancing Kerala’s infrastructure.

We also need to rethink policy instruments and approaches towards durable PPPs in public infrastructure, as well as to create robust non-banking financing instruments for infrastructure-creation.

Second, cleaning and greening Kerala, and mitigating climate change impact – Investments are increasingly vulnerable to environmental and climatic considerations. 

In fact, KPMG’s Global CEO Survey 2019 reveals climate change as a top concern for CEOs.  Kerala’s ecological diversity and abundance of rivers make the state particularly vulnerable.

Kerala can be a global pioneer in environmental and climate change resilience, given its unique diversity of ecosystems and microclimates. One significant measure would be to undertake a climate/environmental audit of the state, highlighting vulnerable geographies and locations, and isolating the variables that can impact sustainability. A number of global impact-investment funds and instruments are now available, and a special focus group could be set up to target such funds.

Third, combining legacy strengths with new tools, and finding new markets – Kerala is probably the only state in India where Ayurveda is used as a mainstream medicine.  The State is home to many Ayurvedic medical colleges and hospitals.  However, the main challenges debilitating growth are standardization, availability of raw materials and use of technology. Traditional players like Kottakkal and new age players like BIPHA have larger roles to play in this area.  Further, life science is an area for collaboration of Ayurveda with Allopathy.

Fourth, everything digital – In an era where everything is being digitised-from asset maintenance for infrastructure, to healthcare and delivery of public services, Kerala is an ideal venue for value-creation enterprises around the digitising drive. The adoption of 5G technology, expected over the next 3-4 years, will be a force multiplier for the kind of talent and skill-sets that Kerala can provide in abundance. 5G is also expected to provide a great fillip to geographically dispersed value-creation, which is ideal for Kerala, given its combined rural-urban settlement pattern.

An interconnected, emerging area is content creation. As the nature and texture of the Internet is changing, from textual to visual/auditory/ AI Web, content-creation is in fact the next big thing.  Kerala can unleash a storm of content creators and aggregators, given its cultural and artistic legacy and abundance of creative talent, particularly in the visual arts.

And my last point, but certainly not the least – stronger linkages amongst the Kerala diaspora.

The nearly-three million diaspora are not just potential investors, but also ambassadors for facilitating inward-investment. While we have some notable examples of magnificent contributions made by globally known Malayali NRIs, many of whom are present here today, we need to do more to utilize their talent, energies and goodwill to promote Kerala as a world-class investment destination. The Loka Kerala Sabha, which just concluded its recent session, is a useful step in this direction, but we need to leverage the Malayali diaspora as effectively as China has done.

We can all make a big difference.

I will conclude by saying that Kerala is still a too well-kept secret.

With its unique advantages, the State is poised to ‘Ascend’ to the next phase of growth.

A critical element on this development trajectory will be to transform Kerala into an investment and industry friendly brand.  The Kerala Government, along with various industry bodies are investing significantly in this direction – and the diaspora have a critical role to play.

My best wishes to everyone engaged in this journey.