In the long term, Indian entrepreneurs might have an edge over their Chinese counterparts, argued some experts in emerging markets attending a recent Wharton Private Equity Conference. Panelists bullish on Indian entrepreneurial potential noted the overseas experience of many working for Western companies, as well as their closer ties and partnerships with U.S. firms. Softer attributes such as a democratic government and a free press will stand Indian firms in good stead over the long haul, another conference participant argued.
China, by contrast, continues to be more attractive in the short term. The combination of a government which has embraced Western-style capitalism, cheap labor, and entry points to a wider range of industries led by a globally dominant manufacturing sector will ensure that Chinese firms remain ahead as a favorite destination for foreign direct investment in the foreseeable future.
On the risk side, India and China present different sets of problems for investors. In India, an evolving but still deliberate regulatory system, inadequate infrastructure, and overwhelming poverty are all part of the investment risk picture. In China, concerns focus on the legal and political systems.
All in all, however, the real drag on the performance of entrepreneurs in both countries is neither political nor economic. At least one expert noted that the real Achilles heel of both systems is the environment.
Here at IFC, we would agree that among the greatest long-term challenges to firms --let alone society-- in those countries is the deteriorating environmental conditions. In light of that, it would appear that a major piece missing from the Wharton conference discussion is an in-depth look at environmentally sustainable investments. It's time to address those issues so that investors can get a truly comprehensive handle on the prospects for investment in those two key Asian emerging markets.
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