Canada-India trade is trending upwards, but Canadian trade officials including Peter Nesbitt, EDC regional vice-president for Asia, want to see even more Canadian businesses get on board.
“Most Canadian companies today understand the things that make India attractive,” says Mr. Nesbitt. “The question many wonder is how to do business in India.”
A recent Angus Reid study for UPS Canada suggests that Canadian small and medium-sized businesses are likely open to learning the answer to that question.
The survey showed 21 per cent of SMEs are looking to broaden their overseas market export activities in 2012 and will consider conducting business in emerging markets such as India. The study also indicated that 59 per cent of SMEs believe rising middle classes in emerging markets have a growing appetite for Canadian goods.
The study supports EDC research that predicts Canadian exports will grow by seven per cent in 2012, with four per cent of SMEs reporting they intend to begin exporting in 2012 and 14 per cent expecting to sustain existing export practices.
While admitting India remains outside the comfort zone of most Canadian firms, Vijendra (VJ) Gairola, EDC’s Mumbai-based chief representative for India, says, “That is changing.”
He notes EDC was involved in $2.4 billion worth of Canada-India trade deals in 2011, “up from
$375 million in 2005.”
He adds, “We saw about a 40 per cent increase in Canada-India trade facilitated by EDC last year alone, particularly in Canadian non-commodity based trade.”
Mr. Nesbitt says companies “succeeding in this challenging and cost-competitive market” are doing so by investing in and establishing a physical presence overseas.
“We serve more than 300 exporters doing business in India. About half of them are now on the ground in India, with a sign on the door and Canadian staff in the market. That’s exciting.”
In India, EDC works closely with the Canadian Trade Commissioner Service (www.india.gc.ca), who provide important complementary value to EDC’s financing and matchmaking services. CTCS experts can suggest local contacts such as legal and tax advisors, accounting firms and potential local partners to help you set up or grow your Indian presence.
Mr. Nesbitt says, “You need to set up manufacturing and sales offices, either directly, through a wholly owned subsidiary or a joint venture. It’s not just about Canada-India trade; it’s about Canada-India and the Middle East, Canada-India and Africa, Canada-India and Europe. The intra Asia trade itself is huge.”
He says companies including Husky Injection Molding, Bombardier and Canadian Solar have got it right. All have introduced manufacturing centres in Asia that enable them to compete in these markets.
TaraSpan, a company that has helped companies including Mitel Networks and March Networks build business in India, offers another interesting model. With the support of investors including legendary Canadian telecom entrepreneur Terry Matthews, TaraSpan provides market entry strategies and other support to Canadian technology companies. “They entered the market by serving larger companies, but now TaraSpan is open to helping non-Terry Matthews companies too. They provide office space, staff and various support services,” says Mr. Nesbitt.
Working diligently and with a trusted partner can mean the difference between success and failure. “We have seen disasters where Canadian companies moved too quickly, assumed too much at face value and didn’t do their homework,” says Mr. Nesbitt.
As a result, he says a commitment to building relationships as well as an understanding of local documentation and business practices is essential. “The ability to engage locally in due diligence and engage potential project buyers in a manner comparable to local institutions is important to secure and maintain their interest.”
Noting a joint venture is a useful strategy, he urges Canadian firms to “spend the time up front with a legal professional to establish the rules for the JV.
“In some parts of the world a handshake is as good as a contract. But a written contract is always useful, especially as the business evolves or disputes need to be resolved.”
Mr. Nesbitt also encourages Canadian businesses pursuing a JV to insist on a 50/50 deal that includes financial control. “You’ll sleep better if a member of your team is managing the purse, especially in the early stage of the relationship.”