The $335M Smart city project in Kerala State has been in the news in recent times. Both partners- The Governments of the emirate of Dubai and the State of Kerala have engaged in mudslinging allegations . One of the major issues has been the demand from Dubai that that Kerala should hand over 12% of the 246 acre project as freehold land. Dubai claims that this would later be sold to investors once the project was completed, yielding a better return for them. Kerala has refused to release the land as freehold and wants Dubai to have it on a long lease basis.
In a state of India where high literacy has created more awareness of global issues and where public engagement with government policies is the norm, selling off Kerala’s sovereign land to another country will not go down easily. To make matters worse, the state is ruled by the communist government, which once initiated one of the most successful land reforms policy. Many of their previous policies have stirred controversy even though history would later prove the soundness of some of the policies. Of course, the man at the top of the government of Kerala, a communist of the old school does exhibit some idiosyncrasies like calling the CEO of SmartCity , a’ drunk’ Arab and he also suffers from a serious case of the foot-in- the mouth syndrome at press conferences.But let us leave that aside and ask why Dubai still persists in wanting the freehold land? 23 board meetings later, the issue still remains and now the emirate wants to go for legal action or arbitration. Why force a state to part with its land? Will Dubai allow the Indian government to have free hold land in Dubai? Why not go down the time honoured route of long term lease? Examples abound of the success of long term lease in protecting investments. Hong Kong is one!.
Several streams of strategic intent can be argued on why Dubai wants the land.
A. To diversify sources of its GDP and wealth creation by moving into a growing and powerful economy.Dubai GDP is Dh68.397 million with projected growth rate of 0.3% growth and strongly dependent on services.
B. The Traditional High ROI model of selling excess land once the project is successful.
C. Locking by investment into one of the fast growing cities in the India, KOCHI with the new found importance of its sea port and the new transshipment container port. Or is it the naval assets and the potential of India only mega ship building facilities.
D. Creating a media circus that would mask an EXIT strategy for the project. The recent sovereign debt rescheduling by the Emirate & over $18 billion sovereign and quasi-sovereign debt obligations in 2011 would add support for this.
E. A delaying tactic to wait for the congress party to come back to power in June and approve the sale of land. The party has already supported the demand.Many commentators have suggested this would then open up a huge stream of corruption for other vested interests like Indian Business men in the UAE and of course for the Congress Party, which in recent times has made a mockery of the rule of law with corrupt ministers and officials.
Whatever is the outcome of the project, it has once again proved that doing Business with India still defies normality, even as we strive to be counted amongst the World’s powerful states.