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Media in the FDI arena

Arvind Virmani

The public debate on foreign entry into print media largely treats it as a single, broad, undifferentiated sector. Most seem to be discussing the narrow issue of foreign entry into the newspaper business. This article tries to throw some new ideas into the public arena so that a differentiated FDI policy can be defined for the various categories of media.

The ability to compete and derive the maximum benefit from competition depends on a given society's knowledge base. We can only compete at the frontiers of knowledge if we have access to that knowledge and have absorbed, adapted and incorporated it into our society and economy.

The Indian economy can become a knowledge-based economy by 2025 if we can provide universal access to primary and secondary education in the next decade or so, and if 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 were consumed or used.

The technological transformation of the communication industry coupled with developments in the transport and travel sector 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 IT-enabled services where we have a comparative advantage or could create one, to become a significant exporter and player on the world stage. The common strengths 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 radio/TV facilities being used for private communication and telephone exchanges for public communication in the near future.

• The use of English in global commerce and trade in services.

• An open society, with the freedom of thought and expression. There are also some differences between different services. For instance, software is more dependent on analytical skills while the media and entertainment industry is more dependent on culture and society.

  Nevertheless, with globalisation, cultural diversity is itself an advantage that can be exploited to produce a unique product, if merged skillfully with the basic cultural and social characteristics of the target audience.

  100 per cent FDI should be automatically 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 become 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. This would cover printing facilities as well as associated services like layout design.

• The business of publishing for export should be on the same basis as the EOU/EPZ policy for industry and the Special Export Zone policy. Material allowed for domestic sale would, of course, be subject to laws applicable to imported material or incoming media.

• Publishing of commercial or private material such as stationery, brochures, pamphlets, leaflets, diaries, calendars, house magazines, journals and newsletters and all other published matter which is not explicitly restricted by a lower foreign equity limit.

Science, humanities and professions

We need to raise the educational and intellectual quality of our entire population and labour force. Foreign competition will reduce prices or increase quality (or both) and help extend the reach of publications to the entire educated population.

100 per cent foreign approval should automatically 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 a demonstrated possibility of either cultural or nationalistic bias.

Science is universal; it is a common heritage of mankind. It does not belong to any nation or culture. 100 per cent foreign equity should therefore be automatically allowed in the publishing of books and journals in science and 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 (like Scientific American and Psychology Today) in the same subjects, with the following proviso:

• The 100 per cent 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).

Cultural globalisation

Reciprocity principle: 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 and 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:

• Exports: If a publishing company 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 is 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 (for example, Japanese and Chinese), or a more explicit criteria for exports (say, 10 per cent of production).

  If our reasoning is that India is or will soon become a very competitive location is correct, the publisher will in due course find that it is profitable to export more from India.

  The idea is therefore not motivated by the consideration of foreign exchange earnings but 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.

• Content: Globalisation of the media cannot merely mean that all the existing cultural (for example, soap operas) and nationalistic (for example, war news) content created in democratic countries like the US, the UK and other English speaking nations is merely transferred to India.

Globalisation must also mean that the cultural and nationalistic content created by one-sixth of humanity living in democratic India is brought to a global audience in due course.

Two criteria, which could define globalisation of publishing are:

• Country Maximum: Content from the US (22 per cent), Japan (8 per cent), China (11 per cent), Germany (5 per cent) and the UK (3 per cent) 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 a world media oligopoly.

  Publishers should be allowed to offset any divergence from this criterion by a point for point increase in the share of Indian content. For instance, if the publication has only 2 per cent content on China, the remaining 11 per cent can be substituted by Indian content.

• India Minimum: Indian content must be greater than India's share in world GDP at PPP (about 4.5 per cent) in the third year after entry and rise to India's share in world population (17 per cent) 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 or writer of Indian origin (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.

Culture, society and entertainment

The reciprocity principle outlined above can also be applied to the areas of culture, society and entertainment. In the area of books and journals providing analysis and information, such as those on food, popular music and films, foreign equity up to 74 per cent could automatically be permitted subject to the Exports and India Minimum criteria and up to 51 per cent subject to the Exports criterion alone.

Higher foreign equity could be considered by the Foreign Investment Promotion Board depending on more formal export commitment or commitment to provide Indian content. In the case of popular novels, magazines and comic books with the primary purpose of entertainment, automatic foreign equity up to 74 per cent could be granted subject to the Exports and Content criteria and up to 51 per cent subject to the Exports and Indian Minimum. criteria. The FIPB route would apply if a proposal cannot meet the Content condition. 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 programmes, along with a third-one relating specifically to India (Editorial Control: see below).

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.

Editorial Control: Control over editorial policy and content must remain 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 the exports, content and editorial control criteria . This could be done through the FIPB route subject to a maximum of 49 per cent foreign equity.

(The writer is senior advisor, Planning Commission.)

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