Geopolitical tensions between India and China are beginning to hurt some of Taiwan's biggest technology companies, including suppliers to Apple Inc. and hindering New Delhi's much-vaunted incentive program for electronics manufacturing.
India has been slow to issue visas to Chinese engineers, who are needed to help Taiwanese companies set up factories in the South Asian nation, people with knowledge of the matter said. India is also nudging companies to opt for the more difficult to obtain employment permits, they added, asking not to be identified discussing a private matter.
The wrangling may delay Prime Minister Narendra Modi's plan to bolster India's manufacturing capacity and deter overseas investors, who invested $30 billion in the six months to September, with the maximum foreign direct investment flowing in the computer hardware and software sector. The companies are looking to India to diversify their supply chains. PM Modi has banned hundreds of Chinese apps and slowed approvals for Chinese investment after a deadly clash along the disputed border between the two neighbors left 20 Indian and an unknown number of Chinese soldiers dead.
Last year, companies such as iPhone assemblers -- Foxconn Technology Group, Pegatron Corp., and Wistron Corp. -- along with many others pledged $1.5 billion to set up mobile-phone plants in India after the Modi government offered them specially-designed incentives to manufacture their products locally for global export. The move was also expected to shift supply lines to India from China.
Visas are an important resource to help expand domestic manufacturing and the "government has to balance its existing policies with the genuine and short-term requirements of technical manpower for setting up new factories," said Pankaj Mohindroo, chairman of the India Cellular and Electronics Association. "We are hopeful that this issue will be addressed soon to everyone's satisfaction soon."
As tensions with China escalated along their Himalayan border over the summer last year, New Delhi stepped up curbs on Chinese activity in the country, adding extra scrutiny for visas for Chinese businessmen, academics, industry experts, and advocacy groups. The measures are similar to those that have long been employed with arch-rival and neighbor Pakistan.
Apart from the delays in granting visas the Indian government has indicated a preference for issuing employment visas instead of business visas for people required to set up the production lines that are being imported by companies, the people said. Employment visas typically require more paperwork and background checks from India's home ministry, and could therefore be the reason for India's insistence. Business visas are also shorter duration.
Companies have balked at the employment permits because it increases costs. It will also lead to double taxation for engineers and technicians since they will continue to be employed by their respective companies in China. Skilled professionals and experts are also needed for training and guidance on machines that are being installed for the first time in the country along with specialists to monitor the entire process.
The development comes at a time when New Delhi is under pressure to boost growth in Asia's third-largest economy which is set for its worst annual contraction since 1952 with millions losing their jobs and being pushed into poverty due to the pandemic.
The incentive program for mobile-makers alone envisages the production of smartphones worth 10.5 trillion rupees and exports of 6.5 trillion rupees over the next five years. It is likely to create over 800,000 jobs.
The New Delhi-based Taipei Economic Cultural Center and spokespersons for the department of industry, the Ministry of Home Affairs and the foreign ministry did not immediately comment on the matter. China's Foreign Ministry also didn't immediately reply to a request for comment. Wistron and Pegatron declined to comment while Foxconn did not respond to emailed questions.
India and China have begun pulling back their troops from a part of their disputed border after several rounds of military and diplomatic talks. However, disengagement of troops from other contentious areas along the unmarked border is yet to happen.