Rival states open Chennai offices to woo Tamil Nadu's investors and its dealmakers

C Shivakumar @ CHENNAI:

Tamil Nadu's status as one of India's favoured industrial destinations is being tested on its own ground. Rival states are opening offices in Chennai to reach the companies that have long looked to the city when expanding.

The Andhra Pradesh Economic Development Board, an investment promotion agency, is contemplating to establish its presence here and Invest UP, Uttar Pradesh's investment promotion agency, has established a presence in the city. Haryana is also expected to follow, say sources.

The contest is also over people. Both agencies are drawing on investment-promotion professionals trained at Guidance Tamil Nadu, the state's investment promotion agency. The state Industries department has described poaching as a "serious concern". As it prepares a pay revision, staff have been asked to sign a bond promising not to join a competing state, according to people familiar with discussions held this week.

"There is huge demand for officials of Guidance because they are more skilled," a former Guidance official said.

The exposure is institutional as well as personal. Guidance was set up 34 years ago and was among the first state agencies to bring investment promotion in-house rather than lean on consultancies such as Boston Consulting Group, Ernst and Young and KPMG, a former Guidance official said. Officials from Kerala, Telangana and Karnataka have visited Chennai to study the model. Guidance has also spent years cultivating a network of target companies that newer agencies lack. Losing experienced staff could mean losing knowledge of investors, projects and negotiations, not just headcount.

A Industries department source told TNIE that there had been attempts to lure Guidance employees. He argued that states should compete on the strength of their propositions, not on each other's staff. "Our approach has never been to compete on incentives alone," he said, pointing to Tamil Nadu's industrial ecosystem, infrastructure, talent, speed of execution and policy continuity.

Andhra Pradesh plays down the rivalry. Openly we don't see it as a competition, an Andhra Pradesh industries official said, adding that it was not as bad as people over here think. The state's priority is anchor projects around which suppliers can cluster, and it will need closer links with Bengaluru, Hyderabad and Chennai to build them.

Tamil Nadu has nonetheless lost ground to it. Under Chief Minister N Chandrababu Naidu, Andhra Pradesh has pursued investors aggressively. Hwaseung Enterprises, the South Korean footwear maker, moved a planned Rs 1,720cn non-leather footwear plant to Kuppam in Andhra Pradesh after being offered more lucrative land-linked incentives last year. It had earlier signed a memorandum of understanding with Tamil Nadu. Andhra Pradesh also beat Tamil Nadu to a proposed flight-testing and integration complex for the Advanced Medium Combat Aircraft, India's fifth-generation stealth fighter programme, and tried unsuccessfully to court a $4 billion HD Hyundai shipbuilding project, coming up in Thoothukudi.

Uttar Pradesh is taking a more direct approach. Its Chennai office, has been operating for about a month under a general manager, according to an Invest UP official. Offices are also being set up in Bengaluru, Hyderabad, Delhi and Mumbai. The aim is to meet investors "on the ground" rather than wait for them to come to Lucknow. Chennai's concentration of automotive, electronics and engineering companies makes it an obvious target. The state is also weighing country-specific enclaves for Taiwanese, South Korean and Japanese companies. Invest UP official has privately called the contest among states a "blood sport".

Tamil Nadu insists the new arrivals do not change its approach. The Industries department official said it remains in regular contact with companies in India and abroad, digitally and in person. "If India has to grow, every state has to grow," the department official said, arguing that states should aim to enlarge the overall pool of investment rather than redistribute it.