The Hindu Business Line : The changing trade winds in Europe

For European companies the focus is Asia and the US, but not Europe, so as to reduce their manufacturing and marketing costs, and modernise their marketing techniques.

Britain is passing through a phase of "cautious optimism" as latest indicators suggest that investment funds managed in the country are up 30 per cent. British financial companies have earned about £8 billion (Rs 6,00,000 crore) in fees, for handling more than £3 trillion worth of assets, which have grown 30 per cent the last 18 months. This is unprecedented for the British financial establishment, which today attracts more investment fees than any of its European counterparts. The top ten British investment firms led by Barclays Global Investors continue to dominate the financial market.

IMA figures

According to analysts, there is no sign that competition in this sector is driving down fees. The Investment Management Association (IMA), which compiled the latest figures, stated that "there is no competition" in fees charged. According to IMA, the British fund managers are charging 0.28 per cent of assets under management. As much as £30-40 billion has moved into bonds and a similar amount in shares. The switch to bonds has been triggered by the anxiety over rising crude oil prices, the prospects of higher inflation and the nervousness in markets highlighted by the constant debate over a "tough or soft" correction.

The silver-lining is that the global market is booming, accelerated by positive signals in the emerging markets led by China, Russia, India and Brazil. European investment companies are looking at Eastern Europe and the emerging Asian markets to boost outward investment flows.

The Asian presence

The US remained the top investor in Britain in terms of projects and jobs created, although the number of projects declined to 446 from 464 the previous year. Japan and India now come second and third with 84 and 76 projects respectively; both sharply up, from last year. Indian companies are moving into auto parts, pharmaceutical, and light engineering sectors. According to executives of the Indian companies operating in Britain and the European Union, days of "catalogue carrying sales missions" are being fast replaced by "physical presence" in European and North American markets to consolidate and expand market share. Japan followed this path in the 1960s and the 1970s to emerge the world's second largest economy.

It is also significant to note that Chinese state-owned companies have yet to venture in buying out European companies to boost their sales. However, observers note that China is "going up-market" with its current range of manufactured products. According to analysts, Sino-European trade could exceed the $100-billion mark by the end of this year.

India's profile

India's trading profile is rated as "modest" and the Indo-European trade volume may reach the $25-billion mark by end of this year. China's export drive is moving into top gear as its companies are offering a better product range backed by sophisticated marketing. Some European traders have complained that China has been selling its products at "political" prices through state-owned companies.

Chinese communities in Europe and North America have also made efforts to boost sale of Chinese goods through Chinese trading houses based in Hong Kong and Singapore.

The Indian companies operating in this region, however, lack "product and marketing intimacy" with India. Hence, major Indian companies prefer to deal directly with European and North American customers by opening offices in European financial centres often manned by personnel imported from India. China is fast moving out of cheap garments and toys and into more profitable and up-market products.

In this background, little wonder that the investment focus of major European companies should be Asia and the US, but not Europe, so as to reduce their manufacturing and marketing costs, and modernise their marketing techniques.

China and India are offering special facilities in "free trade zones" and this strategy may help European and North American buyers have "physical presence" in the Asian market place, now comprising 2.7 billion consumers — 1,100 million in India and 1,600 million in China.