Gentle reminder that it is Monday today. Time to change from the weekend PJs to the weekday ones. So much has happened over the weekend. Let’s catch you up. Our line up today features:
The Great Indian Joint Venture goes into Facebook picking up a stake in Jio and why it smacks of protectionism.
China is opening up for EV business but that could mean India gets Locked out of the Emerald City.
When India’s lenders are desperate for help, RBI casts a lifeline to NBFCs. Sort of.
Gig workers in Indonesia are unionising in a good way in A labour pill for the pandemic.
E-commerce marketplace Lazada’s flip flops show that the best intentions alone don’t necessarily carry through. Let’s dive in.
|Microsoft got to. Alibaba and Amazon want to. Sony, too. Even Softbank was rumoured to. And now, Facebook. Everybody wants to invest in and partner with India’s largest business conglomerate, Reliance Industries.|
In late March, The Financial Times broke the news that Facebook was “close to signing a preliminary deal for a 10 per cent share in the heavily indebted Jio.” On Friday, The Economic Times followed it up.
|Mukesh Ambani-led Reliance Industries and Facebook are exploring the possibility of creating a multipurpose app, similar to Chinese super-app WeChat, by leveraging the WhatsApp platform and user base, said four people familiar with the matter. |
[…] The plan is to create a super-app on the lines of WeChat, which combines digital payments, social media, gaming as well as flight and hotel bookings, among other features. Such an app would provide RIL a two-fold benefit — provide B2C engagement for its consumer businesses, and provide the group insights on users’ spending habits. Reliance Industries, Facebook weigh creating a super-app, The Economic Times
|Why Facebook would need anybody’s help in figuring out how to add users, collect more data on them or make money hand over fist in India, where it had over 400 million users as of July 2019, is the elephant in the room. |
But like I said, it’s not just Facebook that’s wooing Reliance. Microsoft signed a 10-year data centre partnership last year
Alibaba and Amazon both apparently wanted to invest in Reliance’s Retail business
Saudi Aramco is set to acquire a 20% stake in Reliance’s Oils-to-Chemicals business
Sony Corp. wanted a stake in Reliance’s media business, Network 18
There were even rumours of SoftBank investing in Jio
All Facebook needed, though, was for India’s regulators to allow it to operate WhatsApp Payments, which they’ve throttled since launch into a “beta mode”. The two key issues holding up approval are Facebook’s alleged refusal to make its messages traceable and an inability or unwillingness to store all its payments data within India.
“India’s data must be controlled and owned by Indian people – and not by corporates, especially global corporations,” said Reliance Chairman Mukesh Ambani last year.
Not by corporates, especially global corporations.
Facebook does not want to become Coca-Cola.
In 1977, Coca-Cola exited India after over two decades. The trigger was a law introduced by the Indian government that forced multinational companies to dilute their shareholding in their Indian subsidiaries to under 40%. Faced with the possibility that its heavily guarded concentrate formula might end up with an Indian partner, Coca-Cola exited the country.
Its vacuum was largely filled by Campa Cola, a new drink made by its former bottling partner touting the slogan, “The Great Indian Taste”.
|Coca-Cola’s exit was one of the significant events marking India’s five decades under a “license-permit-quota Raj”, during which the state decided not just which companies could operate, but also which products they could sell, at what prices, how many, etc. And multinationals that wanted to stick around needed to “Indianise” themselves by selling shares to the public or to local partners.|
India’s economy and its people would pay the price, as the following chart shows.
|The next few years are not going to be a good time to be a foreign multinational in India. Covid-19 is providing a convenient foundation for businesses, trade groups, and politicians to demand “nationalist” and “patriotic” choices from its citizens. Massively popular and relatively insecure Zoom finds itself the target of well-aimed court cases and government warnings. It may not be far from a ban like the one TikTok faced last year.|
India’s government yesterday abruptly reversed plans to allow e-commerce deliveries of non-essential items from today. It was cheered by local trade associations.
India abruptly removed Chinese investors and capital (without mentioning them by name) from its foreign investment categories that did not require prior approval.
And oh, Campa Cola is trying to make a comeback. Its slogan? “The Great Indian Taste.”
|Protectionism is well and truly here. More often than not, it hurts more than it helps. Just look at electric vehicles.|
|Locked out of the Emerald City Olina China is gradually opening up for business. Locally, at least. This is good news. It means the languishing auto industry can finally be revived from its relative coma. The bailouts have begun. And they’re not just restricted to run-of-the-mill gasoline cars. The largesse extends to New Energy Vehicles (NEV) too. The communiqué, which came just two and a half months after regulators decided that no further cuts would be implemented in 2020, represents a dramatic shift in direction. After NEV deliveries slid by nearly 80% in February, authorities ultimately decided to take matters into their own hands instead of allowing the industry to stand on its own two feet. Technode Drive I/O Issue #20 China isn’t anywhere close to giving up its title as the largest EV market. Now, this is superb news for both local and international manufacturers like NIO, BYD, and Tesla. Before the pandemic hit, EV sales in China had already plunged 77% year-on-year, largely because the government pulled back on demand subsidies for EVs. Now, not only has the government extended its subsidy cover till 2022 for EVs, it’s also directly investing in local companies like NIO and Reech Auto to get the production cycle going. Source: Technode The Chinese revival comes with tight strings to the bureaucracy. Strings that can be pulled anytime, and often in national interest. As Maxson Lewis, the managing director of Magenta Power System in India, argues, this doesn’t augur well for international supply chains. The chances are, exports of lithium-ion (li-ion) batteries and other electric components could be heavily restricted to strengthen local supply chains. This is very bad news for the fledgling EV sector in India. It was just coming into its own, with big league players like Bajaj, TVS, and Tata whetting their appetite with new launches. At the very least, Indian EV makers need li-ion cells to manufacture batteries. At the very maximum, they rebadge cheaper EV brands from China to sell in the Indian market. Closed economies are a double-edged sword for India’s EV sector: there will be little to no supply of raw materials from China if export restrictions come into play. And if any recent “nationalist” press notes are taken seriously, imports from “neighbouring countries” are going to be actively discouraged. Import duties on EV parts were already rising. With all roads closed, there’s no chance of even “assembling in India” for the EV sector. Speaking of raw material. For any business, credit is really the raw material. But NBFCs, through whom nearly 20% of all credit is disbursed in India, just can’t seem to catch a break. RBI casts a lifeline to NBFCs. Sort of.|
Arundhati Imagine you are drowning in really choppy waters. Luckily, a lifeguard shows up. But instead of throwing a rope directly to you, the lifeguard sends the rope on a boat with an oarsman to then throw to you. That’s essentially what the Reserve Bank of India did on 17 April. After days of Non-Banking Financial Companies (NBFCs) crying for help, the RBI delivered. But it took the route of a Targeted Long Term Repo Operation (TLTRO). In TLTRO 2.0, the RBI allocated Rs 50,000 crore to lend to banks, with the condition that they lend at least 50% to small and mid-sized NBFCs and Micro Finance Institutions. In previous editions of the BFO, we have outlined the dire straits NBFCs are in. Their borrowers are allowed by the RBI to defer repayments for three months, but NBFCs themselves do not have this luxury in their repayments to banks. So, is TLTRO 2.0 the RBI’s lifeline? “No,” said the NBFCs I spoke with. Sandeep Srinivasa, co-founder of lending company RedCarpet, says the TLTRO 2.0 is broken by design.
|Lata Venkatesh explains it well in her piece:|
|Bankers of foreign, private and public sector banks, told CNBC-TV18 they can’t find bonds of credit worthy NBFCs and MFIs for as much as Rs 25,000 crore in the system. Moreover, many banks have already reached their NBFC sector exposure limit.|
|Second-time unlucky: Reserve Bank’s TLTRO 2.0 rescue plan for NBFCs likely to be a non-starter, CNBCTV18|
|Even choosing to lend to an NBFC comes with a concern—that it will use the borrowed amount to repay older loans. What you are seeing is the second order effect of the RBI trusting banks more. Banks are regularly audited while NBFCs aren’t. NBFCs are what the RBI regulates with a “light touch.” That’s why even lending products like credit cards are restricted to banks and regular NBFCs aren’t allowed to issue them. As a result, the well-capitalised NBFCs will continue to thrive, while the ones in need will likely continue to get buried. Banks may not be paying it forward, but gig workers certainly are.|
|A labour pill for the pandemic|
The relationship between gig workers and tech companies is swinging wildly.
In California, there’s a standoff between the local government and ride-hailing platforms like Uber and Lyft over who’s responsible for paying drivers emergency relief.
Here in Southeast Asia, it’s a different situation. Counter-intuitively, it’s gig workers who are in a comparatively better position because they’re easy to support, from a logistical point of view. They’re organised through an app and pay-outs can get to them instantly. Gojek and Grab, the main gig-work platforms in the region, introduced features that encourage customers to tip generously, and some let you donate a meal or a shopping voucher to your delivery driver. In Indonesia, the government also agreed to gasoline subsidies for delivery drivers.
It’s gone so far that a segment of informal workers who aren’t organised through apps and whose conditions are even more precarious protested because they feel left out from such support.
The gig workers who drive for Grab and Gojek in this region inhabit a new, in-between space that’s neither traditional informal labour, nor traditional full employment. I’ve written about this previously.
But Indonesia’s delivery drivers aren’t just enjoying the benefits. They’re actually paying it forward. Drivers have taken to posting these types of stories on social media:
How they gave the food one customer ordered for them to someone else who hadn’t eaten
How they used a shopping voucher they got from Gojek to buy basic necessities for a friend in need
How they helped distribute food packages that someone else donated Gojek and Grab drivers are now at the forefront of several relief efforts aimed at helping those who are hit the hardest. They’re community organisers and grassroots implementation partners for charity programmes. Some of these gig worker solidarity networks, formed spontaneously during the crisis, could grow into a movement that defends the interests of informal labourers in the region more broadly, even beyond Covid-19. In some cases though, even the best of intentions don’t hold up.
|Lazada Flip Flops Jum|
E-commerce marketplace Lazada Philippines recently found itself in a sticky situation. As the Covid-19 crisis was unfolding, it suspended its cash-on-delivery (COD) payment option—only to backpedal later. Let’s briefly recap. On 17 March, the Philippines implemented an “enhanced community quarantine”, forcing nonessential services to shut until 30 April. Lazada shuttered most of its marketplace, keeping only its grocery delivery service LazMart running. It also decided to suspend its still predominantly used CashOnDelivery (COD) feature. Citing the safety and well-being of staff and customers, it asked customers to use digital payments, specifically its Lazada Wallet. On 30 March, Lazada commenced delivery of marketplace products classified as “essentials,” but kept COD suspended. It’s altruistic, yes. But also seemed like a perfect strategy. No better time to increase e-wallet adoption than when people are scared to come in contact with anything or anyone for fear of contracting the deadly virus. Yet the plan appears to have hit a snag. How do users top up their e-wallet balance? Bank transfers, credit cards, you say. Those are definitely options. But not for the 77% of Filipinos who are unbanked. In the Philippines, e-wallets have largely grown on the back of the promise of financial inclusion—to give Filipinos excluded by the banking system access to various financial services. Paying online is the main one. To do this, they had to find a way for people without savings or card accounts to top up their e-wallets. And that’s largely through “cash-in” partners, which are physical stores like convenience store chain 7-11, pawnshops, and even neighbourhood mom-and-pop stores. People visit these stores and hand their cash to tellers who top-up their e-wallets. However, Lazada Wallet’s “cash-in” partners remain limited and most of them are closed due to the strict quarantine policy. Moreover, as one Lazada customer pointed out, it’s a bit counterintuitive to visit those stores when you’re supposed to stay home.
|Credit: Prajakta Patil|
|So on 5 April—giving in to popular demand—Lazada Philippines brought back COD payments for its marketplace (LazMart, though, continues to decline COD payments). While it might have not gone perfectly, a Lazada spokesperson told me a week ago that Lazada Wallet’s usage “has increased by almost 30% compared to normal average usage” since the quarantine. That still counts for something.|
|All aboard SS Irony Singapore’s government is planning a new type of quarantine for foreign workers on the island state. After all, when you’re surrounded by water, where do you quarantine people? On a ship of course.|
|“Cruise ships are being looked at as they have “readily available rooms and en-suite toilets to minimize person-to-person contact,” the tourism board said. The two ships being assessed for this purpose—Genting Cruise Lines’ SuperStar Gemini and SuperStar Aquarius—can hold up to 2,000 foreign workers, and will allow health measures to be implemented more effectively in existing dormitories by lowering the number of workers there.”|
|It’s a move laced with irony. Because less than a month ago, Singapore banned port calls by cruise ships since they were a hotbed for Covid infections. But ships are hardly places for social distancing. Cramped rooms, narrow corridors, no means of escape. In fact it’s the perfect antidote to social distancing…unless the island-state just wants to distance itself from potentially infected foriegn workers.|
|I see your Sherlock and raise you a Feluda|
|India has a new weapon in its attempts to flatten the Covid-19 curve. And it goes by a familiar name.|
|The reason we named it ‘Feluda’ was because a competitive paper-strip test being developed by MIT and Harvard goes by the name ‘Sherlock’, after the famous [fictional] detective. So we wanted to give it an Indian twist and decided to call it ‘Feluda’, after Bengal’s most famous detective character created by Satyajit Ray. Also ‘Feluda’ is an acronym for the scientific name of the test — Fncas9 Editor Linked Uniform Detection Assay.|
|Roping in ‘Feluda’ to detect Covid-19, Hindu BusinessLine|
|Correction: In the 17 April BFO edition, we mistakenly wrote M Venkaiah Naidu is the India’s ruling party’s vice president. He is the country’s vice-president. We regret the error.|