Wisconsin never met its goals. And neither does Gujarat.
What is happening in India today is eerily similar to what happened in the American Midwest five years ago, but this time the people and government of Gujarat have no excuse not to be aware of which is likely to unravel. The Americans were told clearly that the Mount Pleasant project made no sense. But still, they went ahead.
It’s inconceivable that Foxconn really thought it would spend up to $10 billion to build a high-tech manufacturing plant in the middle of American agricultural country. But, as Founder and President Terry Gou said early in the planning phase, “There is such a plan, but it’s not a promise. It’s a wish.”
So when Vedanta Ltd. Chairman Anil Agarwal says his company will invest 1.54 trillion rupees ($19.4 billion), we have to take that as wishful thinking rather than a promise. And we can also pause to bathe in the sweet irony of its chosen venture capital partner: Foxconn, the same name behind the Wisconsin project. However, to be fair, the Taiwanese are less a driving force behind this Indian project than an advisory partner. The numbers, choice of location and scope of the project are mainly decided by Vedanta, which bears most of the financial burden.
Foxconn made various promises in Wisconsin that never materialized, with the promise of a state-of-the-art 10G LCD panel factory being the most egregious. At least it never committed to assembling iPhones, the product Foxconn is most famous for.
Taiwanese corporate treachery has in some ways been spurred on by local and national governments bent on selling their constituents (and taxpayers) the assurance that a $3 billion incentive package – the largest in the history of the United States – would be worth it. It will be the “eighth wonder of the world,” Trump proclaimed at the groundbreaking ceremony in 2018.
Governments from Washington to New Delhi are unwilling to provide corporate social protection to attract monotonous projects like chip testing and assembly. They want to send out press releases and tweets that salute their territory’s move to the upper echelons of industrial society. To achieve this public relations goal, they often tie incentives not to reasonable evolutionary steps in economic development, but to extravagant plans that people never dreamed of.
And the recipients of these sweeteners are more than happy to oblige, knowing that there’s almost no downside to over-promising and under-delivering. And those who handed them out – either long out of office or safely entrenched – won’t be required to foot the bill either. Scott Walker lost his re-election bid, largely due to the failed Foxconn deal; however, he did not lose his home like dozens of Wisconsin residents who were displaced to make way for the “marvel” that never was.
Now it’s India’s turn to dream, until she has to face reality.
It may be a coincidence that the project went to Prime Minister Narendra Modi’s home state. The neighboring state of Maharashtra thought it was a shoestring for the deal, going so far as to issue a statement two months ago announcing that the Vedanta-Foxconn firm would invest in it.
Accusations and rancor were flying in Maharashtra after Agarwal and Modi took to the stage to celebrate the winner. But in reality, residents of India’s second most populous state may end up celebrating not that they lost the project, but that they dodged a bullet.
Indians – of Gujarat and Maharashtra in particular – may take this as a warning: you don’t want to be another Wisconsin.
More from this writer and others on Bloomberg Opinion:
• Curb your enthusiasm for India’s next chip company: Tim Culpan
• A US recession will also hit India’s tech hub: Andy Mukherjee
• India’s Chip Dreams aren’t crazy, just misguided: Tim Culpan
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.
More stories like this are available at bloomberg.com/opinion