Potential Focus sectors for SIR
Attracting investments in sectors suitable to the socioeconomic credentials of Kerala is essential to build sufficient avenues for wealth creation especially to the next generation. Kerala has certain comparative advantage to attract investment in high skilled, fast growing and technology intensive sectors such as aero-space electronics, information technology, robotics & automation, trade & finance, food processing, Tourism and Hospitality sectors.
Essential pre-requisites to attract investment
To enable the state successful in attracting the investment, we need to ensure efficient business infrastructure, adequate “ease of doing business” regulatory environment and reliable social infrastructure to offer quality of living standards at par with other competing markets globally.
Important learning from Kerala’s experience
Kerala has a history of developing most of the infrastructure through Government funding and it also has some good agencies that can deliver provided their limitations are addressed properly. Many Government agencies have constraints of funds, limited access to technology and first world experience. In many areas Kerala still maintains the near monopoly position for Government agencies in infrastructure sector. Successful experiences of CIAL, KIAL and KMRL demonstrate the crucial role of public sector in creating capital intensive infrastructure. However the service level standards offered to the public user by infrastructure and utility services are important to ensure reliability and adequacy of social infrastructure. Role of private sector is also important in attracting commercial users. It has been experienced in most cases that private sector has an edge over public sector in providing cost efficient service quality standards.
Strategy to develop efficient business infrastructure
Infrastructure development requires sizeable long term capital. Typically the cost of capital for public sector is lower than that for private sector. Therefore public sector investment in infrastructure would be more cost efficient than private sector
In the case of infrastructure, typically risks are front loaded while returns are tail loaded. Regulatory and political risks are high during the initial planning stage of the project prior to financial closure. While private sector would be averse to assume such risks, the government/ public sector is better positioned to manage these risks better than private sector. However operational risks such as construction and maintenance risks are generally better managed by private sector. Therefore a strategy combining the relative efficiencies of public and private sectors would be most effective
Implementation Framework Proposal
It is proposed that public sector may take the lead in creating critical infrastructure. To have the desired level of focus, efficiency and accountability, it is proposed that each of the critical infrastructure may be created through separate Special Purpose Vehicles (SPVs) under the administrative control of respective departments of GoK.