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08 August 2003

U.S., Indian High Technology Will Benefit Through Cooperation

Private and government representatives met July 1 to discuss possibilities

India and the United States stand to benefit from partnerships to foster trade and innovations in high technology, according to speakers at the July 1 meeting of the U.S.-India High-Technology Cooperation Group (HTCG) in Washington.

Delegations of representatives from the private sector and government held the first meeting of the HTCG, a forum designed to promote bilateral high-technology trade. U.S. Under Secretary of Commerce for Industry and Security Kenneth Juster headed the U.S. delegation and Indian Foreign Secretary Kanwal Sibal led the contingent from India.

One Indian private industry representative, P.C. Chatterjee, observed that the strengths and weaknesses of the two countries combine to create a mutually beneficial investment environment. The United States, he said, has a well-established high-tech innovation infrastructure, but a small growth rate. Conversely, India has less-established capabilities, but enjoys a higher growth rate, "thus setting the stage where both countries may benefit from partnerships in fostering innovation," said Chatterjee, according to a summary of the meeting proceedings released by the U.S. Department of Commerce.

The HTCG participants from both countries looked at various potential areas of cooperation, and placed some emphasis on both defense and bio-research cooperation.

Enders Wimbush, a partner at the U.S. consulting firm Booz Allen Hamilton, said the two governments needed to move beyond current constraints on technology transfer and cooperate to counter common security threats.

Serge Buchakjian, senior vice president for Defense and Space at Honeywell, Inc., praised the growth of technology giant Honeywell in India, which now provides employment for 2,500 workers and yields $200 million in annual revenues.

However, Buchakjian cautioned that investing in India was "not a sprint," but instead more comparable to a "marathon" that requires long term efforts for success.

Former Under Secretary of State for Political Affairs Thomas Pickering, in concluding remarks at the conference, noted that the Indian economy has changed dramatically over the past decade, particularly through the emergence of the country's information technology capabilities and the development of its life sciences and nanotechnology sectors.

Pickering, who now works as a vice president for Boeing, said the U.S. private sector is willing to work with the U.S. and Indian governments to support the development of a stronger high technology relationship.

Following is a summary of the July 1 proceedings, released by the Commerce Department August 6:

(begin text)

Summary of Proceedings
U.S.-India High Technology Cooperation Group
"Financing Innovation Forum"
July 1, 2003
Ronald Reagan Building and
International Trade Center
Washington, D.C.

The following is a summary of proceedings at the Financing Innovation Forum convened on July 1, 2003 in Washington, D.C., under the auspices of the U.S.-India High Technology Cooperation Group (HTCG). The Forum was attended by approximately 150 participants, including representatives of the U.S. and Indian Governments and U.S. and Indian companies. The Forum commenced at approximately 9:00 a.m. and concluded at approximately 6:00 p.m.

I. Convening of HTCG - Private Sector Session

Kenneth Juster, Under Secretary for Industry and Security of the U.S. Department of Commerce, opened the Forum by welcoming everyone to the first activity convened under the HTCG and thanking them for attending. He noted, in particular, the presence of Indian Foreign Secretary Kanwal Sibal, Ambassador Lalit Mansingh, the delegation of more than 40 distinguished representatives of the Indian public and private sectors, and the approximately 100 representatives of U.S. high technology industry.

Under Secretary Juster's remarks provided an overview of the HTCG, including: the HTCG's origins in the November 2001 meeting between President Bush and Prime Minister Vajpayee, in which they expressed a mutual desire to transform the U.S.-Indian relationship, including in the area of high technology commerce; the creation of the HTCG by Under Secretary Juster and Foreign Secretary Sibal in November 2002; and the Statement of Principles for High Technology Commerce agreed to in February 2003. Under Secretary Juster highlighted, in particular, how the Statement of Principles recognizes the importance of private sector participation in the high technology dialogue between the two countries. Accordingly, he explained, a principal goal of the Forum was to hear from the private sector about the challenges that confront high technology trade and investment. In particular, he urged that conference participants focus on specific, realistic policy proposals that can be implemented by our two governments in the near and medium term to enhance bilateral high technology trade and investment. He also expressed the hope that the Forum would allow those in the high technology industry to share ideas, create connections, and become invigorated to propel U.S.-Indian high technology cooperation forward on their own.

Kanwal Sibal, Foreign Secretary of the Government of India, began by thanking those who organized and were attending the Forum, and by recognizing that enhanced U.S.-Indian business ties can only be advanced by the two governments working in partnership with their private industry. Foreign Secretary Sibal said it is understandable that those who are the strongest advocates of closer U.S.-India relations are the ones who feel the most disappointed that U.S.-India trade and investment remains comparatively low. He noted that there are, however, three encouraging signs: (i) growth in trade between the two countries (both Indian exports to the U.S. and U.S. exports to India) in 2002; (ii) U.S.-India economic relations are being driven by knowledge-based 'industries of the future,'; and (iii) at the micro level, there are many powerful examples of American stakes in Indian business and, increasingly, examples of Indian investment in the United States. Nonetheless, Foreign Secretary Sibal stated, the gap between promise and reality is enormous, and there are domestic and external regulatory issues to be addressed.

Foreign Secretary Sibal noted that these issues are being addressed in the bilateral economic dialogue between the countries. He singled out the HTCG as a forum for advancing high technology commerce through specific, tangible, realistic, and achievable ideas, pursued in a realistic time frame. He went on to give brief synopses of the four main areas (defense, biotech, nanotech, and IT) which were to be discussed and their importance in terms of high technology cooperation. Foreign Secretary Sibal stated that trade in dual-use technologies is an important component of high technology commerce and, while the lifting of sanctions against India in September 2001 has improved the environment for flow of "dual use" goods and technologies, more can be done to enhance trade in these goods and technologies. He concluded by noting that, with the expertise assembled at the Forum, he was confident fruitful discussions would take place.

II. Welcoming Remarks

Phil Bond, Under Secretary of Commerce for Technology and moderator for the Forum, welcomed participants to the conference. He noted that U.S.-India bilateral cooperation in the high technology area was a high priority for the Administration, and that the HTCG had attracted substantial attention for its work. He also noted that today's forum was consistent with the Secretary Evans strong emphasis with building public-private partnerships to advance technology. Finally, Under Secretary Bond provided an overview of the day's agenda.

III. Panel Discussion: Current Climate for Investing in Innovation

Rajat Gupta, Managing Director Worldwide, McKinsey & Co., chaired this panel convened before a plenary session of the Forum. Mr. Gupta began by providing an overview of U.S.-India high-technology trade and investment climate. Mr. Gupta noted that since 1965, two million Indians have emigrated to the United States, most of whom were highly skilled and educated. In the 1990s, India consciously focused on outsourcing knowledge, with a particular focus, between 1998-2001, on developing new business models. During the last five years, several major U.S. companies have established software and financial services operations in India, including General Electric, Lehman Brothers, and Bank of America. These companies have been attracted by India's rich science and engineering talent pool and the lower costs associated with operating in this market. Mr. Gupta identified targets for governmental action in the following areas: joint ventures, integration of offshore production, outsourcing, and private partnerships.

P.C. Chatterjee, Chairman, The Chatterjee Group, stated that innovation is a key to worldwide economic growth. He noted that the infrastructure for innovation consists of risk capital, mechanisms (idea gushers) and people (talent pool). Mr. Chatterjee observed that the United States' innovation infrastructure is well-established, but the growth rate is small. In contrast, India currently has less-established capabilities, but a higher growth rate, thus setting the stage where both countries may benefit from partnerships in fostering innovation. Mr. Chatterjee recommended that the forum focus on creating viable risk capital flows; idea gushers (e.g., policy initiatives); and intellectual property markets. He also noted that the increased research and development costs in pharmaceuticals will lead to increased health care costs; outsourcing research and development in India could significantly reduce such costs.

Amit Mitra, Chairman, the Federation of Indian Chambers of Commerce and Industry ("FICCI"), reported that India is emerging as a global hub for research and development, with more than 100 multinational corporations operating in India, including General Electric, Daimler Chrysler, and Eli Lilly. Dr. Mitra noted that Eli Lilly has 17 clinical trials under way in India at this time. Dr. Mitra stated that a recent FICCI survey of multinationals operating in India found that 62 percent of these companies' India operations were profitable, and that 17 percent of the respondents were considering expanding presence in the country.

Dr. Mitra also highlighted India's impressive human resource capital, including its 1,500 research institutions, 10,428 higher education institutes, 200,000 engineering graduates and 300,000 non-engineering graduates. However, he noted that Indian graduates do need to acquire critical thinking skills that are commonly taught in American academic institutions.

Dr. Mitra advised that the Indian government's new science and technology policy calls for increasing research and development expenditures to 2 percent of gross domestic product by 2007, compared to current expenditures of 0.8 percent of gross domestic product. Sectors of interest include pharmaceuticals and biotechnology.

Saurabh Srivastava, CEO, Xansa India Ltd., cited innovation as the primary engine for economic growth and noted that innovation requires adequate funding. He stated that innovation is promoted in knowledge-based industries and benchmarked India's capabilities on a par with Israel at this time. Mr. Srivastava observed that India's life sciences industries have recorded tremendous growth, its information technology sector is well-established, and India's is implementing new intellectual property statutes. He estimated that 15 percent of employees in the U.S. life sciences industries are of Indian-origin.

Mr. Srivastava stated that India is the third largest recipient of venture capital in Asia because it has a reasonably developed capital market. He advised that both the United States and India would benefit from greater cooperation and partnerships, with U.S. firms providing needed capital and Indian firms supplying skilled personnel and speeding innovation. He also noted that pending legislation in India must allow for freer movement of capital, resources and people

Enders Wimbush, Partner, Booz Allen Hamilton, offered an action plan to foster greater defense cooperation. He stressed the need to move beyond the technology transfer constraints, and focus on what can be done, rather than what cannot. He recommended that the United States and India identify a threat that each country feels comfortable in cooperating on to counter, and suggested that the U.S.-India High-Technology Cooperation Group establish a subgroup as an advocate for defense cooperation. Mr. Wimbush also stated that India should create a one-stop shop for defense cooperation and develop a roadmap for the Indian defense procurement process. Mr. Wimbush also recommended that the Indian defense officials finalize a couple of high profile procurements and both governments should track implementation for lessons learned.

IV. Breakout Sessions: Technology Sector Outlooks

The Plenary session then broke into four breakout sessions, each focusing on a different high technology sector (Defense Technology; Information Technology; Life Sciences; and Nanotechnology). Each session had two co-chairs - one selected by the U.S. Government, the other selected by the Government of India. The co-chairs were charged with mediating a discussion about the outlook for bilateral trade and investment in their respective sector, challenges facing such trade and investment, and recommendations for policymakers. The results of the breakout sessions were recorded by rapporteurs, and presented by the co-chairs to the Plenary session (see below) in a roundtable format.

IT Session

Arjun Batra, Director Intel India Development Center, and Saurabh Srivastava, CEO Xansa India Ltd. and Chairman, FICCI IT Committee chaired the largest breakout session of the forum. Mr. Batra noted Intel's efforts to create local markets in India through the establishment of Business Centers and activating them at appropriate times based on the local situation. Improving the Indian innovation environment could be achieved by the separation of public and private telecommunications networks, changing policies to update or remove archaic laws concerning labor separation, and the stimulation of local consumption for products (i.e., PC's) through lowering of the 35% tariff rate.

Mr. Srivastava described the Indian workforce as one of the highest quality workforces in the world. The India infrastructure has rapidly changed in the last ten years and is now mature and supports videoconferencing. India's telecommunications costs are competitive with those in the United States. There are good prospects for joint development with India's IT industry in creative software development, embedded software products, and media design and e-banking. Impediments in the Indian market include the lack of Beta sites, the lack of risk capital, restrictions to the movement of capital, know-how, people and goods. He felt that patent registration should be made easier.

The session was then opened to general participation. There followed a wide-ranging discussion on a variety of issues relating to cooperation in the IT space. In addition to the specific recommendations set forth in the Roundtable discussion (see below), substantial attention was paid to the issue of outsourcing and movement in the United States to limit the freedom of U.S. companies to outsource to India. Substantial concern was expressed by participants that such movement, if brought to fruition, would hamper high technology cooperation. There was also discussion of the need for intellectual property, and the challenges posed in obtaining financing for cross-border cooperation at a small-business level.

Defense Session

The U.S.-India High Technology Cooperation Group (HTCG) breakout session for defense technologies was co-chaired by Serge Buchakjian, Senior Vice President for Defense and Space, Honeywell, and A.K. Ghosh, President and Chief Operating Officer, VXL Technologies Ltd. This session was opened by Mr. Buchakjian who provided an overview of Honeywell's operations in India. In describing why India has been an attractive investment destination for his company, he noted that what started with humble beginnings in a collaborative effort with Tata Institute of Fundamental Research in 1988 has grown to a $200M annual source of revenue with a work force that now stands at 2500 Honeywell employees in India. He cautioned those expecting quick results, particularly in the defense technology sector, that investing in India was "not a sprint," rather, more comparable to a "marathon" requiring long term efforts for success. In establishing the tone for the meeting he asked participants to focus on impediments to developing defense technologies in India and recommendations that would help solve these obstacles.

Mr. Ghosh followed with a historical perspective and summary of the structure of India's defense industrial base, including the role of state-owned enterprises (Defense Public Sector Undertakings and Ordnance Factories), and the increasing opportunities for the Indian private sector (with up to 26 percent foreign investment) to compete to satisfy India's defense requirements. He noted that India was seeking to develop long-term cooperative partnerships with U.S. defense suppliers involving technology transfer, research and development, co-development, co-production, third party sales, and outsourcing. He highlighted the capabilities that Indian companies could offer potential partners, citing examples in the high technology manufacturing, precision engineering, telecommunications, and software development. He emphasized, as well, the "tremendous" personnel assets available in the Indian work force to meet the demands of these potential partnerships.

Mr. Ghosh also discussed the perceptions and realities of the Indian government bureaucracy. He advised that India had adopted legislative measures to facilitate approval of foreign investment. These measures, he added, also address the issue of transfer of royalty payments. He also stated that fears associated with the protection of intellectual property were unfounded noting that intellectual property rights were "more secure in India than anywhere else." He further stated that Indian industrial trade associations, including the Confederation of Indian Industries and the Federation of Indian Chambers of Commerce and Industry, were also working with the Indian Ministry of Defence to interject industry's views to improve India's acquisition process.

Mr. Ghosh concluded by stating that the key to success in future collaborative efforts was enhanced mutual trust more than increased legislation. He also suggested a new paradigm and attitude based on optimism rather than the pessimistic approach that has marred such efforts in the past.

The session was then opened to general discussion, and there was active participation by the approximately 50 persons in attendance. The items listed below were mentioned by a variety of participants; however, a qualitative assessment or measure of the potential for success with these collaborative efforts was not made. One area where, it was generally believed, the U.S. and India would have mutually high interest, was technologies associated with counterterrorism and counterinsurgency. Specific prospects for joint development in the defense technology sector include:

* Communications systems including multiplexer and frequency hopping systems.

* Satellite networks

* Information security, encryption technologies and solutions

* Minesweeper technology

* Shipbuilding

* Combat aircraft

* Precision guided munitions development including laser guided munitions

* Nanotechnology

* Unmanned Air Vehicle (UAV) technology and associated sensors

* Data links for airborne and vehicular surveillance platforms

* Software development

* Manufacture of electronics components

* Test equipment

* Tanks and armored vehicles

* Missiles, rockets and launchers

* Radar and sonar systems

* Air defense systems

* Torpedoes and mines

* Small arms and field guns

The following summarizes what were viewed by the defense technologies breakout group as the key impediments to advancing growth in the defense technology sector:

* Perception that the United States was not a reliable supplier of defense articles and services based on sanctions experience.

* Uncertainties associated with the administration of U.S. export controls with India, including lifetime support and level of technology release. Some inconsistency was noted between stated licensing policy and the actual export licensing process.

* Lengthy and cumbersome Indian defense acquisition process. Traditionally, the Indian defense acquisition process has been shrouded in secrecy. As a result, there is a lack of confidence in the acquisition process, particularly with Indian industry, because of real and perceived inconsistencies.

* Lack of interoperability between U.S. and Indian armed forces. It was viewed that a key component of future cooperation in the defense technology sector was joint operations between the U.S. and Indian military. The conduct of joint exercises, however, is hampered by lack of interoperability.

* Uncertainty associated with Indian private sector's role in research and development, and a perception that Indian defense officials favor U.S. industry cooperating with state-owned enterprises.

Life Sciences Session

The Breakout Session on Life Sciences Outlook, U.S.-India High Technology Cooperation Group "Financing Innovation Forum" was co-chaired by Bijan Dorri, Global Leader, Imaging and Medical Technologies, General Electric, and Sreenivas Devidas, Vice President, Business Development and Strategy, Jubilant Biosys Pvt Ltd. There were fifteen participants to this session that included representatives from the US and Indian governments, Indian and US biotechnology, medical and pharmaceutical industries, and Indian venture capital organizations.

Session proceeding were started by Dr. Devidas who provided an overview of the Indian life sciences industries. The presentation underlined the significant growth potential of biotechnology in India and the windows of opportunity in the biotechnology field for global companies. These opportunities focus on the low cost and high quality contract research and manufacturing services provided by the Indian companies. While Indian biotechnology companies have demonstrated their capabilities in bringing new biopharmaceuticals to the local market, in the vaccine and recombinant therapeutics area, they have not overcome the perception that they cannot bring a product to a Western market. India needs a few success stories. To that end, Indian biopharmaceutical companies are building US-approvable production facilities.

The co-chairs' presentations were followed by a roundtable discussion. The discussion noted that India has shown a tremendous progress in terms of infrastructure development, technology base and range of production for the life sciences industries, such as biotechnology, biosecurity, pharmaceutical, bioinformatics, agro-biotech industries. However, the discussion also focused on the lack of Intellectual Property Rights (IPR) legislation (Trade Related Aspects of Intellectual Property Rights or TRIPS, is expected to take effect on January 1, 2005, per India's World Trade Organization obligations). In addition, participants also recognized India's shortcomings on the timely implementation of data protection. The IPR issues were cited as reasons for low foreign and local venture capital investments and the difficulty in the operation of multinational corporations which in turn contribute to India's very serious brain drain of skilled and highly educated scientists (95 % of Indian Ph.D.s leave India). This loss further contributes to the Indian difficulties of keeping commercially-minded professors at Indian universities which precludes universities from spinning off innovative startup companies.

The best prospects for US-India joint developments programs were identified in the area of Biosecurity and Bioterrorism joint research, strategic alliances between academic institutions and industry from both countries on continuous employee education (applied science and industry-oriented training) and increased support and promotion of US investments into the Indian biotechnology industry. Dr. Devidas proposed the US open phase I funding (up to $100K) under the US National Institutes of Health Small Business Innovation Research (SBIR) Program to the Indian biotechnology start up companies applicants. He also proposed allowing Indian companies to partner with USG facilities under the Cooperative Research and Development Agreements (CRADAs), and promoting the cost savings of India-based contract research and clinical studies to small and medium sized US biotechnology firms.

These joint programs will need to be actively promoted by both governments and will require the adequate implementation of IPR.

Nanotechnology Session

The nanotechnology breakout session was co-chaired by Dr. Mihail Roco from the National Nanotech Initiative and Dr. Krishna Ella from Bharat Technologies, an Indian biotech firm. Dr. Y.P. Kumar, an Adviser from the Ministry of S&T also attended. According to Dr. Ella, there are only 25 or so firms doing nanotech research in India as part of biotech research. Dr. Kumar told the audience of current GOI projects and Dr. Roco gave an overview of U.S. nanotech research - university centers of excellence, and USG centers of research.

The discussion during this breakout session was devoted to finding ways to push forward on areas of joint development and commercial cooperation. Although India's nanotechnology research is still in its early stages, India has shown capabilities that would be useful to this growing industry. India's large pool of well-educated human resources, many of whom speak English, are being tapped by U.S. companies to assist with manufacturing and IT services capabilities. Substantial discussion was devoted to the issue of whether similar structures that could be applicable in the nanotechnology area.

The participants noted that the GOI Nanomaterials Science and Technology Initiative (NSTI) potentially offered a venue for greater cooperation. The NSTI is a project in which the GOI has invested 20 million USD over the next five years for nanotechnology research and development.

Possible areas of collaboration include instrumentation and standards. The participants also suggested that the U.S. and India could do engage in cooperation between research centers, including the potential training of Indian scientists in U.S. labs.

The participants agreed that biotech/agriculture, manufacturing and materials sciences and, in particular, nano-electronics were the hot areas for potential nanotechnology applications and cooperation. Finally, discussion centered on whether partnering with two industry groups that have formed both in India (www.indianano.org) and in the U.S. (the NanoBusiness Alliance which includes DOC, NIST, nanotech companies and venture capital firms).

V. Roundtable Discussion: Factors Influencing Investors at the Firm Level - Lessons Learned from the Breakout Sessions

During the roundtable discussion, the co-chairs of the breakouts sessions presented the recommendations of the participants in the breakout sessions.

IT Input

Recommendations:

* Create a case study on impediments and solutions when entering the Indian market

* Create a research project to determine the total cost of entering the Indian market at the border
* Request that India use the U.S (not the EU) model for data privacy

* Implement ways to make India a more viable market such as changing perceptions so that Indian consumers and the Indian government are viewed as a potential customer. U.S. companies to be invited by government for purchases

* Acceleration in reduction of excise taxes and special additional duties in addition to reductions already planned in the IT agreement;

* Patent registration should become easier;

* Indian government should work more closely with the private sector and to the extent that diplomacy allows make detailed reports of meetings available over the Internet;

* Modernize Indian laws - especially contract law;

* Work to reduce restrictions of the movement of capital, know-how, people and goods; address proposed restrictions on L-1 Visa; consider new type of visa to replace H-1 visa;

* Complete Totalization Agreement;

* Remove impediments to greater investment in telecommunications by allow the mixing of public/private networks, creating a level playing field by simplifying review and license procedures, allowing adoption of the best practices/procedures, and allowing one-stop-shopping, billing, and ordering;

* Create a guide for how U.S. venture capitalists can invest in India;

* Implement infrastructure improvements;

* Promote collaboration in university research;

* Make State Bank of India funds available to address scarcity of capital;

* Focus on the potential for joint opportunities: embedded software, chip design, wireless (adoption) revolution, services in the legal, educational, and medical sectors.

Defense Input

Recommendations:

* Continue steps to normalize defense trade relationship with India. It was believed the most effective action in this regard would be a Presidential statement that defines and publicizes the Administration's policy on defense cooperation with India. It was suggested that the Administration engage Congress on this issue to insure legislative cooperation with any future efforts.

* Repeal the Glenn Amendment to provide the Administration more flexibility in normalizing trade with India. It was also believed that U.S. industry would be a more effective tool in this regard and should lobby Congress to seek its repeal.

* Establish a joint consultative group consisting of industry representatives, government procurement specialists, and government policy experts to identify mutual interests and concerns as well as prioritizing areas of mutual benefit in order to strengthen U.S.-India defense cooperation.

* Create a Web site to share information on how to conduct defense-related business, market opportunities, and as an information resource for the U.S. and India business communities.

* Explore further streamlining the administration and processing of U.S. export controls towards India, with the possibility of injecting an assurance mechanism for long-term commitment whenever a licensing decision is made. An example cited was the ten year validity period for a Technical Assistance Agreement approved under the International

Trade in Arms Regulations (ITAR).

* Review the Entities List to identify and remove those entities that are no longer of concern. Update entities and licensing policy as appropriate. It was suggested that all license applications to listed Entities, including controlled items, be reviewed with a presumption of approval.

* Take advantage of existing mechanisms, including the U.S.-India Defense Policy Group and its working groups, to discuss joint projects, defense sales, and technical issues, to promote greater cooperation.

* Review the U.S. Munitions List to ensure that items, especially those related to homeland security, counterterrorism and counterinsurgency are under the appropriate U.S. licensing jurisdiction.

* Increase dialogue with Indian defense acquisition community concerning Indian defense priorities, its strategy toward future requirements and modernization, and procurement processes including the determination and incorporation of life cycle costs into this process. It was generally viewed that there needs to be more transparency to build confidence in the process.

* Promote joint exercises and dialogue between the Indian and U.S. armed forces. This dialogue should include promotion of Foreign Military Sales.

Life Sciences Input

Recommendations:

* Address the current lack of Indian Intellectual Property Rights (IPR) legislation;
Trade Related Aspects of Intellectual Property Rights or TRIPS should take effect on January 1, 2005, per India's signatory Agreement with World Trade Organization;

* Address - in part, through IPR protections - the Indian "brain drain" problem:
"Brain drain" of skilled and highly educated scientists (95 % of their Ph.D.s leave India); Difficulties in keeping commercially-minded professors at Indian universities; Precluding universities from spinning off innovative startup companies; Low foreign and local venture capital investments.

* Seek to encourage U.S.-India joint developments programs in the biosecurity and bioterrorism areas;

* Promote strategic alliances between academic institutions and industry from both countries on continuous employee education (applied science and industry-oriented training);

* Increased support and promotion of US investments into the Indian biotechnology industry, including: opening the US National Institutes of Health Small Business Innovation Research (SBIR) phase I funding (up to $100K) to Indian biotechnology start up companies; allowing Indian companies to partner with USG facilities under the Cooperative Research and Development Agreements (CRADAs); promoting the cost savings of India-based contract research and clinical studies to small and medium sized US biotechnology firms.

Nanotechnology Input

Recommendations:

* Since there is no S&T agreement in place between the United States and the Government of India due to the IPR annex requirements that are needed and have yet to be approved by the Government of India, intellectual property rights issues still remain the principle obstacle toward S&T cooperation.

* The Indian Government also views United States Government's export controls as impediments toward cooperation. There are also some concerns about the ability of Indian personnel to work on certain projects in the United States due to licensing requirements; very often it is industry perception of the ITAR and EAR that a license is required.

* Steps should be taken by both the U.S. government and the Government of India to renew their expired S&T agreement, which would also include the IPR annex. At present, cooperation on nanotechnology will probably need to be administered through private industry cooperation between the two nations and or through center-to-center cooperation. This would allow parties to cooperate without the need for an S&T agreement.

* Other policy recommendations include a review of the framework for export control cooperation, direct industry-to-industry communication, and the promotion of educational and technical exchanges between the governments.

* The appropriation of alternative funding mechanisms for nanotechnology R&D projects as well as the funding of collaborative R&D activities, particularly between R&D centers in nanotechnology, is also important. The large research library of fungi in India would be of benefit to researchers in the US - joint development would drive down duplication of research and its costs, and allow for more original R&D thus strengthening the expenditure of the dollar or rupee.

Other Roundtable Observations

Several attendees recommended the collection and dissemination of best practices associated with U.S.-India trade and investment, including corporate case studies. Mr. Buchakjian provided an overview of Honeywell's successful history in India, observing that it takes time to build strong relationships in the country, characterizing his company's corporate strategy in the market as a "marathon, not a sprint."

Several attendees touched upon lingering concerns with intellectual property protection in India. Mr. Ghosh advised that India is enforcing its intellectual property laws and policies, and challenged attendees to cite a specific example of an intellectual property violation. One audience member identified concerns in the pharmaceuticals sector.

Several Indian attendees suggested that U.S. Government research and development programs earmark certain funds for investing in India, including the National Science Foundation, the National Institute of Health, and the Small Business Innovation Research program. Under Secretary Bond noted that there are many facets for possible cooperation.

Michael Clark, Executive Director, U.S.-India Business Council, suggested that the U.S.-India High Technology Cooperation Group identify and champion a specific project(s), citing the Indian and U.S. armies possible common interest in studying systems biology and anthrax detection as candidates.

VI. Panel Discussion: Financing Innovation

Phillip Bond, Under Secretary of Commerce for Technology Administration, moderated this discussion.

Kanwal Rekhi, President and Chief Executive Officer, Ensim, discussed the important role angel investors play in supporting entrepreneurs in the earliest stages of development, before a project has matured to the point that would be suitable for consideration by a venture capitalist.

Al Berkeley, Vice Chairman, NASDAQ, told participants that the U.S.-Israel investment relationship could be a good model for Indian firms to emulate to foster a "capital bridge" between the United States and India. Mr. Berkeley stressed the need for excellent disclosure with institutional investors and the importance of developing realistic expectations in developing a strong, long-term market strategy, grounded on mutual trust. He also noted the need for foreign governments to permit the repatriation of funds and to eliminate non-tariff barriers. Berkeley cited non-tariff barriers as key factors in the low-trading volume recorded in its Japan and European units, which led to a decision to close NASDAQ's operations in those market.

Renuka Ramnath, Managing Director and Chief Executive Officer, ICICI Venture Funds Management Company Ltd., advised that her firm has been a leader in supporting Indian software companies and biotech firms. She highlighted India's strong human resource and knowledge bases and noted the need for additional capital (from government and the private sector) to stimulate further growth.

Pratip Kar, Executive Director, Securities and Exchange Board of India ("SEBI"), provided an overview of SEBI's roles in regulating and promoting the development of India's securities industry (including venture capitalists). Mr. Kar advised that India has high corporate accounting and corporate governance standards. Mr. Kar stated that India is keen to support venture capitalists and characterized India's venture capitalist registration, disclosure, and reporting requirements as minimal and non-burdensome. Mr. Kar predicted that there will be some consolidation among India's current 23 exchanges in the future. He also advised that SEBI has been at the forefront in fielding innovative technologies to process transactions, with systems similar to those in operation by the New York Stock Exchange and NASDAQ.

Several attendees queried the panelists concerning the relationship between Indian academic and research institutions and the India private sector in promoting technological innovation. The Indian panelists advised that there are few small business incubation programs in India, and little linkages between Indian academic and research universities, unlike in the United States.

Mr. Berkeley observed that a consortium of U.S. universities has developed a subscription-based catalog of $30 billion in available U.S. grant funds, of which 50 percent could be pursued by foreign parties. The U.S. consortium invited Indian institutions to subscribe to this service, but were rebuffed, with potential Indian partners advising that the Indian government satisfies their funding needs.

Under Secretary Bond recommended that attendees review the Technology Administration's Innovation in America series, examining corporate, federal laboratory, and university views on research and development.

VII. Conclusion

Ambassador Thomas Pickering, Senior Vice President, Boeing, noted the dramatic changes in the Indian economy over the past decade, in particular the emergence of the country's information technology capabilities and promising life sciences and nanotechnology sectors. Ambassador Pickering stressed Boeing's commitment to the market, and expressed his hope that future changes in governments in both countries would not jeopardize the closer relationship that has developed over the past two years. Ambassador Pickering acknowledged that there remain issues of concern in the two countries' relationship, including protection of intellectual property and export controls. He endorsed Mr. Wimbush's action plan as a means to foster closer defense cooperation.

Ambassador Pickering expressed industry's support for the High Technology Cooperation Group initiative chaired by Under Secretary Juster and Secretary Sibal and relayed industry's willingness to work with both governments over the coming months to support the development of a stronger U.S.-India high technology relationship.

Mr. Bharat Wakhlu, President, Tata Inc. echoed Ambassador Pickering's support for the High Technology Cooperation Group's agenda, noting that private sector participation in the process is critical to fostering high technology cooperation. Mr. Wakhlu identified several perceived impediments to greater cooperation. He noted that there remains a perception that cumbersome barriers continue to hinder high technology trade between the two countries, and recommended a high level government statement endorsing such trade and recognizing that trade is an important component in the two countries' relationship. Mr. Wakhlu recommended that the two governments become more responsive to the needs of industry, and increase openness and transparency in decision making. Mr. Wakhlu also identified the need to lower tariff and non-tariff barriers, adding that Indian industry would welcome foreign competition and the free flow of goods, services, and people. Mr. Waklhu stressed the importance of developing trust and mutual respect. He also suggested that the High Technology Cooperation Group identify, spearhead, and highlight four or five special joint projects to strengthen the U.S.-India relationship.

Phillip Bond, Under Secretary of Commerce for Technology, offered concluding remarks and thanked participants for their hard work and insightful recommendations.

(end text)

(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)



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