Newsletter from Kerala State Industrial Development Corporation 4 Move to logistics
6 Writing on the wall
Vol.1 Issue 4 August 2010
8 The retail boom
Panchatantra for growth
Infrastructure, logistics, knowledge hubs, retail and infotainment. Five sectors that will fuel the growth of Kerala in the future. Sectors that will help the State move in step with global trends and create jobs. They are environment friendly and will build themselves on the strengths of our society. KSIDC has introduced special schemes for entrepreneurs to take up projects in these segments. In a two-part series, Update explains the potential of these sectors, and the opportunities they bring in. Turn to page 4
Global bids for Ponnani, Azhikode ports…
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he Kerala Government has invited global bids for the development of the Ponnani and Azhikode ports in Malappuram and Kannur districts, respectively. These are among the six ports the State government had chosen to develop through public-private partnership (PPP) route. The Rs 2000-crore Ponnani project is aimed at developing the port into an all-weather deepwater port capable of handling vessels of around 50000 DWT. The project has three phases and the first phase is scheduled to be completed in three years. The port will have both rail and road connectivity for the movement of cargo to hinterland destinations. The Rs 4,500-crore Azhikode port project is part of the National Maritime Development Project and involves setting up a wharf to unload coal meant for the thermal power plant coming up at nearby Cheemani, a cement terminal and a wharf to handle general cargo.
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hief Minister V S Achuthanandan inaugurated the work of the first phase of the International Container Transhipment Project at Vizhinjam. The works include devel-
Kerala Tourism strikes PATA gold
…as Vizhinjam ICTT gets off opment of basic infrastructure for the port such as road and rail connectivity, water and power supply, acquisition of land and obtaining of various clearances. The environmental impact
study on road and rail connectivity is underway and steps had been taken for obtaining environmental and coastal regulation zone clearances.
Advanced technology park in Kozhikode The State government is setting up an Advanced Technology Park at Ramanattukara in Kozhikode. It will house a knowledge park that will facilitate industrial production and research-oriented activities in electronics, micro-electronics, biotechnology, avionics, nanotechnology and pharmaceuticals. Kerala Industrial Infrastructure Development Corporation (Kinfra) and the Infrastructure Kerala Ltd. (InKEL) are developing the park. The Rs 9,000-crore project coming up on 85 acres of land is expected to be completed in five years. It would create 25,000 direct and 30,000 indirect employment opportunities.
Kerala IT heads for Nordic countries
www.keralatourism.org, the official website of Kerala Tourism, has won the prestigious ‘PATA Gold Award 2010’ for the best website. The PATA (Pacific Asia Travel Association) awards honour industry stakeholders who have made outstanding contributions to the promotion of travel and tourism in the Asia- Pacific region. The site is one of the most popular travel websites in the world and is currently available in English, Hindi, French, German, Chinese, Italian, Spanish and Malayalam. 2
The Group of Technology Companies (GTECH) working in Technopark, Thiruvananthapuram, has identified Denmark, Sweden, Norway and Finland as potential growth markets. These countries face a demographic challenge and cost pressures to sustain their economic growth which is dependent on cutting-edge technology and innovation. GTECH has identified emerging sectors such as clean technology, health and life sciences as thrust areas, and said Kerala IT industry could play a critical role in sustaining the competitiveness of these economies by offering cost competitiveness and quality solutions. Government delegations from Denmark and Sweden recently visited Technopark and Infopark to showcase and identify the potential business areas for the Kerala-based IT companies.
KSIDC NEWS
Kerala to host warship design centre KSIDC anchors project by Defence Ministry and Mazagon Dock Ltd
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n ambitious project that would reposition Kerala as a major centre for maritime activities, including ship building got a shot in the arm. The State Cabinet has cleared the leasing out of 40 acres of land to public sector Mazagon Dock Ltd for setting up a National Institute of Warship Design Centre at Kadalundi Village in Kozhikode district. The full fledged institute and ancillary facilities will be set up by the Ministry of Defence and Defence shipyards, with Mazagon Dock Ltd as the lead shipyard. KSIDC is the nodal agency for the project. The project would be commissioned in three phases and will require 100 acres of land. The total investment is estimated to be Rs 300 crore. The Mazagon Dock Limited, a government of India undertaking, is engaged in the manufacturing of warships and submarines for the Indian Navy.
From MD’s Desk
New horizons T
he world economic order is up for big changes. China has recently upstaged Japan to become the second largest economy. India, which at present is at the 11th position, is expected to occupy the third slot by 2030. The growth of these emerging economies is a result of the success of the respective governments in identifying opportunities for big growth, and putting in place enabling conditions so that their people grow and realise their full potential. Kerala has long prided itself on having social indicators that match those in the developed nations. While the State was unable to extend its stunning performance to economic growth, it did remarkably well in certain chosen areas. The growth of tourism, healthcare, manufacturing and IT industries in the last two decades is an example of the success of a targeted approach to growth. In its 50 years of operations, KSIDC has identified growth sectors and helped entrepreneurs. Now KSIDC is venturing into new areas which it believes are going to be the engines
of Kerala’s growth: infrastructure, logistics, knowledge hubs, retail and infotainment. This issue of Enterprise and Industrial Update focuses on these growth areas. I believe the reports will be useful for those who consider Kerala as an investment destination. The success of early birds in these sectors is sure to inspire new entrants. The State has no dearth of entrepreneurial spirit and I am sure that the reports will help prospective entrepreneurs take an informed decision. With the global economy getting more and more integrated and entrepreneurs defying borders in search of excellence, Kerala stands a good chance of attracting big investment into these sectors. KSIDC will extend all its resources to those who come forward and grab the opportunity. I solicit your feedback at mdksidc@vsnl.net Alkesh Sharma 3
logistics
Just Move it Logistics account for 13 per cent of India’s GDP. Assuming India’s GDP to be around $1.2 trillion, the size of the logistics industry is around $150 billion. The industry is growing at 20 per cent per annum, when compared to the economic growth rate of 8-9 per cent.
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ot enough reasons to take to logistics industry in Kerala? Then you have the best reason of them all: Kerala is commissioning India’s first and only International Container Transshipment Terminal (ICTT) in 2010. It is estimated to handle 1 million TEUs a year against the 3.5 lakhs TEUs handled now. The State has been a trader’s paradise long before it became a tourist paradise. Kerala had trade relations with many parts of the world. At present, proximity to international maritime highways puts the state in a very advantageous position. The ICTT is expected to transform Kochi into a transshipment hub. Feeder ships from nearby ports will bring cargo to the port for transshipment to mother ships, which will take them to destinations all over the world. The terminal will also serve the needs of the industries coming up in the Kochi-Coimbatore industrial corridor. The ICTT will throw open many new avenues for entrepreneurs in Kerala. Logistic service providers (LSPs) will be among the main beneficiaries of this project. They move material through the supply chain, from the suppliers to the manufacturer and then to the customer. Storing the products 4
at warehouses and shipping them to their destination are the main functions of LSPs. They also provide value added services like packaging, labelling, consolidation, mixing, breaking bulk, repairs, etc. These value added services help their clients to postpone making the final product till the customer order is received, thereby reducing inventory levels and wastage and enhancing customer satisfaction and competitiveness. Containerisation is a big innovation in logistics. It enables easy handling of cargo as it moves through various ports to its final destination, thereby reducing handling cost and time. It also promotes efficient utilization of space and safer transportation. Containerisation of products near the place of produc-
Tamil Nadu, whose ports handle around 2 million TEUs a year has around 50 CFSs in operation. By the same measure, ICTT having a capacity of 1million TEUs in the first phase, will need around 25 CFSs. The State currently has only 10 CFSs, including those under construction.
tion could help in taking the maximum advantage of its benefits. This opens up the need for Inland Container Depots (ICDs) - standalone customs stations located inland - and Container Freight Stations (CFS) in the vicinity of the ICTT and its feeder ports. CFSs are mini logistic centres, which act as extensions to the port. They decongest the port by shifting many of the activities outside it. Activities like warehousing, consolidation of less than container load (LCL) cargo, disaggregation of cargo, storage, repair, maintenance and fumigation of containers etc take place here. Tamil Nadu, whose ports handle around 2 million TEUs a year has around 50 CFSs in operation. By the same measure, ICTT, having a capacity of 1million TEUs in the first phase, will need around 25 CFSs. The State currently has only 10 CFSs, including those under construction. The CFSs will need appropriate supporting systems like the material handling equipment needed to run the operations of the station. Information systems will also be needed to run its operations efficiently. This will create an additional market for vendors of material handling equipment and software, catering to the logistics sector. The containers used in the port, have to be parked safely until it is ready to be filled. With the commissioning of the ICTT, the need for empty parks will increase many fold. Kerala is a consumer state. The
products, manufactured in other States are usually transported to the state by rail/road. The ICTT will provide these manufacturers a cheaper alternative to transport their goods to Kerala and its adjoining states. Retailers will also need facilities like warehouses and cold chains which have to be setup across the state. Logistics parks offer the whole range of logistic services under one roof. Retailers with diversified products can store their goods at one place and save on logistics costs. Material handling equipment (MHE), transshipment and cross docking facilities, trade facilitation services, transportation services etc will be provided in the logistic parks. Third party logistics (3PL) players, who act as a single point of contact to customers, are also needed. Such companies take care of all the logistical needs of companies, freeing them to concentrate on their business. The need for skilled personnel in the logistics sector has been felt for quite sometime now. The Indian Maritime University has already started its centre in Cochin. It will offer professional courses in Shipping and Port Management. Opportunities abound for institutes that provide training to students in the logistics sector. Logistics is a high-cost, low-margin business. To be successful, LSPs should try to become a single point of contact to their customers, by broadening the range of services they offer. Different industries require different types of logistic services. The Centre for Perishable Cargo at CIAL caters to the needs of vegetable exporters and has estab-
N Asokan, CEO, Mather Projects Ltd.
CFS lished a niche market for itself. LSPs should find their place in the chain, build collaborative relationships with clients and form alliances with other firms in the chain to be successful. Although logistics is being seen as an industry with high potential for growth in India, it doesn’t have too many big players. It is estimated that only 1 per cent of the logistic services are provided by the organised players. Small players can enter the sector and grow big by reaping the first mover advantage in this industry with huge potential. The Kerala State Industrial Enterprises, a public sector company, is setting up a CFS on nine acres of land in Kochi. “We are creating facilities for 800-900 TEUs,” said MD Josemon, Managing Director, KSIE. “This may be scaled up to 3000 TEUs.” KSIE, which took less than nine months to start operations of Kerala Soaps Ltd, is planning to repeat the performance in CFS also. “We are planning to commission the CFS in December,” said Josemon. N Asokan, Executive Director and CEO, Mather Projects Limited, said his company is seriously evaluating the prospects of setting up an integrated logistics park which would house a CFS, warehouse, cold storage, container park, container repair centre etc. “We are looking at developing a facility where global leaders will come and set up their shops,” he said. There is movement on the ground. And the early bird catches all the worms.
The CFSs are an integral part of the logistic chain in the movement of containerised cargo for exports and imports. CFSs are basically facilities set up for handling and storage of containers between sea ports and cargo centres. The activities also include storage of laden and empty containers, stuffing and destuffing of cargo, and examination and assessment of cargo by the Customs officials. They also provide facilities for bonded warehousing.
The scope The total volume of containers handled by all the five functioning CFS in and around Kochi is 16,315 TEUs in 2008-09. The Cochin Port last year handled 3.5 lakh TEUs.
The opportunity • • • • • • •
Container Freight Stations Inland Container Depots Logistics parks Empty container parks Container repair/cleaning stations Warehousing Cold storages
The TEU story Twenty-foot equivalent unit or TEU is a unit of cargo capacity. It is based on the volume of a 20-foot-long (6.1 m) intermodal container, a standard-sized metal box which can be easily transferred between different modes of transportation, such as ships, trains and trucks.
5
EDUCATION
Writing on the wall Consider this: • India has 55 crore people below age 25 • India’s Gross Enrolment Ratio (GER), or the share of people aged between 18 and 25 entering the higher education sector, is 12 per cent. It is 25 per cent for many developing countries. • Only 2 per cent of the people aged between 15 and 25 get formal vocational training. The figures are 96 per cent in South Korea, 80 per cent in Japan, 75 per cent in Germany and 68 per cent in UK. • India with 110 crore people has over 400 universities; UK with 6 crore people has 109 varsities. • About 1.6 lakh Indian students study abroad. If their average expenditure on fees and maintenance is $25,000 per student per year, Indian students overseas are spending $4 billion. The lesson is simple and straight: a lot of young Indians are waiting to be educated. And
they need institutions of quality to enroll themselves in.
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hat India is one of the fastest growing economies mandates creation of a human resource pool that can sustain the growth. Recognising this fact, the Eleventh Five Year Plan (2007-2012) has placed high priority on education as a central instrument for achieving rapid and inclusive growth with specific emphasis on expansion, excellence and equity. It has allocated Rs. 3 trillion, a five-fold increase over the Xth Plan. However, the opportunities for higher education are just inadequate: The Associated Chambers of Commerce and Industry of India say capacity constraints in Indian institutions forces a lot of students to seek admissions abroad. It is estimated that half of the 22 crore children, aged between 6 and 14, either
By invitation
Quality is the key
Dr GPC Nayar
Kerala has immense potential to develop itself into a knowledge hub. Dr GPC Nayar, Chairman of SCMS Group of educational institutions is the most successful and recognisable face of entrepreneurship in the education sector in Kerala. A PhD from US, Dr Nayar started off his venture in 1976 in Kochi offering a diploma course in public relations. When the government opened up the economy in the early nineties, he smelled an opportunity in management education. Today, more than 3500 students enroll themselves every year 6
to pursue their dreams in management, technology, life sciences and communication in three SCMS campuses. The group today has assets worth Rs 780 crore. In this article, Dr Nayar, who is also the national president of the Federation of Associations of Management of Unaided Professional Educational Institutions in India, analyses the trends and opportunities in the higher education sector in Kerala, and gives some tips for being successful.
do not go to schools or drop out in between. The enactment of the Right to Education Bill will put them back in school, adding pressure on the existing educational infrastructure, especially in the higher education sector. In this backdrop, the National Knowledge Commission has recommended opening of about 1,500 universities to take the GER to 30 per cent from the present 12 per cent by 2020. Considering that the country has only around 400 universities now, the move heralds a real revolution in India. Knowledge hubs The concept of setting up knowledge hubs is not new: Nalanda and Taxila used to be universities imparting knowledge in every shade of human life. In modern times, institutions offering diverse courses have proved to be successful. The prime example is Manipal, a sleepy village that transformed itself into a knowledge hub offering courses in a variety of streams. The National Knowledge Commission has identified technology, management, medical and para medical science, legal and vocational education
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he National Knowledge Commission wants the gross enrolment ratio in higher education to be 30 per cent, and educate half of these students in technical and management streams. I believe they are going to create wealth for this nation. Kerala has got many advantages in education compared to other States and must make the most of this opportunity. Kerala society values education much more than anything else. The State has a lot of entrepreneurs who are interested to enter the education sector. It has quality manpower required to run educational institutions. The State is also well connected by air, rail and road. Quality is the deciding factor for any educational institution wanting to be a global leader. If we can provide good education here itself, the flow of students to other States and foreign countries for higher education can be restricted. In fact, people chase quality,
The National Knowledge Commission has recommended opening of about 1,500 universities to take the GER to 30 per cent from the present 12 per cent by 2020. India has only around 400 universities now!
The Kerala advantage Kerala has been one of the foremost destinations for higher education in India, offering various specialised courses. However, the demand for new educational centres which target creating a new generation of educated youth and based on ideas of social justice is on the rise. “If you offer quality education,
there are takers for all courses,” says Dr GPC Nayar, chairman, SCMS group (see write-up). Connectivity: Kerala has excellent connectivity by road, rail and air. The length of road per lakh population in Kerala is 509.23 km, against a national average of 321.3 km. Its three international airports (with the fourth one taking wings) make every part of the State accessible to international students. Climate: Kerala with its unique weather with no extreme heat or cold conditions can accommodate students from all parts of the world. Human resource availability: With a tradition of universal public education dating back a century, Kerala is abundant with human resource for every branch of knowledge. Acceptability of English: English is the medium of instruction in all higher education institutions in Kerala. Kerala has for long given top priority to education. For more than a century its schools welcomed people across sections, irrespective of their caste and economic background. Now, it’s time to welcome people from across States and even across borders.
and we can attract them. At SCMS, we are trying to cater to this need. About 80 per cent of the students who make it to the PGDM programme at SCMS are non-Keralites. They have to spend over Rs 8 lakh for the two year programme. However, there has never been a dearth of applicants: last year we got about 11,000 applications. If your aim is to set up a world-class educational institution, then you have to spend money on the infrastructure, campus and faculty. Even then, quality does not happen overnight: you have to strive for it and wait with patience for the result to come in due course. An entrepreneur must acquire an in-depth knowledge on the area in which he is working. It has been my constant endeavour to update myself on the new developments on the frontiers of technology. I read a lot and collect as much information as possible about the education sector even now. I make it a point to visit prestigious educational
institutions, study their infrastructure and incorporate good practices in our institution. All this, along with a dedicated effort from the whole team, has made SCMS what it is today. You cannot stop growth, nor can you run backward when the society advances. Responding to situations is also important. One needs to find out the need and dedicate oneself to it so as to emerge a clear winner in that chosen field. I was open to the changes the government was bringing in the economy in the early nineties, and I foresaw that management and technical education will be in high demand in the following years. My advice to entrepreneurs planning to enter the education field is to come into this sector only if you can run it well since you are dealing with the decision-makers of the future. Also remember that there is no shortcut to success.
as priority sectors for higher education in India.
7
Shopper’s own Country A burgeoning disposable income and high literacy rate have made the wealth-conscious Keralites give the term ‘retail boom’ a new meaning. And how! Today they are brand-conscious and ready to splurge.
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ndia is happening, and it is most reflected on its retail business. It is estimated that Indian retail will grow 50 per cent in the next five years to touch a figure of $543.2 billion in 2014. Moreover, US-based consultancy AT Kearney has placed India as the most attractive nation for retail investment among 30 emerging markets. And if India happens, then its consumer capital cannot lag behind. As much as 20 per cent of Kerala’s GDP comes from the retail sector. It is not just the traditional sectors of jewellery and textiles but also cars and fast moving consumer goods (FMCG) that are doing brisk business in Kerala. It couldn’t get better for retailers. And there are reasons too. The series of festivals has transformed shopping into a celebration in Kerala. A reason why the presence of MNCs and national players hasn’t dimmed the prospects of home-grown retailers. This flexible purchasing power has enabled Kerala to gain fame as a fast growing, expansive business field for major retail segments. A perfect case in point would be the jewellery sector. More than 10 jewellers have multiple showrooms across the State and abroad. The change in purchasing habits of corporate Kerala and increasing 8
Kerala, with its three international airports and a string of well-connected cities and towns, offers a unique opportunity to retail chains to set up shops. The previously untapped parts of interior Kerala today signify a big market for retailing, as discovered by many retail chains. Their strategy to target the bottom of the consumer pyramid has met with considerable success. Sensing the immense potential of retailing, the Government of Kerala launched the Grand Kerala Shopping Festival (GKSF) in 2007. The fest covers trade establishments throughout the State. Its growing popularity is indicated by the increase in the number of participating mercantile shops from 2500 in 2008 to 5008 last year. Around 31 lakh coupons were sold in the same period, twice the number sold in the previous year. The concept of ‘shopping tourism’ has thus got a shot in the arm, thanks to GKSF, as it targets the NRKs who visit Kerala in the December-January period.
foreign brand awareness have enabled major MNCs to set up shop in Kerala. Consider the case of luxury car makers who have discovered that Kerala has people with deep pockets. The segment comprising Mercedes Benz, BMW and Audi grows at an annual rate of 20 per cent in the State and sold 400 cars in 2009. The State with no big metro accounts for almost 5 per cent of the total sales in India. The sales of BMW, until July 2010, have risen by 30 per cent compared to the same period last year. Today, it’s not just the elite or super rich who are gaining access to these high end models. All these figures Kerala with no big metro are set to multiply with the further accounts for almost 5 per cent growth of IT parks and SEZs. This will of the total sales of premium ensure a perennial influx of brand conluxury cars in India. scious middle class people from variThe opportunity Advantage Kerala ous parts of India. • Shopping malls • Seamless chain of cities And retailers are • Supermarkets and towns not just watching • Retail chains • High brand-consciousness the show from the • Restaurant chains • High disposable income sidelines; they plan • Textile shops • Exposure to global quality it big for the State. • Branded retail standards The mushrooming of malls across the State having a combined space of more than 18 lakh sq. ft is the first sign. The Cochin Lulu Mall, India’s biggest shopping mall spread over 20 lakh sq. ft will catapult Kochi into the global league of retailing The Cochin Lulu Mall, spread over 20 lakh sq. ft, is expected to mega cities when it catapult Kochi into the league of retailing mega cities when it opens in 2011. opens in 2011.
For private circulation only. Prepared by Independent Media (+91 484 2423331) for Alkesh Sharma, Managing Director, Kerala State Industrial Development Corporation Ltd, Keston Road, Kowdiar, Thiruvanathapuram-695 003. Executive Editor: K G Ajith Kumar. The opinions expressed in these columns need not necessarily reflect those of KSIDC.