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Foreign investment is security threat, warns Indian security agency 

New Delhi, October 25, 2006

India’s apex security agency, the National Security Council (NSC), has warned that Foreign Direct Investment (FDI) in certain industrial and service sectors of the Indian economy can be a security threat, news reports said Tuesday.

In a classified document prepared by the National Security Council Secretariat (NSCS) on Potential threats to India’s National Security from Foreign Direct Investment (FDI), the NSC proposed legislation to not only cover future foreign participation in the Indian economy but subject past agreements to security monitoring and scrutiny, reported business daily The Economic Times, quoting the document. ‘‘Such legislations are in existence in the US, UK, Thailand, Mexico and several other countries,’’ the NSC report said.

The Indian goverment is likely to enact umbrella legislation cutting across all sectors to protect India’s vital national security interests. The legislation the National Security Exception Act will empower the government to suspend or prohibit any foreign participation proposal that may threaten national security, the newspaper said.

The NSC, established in 1998 by former prime minister A B Vajpayee’s government, is the apex agency looking into political, economic, energy and strategic security concerns of India, and has been arguing the need for identifying sensitive sectors and locations for FDI, saying there was a need for reviewing such investments.

The NSC is headed by the prime minister of India and has as its members cabinet ministers. Initiated by the Cabinet Committee on Security (CCS), the report detailed recent instances of sectoral threats and highlighted Russian mafia using the real estate route to pump in money as the sector comes under automatic approval, requiring little scrutiny. The NSC said Egypt’s mobile telecom company, Orascom Telecom Holdings, has the potential to be on board one of the country’s major telecom operators, Hutchinson Essar. ‘‘Orascom has received investments from the late Yasser Arafat’s organisation. It is the biggest telecom player in Pakistan and has a large share in Bangladesh. Orascom’s presence in an Indian company’s board is not in our national security interest, as it could gain access to our ICT (Information, Communication, Technology) assets and enhance the capabilities of our adversaries in gathering intelligence,’’ the NSC report said.

Domestic airline SpiceJet has also come under the NSC scanner. ‘‘Royal Airways, incorporated in Pakistan and the owner of SpiceJet, has indulged in stock market manipulations. The credentials of foreign investors associated with the aviation enterprise have been questioned abroad,’’ it said.

The NSC document mentioned that the presence of Chinese software company Huawei is not in the nation’s interest. ‘‘A former PLA officer and a member of the Chinese Communist Party has established the company. He is a member of the Chinese Communist Party and is close to the Chinese government.’’

The NCS’s report could force the government to rethink its plans to allow cargo operations to Mumbai and Chennai by Great Wall Airlines, which has a 51 per cent stake by Chinese state-owned company, China Great Wall Industry Corporation (CGWIC).

Russian mafia holidays regularly in Goa. An open secret in defence circles.