We also welcomed a great audience that ranged from a number of Peers, High Commission staff, the Commonwealth Enterprise & Investment Council, FTI Consulting, and the FCO.
Prof Buckley and Dr. Munjal’s study - “The role of the Country Alliances in Reducing the Transaction Costs of Internationalism: Evidence from Indian Multinational Enterprises”, examined over 1000 overseas acquisitions made by 326 Indian multinationals between 2000 and 2007 in 82 countries. Specifically, they explored how a Commonwealth alliance would influence business in India.
Prof Buckley opened by discussing the value of the Commonwealth and how it was an understudied topic. He said that a Commonwealth alliance would bring together the advanced and emerging economies of Australia, India, the UK, Canada, South Africa, Nigeria and Malaysia, who accumulatively have a (GDP) worth $10.450 trillion.
More generally, he explained the different barriers which affected International business and trade, specifically looking at: Cultural Distance, Geographic Distance and Economic Distance (cost of trading):
Dr Munjal went over their findings and was incredibly informative. They proved that:
Cultural Distance was an important factor for Indian Multinationals, with them seeking “to invest in countries which have a lower cultural distance from India”. Countries with similar identities and cultures were easier to do business with and “reduced risk and uncertainty” in international trade.
Commonwealth countries are psychologically close, with our shared history and heritage alleviating many cultural barriers. Similar laws, customs and language make for a positive environment to trade and invest.
Geographical Distance between trading countries will never change, technological advancement, free trade policies and procedures can encourage international trade. In fact, they noted that many South Asian multinationals often do not wish to invest in neighbouring countries due to what has been described as “political rivalries”.
Economic Distance calculated the costs of undertaking business in countries influenced by investment and trade. The outcome was that the “Home-host country alliance positively influenced the internationalisation of Indian MNEs”. If trade between nations was cheaper/free it would be a sweetener in any transaction.
Q & A Session
We had a lively and engaging Q&A session. Our Executive Director asked about the effect of immigration and visa issues to businesses looking to invest and trade. Prof Buckley said that there was “strong implications” on “restricting Commonwealth opportunities” should current polices remain unreformed. He also spoke about increasing the Commonwealth supply chain that also included individuals. If this was restricted too heavily then this would indeed impact investment.
Our director also asked what Britain could do to make the Commonwealth more business friendly. Prof Buckley said that there was “not a lot of marketing of the Commonwealth” especially in trade and investment and that “maybe there should be a renewed focus”. He reiterated that there “remained a strong Commonwealth effect” and their research bears this out. However, governments are not capitalising on such benefits.
We heard other questions that looked at the cultural dimension and its impact on trade and investment. Lord Howell spoke of the Commonwealth’s common working language and that it was not just the English we speak, but its “internal laws or DNA” that allows for a “certain way of thinking, our phraseology which governs how English speakers behave.” This has a significant impact on business. He said that this would become more pronounced with the growth of services and digital goods. Our speakers agreed and also said that the institutional strengths of the Commonwealth are salient. Such examples are business case law and accounting practises.
Other questioners asked about Indian diasporas in Commonwealth nations how this could affect trade and investment. Our speakers agreed and said they would like to do more work in this area. We proposed that this could be opened up to included a wider Commonwealth diaspora.
In conclusion, Prof Buckley and Dr. Munjal provided timely evidence for policy-makers and businesses of the value of a Commonwealth alliance and provided an important reminder that the Commonwealth is a tremendous but undervalued network which could and should be harnessed.