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Vedanta deal: Wisconsin is coming to India and not in a good way

The project is fantastic: a $19 billion investment in the semiconductor and display industries, creating 100,000 jobs in a state with little experience in technology manufacturing.

If voters and taxpayers in Gujarat are excited about this “historic investment,” they should read Wisconsin’s recent history. The US state bought into a similar dream in 2017 when then-President Donald Trump teamed up with then-Governor Scott Walker to lure Foxconn Technology Group, whose flagship Hon Hai Precision Industry Co. Invest $10 billion and hire 13,000 employees.

Wisconsin never reached its goals. And neither is Gujarat.

What is happening in India today is eerily similar to what happened five years ago in the US Midwest, but this time the people and government of Gujarat have no excuse for not being aware of what is likely to unravel. The Americans were clearly told that the project in Mount Pleasant was pointless. Yet they went on.

It’s inconceivable that Foxconn really thought it would spend a whopping $10 billion to build a high-tech factory in the middle of American farmland. But as founder and chairman Terry Gou said early in the planning phase, “There is such a plan, but it is not a promise. It’s a wish.”

So as the chairman of Vedanta Ltd. Anil Agarwal says his company will invest 1.54 trillion rupees ($19.4 billion), we should consider it wishful thinking, rather than a promise. And we can also pause for a moment to soak in the sweet irony of its chosen venture partner: Foxconn, the same name behind the Wisconsin project. But to be fair, the Taiwanese are less of a driving force behind this India project and more of an advisory partner. The numbers, choice of location and project size are largely determined by Vedanta, which bears most of the financial burden.

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Foxconn has made several commitments in Wisconsin that never materialized, with a promise for a state-of-the-art 10G liquid crystal display panel plant being the most egregious. In any case, it has never committed to assembling iPhones, the product for which Foxconn is best known.

The insidiousness of the Taiwanese company was in some ways spurred on by local and state governments seeking to sell their voters (and taxpayers) assurances that a $3 billion stimulus package — the largest in US history — would be worth the cost. It will be the “Eighth Wonder of the World,” Trump declared at the groundbreaking ceremony in 2018.

Governments from Washington to New Delhi don’t want to offer welfare companies to lure brominated projects like chip testing and assembly. They want to send out press releases and tweets applauding their territory’s relocation to the higher echelons of industrial society. To achieve that PR goal, they often link incentives not to reasonable evolutionary steps in economic development, but to extravagant plans that people never dreamed of.

And the recipients of such sweeteners are more than happy to oblige, knowing that there is almost no downside to promising too much and delivering too little. And those who’ve handed them out — either long out of office, or safely entrenched — don’t have to foot the bill either. Scott Walker lost his reelection bid, largely because of the failure of the Foxconn deal; however, he didn’t lose his home like dozens of Wisconsinites who were displaced to make way for the “miracle” that never was.

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Now it is India’s turn to dream, until the time comes when it must face reality.

Perhaps it is a coincidence that the project went to Prime Minister Narendra Modi’s home state. The neighboring state of Maharashtra thought it was a shoe-in to the deal, going so far as to issue a statement two months ago announcing that the company Vedanta-Foxconn would invest there.

Accusations and rancor flew high and low in Maharashtra after Agarwal and Modi took the stage to celebrate the winner. But in reality, the people of India’s second most populous state may not be celebrating losing the project, but rather dodging a bullet.

Indians – particularly in Gujarat and Maharashtra – may take this as a warning: you don’t want to be another Wisconsin.

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