As we begin the New Year according to the Hindu calendar, I am still remembering my cuttings from the newspapers dated October 6. On that single day, the media reported Tata Tea's [Get Quote] purchase of a South African tea company; Ashok Leyland's [Get Quote] bid for the automobile casting unit of a huge Turkish group; Mahindras, Zoom Auto Ancillaries and ICICI [Get Quote] Venture joining hands to bid for an Italian diesel engine maker; and Mahindra, on its own, resuming talks to buy a Romanian tractor company.

The biggest news that day, of course, was the Tatas' proposal to buy the Anglo-Dutch Corus Group, the world's ninth largest steel maker. As it is, India's acquisitions abroad have totaled $ 7.2 billion, spread over more than a hundred deals, in the first nine months of the current year, witnessing a sharp rise from $1.5 billion in 2004, and three times that in 2005.

Even if half the transactions since reported materialise, quite possibly, India's outward direct investment could exceed the FDI inflow in the current fiscal year. And, we are supposed to be a poor, capital hungry country!

Clearly, a huge amount of our risk capital seems to find the climate abroad very attractive, even as intending foreign investors in India continue to be deterred by our labour laws, our bureaucracy and our infrastructure. While lauding the entrepreneurial instincts of the Indian businessmen, I am not quite able to overlook certain recent cases of developing countries taking over businesses abroad.

Lenovo, by far the largest PC maker in China, took over IBM's computer manufacturing business a few years ago. Lenovo is still struggling to digest the purchase - the market share of the unit has been falling and it has lost $1 billion in the last three and a half years, as the competition with Dell and HP remains very strong.

One major problem has been integrating the Chinese and American corporate cultures into a smooth whole, which can deliver results. Some key people have left, while others are happy with the more entrepreneurial culture the Chinese have brought in.

While Lenovo supply chains within China are extremely efficient and world class, such is not the case in the rest of the world. (Incidentally, Lenovo has a strong and growing presence in India as well).

This apart, even as the management strives to integrate fully all the businesses, one question that may continue to pose a problem is the lack of enough financial resources to take aggressive stands in the market, as compared to the resources with rich competitors like Dell and HP.

Another recent case is that of BenQ of Taiwan which took over Siemens' mobile phone manufacturing unit in Germany on October 1, 2005. BenQ is itself a Taiwan-based, highly efficient contract manufacturer of mobile telephones.

The competition in contract manufacturing is so intense that units have to be super-efficient, even as they work on very thin margins. Siemens' unit was loss-making but BenQ felt that with its experience of efficient manufacturing, and its eastern entrepreneurship, it could make the unit pay, particularly as it was available at a negative cost - in other words, Siemens was willing to pay several hundred million dollars to the buyer of the unit, to get rid of a headache. By September 30 this year, BenQ had lost a billion dollars on the German unit and was forced to pull the plug.

Yet another case worth pondering over in the context of ONGC's [Get Quote] investments abroad, is what Russia is doing to Shell, which has made a huge commitment to Sakahlin 2, an oil field. Just as Shell was about to begin shipping oil/gas from the field, the authorities have clamped down, alleging violation of environmental rules. Another major US oil company has also been hit similarly. ONGC has a large investment in Sakahlin 1. It is also exposed to political risk in many other countries, like Sudan.

And, many of these investments have been made for the elusive goal of "energy security". One wonders, after Russia, Ukraine, Bolivia and Venezuela (to cite only the recent cases), how wise the strategy is?

While one wishes our entrepreneurs well, where huge amounts are being invested abroad, commercial and political risks of a nature and scale we are not perhaps used to, should not be forgotten.

Tailpiece: There is good news for us in Maharashtra, thanks to the Karnataka government. I have long felt that Bangalore became the preferred destination of IT companies and emerged as the IT capital of the country because of the absurdly high real estate prices in Mumbai, thanks largely to the Maharashtra Urban Land Ceiling Act. (The Maharashtra government continues to swear by the Act despite its counter-productivity and indeed the Centre's advice against it.)

The Karnataka government is now doing its best to return the favour by banning English medium schools and declaring state-sponsored bandhs, � la yesteryear's West Bengal.