Op-Ed Commentary: Chris Devonshire-Ellis
As September 18th, the date on which Scotland will undergo a referendum on whether to remain part of the United Kingdom, draws ever closer, debate has been raging throughout the UK as to the economic viability of such a split. However, research conducted by Dezan Shira & Associates on foreign investment between Scotland and China has revealed a paucity of related statistics, suggesting that the country is not mature enough in its institutions to go it alone when looking to attract FDI. The northern country has little available data on investments with China, one of the largest recipients of FDI in the world.
Searches conducted online revealed no immediate data made publicly available on the extent of Scottish investment into China, and little on Chinese investment into Scotland. While it is likely that these figures are collated and recorded as part of the overall data pool for the United Kingdom, Scottish institutions themselves appear to have been remarkably lax in seeking to attract FDI from what has become the world’s second largest economy.
Communications with major Scottish government agencies responsible for monitoring investment into the country revealed an apparent ignorance regarding the true nature of Chinese investment into Scotland, citing the number of Chinese registered businesses in Scotland for both 2012 and 2013 as five. It was further noted that due to statistical reasons numbers are rounded to the nearest five, meaning that the true figure could be anywhere between three and seven.
However, rounding up figures in this case to the nearest five produces a result that could legitimately be marketed as over 100 percent of the actual investment figure. This suggests that statistics gleaned even by Scottish Government agencies could be seriously inflated. Chinese companies that have invested in Scotland were quoted as numbering twelve, with one agency stating “In total, Scotland has twelve Chinese inward investors through a mix of direct investment, mergers and acquisitions, R&D partnering and joint venture business models: Lenovo, Todd & Duncan, Cochran Ltd, Bank of China, Ganten, PetroChina, Sinopec, CNOOC, Xinhua News Agency, iRock Technologies, Shandong Ruyi Technological Group Ltd and Huawei.”
Currently in the pre-referendum election period, agencies stated that they were unable to provide any further information on any investment into Scotland until after the referendum on 18 September. This suggests, however, that all work on attracting investment into Scotland has ceased for the time being, a curious state of affairs for a country in need of investment and whose main thrust towards independence has been on the basis of increased power and wealth creation. This behaviour is at complete odds with the stated aim.
Readers may draw their own conclusions from these statements, however to my mind it points towards a woeful lack of Scottish infrastructure or capabilities when it comes to attracting foreign investment or even monitoring it. This points either to inadequate financing and direction by the Scottish Government in reaching out to actually attract investment into the country, and is additionally suggestive of a complete over-reliance on British investment and funding from companies within the United Kingdom.
An independent state, with its own tax laws, would no longer be able to exclusively rely on investment from British companies, a situation further compounded by the large question marks as to an independent Scotland’s ability to apply for membership in the European Union, which guarantees free trade amongst members. Westminster has already indicated Scotland will not be able to keep the Pound Sterling as its currency, and E.U. membership for new states requires members to possess their own currency. Scotland does not have this.
As concerns China, one wonders where Scotland’s ability to fund Embassies and Missions abroad will come from. A Scottish Embassy in Beijing? But what about the costs of running that together with Shanghai, and Hong Kong, let alone the rest of Asia. While Scottish yearning for a national identity is admirable, it already has a rather more potent brand to sell than the average Englishman. Whisky, Kilts and Haggis seems rather more identifiable than Gin, Bowler Hats and Fish & Chips. Scotland has a strong national identity, yet it remains underutilized. That is hardly the fault of the Union.
Plus, Scotland enjoys great representational facilities under the banner of the United Kingdom with an extensive network of Embassies, Consulates and Government agencies all available to assist. But it would help their case more to go it alone had Scotland actually used these to generate FDI into the country. The Scottish FDI relationship with China, as just one potentially lucrative business partner, demonstrates that Scotland has a long way to go before being anywhere near independent enough to stand on its own two feet and compete for global investment.
Chris Devonshire-Ellis is the Founding Partner of Dezan Shira & Associates – a specialist foreign direct investment practice providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam, in addition to alliances in Indonesia, Malaysia, Philippines and Thailand, as well as liaison offices in Italy, Germany and the United States. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
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