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Mon, Aug 14, 2006 - Page 10 News List

US warns India of investment fallout from ban on sodas

SETBACK A US official said that the allegations against Coke and Pepsi could be viewed as unfair competition and affect India's investment image


As Coca-Cola and Pepsico lose their fizz in India, the US government and business leaders are warning of potential fallout on investment in the booming country of a billion-plus people.

The soft-drinks giants are suffering a publicity nightmare in India after an environmental group alleged that their sodas contain toxic levels of pesticides, leading to full or partial bans in six Indian states.

The clamor against Coke and Pepsi has been an unwelcome reminder to some in the US that India, despite more than a decade of economic reforms, remains a hazardous place to do business.

"This kind of action is a setback for the Indian economy," Undersecretary for International Trade Franklin Lavin said.

"In a time when India is working hard to attract and retain foreign investment, it would be unfortunate if the discussion were dominated by those who did not want to treat foreign companies fairly," he said.

The soft-drinks giants have hit back with a barrage of press statements and publicity campaigns in India to insist that their beverages are perfectly safe.

"The Coke you drink in India would be as clean as the Coke you get in Paris," Coca-Cola Asia group communications director Kenth Kaerhoeg said.

India's Supreme Court has given the companies' Indian arms six weeks to reveal the ingredients of their soft drinks. Coke and Pepsi account for nearly four-fifths of India's US$2 billion soft-drinks market.

The beverage giants have yet to say whether they intend to comply with the court order. But for a company that guards its product specifications as jealously as Coca-Cola, it looks a tall order.

Both Coca-Cola and Pepsico were forced out of India in 1977 by a socialist government that objected to a lack of local investors and an unwillingness to share technology such as Coke's top-secret formula.

The 16-year ban ended in 1993, two years after India launched ambitious economic reforms to prise open its closed economy and start catching up with rival China's stellar growth.

The US is India's largest investment partner, with a 17 percent share. India's total inflow of US direct investment topped US$1 billion last year, according to US government data.

Coca-Cola's statement came a day after two leading Indian industry bodies criticized the state bans as potentially harmful to India's investment image abroad.

"We would like this to be resolved as soon as possible before it does have any impact, before it does take on proportions that would have repercussions on India," said Kiran Pasricha, the US head of the Confederation of Indian Industry.

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