FACEBOOK-JIO DEAL: A PRECURSOR TO THE POST-COVID WORLD

IS A NEW GLOBAL ALLIANCE TO TAKE ON CHINA IN THE OFFING?
In the midst of the coronavirus pandemic, a commercial deal between two private companies can have strategic diplomatic significance and can give a clue to the post-corona world.

One of the most glamorous technology giants, Facebook, has picked a minority stake of 9% in Reliance Group’s Jio telecoms for a whopping Rs 43,350 crore. This is largest single technology investment for a minority stake. The deal values Jio at $60 billion.
This deal has taken the breath away from corporate watchers. But then, everyone has welcomed it.

In sharp contrast, there has been another silent share purchase which was followed by union government’s move to stall it. A Chinese bank had acquired a small incremental stake in HDFC Bank. Following the information of the acquisition, the union government issued a directive that any deal by companies from countries sharing a border with India has to have prior clearance.

Following the announcement of the restriction on investment from neighbouring countries, the Chinese ambassador in India had issued a statement criticising the move. He ran it down rather strongly.
These are tales of two acquisitions, receiving diametrically opposite reception. One needs to go behind the apparent stories of these two deals. To understand their perspective and the different responses they elicited, one has to understand the broader context of the current global misfortune.

But before that a little look into some details of the Facebook-Jio deal.

Facebook owner Mark Zuckerberg has stated that he was interested in collaborating with Reliance’s digital market place for servicing the requirements of small Indian businesses. Zuckerberg mentioned some 60 million small businesses who are looking for tools to get in touch with their customers and customers seeking to communicate with them. Zuckerberg was emphatic that Facebook has one of the largest user bases in India. In contrast Facebook is blocked in China.
On his part Reliance chief, Mukesh Ambani said that the coming together of the two companies would help in digital transformation of India. He said there are 30 million kirana shops in the country which would look forward to contact their customers on the digital market place. Additionally, there are many more opportunities for business. Some 120 small farmers could also benefit from the digital market place run on Facebook’s WhatsApp platform.

These are big numbers for business which you do not find much outside of China. The digital platforms work on large numbers and hence companies seek out these big time potential digital markets.

One has to keep at the back of mind the global rethinking that the current epidemic has set in. Already, there is widespread suspicion about China and its harsh and high handed global diplomacy. Most American large corporations which have invested in China are thinking of re-shoring or relocating their production back in USA or elsewhere. China all of a sudden has become a no-no land. Japan has been reported to have asked its companies to withdraw and even announced an incentive fund —some $2.2 billion—for companies choosing to set up facilities in places other than China.
When going for big numbers in the post-Covid world, India would be a natural choice for companies. Facebook-Reliance Jio deal could be precursor to that trend.

If anything China’s handling of the Covid epidemic in its own country, its play with the numbers, its refusal to warn the rest of the world sufficiently in advance have bred suspicion all around. The fact that the outbreak started in Wuhan’s so-called animal market, and the coincidence that Wuhan is the place where China has its most ambitious virological institute, has further fuelled suspicion about the ultimate origin of the pandemic.

USA had earlier spoke of its suspicions about possible a leak from the Wuhan institute of virology. Washington Post wrote about diplomatic correspondence on the safety and security of storing dangerous viruses in the virology institute. Now Australia has urged a joint international probe into the origins of the epidemics. The talk about the virus having leaked from the institute and alleging the concoction of the animal market story to cover it up has taken some hold. But, the country’s handling of figures and data has been what galled global circles.

The Europeans have talked about China’s “truth management” as far as the reports of Covid patients and deaths in that country. The sudden revision of the death figures much later, jacking up the death toll substantially, has also been noted as “alarming”. What has happened is a “trust deficit” and a pervasiveness of China’s haughty and aggressive diplomacy have further shaken confidence. The upshot is that now people do not want to put all their eggs in one basket.
One of the biggest incident driving this idea was the sudden suspension of exports of medical ingredients. The Indian medical ingredient producers have all been driven out of business by the aggressive cheaper producers from China.

However, as China went in virus epidemic and supplies stopped, Indian firms were left high and dry. The European pharmaceutical formulations makers had also faced a similar dilemma and therefore are thinking on having ingredient manufacturers close at hand. What is worse after the Covid episode is that now China is feared to spring back more forcefully and more powerfully on to the international scene at a time when most others countries are reeling under the Covid pandemic.

China’s tone has changed and is talking down to others. Any slightest criticisms of the Chinese on the social media have been attacked viciously by crops of social media warriors. Many of these are being described as “wolf diplomats”. That does not really work for confidence building.

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