The effect of past FDI in a given location is an under-investigated aspect of internationalisation. This story from last week raises some interesting questions about legacy. Talking about Aussie bank ANZ it reports that:
ANZ’s mixed history in India could count against it in a three-way race for the some of Royal Bank of Scotland’s Asian assets.
It goes on to discuss the possibility that Indian banking regulators might not be too pleased to see ANZ back on the scene.
ANZ took over the Indian operations of British overseas bank Grindlays back in 1985 and ran them through to 2000 (along with other subsidiaries in Africa and Asia).
The bank was embroiled in a substantial chequing scandal involving an Indian share-trader that dragged on through much 1990s (for some discussion of this see here – although it is a startlingly complex legal affair). Awkwardly the plaintiff bank in the legal proceedings was owned by the Reserve Bank of India, the same body that will have the major say in approving ANZ’s bid (or not).
It begs the questions:
– Can ANZ distance itself sufficiently from a decade-old scandal?
– Can it make it strong case that it has better appreciation for international environments now?
The latter will be difficult as the Grindlays sale substantially reduced ANZ’s exposure to international markets, particularly in the Asian region. Indeed that was one of the main drivers of the sale, coming as it did in the wake of the Asian currency crisis.
The possibility that the article ignores (surprisingly) is whether the Indian officials (and public) might be just as annoyed by the Grindlays sale itself. ANZ could quite rightly be slammed for abandoning a large and viable bundle of assets in a time of economic crisis, and showing little faith in what would soon become one of the fastest growing and promising economies in the world.
To use a teen-flick analogy, ANZ could be seen as the jock who teased the shy, wallflower, promising much but publicly humiliating her. This shrinking violet has now lost the braces, removed her glasses and shaken out her hair to reveal herself as a real beauty. She can afford to play hard to get, and when choosing suitors the brutish Aussie has got a lot of sweet-talking and sorries to say.
Multinationals can’t afford to forget their past, or expect to be able to walk away from (or more importantly, back into) a country without folks remembering who they are and judging them in that light.
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