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Bad Chemistry For Dupont (Int'l Edition)

Business Week International International Business: INDIA


At an unfinished DuPont nylon factory in the Indian village of Keri, a cement slab marks the spot where Nilesh Naik was cremated in January. The 25-year-old villager was killed by local police on Jan. 23 as he and as many as 200 other DuPont Co. opponents tried to prevent company officials from getting to the site. A dozen others were wounded. The shootings sparked three days of attacks on DuPont's property. Today, charred furniture litters the concrete buildings. Burned vehicles lie about in the sun. DuPont has withdrawn all workers and ceased construction.

So ends DuPont's seventh year of trying to erect a $190 million nylon plant in Keri, in the southern state of Goa. Since 1987, the company has jumped over the hurdles thrown at it by the government, competitors, and environmentalists. But Naik's killing may have finally shaken the resolve of DuPont. The company is "reassessing" its plans, says Kenneth Hostelley, president of DuPont Far East Inc. With Thapar Ltd., its joint venture partner, DuPont may try to find a friendlier home elsewhere in India.

DuPont may not have much luck. It and other companies such as U S West Inc. and Enron Corp. have found that despite new economic openness, distrust of foreign companies still runs deep among many Indians. With the Hindu nationalist Bharatiya Janata Party (BJP) winning key state elections in early March, some local governments may try to fan the flames of antimultinational sentiment even more.

DuPont has spent years trying to overcome suspicion of foreigners. When the company first attempted to set up the Goa plant in 1987, local rivals waged a successful lobbying war to keep the company out. DuPont tried to resurrect the project in 1991, when Prime Minister P.V. Narasimha Rao's government started welcoming foreign companies. Environmentalists and other local critics rallied against the plant, complaining that in the rush for economic reform and development, the voices of ordinary Indians were being ignored. For many, memories of a 1984 disaster at Union Carbide Corp.'s Bhopal plant remain fresh. "The people were not consulted," says Kamlakar Sadhale, a local architect. DuPont attributes much of the opposition to "misinformation."

While it has encountered the most violence, DuPont is only one of many Western companies to face difficulties in India. For instance, Enron's power project near Bombay has been tied up in court battles by locals, and with the BJP now running the state government, Enron could face further disruptions. U S West has been criticized for acquiring rights for a $100 million telephone project in south India before telecom licenses were given out. And egged on by some members of parliament, the Finance Ministry has said it will investigate allegations that Coca-Cola, Hewlett-Packard, and other multinationals are unfairly trying to get rid of their Indian partners after using them to gain entry to the Indian market.

Executives from the targeted companies dismiss the charges as petty. Hewlett-Packard India President Suresh Rajpal believes Indian companies, like HP's partner Blue Star, are crying foul as a way to milk more money out of their foreign partners. "They start shouting the local partner is getting raped," he says.

DRIED UP. With the ruling Congress Party losing five of eight state elections in the last three months, politicians are in no mood to come to multinationals' aid. Support for the DuPont project from the national and state governments, both ruled by the Congress Party, has dried up. The party is spending its energies trying to make its economic reform agenda look populist. Goa Chief Minister Pratapsing Rane had backed DuPont's efforts since the mid-1980s. Now, he says, "if the people don't want it, then we have nothing to say about it."

Other states have wooed DuPont in recent weeks. But they may change their minds if constituents begin to wonder about accepting a chemical plant another state rejected. If DuPont wants to change Indians' opinions about big, bad multinationals, it will have to look to itself, not Indian leaders, to start the job.


The chemical giant's hopes for a factory have fizzled


DuPont first attempts to build tire plant in southern state of Goa


After intense opposition from local rivals, DuPont abandons plans


Government's new economic reform policies prompt DuPont to try again


Environmentalists and industrialists team up to block DuPont's entry


After police kill one protester and wound a dozen others, DuPont may seek another site

DATA: BUSINESS WEEKBy Sharon Moshavi in Keri

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