Posco Gets Crucial Go-Ahead on Indian Project

Korean steel giant Posco (NYSE: PKX  ) has just received a crucial go-ahead in its efforts to initiate India's single largest foreign direct investment project ever. After having secured a much-needed vote of approval from India's environmental minister, the $11 billion project is set to become an extremely significant venture from both an economic standpoint and a symbolic one.

Over the past few years, Posco has been forced to battle numerous, separately motivated constituents in its quest to build a giant steel plant in the Indian state of Orissa. As one can imagine, the vast number of positives and negatives associated with creating a giant, resource-intensive entity like a steel plant ensured that nearly every interest group from Orissa to New Delhi made sure its opinion was heard. But now, the only thing that stands between the company and its new plant is a court case brought on by a rival firm that doesn't appear to be a hugely significant roadblock.

The environmental ministry's sudden change of heart after months of negative reports suggests there must be a lot more going on behind the scenes. This could include anything from large-scale bribes to an unexpected sensitivity for the political equity to be gained by approving a project of this magnitude.

None of this is surprising, of course, in a nation like India where a massive number of Congressional figures and government bureaucrats have criminal records. The more important aspect of this deal, however, is what it means for investment-friendly minds and the vast number of foreign companies attempting to do business in India.

A record-breaking $11 billion FDI project may seem fairly unimpressive to American investors, but numbers on this scale are incredibly meaningful in a relatively immature market like India. If the project can indeed be seen through, it will carry very significant weight in the minds of foreign companies interested in making large-scale capital investments in the Asian sub-continent. In fact, $11 billion could easily just be the first of many FDI records to be broken in years to come.

Familiar players that could continue down this path include companies ranging from Wal-Mart (NYSE: WMT  ) -- which intends to go from a handful of stores there now to several dozen in the next few years -- to businesses like American Tower (NYSE: AMT  ) that have been instrumental in fueling India's massive wireless infrastructure growth. These companies and others are undoubtedly eyeballing recent events involving Posco and are likely to be seeing the slow evolution of a more investment-friendly market.

It may not happen overnight, but the greater investment climate in India is slowly turning in favor of investors. Posco's good fortune may be just the beginning of good news to come.

Fool Nick Kapur is on the ground in India reporting live from the scene. He has no position in any of the companies mentioned above. Wal-Mart Stores is a Motley Fool Inside Value selection. American Tower is a Motley Fool Rule Breakers pick. Wal-Mart Stores is a Motley Fool Global Gains recommendation. The Fool owns shares of Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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