The eastern state of West Bengal, with a population equalling Vietnam's, has been run from capital Kolkata by a democratically elected communist government for the past 28 years, making it the world's longest-serving communist government.

"We're encouraging foreign direct investments because we need it badly," Bhattacharya said on Tuesday as he made a pitch to Singapore investors to invest in his state, which he called India's gateway to East Asia.

"We either reform or perish."

Bhattacharya's pitch to attract Singapore investors, which follows similar pitches made earlier in Japan and other developed countries, reflects the growing competition among Indian states to seek foreign capital irrespective of their political ideology.

Indian communist parties, whose backing helps the Congress Party-led government in New Delhi stay in power, have consistently opposed efforts by the federal government to sell critical state-owned companies such as airlines, airports, oil refiners to foreign investors.

Bhattacharya, who is also a member of the powerful politburo of the Communist Party of India (Marxist), said although his party is opposed to the sale of profitable state-run companies it is all for selling control in unprofitable state units because they need the infusion of new technology and capital.

Even capitalist Singapore's economy is dominated by highly profitable government-owned companies, he said.

Indian communists have changed over the past decade, he said, learning their lessons from the collapse of the Soviet Union, the rise of China and economic reforms in communist Vietnam.

The party's left-wing politics is aimed at improving the lot of the poorest of society.

"But we're not fools. We're trying to learn from our mistakes," Bhattacharya said.

"One thing is very clear -- globalisation has become a must and nobody can hold back this process. The world has become a global village and we have to take advantage of this situation."

He pointed out that West Bengal's agricultural reforms has strengthened its rural economy and has helped the state economy grow by an average 7 percent in the past 12 years, faster than even India's growth rate.

The government is now building on its strong agricultural base to develop its industrial sector, using the state's abundance of resources such as coal, iron-ore and minerals.

The government's pitch has not fallen on deaf ears.

The state has already attracted a George Soros-affiliate to set up eastern India's biggest petrochemical plant near Kolkata and got Japan's Mitsubishi Corp. to set up an oil refinery.

The government got information technology companies such as IBM, Computer Associates and Wipro to open software and business-process outsourcing centres that have employed tens of thousands of highly qualified, English-speaking graduates.

To attract investors into its information technology industry, the government has banned labour strikes in the sector.

Militant trade unionism in the early decades of the communist government had led to a massive flight of capital from the state.

But Sanjeev Goenka, one of West Bengal's top industrialists, said the labour situation has changed and the government has even helped one of his companies to lay off 30 percent of workforce.

"The reality is very different from the perception," Goenka said. "Please come and invest."

But even some of the most hopeful industrialists, acknowledge that the government faces an uphill task in changing investors' views of the communist-run government.

© Reuters 2005. All Rights Reserved.