Friday, December 21, 2012

Will Mukesh Have the Last laugh in 2010?

It’s slated to be the largest non-pharma deal this year (till date), if successful. But the Bharti-MTN deal is much more than that, for it can potentially be a major game changer in corporate India’s most high profile sibling rivalry – that of the Ambani brothers

We still remember the blistering summer of mid-June, 2005 in Mumbai, when this magazine was launched in a glittering function at the Taj. Virtually all the guests were gracious enough to have a few words of praise for Business & Economy. But once the polite conversation got over with, it was back to the BIGGEST story of those days-the public spat and the looming split between Mukesh and Anil Ambani. There were whispers about how a battle over family crown jewels between the two had been transformed into a deeply bitter and rancorous personal feud that had ostensibly dragged even close lieutenants and spouses into the quagmire. Mumbai denizens were wondering which brother had better access to the corridors of power in Delhi. There were apocryphal tales about how the head honcho of ICICI Bank K. V. Kamath was desperately working out a deal whereby at least a public façade of an amicable split would be maintained. South Mumbai residents talked in awe of how the matriarch Kokilaben was holding all night counselling sessions at Sea Wind, the multi-storied Ambani residence in Colaba. Even as we talked a little and gossiped a lot more, mobile phones started twittering with calls and text messages announcing a final and formal split between the two. We knew what the cover feature of the second issue of Business & Economy would be.

Beyond the headlines, the real story was the gut wrenching emotions and angst that haunted Mukesh Ambani when he had to part with his brainchild, his passion and his personal tribute to his father – the late Dhirubhai Ambani. That was Reliance Infocom. Though these things can never be accurately verified, people close to the split swear that Mukesh swore that he will reclaim his dream and passion sometime in the future. Meanwhile, within weeks of the split, every company and employee of the companies that came under the control of Mukesh abandoned their Reliance phone handsets and connections.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
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Thursday, December 13, 2012

ALTERNATIVE: NATURAL RESOURCES


The search for ‘alternatives’ has pervaded the social family fabric

Another similar example is of petroleum. For ages, countries have been fighting over this most expensive natural resource. The popular understanding is that petroleum/oil reserves are limited and would run out in this century. Going against this, many scientists are now trying to prove that oil is neither a fossil fuel nor will ever get exhausted in the near future. For example in the book, Black Gold, Strange Hold, the authors prove that oil can be easily found between granite rocks; ergo, it is not a fossil fuel and thus cannot get exhausted in the near future. Furthermore, in 2004, a few scientists of Harvard University’s Department of Chemistry synthesised methane inorganically in a diamond-anvil experiment to prove that the hydrocarbon resources of the bulk Earth may be much larger than traditionally thought. OPEC shows that because of improved technology, by 2020, oil production will cross a tremendous figure of 1,600 billion barrels annually with reserves of 3,400 billion barrels – as compared to, say, 24 billion barrels that were being produced globally in 2003.

NASA’s scientists are developing methods for turning carbon dioxide into fuel. Even conversion of natural gas to diesel fuel and petrochemical feedstock has been made possible in recent time – Exxon in Qatar, Shell in Malaysia are a few doing this. On another front, if you thought gold was valuable, scientists are trying to even develop alternative ‘artificial’ metals and jewellery too [one reason perhaps why Warren Buffett thinks gold is a useless investment]. Pearls, diamonds, you name it and De Beers accepts now how even so-called experts can’t make out which is real and which artificial. If Volkswagen is trying to use auto-engines made out of silicon carbide [and thus eliminating the use of metals], many other companies are using the much cheaper and abundant palladium instead of platinum. If agro-researchers have found out ways to genetically mutate seeds, stem cell researchers are even scampering on the ethically explosive issue of bone marrow stem cell embryo development.  


 Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Sunday, December 9, 2012

The secret of the Unicorn!

No surprises; it’s nationalism and not globalization that has created great nations over the years
 
Last month, the Obama Administration made it clear in no uncertain words that the companies which are recipients of money under the Troubled Asset Regulation Program (TARP) as part of the financial stimulus package will have to abide by the new restrictions imposed on outsourcing of work to destinations like India. For many in India, it was nothing but an obnoxious move on the part of a dogmatic Obamasque US administration seeking the easiest (but definitely counter-effective in the long run) way to fix the problems of the US economy rather than dealing with the real structural problems plaguing it. Intriguingly, however much one might criticise Barack, the reasons for which Obama has taken this path are the same that come into play when Indians or Chinese thump their chests when companies of their country’s origin go out and handsomely acquire a US or a Europe based company. The string that binds both Barack and us is fanatic economic nationalism, for our respective countries of course. Quite some time since the homo sapien race decided to exit forests and to materialize the concept of society, the concept of ‘he’, ‘his’ people and ‘his’ land have always been more important than ‘they’, ‘their’ people and ‘their’ land. Evidently, this philosophy hasn’t changed much till date. So, from the era of hostility between Sparta (present day Greece) and Troy, when Achilles decided to fight for his bête noire Agamemnon, the Spartan king, because Spartan ‘pride’ was at stake, to the era of the British, French, Dutch and Spanish empires, when they often fought prolonged and violent battles keeping imperial interests in mind, it was all the same nationalistic fervour in play.

In fact, the time-line between the beginning of the First World War and the end of the Second World War and furtheron after it, has been the most intriguing period in terms of the transformation of nation states into nationalistic states. While four established empires – namely Russian, Ottoman, German and Austro-Hungarian – were washed away by the tides of the First World War, this period also witnessed the emergence of the violent form of ethnic nationalism which almost destroyed the world with the rise of the German Nazis and their fanatic obsession with the obliteration/subjugation of Jews and in fact anyone who – according to them – was not a pure Aryan.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Friday, December 7, 2012

Lets talk now!

US finally realised it for a change

Well let’s look at it this way. Finally Iran and its intransigence is of some use to the world. At least it’s helping to bring some sanity in the US’s way of looking at the world and solving some key global issues. The US for once realized that Iran is no Iraq and that it cannot solve this issue on its own but would require the help of its erstwhile bete-noire Russia’s help in this case. Obama’s confidential letter to the Russian president Medvedev exemplified that. It was stated in the letter that the US will shelve the interceptor missile system that it plans to install in Poland with a hi-tech radar facility in Czech Republic, provided Russia successfully pursues Iran to shelve some of its nuclear ambitions. While Bush offered it as a direct quid pro quo, Obama on the other hand is trying to involve Russia as a strategic ally not only in the Iran issue, but also in war on terror in Afghanistan. It also talked about renewing arms treaty between the two countries that is expiring this year. However, Russia’s pride and Cold War hangover was instrumental in their refusal to the offer (denying being a second fiddle to the US), albeit expressing desire to talk on missile defense plan with the US. Obama is also considering a Russian proposal (which Bush refused) to install a part of the missile defense system on their own soil, so that it cannot be used against them. He is likely to respect the proposal only if it is effective and affordable.

Time since the Soviet disintegration, Russia has never got the right kind of treatment from the US that it always deserved. Even when Russia was included in G8, a certain antagonism still prevailed. If Obama succeeds in mending the relationship between the US and Russia by giving the latter its due respect, it’s for certain that many of the world’s major predicaments would be solved much more amicably. There are several issues on which Russia and the US do think on similar lines but for the needless turf war between the two, they refuse to accept it.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Thursday, December 6, 2012

Miles to go before I...

Nitish Kumar has become Bihar CM after a long fight and wait, he is now campaigning for a second term

“This is the time for change and to get the best out of it, we will have to wait.” These are the words of Nitish Kumar, the Chief minister of Bihar, who was talking to people during his Vikas Yatra in Bihar. He promises to effect tremendous positive change in the state, which until now has been suffering from poverty, lack of education and other administrative faults.

A product of JP Revolution, Nitish had to keep a devil’s patience before taking on the helm of affairs in Bihar. An Electronics engineer by profession, Nitish’s political career started when he joined the student revolution first in 1974 and then in 1977, when he was sent to jail under MISA. A strong and patient man, it took Nitish longer than his contemporaries Ram Vilas Paswan and Lalu Prasad Yadav, who had joined the politics during the same period. But in 1985, when Nitish first reached the Bihar Assembly, he never looked back. In 1988, he became the General Secretary of Janta Dal. In 1989, he became the member of Lok Sabha for the first time and the Union Agriculture Minister in 1990. He also became MP in 1996 and 1998 from Janta Dal, not just as a political leader but also as a leader. But it was only when he defeated his colleague and Dalit leader Ram Vilas Paswan and became the Railways Minister in the Vajpayee government, that his real abilities as a politician came in the limelight. For Nitish, who wanted to go up in the political ladder, this was a God-sent gift which he capitalised on to the fullest. When he became the CM of Bihar in 2005, it had begun a totally new chapter in his life.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Wednesday, December 5, 2012

CONGO: NKUNDA ARREST

The momentum has been set, now Rwanda & Congo must sustain it

The rebel leader was captured after his forces failed to subdue the unprecedented joint Rwandan-Congolese military operation. Rwanda, which has invaded Congo twice since the 1994 carnage, has surprisingly changed tracks and is evidently under global pressure.

Many in Congo's government now want Rwanda to extradite Nkunda, so he can be tried for war crimes. However, will Rwanda do that or, following more private trade-offs, eventually allow its former ally to retire in some Tutsi-protected retreat? The outcome – either way – should tell us about the extent of the collaboration between Congolese President Joseph Kabila and his Rwandan counterpart Paul Kagame. It is important that they do not disturb this positive trend so that lasting peace may prevail.
 

Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Monday, December 3, 2012

All the answers to improve human life

Muhammad Yunus, Nobel laureate, explains why creative capitalism in fact holds all the answers to improve human life, as told to B&E’s Neha Sarin

But the question is whether this creativity should be put in the present restrictive format that we drive or rub-in this format and define newer boundaries for capitalism. We simply need to look at the term in a new way, perhaps just like the one when I started by trying to bring in social reforms.

Today, ‘social business’ is the missing element in capitalism, and therefore should be included in the system well. The present system is in the business of making money, and textbooks say that the very mission of business is profit maximisation… so no matter what else you want to add with it, the mission remains unchanged. Why don’t we clear-out the sole motive of profit maximisation from business and include social business in it as well; something which will exclusively do good to people. When it comes to me, it was all about ‘others’ and nothing for me as an investor. In no way do I want to benefit myself. As a person, I will be investing in both types of businesses – one in which I will make money, and another in which I would be investing that money to change the world… and that itself should be the ultimate goal for capitalism.

B&E: What, as per you, are the benefits of ‘creative capitalism’?
MY: Honestly speaking, I don’t know if I am really following any kind of creative capitalism. I don’t believe in creative capitalism! I am talking about a new form of capitalism here, which is a nouveau form of completely redesigned and restructured capitalism, where there is room for two kinds of businesses and not just one. So what I have done is that I have created space for new types of businesses like the Grameen Bank where investors don’t really make any profit. Also I have designed a profit maximising business which is all by poor people & is also a social business within the Grameen Bank. I don’t make any money out of that, I don’t own any share or whatsoever in any of the social business I have created. Coming back to your question of creative capitalism; No! I haven’t done any creative capitalism yet and haven’t benefited from it.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Sunday, December 2, 2012

The story of transformation

The story of transformation - of how wildlife poachers of the Mogia tribe, became its protectors

“My group of six along with other Mogias were caught and jailed,” informed Lakhan Singh. After four years of imprisonment, the officials of the Forest Department succeeded in convincing Lakhan Singh and other Mogias to become informants on other active poachers of their tribe. “I was told that in a few years, there would be no tigers in Ranthmbore.

I have lived amidst the forest with animals like tigers and leopards and I did not really like seeing the animals being killed for their skin and bones to foreign countries. Now that I have a choice, I would choose to protect our forest and our tigers”, said Lakhan Singh. In the last four years, there has been a drastic fall in poaching activities in Ranthambore. And the continous rise in tiger numbers has made it possible to translocate some to Sariska National Park.

“Mogias have a very deep network of animal dealers and smugglers, but we are taking all possible measures to nab them,” said a forest official (name undisclosed). “We also try to provide them with alternate jobs to earn a livelihood and I’m glad that we have transformed many of them who are now our informants.” Indeed, Lakhan Singh was an example of a poacher-turned-protector of animals. But did the transformation really lead to satisfaction, I wondered. One kill fetched him approximately Rs.15,000. With a wife and seven kids, and just the job of loading stones and filling potholes, Lakhan Singh remains unsure of providing a regular meal to his family. With no tangible support for a regular income, hope this wildlife protector’s newfound flicker of motivation does not extinguish soon…


Source : IIPM Editorial, 2012.An Initiative of IIPM, Malay Chaudhuri

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Friday, November 30, 2012

LEADERSHIP: HOWARD STRINGER

Sony will have to be more realistic in its short term strategy in the wake of new challenges

These results leave Stringer with a tough job ahead. Stringer, an alumnus of University of Oxford, joined Sony Corp. as its member of the board in 1999 and went on to become the first non-Japanese to lead the company, after heading Sony’s US operations for six years.

It was under his leadership that Sony achieved a record profit of 369.43 billion yen ($3.73 billion) for the year ending March 2008. But could he not foresee what lay ahead of the company?

Rob Enderle of Enderle Group states, “These problems are historic and Stringer, while making some progress, has been too little too late. Sony needs a massive restructuring and, so far, no one appears to have the authority or will to do that.” Is it the same Stringer, who made rival divisions of Sony work together?

Furthermore, stock price of Sony has fallen by 56.9% since January 1, 2008 to $23.29 on November 10. Low consumer spending & the economic crisis further complicate the challenge. Sony would now have to focus more on its non-premium offerings and lower prices on its premium products. Lay offs are also not ruled out. Desperate times call for desperate measures, ''like.no.other''!


Source : IIPM Editorial, 2012.

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Agony of the second spot

Yahoo!'s only worthwhile option now seems to be AOL

The saga of the top three search engine providers has a script quite similar to a typical love triangle. First, Microsoft made public a hostile bid of $31 per share to acquire Yahoo!, which was later raised to $33 per share earlier this year; but Yahoo!’s board declined the offer. Then Yahoo! rushed for a tie up with Google; but has itself become the scorned suitor now; with Google citing regulatory issues (parents in the love triangle analogy!). Google was looking at placing ads on Yahoo!’s search queries, which would have brought as much as 80% of the search advertising market into Google's control. But Google opted to move out citing that it would’ve resulted in protracted legal battle and damaged its relationships with partners. In addition, the search engine giant also blamed regulator and advertiser concerns after the Justice Department’s interference.

Rob Enderle, Prinicipal Analyst, Enderle Group says, “The impact of the deal plug out will probably be harder on Yahoo! than on Google which is why Google pulled the plug. It leaves Yahoo! looking like they were unable to execute another strategy and Google remains dominant in the space.”


Source : IIPM Editorial, 2012.

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Thursday, November 29, 2012

Realise India’s economic potential

Reforms can help realise India’s economic potential, provided there are ‘real’ reforms!

The reforms that Dr. Manmohan Singh launched in 1991 have done much to simplify the maze of regulations and licensing that stifled entrepreneurship, but the job is only half done. India rates only around the 50th percentile of the 2007 World Bank rankings on the dimensions of government effectiveness, regulatory quality, rule of law, and control of corruption. In the bank’s latest survey of business environment, almost 60% of those questioned rated corruption as a major or moderate obstacle; the corresponding number for the functioning of the judiciary was about 30% and that for taxes and regulation, 40%. India ranks only 48th among 131 countries on the World Economic Forum’s competitiveness index. This is not good enough for a would-be economic superpower. Business is a mixture of competition and cooperation. Everyone knows and extols the social benefits of competition. In contrast, cooperation is usually identified with cartelization and social harm.

But there are dimensions of cooperation that benefit not only the business community but society as a whole. Improvements in the institutional infrastructure of property right protection and contract enforcement, and improvements in most physical infrastructure, are cases in point. Take corruption, which is rated the most serious obstacle. When firms compete to win lucrative public contracts or licenses using corruption, some win and others lose. But even the winners have to give up some or even much of their profits to pay the bribes. To be sure, each will retain a temptation to cheat and gain an advantage at the expense of others through bribery. What is needed is a system whereby the others can deter the cheater with a credible threat of punishment. Suppose the community has a norm that no one should engage in bribery to win a favorable contract or license. If a member violates this norm, the community stipulates that no others will have any dealings with him. The cheat is going to need some things – material inputs, trade credit, and so on – from the others. If the others ostracise him, he will be unable to fulfill the contract and so won’t profit from his bribery. Of course he can try to induce some of the others to violate the ban by offering them shares in his profits. But that will dilute his profit. More importantly, community also stipulates that anyone who engages in dealings with a cheat is himself labeled a cheater and ostracised. If the business community, with some support from the government, establishes the needed infrastructure, and if the government pursues Rodrik’s other criteria, then India’s great economic potential can be fully realised...


Source : IIPM Editorial, 2012.

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Monday, November 26, 2012

Why we do what we do

In other words, the reasons for our super-obsession with criticising India!

The arguments were intense. Half of our editorial team was arguing for running a purely national Scrutiny section, as opposed to covering international stories too. And half was arguing against the premise, debating that we should cover even international stories. The only problem was, they were the same halves! In other words [if you’re not thoroughly confused already], while one half was arguing for and against the same issue, the other half was thoroughly disinterested in having to do anything with it! Well, we were tickled breathless – we kid you not, it’s the same case with India. While one half of us Indians are busy inanely arguing for and against issues without understanding what stand to take, the other (illiterate?) 600 million odd half is busier organising the daily meal, finding out a place to defecate, ensuring that the girl child & lady of the house don’t get raped, and of course, ensuring death doesn’t become a family issue this week.

India, as a noted foreign economist put it, is a stale mistress few would like to wed, and sadly, fewer to bed. Change today, in India, is a word privy more to private corporations than to government bureaucracy. Many of those who are opposed to change often swear by the Constitution to rationalise their opposition, without realising that even the Constitution has been amended a smashing number of 93 times – vindicating the fact that what was of relevance in the past needs to change its dimension for the future. The context in which we mention this is that India is galore with organisations that in some sense are past their prime, but can play stunning change agents to bridge the ever increasing rural urban divide. For example, while the Indian government is gearing up to open up the banking sector to foreign companies, what it doesn’t realise is that many of India’s homegrown problems [like the fact that more than 50% Indians don’t have access to banking] can be solved by homegrown solutions like converting, say, the India Post into a separate bank, thereby at one go creating nearly 130,000 bank branches for rural India!


Source : IIPM Editorial, 2012.

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Sunday, November 25, 2012

“The AMP target is achievable”

Dillip Chenoy, Director General, SIAM

B&E: On the Automotive Mission Plan.
DC: As far as the AMP is concerned, it is well on track and I think the 10% (as part of the GDP) mark is achievable. Earlier the government thought that the AMP was a bit conservative. Soon the Ministry of Heavy industries will start to initiate the plan and things will move in a positive direction.

B&E: Causes for general market volatility in the Indian auto market.
DC: Increased operating costs, interests rates and a depressed market is putting pressure on the industry as people are postponing their purchases. If the interests rates are reduced, it is beneficial for the consumers. When sales increase it is good because there is volume in the market.

B&E: On the resurrection of the two-wheeler industry after a continuous bad phase.
DC: The two-wheeler industry has gone through some tough times in the last few years, therefore it has now taken a couple of initiatives and plans like launching new products and schemes which have brought back the sales numbers.

B&E: On the July 2008 sales.
DC: There are three factors discussed this month, first growth of passenger vehicles has been lower then expected. Secondly, the two-wheeler industry has grown well, and thirdly commercial vehicles and three-wheeler sales have improved this month as compared to the last couple of months.


Source : IIPM Editorial, 2012.

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Saturday, November 24, 2012

Low on sugar, lower on spice!

It’ll be tough to turn around SpiceJet without a radical reorganisation

For quite some time, the Indian aviation market was pouring over with news flashing from all across about SpiceJet looking for a stake sale, ever since the hostile winds in the sector have taken their toll. With esteemed players like Anil Dhirubhai Ambani Group, Kingfisher Airlines and even Jet Airways competing to gain control, speculations abounded on who will finally relish the spicy taste of this airline company. Finally, investing firm WL Ross & Co. LLC gets to be the “lucky” one. The company has recently invested some $80 million in SpiceJet and will own close to 15% stake. But will SpiceJet be able to decisively clear the air pocket with this investment?

The industry challenges remain the same as before the deal, namely the convergence of a high cost environment and slowing demand. However, the deal will provide some cash flow relief and additional time for the carrier to develop an effective strategy to navigate the difficult industry conditions,” comments Binit Somaia of Centre for Aviation.


Source : IIPM Editorial, 2012.

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Thursday, November 22, 2012

INFRASTRUCTURE DEVELOPMENT: DAM REHABILITATION

Governments rarely consider rehabilitation while drafting dam projects

The problem is that such rehabilitation moves are completely subject to political deviancies, wherein one government might be appreciative of the same – to earn brownie points – but another government, from another political camp, might be totally against the implementation of the same. Sadly, even celebrities lose no time in jumping on the media bandwagon to cry hoarse about their support (or lack of it) to the ‘movement’.

Can’t an Indian government just face up to the current reality and do something about such problems in relocation and resettlement. For crying shame, a formal Rehabilitation & Resettlement Bill was passed finally only in the year 2007, a full sixty years after Independence. We suspect it’ll take another sixty before they put the Bill into action... 


Source : IIPM Editorial, 2012.

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