Unlike the two party systems of the US or UK, our political landscape suffers from an alphabet soup of parties with about fifty expected to have representation in the 2009 Lok Sabha. It arouses frustration and indignation, particularly among the die-hard supporters of the BJP and the Congress. Stock markets hate them for the uncertainty they induce. Businesses find them impediments to progress. Several of them may win no seats whatsoever and have no more than nuisance value. However these regional parties are playing an incredibly vital role in the maturation of the Indian democracy and it would be erroneous to view their emergence only in a negative light.
It is important to recognise that regional parties are a result of the failures of the Congress and BJP. The failure has been at two primary levels - inability to address the social and economic concerns of various sections of an incredibly diverse country and failure to produce leaders with sufficient local appeal. Regional parties have filled that space by representing local concerns and having stronger leaders at their helm. The Congress is paying the price for decades of a high command driven organisation with no leadership talent being nurtured at the grassroot levels. The BJP is suffering for its inability to shape a more inclusive and universal appeal. The fact that both the BJP and Congress have been reduced to single digits in UP, is as much an indicator of the strength of Mayavati and Mulayam as the decline of Congress and BJP organizations. Till the Congress and BJP get their local organizations vitalized with effective leadership at local levels and greater mass appeal, they will have to keep whining about the existence of these parties.
There are several misconceptions and myths surrounding regional parties which are not exactly borne out by the facts.
A popular perception is that regional parties do not care for national agendas and are hence detrimental to national governance and progress. Reality is that there isn't a single headline issue which appeals to the entire nation or even if it does, no party is seen to have a better solution than the other, e.g. terrorism. For decades national issues were seemingly important whether it be poverty or corruption but the country is moving beyond slogans. The results of any government’s performance are visible at the local level and how they impact the quality of life. The disconnect was never more obvious than between the BJP's "India Shining" campaign and our rank of 128th in the Human Development Index. The verdict on the BJPs attempt at this feel-good nationalist fantasy was damning. Definition of overarching national issues grossly undermines the diversity of issues which plague the country and the existence of countless aggrieved groups. One can argue that regional parties are political entrepreneurs providing a voice to these groups and attempting to wrangle solutions that address the real issues that matter to people.
Another myth is that the crème de la crème of ministerial talent is with the Congress or BJP and hence they can provide much better governance. Nothing can be farther from the truth. For instance, in the UPA government, three of the best minsters were Lalu (RJD), Raghuvansh Prasad (RJD) and Dayanidhi Maran (DMK). Lalu's railway achievements are well known. Raghuvansh Prasad has been the quiet overachiever as the Rural Development Minister. 181000 km of rural roads, coverage of rural sanitation program went from 19% to 59% are among his major achievements. Not a mere populist, Prasad's has left behind a mammoth system of direct funds distribution of over 5 crore bank and post office NREGA accounts, in one masterstroke bringing more people in the banking system than any other measure. P.C. Gupta, the Corporate Affairs minister whose deft handling of the Satyam affair is also from the RJD. There are others from the regional parties who were terrible but they shared that dubious honour evenly with Congress ministers. Incompetence is not the unique preserve of regional parties.
A frequent charge against these parties is that they have no consistent political ideology and are driven by political expediency. It is laughable that such a charge is levelled by the two national parties given their own records of convenient embraces to be in power. In terms of ideology, both parties engage in fairly dangerous posturing which leaves you wondering where they stand vis-à-vis their stated positions. Take the BJP's doublespeak regarding the Ram Mandir. The manifesto clearly states the intent to build the mandir but the "softer" faces in popular media point out that in spite of being in power in the late 90s, the BJP did not push for it. The Congress has the secular, inclusive positioning yet it fails to take any action in Mumbai when thugs of the MNS/ Shiv Sena routinely attack non-Marathis and Muslims on frivolous pretexts. My friends in either camp will point out that it is politics and strangely that is exactly what they accuse the smaller parties of.
A feature of parliamentary democracy is that each voter is faced with a difficult decision - whether to vote for the best representative for one's constituency or the government in Delhi. For several decades, voters seemed to have exercised the latter option. It was Indira or Rajiv or Vajpayee at the expense of electing the best representative for the constituency. MPs who spent most of their elected tenures in Delhi rather than with those who elected them became the norm. Over the last two decades, voters' are engaging in a more nuanced decision making process balancing the choices and issues in front of them rather than being swayed by one headline concern or the other. It would be naive to assume that they have no concern for national issues. Problem is there are very few candidates who can claim to strike the right balance across the multiple concerns and till we have such candidates, the pendulum will keep swinging. Competition from a source which is closer to the people has come in the form of these regional parties. The onus is on the Congress and BJP to get down to the grassroots level and bring people to the fore who can provide the local leadership and real actions which the people really need. This is Surf vs Nirma in the political marketplace. Blaming the consumer for selecting an "inferior" product will go nowhere hence the whining must stop.
Admittedly it is not all hunky dory with the regional parties either. The BSP and SP have more candidates with criminal records than the others. Neither do many of these parties have any clarity on their stance on various issues. The BSP did not even consider it worthwhile preparing a manifesto. Yet as much as we might wish, reality is an orderly two party system is more feasible in a monocultural society where taxes and abortion are election issues than roti-kapda-makaan and bijli-sadak-paani. In our fragmented and stratified society with polar opposite developmental landscape, it is not going to follow an orderly script and we have to get used to these parties being part of our political landscape
Sunday, April 26, 2009
Monday, January 19, 2009
The Satyam Drama and Non-State Actors
The Satyam saga has rounded off a double whammy with the Mumbai attacks giving us our very own version of 9/11 and Enron in close succession. The magnitude of the fraud is jaw dropping but the mechanics remain unclear. Most in the industry find it inconceivable that this was going on for seven years with nobody outside of a few people getting a whiff of this. It is possible to cover up revenues and profits to such a large extent in a business which relies on trading or other form of non-physical revenue sources but to do so in a business as straightforward as billing people's time seems hard to fathom. If it was indeed so, then it was an extensive cover-up operation in collusion with several people and key stakeholders. In any case, a lot more should emerge in the coming days and months. But this is not about the anatomy of the fraud but the responses thereafter.
While it took a lot of flak for taking 4 days to arrest Raju, the Central government has surprisingly responded effectively and prudently. Speedily overhauling the board with eminent members has certainly restored stability and decelerated the flight of customers and employees at the very least. Whether Satyam has chance of surviving or being acquired is a different matter but then that is not the government's responsibility. Despite calls from the AP government and sections of the industry, the government has rightly ruled out any bailout or legal immunity for new management. While my heart goes out for Satyam employees, employment guarantee for highly paid white collar workforce funded by taxpayer money is stretching things too far.
While the government has done as well as it could have, it is the others - non-state actors - who have not covered themselves in glory.
Topping the list in my book is the ICAI. They have openly stated that they will take action against the partners but not Price Waterhouse. This even before an inquiry into the auditing failures has been initiated. So if it turns out that there was inadequate adherence to auditing procedures and standards at the firm, we are being told that the watchdog will look the other way. ICAI vice-president Uttam Prakash Aggarwal sounds like the Hyderabad police 4 days after Raju's confessional - “The institute can proceed only if we receive a complaint. Despite the public outcry, so far we haven’t received a single complaint — neither from banks, nor from shareholders”. The GTB-PwC accounting probe by the ICAI is continuing for over 4 years with no end in sight. Is the ICAI more interested in regulating auditors or protecting its members? Chances are that PWC will come out unharmed after 7 years of certifying the books in the biggest accounting fraud in Indian history. Another example that businesses can never effectively self-regulate.
Then we have the demand from potential acquirers that the government assume Satyam's liabilities as a precondition for acquisition. Henry Paulson's singular contribution to M&As will be that we will continue to be treated to this ridiculous demand from suitors of any failed enterprise. Acquiring a $2 Bn outsourcing business at rock bottom prices and no risk sounds like a bright idea provided you can find a sucker government to buy into it.
Among the FIIs, we have the curious case of Lazard acting like cry babies at not being granted a board seat and offloading their 7% stake in a huff. If this is indeed true, are we to believe that Satyam's valuations would be considerably higher if Lazard had a board seat? Whatever happened to the reasons for hiking their stake from 3 to 7% over the last week itself after the scandal broke out? Was Lazard pumping in cash to angle a board seat or there was a genuine belief that the investment could yield a return? Anyone with funds invested with Lazard should be terribly worried.
The Satyam fiasco has also severely dented the credibility of dime a dozen corporate awards being given out some of whom were conferred on the company for Corporate Governance. We have become a nation obsessed with lists and awards and every media outlet worth its salt has corporate achievement awards doled out in televised ceremonies with the sole purpose of driving TV ratings. The more the awards, the more questionable their credentials and value. It would make sense for India's best corporate names like Tatas, Infosys, Wipro etc to do an Aamir Khan and excuse themselves from consideration for these meaningless awards from media outlets and so called think-tanks. This should automatically bring the value of these dubious awards to nought.
We haven't surely seen the last of corporate scandals and it would be naive to assume Satyam is an isolated incident. In a country where anything can be forged for a price, cooking of books is common occurrence. Auditors, bankers and others work in cahoots to execute fairly well-oiled scams. So it should come as no surprise if many more come to light as they often do after every era of economic excess.
While it took a lot of flak for taking 4 days to arrest Raju, the Central government has surprisingly responded effectively and prudently. Speedily overhauling the board with eminent members has certainly restored stability and decelerated the flight of customers and employees at the very least. Whether Satyam has chance of surviving or being acquired is a different matter but then that is not the government's responsibility. Despite calls from the AP government and sections of the industry, the government has rightly ruled out any bailout or legal immunity for new management. While my heart goes out for Satyam employees, employment guarantee for highly paid white collar workforce funded by taxpayer money is stretching things too far.
While the government has done as well as it could have, it is the others - non-state actors - who have not covered themselves in glory.
Topping the list in my book is the ICAI. They have openly stated that they will take action against the partners but not Price Waterhouse. This even before an inquiry into the auditing failures has been initiated. So if it turns out that there was inadequate adherence to auditing procedures and standards at the firm, we are being told that the watchdog will look the other way. ICAI vice-president Uttam Prakash Aggarwal sounds like the Hyderabad police 4 days after Raju's confessional - “The institute can proceed only if we receive a complaint. Despite the public outcry, so far we haven’t received a single complaint — neither from banks, nor from shareholders”. The GTB-PwC accounting probe by the ICAI is continuing for over 4 years with no end in sight. Is the ICAI more interested in regulating auditors or protecting its members? Chances are that PWC will come out unharmed after 7 years of certifying the books in the biggest accounting fraud in Indian history. Another example that businesses can never effectively self-regulate.
Then we have the demand from potential acquirers that the government assume Satyam's liabilities as a precondition for acquisition. Henry Paulson's singular contribution to M&As will be that we will continue to be treated to this ridiculous demand from suitors of any failed enterprise. Acquiring a $2 Bn outsourcing business at rock bottom prices and no risk sounds like a bright idea provided you can find a sucker government to buy into it.
Among the FIIs, we have the curious case of Lazard acting like cry babies at not being granted a board seat and offloading their 7% stake in a huff. If this is indeed true, are we to believe that Satyam's valuations would be considerably higher if Lazard had a board seat? Whatever happened to the reasons for hiking their stake from 3 to 7% over the last week itself after the scandal broke out? Was Lazard pumping in cash to angle a board seat or there was a genuine belief that the investment could yield a return? Anyone with funds invested with Lazard should be terribly worried.
The Satyam fiasco has also severely dented the credibility of dime a dozen corporate awards being given out some of whom were conferred on the company for Corporate Governance. We have become a nation obsessed with lists and awards and every media outlet worth its salt has corporate achievement awards doled out in televised ceremonies with the sole purpose of driving TV ratings. The more the awards, the more questionable their credentials and value. It would make sense for India's best corporate names like Tatas, Infosys, Wipro etc to do an Aamir Khan and excuse themselves from consideration for these meaningless awards from media outlets and so called think-tanks. This should automatically bring the value of these dubious awards to nought.
We haven't surely seen the last of corporate scandals and it would be naive to assume Satyam is an isolated incident. In a country where anything can be forged for a price, cooking of books is common occurrence. Auditors, bankers and others work in cahoots to execute fairly well-oiled scams. So it should come as no surprise if many more come to light as they often do after every era of economic excess.
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