| |
India: Business at a
price
By Indrajit Basu
KOLKATA - How corrupt is India? It is a question
that hangs embarrassingly over the country after Xerox
Corp, the troubled office equipment giant that is
embroiled in an accounting scandal in the United States,
made a startling admission last week that its Indian
subsidiary, Xerox ModiCorp, had paid up to US$700,000 in
graft to secure government contracts.
News of the payment of graft is certainly not
new in India. It is a known fact that
before Xerox, many multinationals, such as the disgraced Enron,
have resorted to this strategy to achieve their objectives.
What is new, however, is that the Xerox revelation is
the first instance of a multinational corporation
admitting payments of graft to the government of India
to get its work done. Experts say that this disclosure
could lead to many more skeletons emerging from
corporate closets.
Time was when anything
happening across the world failed to make ripples in
India, protected as it was by closed-door economic
policies that were a mixture of the capitalism of the
free world and socialism advocated by the erstwhile
Soviet Union. But not any more. In fact, if the
decade-old liberalization process has brought India
opportunities - the best from foreign shores - it has
also brought in the worst forms of corruption and fraud.
The latest stinging revelations by Xerox Corp
that the company had made "improper payments" to bag
government contracts clearly indicates that there are
more worms in the can. Although Indian company laws
consider paying as well as receiving graft illegal, and
impose punitive actions for such offenses, most of it is
on paper, and there is a simple route to beat it.
A company in India is not supposed to possess
unaccounted money - known as "black money" in the
country, required for paying graft. So, a smart manager
appoints an agent who is paid for fictitious services.
The agent then returns the money in cash, after, of
course, taking his cut, which is then used to purchase
influence in government departments.
"It is not
the easiest thing to do, but it is possible," says Sunil
Munjal, the vice-chairman of Hero Motors, the largest
two-wheeler maker in India. Like Munjal, even as the
rest of the business community in India is trying to
shrug off the whole Xerox episode as a storm in a tea
cup, many nevertheless are worried.
"The Xerox
scandal is part of a far deeper problem in Indian
society: the problem of corruption," said Vinayak
Chatterjee, chairman of Feedback Ventures, a venture
management company that assists Indian and international
companies to set up new ventures in India.
Quoting Transparency International figures, the global
non-governmental organization engaged in the fight
against corruption, Chatterjee added that India ranked
66th among 85 nations in its corruption perceptions
index. Turned the other way round, India is the
14th most corrupt nation in the world in terms of least
transparency. According to both Munjal and Chatterjee,
the index "is obviously not a good example of
corporate governance in India".
India's
corruption index was 2.7 on a scale of 0 (highly
corrupt) to 10 (highly clean). The rating is based on
perceptions of business people, academics and risk
analysts. The US ranks 17, with a score of 7.6. Finland
tops the table with the cleanest record.
Studies
and scandals such as these outlined above are obviously
bad news for India, a country that is trying to compete
fiercely in the global marketplace. "Though it is
difficult to ascertain the extent of the impact," said A
K Chowdhury, managing director of India's credit rating
agency ICRA, "no doubt this type of laxity in corporate
governance could affect credit ratings of Indian
companies in general." But a greater problem is
enforcement, and the investigative system in India is
weak. After all, says Chatterjee, "you are a thief only
when you're caught".
And this
becomes more important against the backdrop of a
system where corporate India has to function in an
environment that offers motivation to make improper payments, such
as Xerox's Indian subsidiary. "But the issue is not
about whether it is seen or exposed,” said Chatterjee.
“The underlying issue is society's value system. And that
is really what everybody doing business in India needs
to think about."
However, for anyone doing
business in the country, or planning to start a venture,
does this mean that there is no way out but bribery as a
part of business and life? "No," says Chatterjee. "It is
the exposes or scandals like this that force India to
move quickly to a far more honest and value-driven
regime. And the quicker the better."
According
to Chatterjee, a corrupt environment should not stymie
the zest for doing business in India. "In life there are
motivations to do many things, many of which could be
immoral or undesirable," says Chatterjee. "In that
milieu, a corporation, like a human being, should adopt
a certain value system. And as long as a value-system is
in place, there shouldn't be problems."
Chowdhury of ICRA is even more optimistic. "So
far as India is concerned, the greater the number of
revelations like Xerox, the quicker is the chance of
positive transformation."
Indeed, some good
news amongst all the bad.
(©2002 Asia Times Online
Co, Ltd. All rights reserved. Please contact content@atimes.com
for information on our sales and syndication
policies.)
|
| |
|
|
 |
|
