Why fears of a foreign hand are real

Why fears of a foreign hand are real

Arun Kumar

CESP/SSS, JNU, N Delhi 110067

The Hindu on June 22, 2012.

Mr. Pranab Mukherji is likely to be India’s next President. It seemed to be touch and go till the tide turned in his favour. Those in the know suggest that the corporates swung it for him not because he is one of the most seasoned Indian politicians but because they wanted him out of the Ministry of Finance. He has acted tough on retrospective taxation and GAAR – the measures in his recent budget to tackle black income generation. But, apparently the real pressure was from foreign shores and the Indian corporates who are now MNCs are sensitive to that. So is our political leadership. Britain and Netherlands exerted strong pressure on the Vodaphone case. How much of our politics is being determined by such pressures?

Other recent cases of pressures are Mrs. Clinton’s visit to India to influence government’s policies on trade with Iran and on FDI in retail, the S&P downgrade of India, the Aircel Maxis deal. There are also less visible cases of pressures as in recent defense purchases (British were upset), energy sector investments (Oil, gas and nuclear), opening of markets and so on. These are impacting Indian politics, especially at the top because of a lack of coherence there.

The Bofors scam has had a continuing impact on politics at the top since 1987. The recent interview by the then Swedish chief police investigator, Mr. Lindstorm, has again brought the issue to the fore. That Mr. Quattrochi, an Italian businessman based in India and a close friend of the Gandhi family, was one of the recipients of kickbacks has been underlined. His role in swinging the Bofors deal at the last minute was known. It is not in doubt that pay offs were made or that the Bofors guns have proved their mettle. But the latter cannot justify the former. The only unsettled issue is who got the money.

That Mr. Quattrochi had powerful friends was confirmed when he was allowed to escape the country during the Congress rule. The case was apparently deliberately spoilt by the investigative agencies, including the CBI and, therefore, lost in the Courts – in Malaysia, Britain and Argentina. The red corner notice against him `could not be executed’ since our police agencies could not `find’ him even though journalists could interview him.

Evidence points to a high level cover up. Mr. MS Solanki, the then External Affairs Minister sacrificed his Cabinet berth rather than reveal what he wrote in the paper he passed on to the Swiss counterpart at a meeting. At that point of time, the Swiss bank accounts were being investigated by the Indian agencies to trace the Bofors pay-off trail. Could such a sacrifice of a political career be for an ordinary leader.

Who took the money even if not Rajiv Gandhi and why did the investigative agencies spoil the case? Investigations are essential to clear the air about these questions. A former Minister in the PMO mentioned to this author in an interview on the black economy that when he went with the Bofors file to the then PM, he was told to close the file since there could be threat to his life. No wonder, none of the non-Congress PMs changed the course of investigations to bring it on track and none of the Congress PMs have wanted the truth to come out.

Kick-backs have been common globally in dealings with MNCs. Sweden is one of the least corrupt countries in the world but its corporations have bribed to get contracts as the Bofors case points to. The US based MNCs have resorted to bribes in spite of it being illegal as per the US law. Recently, Walmart has admitted to having bribed its way through in Mexico. When the top management learnt of it, rather than exposing corruption, the internal probe was closed. The same Walmart has been trying to enter India. Mrs. Clinton’s agenda included `persuading’ India. The only CM she visited was Ms. Bannerjee, the important UPA partner opposing FDI in retail. It is reminiscent of Mr. Kissinger and the Secretaries of Energy and Defence flying to India to lobby for Enron in the mid-1990s. Enron admitted to spending $60 million in India, to `educate’ policy makers. Wikileaks exposed how extensively the US government keeps track of goings on in India so as to effect policies.

It is not just a few MNCs that indulge in corruption or use their governments to apply pressure on policies. MNC banks are known to help Indians take their capital out of India. UBS bank, the largest Swiss bank was fined $750 million by the US for helping its citizens to keep secret bank accounts. This same UBS bank was allowed entry into India in spite of its known role; was it a reward for helping some powerful people?

Executives of Siemens, a supposedly honest MNC and an important player in India, were  indicted in the US in December 2011 for bribery in Argentina. Investigations revealed that $1.4 billion of illegal payments were made between 2001 and 2007 in Bangladesh, China, Russia, Venezuela and so on. These were often routed via consultants. The company paid fines and fees of $1.6 billion to the US and German governments for the bribes it paid across the globe.

Siemens started bribing soon after the end of World War II to get contracts under the Marshall Plan which were mostly going to the Americans. Since its prosecution, Siemens claims that it has appointed Compliance Officers to check bribery. But, with the prevalence of a high degree of illegality internationally, can one company be honest while others are not? How would it win contracts when those in-charge expect to be bribed? Since non-transparent processes are set up, at every step, decisions need to be influenced as has been shown in the Bofors case or the 2G spectrum allocation.

The Vodafone case is important for revenue since MNCs (Indian and foreign) have used tax havens and tax planning to avoid paying taxes in India. They create a web of holdings to hide the identity of the real owners of a company are or who it is being transferred to. In 1985, in the Mcdowell case, the SC bench observed, “Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods”. This judgment was over turned in 2003 in the Azadi Bachao case filed against the use of the Mauritius route to avoid paying tax in India. The government had opposed the petition. Vodafone has taken advantage of this judgment to successfully argue against having to pay capital gains tax in India on transfer of a company in a tax haven which owned the Indian assets. Mr. Mukherji was trying to recover lost ground.

Indian policies have been subject to foreign pressures since the days of the cold war in the 1950s. But until the mid 1980s the decisions were accepted as being in the `long term national interest’. There were accusations in the procurement of the Jaguar aircraft also but these did not create the furor that the Bofors scam did. Since the late 1980s, as in the case of Bofors or the New Economic Policies in 1991 or the Indo-US nuclear deal, sectional or individual interests have become dominant. These have played havoc with national politics. Pressures and counter pressures are mounted through political parties and their leaders and big business.

Some Congressmen feel that they cannot spare Pranabda since he is crucial to the functioning of their party and the government. So, Mr. Mukherji becoming the President may be a destabilizing event. The lesson is that foreign pressures tend to damage the political processes which national politics cannot undo. The public is left bewildered by the goings on, as in the present case of selection of the presidential candidate.

arunkumar1000@hotmail.com

                                               

For drafting an ideal Lokpal Bill

For drafting an ideal Lokpal Bill

Arun Kumar

CESP, SSS, JNU
The Hindu, May 31, 2011

The drafting of the Lokpal bill is back in the news after the Assembly elections. The co-chairperson of the high powered committee has said that progress is slow and the deadline of June 30 is likely to be missed. Some civil society groups have made suggestions on what the Bill should contain. The Chairperson of the Drafting Committee has responded with alacrity sensing an opportunity to get the government’s way by claiming division in civil society. Apparently, important differences remain unresolved between the representatives of civil society and the government, especially, with regard to the inclusion of the Prime Minister and the higher judiciary under the purview of the Lokpal. Two issues arise, how important is the inclusion of these two and whether missing the deadline of June 30 by a few months to get a good Bill in place makes a big difference given that the Bill has been pending for 42 years.
If it is the magic wand that would eliminate corruption right away then it is urgently needed. Those in favour of the Lokpal suggest that it would check the vested interests who are spreading corruption in society. But, they are not able to convince the doubting Thomases who argue that it can neither be the panacea for all ills nor can it root out the endemic corruption in society at one go. The skeptics, who have often been in the forefront of the fight against corruption, need to be differentiated from the vested interests who have been stalling the Bill for their narrow ends. The skeptics are not for needless delay but only want prioritization of the steps to fight corruption.
Lokpal is presented as a watchdog over the corrupt system. What has our experience been with the many watchdogs we have? There is the CVC to oversee the functioning of the investigative agencies but we know that it has been largely ineffective. We have the election commission to see that fair elections are conducted and it is seen to be successful but the political system seems to be getting more corrupt. There are the legislatures which are to be accountable to the citizens and oversee the functioning of the nation but we are witness to their growing criminalization and penetration by money power. The judiciary is supposed to see that justice is done which is another form of accountability. But, increasingly, judges at all levels have been accused of corruption. There are the lesser watchdogs, like, the intelligence agencies and the regulatory bodies but they too have been accused of growing corruption. Given all this, can there be a perfect Bill which will somehow insulate the Lokpal against the corruption in society?
Today, illegality in society is widespread. It affects almost all social, political and economic aspects of the nation’s life. Tackling the growing illegality is then the most urgent task. Thus, while the Lokpal may not be the one thing on which all attention needs to be focused, it is perhaps the most important step in the drive against corruption.
It is not that the nation does not know what should be done to deal with the black economy and the associated illegality. Since the Fifties, there have been dozens of committees and commissions that have gone into various aspects of the problem. For instance, the Kaldor Report (1956), Santhanam Committee (1964), Wanchoo Committee (1971), Dagli Committee (1979), NIPFP Report (1985), Kelkar Committee (2002) and so on. Then there are the Estimates Committee, CAG and the PAC reports of various kinds.
The Reports contain thousands of suggestions and hundreds of them have been implemented. Like, reduction of income tax rates (from 97.5% in 1971 to the present 30%), elimination of many controls (MRTP, FERA, licensing, trade controls, etc.), demonetization of currency, voluntary disclosure of incomes (VDIS), Bearer Bonds, acquisition of undervalued property, foreign exchange controls, introduction of VAT and so on. Yet, the size of the black economy has continued to grow.
The various movements against corruption (like, Nav Nirman movement in 1972) or changes in the laws (like, the introduction of RTI) and the corresponding steps to fight corruption have been repeatedly thwarted/diluted by the corrupt. People have often been disappointed by these failures and become cynical. Yet, they have periodically reacted with positive outcomes, like, in the Jessica Lal case. The subversion of the steps to curb the black economy and the associated corruption is engineered by the ruling elite consisting of the Triad between the corrupt politicians, the businessmen and the executive. Since they make huge additional incomes through the black economy, they have little incentive to curb their own illegality by checking the black economy.
Can there be a perfect law that cannot be subverted? Experience tells us that this has never been the case. No Bill has fully solved the problem it set out to resolve. Our Constitution is often praised but has had to be repeatedly amended and we continue to run into problems. A law in practice has seldom turned out to be as it was drafted on paper. Human ingenuity is such that it finds loopholes to subvert the law because the spirit is not willing. Would the same fate meet the Lokpal Bill?
Take Section 138 meant to prevent the crooked from deliberately bouncing their cheques? Another instance is Section 12(6) which allows for summary trial of cases where a signed lease exists and where the tenant does not vacate the property automatically when the lease ends. Today, lakhs of cases relating to these provisions are pending in courts because the courts allow delays. The crooked then cock a snoot at the law while the honest go on the back foot. This occurs because there is lack of accountability of the judges - if a case drags on, who are they answerable to? The party that suffers due to delays cannot take a tough stance lest it antagonizes the judge and they have to suffer.
How can accountability be built into the system? Either the judges can be accountable to their conscience or to a higher authority. Today, greed and decline of morals have made the former rare. In the case of the latter, the chain ends with the Chief Justice. If she demands accountability, it would percolate down to the lowest levels. Similarly, in the government, if the PM and the CM demand accountability, the entire administration would follow suit.
Conversely, even if the PM or a Chief Justice are honest but they practice non accountability and arbitrariness, that spreads downwards and corruption grows. Information about wrongdoings in high places is collected by the intelligence agencies through phone tapping and other means but this is not acted upon. Such inaction would no more be feasible if the Lokpal Bill brings the PM and the CJI under its ambit.
But, can it bring about accountability in the political process, something elections have failed to do?  Some doubt it, since the appointment of other constitutional authorities, like, the Election Commissioners, CVC, Judges in HC and CIC have run into controversies and that could also happen in the case of the Lokpal. How can the honest get to the top when corruption is endemic, except by accident?
Be that as it may, the surest way to subvert the Lokpal is to make it widely applicable to all manner of corruption. It would get embroiled in all kinds of wranglings and become like our courts; choked with cases. We have enough laws to curb corruption at various levels provided there is implementation and only accountability can ensure that. Thus, it is critical that those above demand accountability from those under them. The buck would only stop end at the top – with the PM and the CJI at the Centre and the CM and the Chief Justices in the states. That is what the focus of the Lokpal (and Lokayukta) should be. Even then without public pressure through movements the Lokpal can get subverted.
In brief, in the last six decades many steps have been taken to curb the growing illegality but they have not delivered due to lack of accountability in the system and decline of self regulation since greed has been placed on a new high pedestal. It is argued that setting up of a Lokpal is not a magic wand to eliminate corruption but important. However, its success would depend on limiting its scope to the very top which would make it manageable and lead to accountability all down the line. Then only would laws be followed both in letter and spirit and become meaningful.

arunkumar1000@hotmail.com