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