By coincidence or design, three different TV channels in India have aired, in the last 48 hours, lead stories with similar titles - "Is this the end of the American dream?" There's an obvious element of sensationalism in the title, but one can't help feeling that maybe the great citadel of capitalism has a few cracks after all. The Fed's decision to pump in a hefty sum of taxpayer money to bail out AIG is reminiscent of the nationalization of banks and industry in India, and the takeover of private industry in Russia. Socialism, once touted as a messiah for the ills of the world, is dead, and yet it's ironic to find the ultimate symbol of capitalism tracing exactly the same path.

In hindsight, perhaps the bailout of Chrysler in the 70's was a mistake. Had Chrysler been allowed to collapse, it can be argued that the American automobile industry would have been in a better shape today.

Why don't we learn from history? Why is human memory so short? Have we already forgotten Enron and WorldCom? Failure can be due to inertia (the auto giants' failure to see the writing on the wall), prior strategic commitments (Prof. Pankaj Ghemawat's phrase - IBM and the mainframe computer), or the Icarus Paradox - the very success that propels organizations to the top of their industries also spells their doom bringing in its wake an aura of infallibility.

In the latest examples of failure, the third dimension appears to be at work. Not long ago, the  companies that have fallen in recent days were the investors' delight. These were the dream companies to work for. Only the brightest could get in. And yet, the brightest could not prevent the failures.

Five thousand years ago, our scriptures emphasized that greed spells doom. That's precisely what we are witnessing today. Managers of these companies could do no wrong. Buffered by fancy salaries, variable incentive schemes, and a host of perks, they turned speculators - with disastrous consequences. Whatever happened to the agency theory concept? Managers are supposed to be trustees of public wealth. Who is to be held accountable for the mess we find ourselves in? Will the whizz kids please stand up and be counted?

Maybe some good will come out of all this. Already, there is talk of traditional industry, that has long been crying about a lack of talent, being able to attract A+ grade candidates at A- grade salaries. Hopefully, the stratospheric salaries in some sectors will find more realistic levels. Organizations may yet realize that there are no substitutes for hard work, perseverance, and incremental but consistent growth.

And society at large would do well to find ways of penalizing the wrong-doers - however high and mighty they may be. We may choose to return to values-based value creation - or perish: the choice is entirely ours.

• The government of India (one wonders whether governments do not have anything better to do) is up in arms about a commercial for Axe deodorant. The deodorant is supposed to be chocolate-flavored and the video clip shows a man apparently covered in chocolate being chased by a handful of young ladies. The message conveyed is "as irresistible as chocolate."
• Last year, the government asked an advertiser to take off two "indecent, vulgar, and suggestive" ads for undergarments.
• Right here in Bangalore, pubs cannot be open after 11.30 PM. Dancing is not permitted. The Chairman of the UB group that also runs Kingfisher Airlines has said he will join any agitation against such moral policing.
• The Health Minister of the Federal Government has given a clarion call against "junk foods." One wishes he would spend some time improving the Primary Health Care centers in villages and indeed all government-run hospitals.

Marketers and advertisers do not seem to understand the Indian market one bit. The entrance to the Bangalore International Airport features a huge Louis Vuitton suitcase. You just cannot miss it. How many people will actually buy their product? Would the firm be kind enough to disclose its sales figures and its ad spend?

Other media leaders are not far behind Vogue. Pick up any issue of Time, Newsweek, Fortune -- or any international magazine for that matter (Asian Editions). You will come across advertisements for watches that have been around for 175 years, exotic holidays that most people cannot afford, and life-style goods that cost a fortune. How many buyers can they find in countries like India?

The transition from a largely state-controlled economy to a market-driven economy can never be smooth or painless. Glaring disparities do exist. Right next to one of the finest hotels in Mumbai lies the largest slum in South Asia. For all the lofty claims made about Bangalore being the silicon city of India, it has taken just a few days of rain to render the "best" among residential areas unfit for living.

The sheer diversity of the country is staggering. With over 500 languages, myriad cultures and sub-cultures, and huge differences in income levels, the challenge for marketers is understandable. Yet, one cannot help observing that marketers need to be sensitive to the diversity and address it in ways that do not offend large sections of the population. Some firms have done this quite successfully. Million-dollar homes are not advertised in any media but are targeted through fancy-looking brochures, direct mail and even walk-through CDs.

While there is nothing wrong in those earning high salaries having aspirations and getting into the rat race, flaunting such wealth in a manner that is disdainful of the suffering of millions is sure to sow the seeds of undesirable tendencies among the have-nots. Organizations, marketers and users can ignore these at their own peril.

Thus, it should not come as a surprise to find brilliant programmers becoming team leaders or project managers who cannot deliver on time, cannot assure quality and invariably overrun budgets. The scenario is no different in other sectors. Managers today are so hard pressed for quarterly, monthly, weekly, daily, and in some cases, hourly progress reports that they do not have the time to learn anything new. Where then is the time to unlearn that which is obsolete?

A downturn represents a fantastic opportunity to correct this anomaly. Since the pressure for meeting deadlines or achieving targets is not very high, at least in a relative sense, organizations would do well to invest in people and enhance what Nobel Laureate Mohammed Yunus calls "Social Capital." Employees at all levels can be sent for outbound training activities that would improve their team building and team working skills, and bring in a sense of process ownership that can do wonders to the organization when normalcy returns to the industry and the economy.

In firm after firm, we see individuals who are great when it comes to their performance but fail to build teams or to be a part of a team. The organization finds it difficult to do away with them since they do contribute significantly, particularly in the short term. In the long term, however, such individuals are value dissipaters. Investing in training such managers in particular to develop the ability to look at the big picture and to act in ways that strengthen the organization is probably the best investment that a firm can make in a downturn.

It is not easy; it requires visionary leadership, a courageous attitude to look at a downturn as an opportunity to fine-tune the organization to realize its avowed vision. Equally, it requires an organizational culture that is tolerant of honest mistakes and that fosters a nurturing environment where employees are passionate about their work and hence can deliver whatever the organization wants. Sadly, this is easier said than done given the preoccupation with share price movements and the need to provide favorable projections to all stakeholders.

For more, see the Complete Downturn Survival Guide

• Nearly half of respondents said it was quite appropriate to use the office telephone to make personal calls - even long-distance calls.
• About 55% said it was OK to fudge expense accounts.
  
• Almost half had no qualms about recording their entry times as being within permissible limits, even when they arrived late. Similarly, they did not hesitate to mark the exit time as required even when they left early. (This finding was restricted to manual systems).
  
• 60% admitted to lying while applying for leave, a figure that reached 75% in some cities.
  
• Another 60% found nothing wrong in carrying office stationery to their homes, while 63% said it was okay to do personal work during office hours.
  
• 62% considered offering someone a bribe "normal and ethical" behavior.
  

These findings, from several major cities and across different industry sectors, inevitably lead to the question, "Are we witnessing the downside of ethics in the workplace?" More worrisome is the rationale of the respondents - when top management can charge millions on the expense account, what's wrong with our doing it at the level of hundreds or thousands? Thus, the effect of leadership on organizational culture is also brought into sharp focus.

In a country that is already pretty low on the honesty index (and high on the corruption index), such practices should set alarm bells ringing.

Ethics itself is a grey area, there being no absolute right or absolute wrong. Where do you draw the line between what is acceptable and what is not? At the same time, isn't honesty or integrity a binary phenomenon? Either one is honest or one is not. Can there be something like 80% honesty?

Mark McCormack, in his book On Managing, recounts how he was able to save thousands of dollars by the simple expedient of installing coin boxes beside company telephones and asking employees to drop a coin whenever they made a personal call. Of course, this was long before the mobile revolution. Would this work today?

At the other extreme of the proverbial pendulum is the case of a former CEO of RJR Nabisco who ordered so many aircraft for himself and for his aides that a separate hangar had to be built to house them. Whose money was it anyway? And what happens to the Agency Theory Concept?

End of the day, it boils down to values. What do you believe in and to what extent are you willing to undergo pain / suffering / unpleasantness / an uneasy conscience to achieve your ends? Aren't the means as important as the ends? Don't we want to learn anything from the collapse of once large and perceived-to-be-infallible organizations?

On a personal note, my father was a government officer for thirty years. He had a vehicle (first a jeep, then a van and finally a car) allotted for his use throughout his career. He never used it for any personal work. Not once did he allow any of his children to enter the vehicle, leave alone taking a ride in it. I am sure even today there are many officers who follow a similar set of values. Maybe old-fashioned, may be belonging to a different era - but till the end, he could sleep like a child - with a clear conscience.

How do you inculcate value systems in an organization or in a society?

For India, 60% of whose population is dependent on agriculture, land holdings are highly fragmented, remunerative prices are a distant dream, farmers unable to repay their high-cost debt committing suicide is the stark reality, any measure that may adversely affect the agricultural sector would be political suicide. The fact that Brazil and China had their own constituents to nurture fueled the fire further.

Like it or not, free trade has its limitations, all the theories put forth over the last 200 years notwithstanding. And it is not a flat world, after all.

Does this mean the end of multilateralism as some experts have predicted and a shift toward regional blocs or even bi-lateral agreements? One hopes not. It is easy to forget history. India was the richest country in the world before the British rule. The amount taken away by the British is estimated at over a trillion dollars in today’s terms. 2 out of 3 Indians live on subsistence income and the euphoria over the per-capita income reaching $950 is misleading. Glaring inequalities persist. Fragmentation of land is compounded by the vagaries of the monsoon (rainy season). One year you have too much rain destroying standing crops and the following year you have too little rain leading to drought. As late as in 2003 – 04, we had buffer stocks of food grains. This year, a shortfall of over 20 million tons is most likely.

Populist measures like rice at just over 2 cents a pound to those below the poverty line (the term BPL – Below Poverty Line is itself a cruel joke) does not benefit the recipients – instead, it finds its way into stand-alone retail outlets that rake in huge profits by selling the rice. The shortfall has in turn led to an unprecedented level of inflation – almost 12% - although the share of agricultural produce is claimed to be just 2%.

The developed countries cannot any longer substitute rhetoric for substance and get away with it. The ubiquitous nature of information today makes it impossible for any country to take the high moral ground. The huge export subsidies given by the developed countries lead not only to depression in the international farm prices but also crush domestic farm prices due to subsidized dumping. Statistics available in the public domain indicate that the EU accounts for 92% of export subsidies by value, with expenditures of $29.3 Billion over the 1995 – 2000 period.

Another report highlights the distortions that have occurred after the WTO came into existence. The full cost of US wheat in 2001 was $6.23/bushel while the export price was $3.50/bushel. In 2002, the gap widened with the full cost touching $7.24/bushel and the export price being $4.09/bushel. In 2003, the full cost vs. the export price of cotton was $1.054/pound and $0.562/pound.

Who actually benefits from export subsidies?

As the WTO allows subsidies for handling, storage, transportation, processing, upgrading and export promotion, the biggest beneficiaries of subsidies are transnational corporations that are engaged in the whole chain of activities. Since these corporations control 70% of world grain trade, they and not the farmers are the real beneficiaries of subsidies. According to the US Department of Agriculture, between 1997 and 2002, the US lost over 90,000 farms of less than 2000 acres, while 3,600 farms grew to more than 2000 acres.

Apart from the huge benefits accruing to them in their home countries, the transnationals, by virtue of their presence, derive benefits from the developing countries as well. As an example, the economic cost of wheat procured by the state-owned Food Corporation of India was 8.57 cents per pound, its open market price was 7.39 cents per pound and here is the shock – the same wheat was sold to a transnational corporation for 4.55 cents per pound. The transnational then converted the wheat into “fresh” flour and sold it in India itself at 21.14 cents per pound. To complete the picture, the poor farmer got less than 5 cents a pound. Now you decide – who benefits from subsidies?

What is the way out?

For emerging countries like India, with all the imperfections cited earlier, a few initiatives are imperative:

· Co-operative farming that would usher a second green revolution, increase productivity by 80 – 100%, and bring about disintermediation. This is eminently feasible as the success in milk production and distribution has shown.

· Move towards value added products and processed food since these not only have a huge market but also market access.

· Become a member of Free Trade Agreements with ASEAN and APEC Countries.

· Aggressively promote the cause of developing nations at all international fora, not on the basis of emotion, but on facts and figures.

· Enter into bilateral trade negotiations with nations facing more acute food scarcity than India.

The WTO to be relevant needs to correct two major flaws – the flaw of inappropriate invasion into sovereign domestic space by imposing disciplines for domestic agricultural production which interferes with the objectives of sustainability and food security, and the flaw of failing to prevent unfair trade practices based on unjust and artificial prices leading to dumping.

The WTO has another alternative too – recognize the havoc being created by the agribusiness lobby and take agriculture out of WTO.

Does this mean there is no longer any value attached to attributes like loyalty? Or is it that executives no longer care? What are organizations doing to retain human talent, which at the best of times is scarce anyway.

On the one hand, we lay so much emphasis on the value of human capital. Models are available to quantify it and many organizations even publish this value as an annexure to financial statements. On the other, we do not seem to be doing enough to nurture and retain talent in a manner that would enhance organizational performance and also make employees happy and contented.

Among the factors responsible for executives hopping from one job to another every year if not more frequently, we have identified the following as the top three:

1. Monetary considerations (unless you move, you won’t get more)


2. Work environment (organizational culture does not recognize performance)


3. Colleagues – bosses, peers and direct reports – there is no synergy with everyone working in silos

It has been established that between resources and capabilities, the latter are more difficult to imitate and hence are more sustainable. The source of many a capability is the human intellect. People generate ideas, people come up with new ways of doing things and ultimately it is people – not just technology or finance – who deliver results. Given this context, it is indeed paradoxical that organizations seem to be doing precious little to take care of the most critical asset they have.

One would like to imagine that all the answers have been found – 360 degree feedback systems, the balanced scorecard, the learning organization. How is it that in spite of all these powerful tools or techniques, organizations are still floundering when it comes to managing people?

One answer to this puzzle could be the relative dearth of leaders who can inspire and motivate; leaders who are so passionate about what they say and do that the effect rubs off on everyone else. Since leaders cannot be mass-produced, what is the way out?

Another answer could be in the human condition itself. The pursuit of materialistic possessions, while not inherently wrong in itself, has its limitations. We can easily satisfy our needs but we would be hard pressed to satisfy our greed. If key people happen to leave at regular intervals, how does the virtuous process of forget, borrow, and learn happen?

Organizations with high levels of attrition may be fighting fires most of the time instead of creating longterm value for the various stakeholders. Innovation, perhaps the most critical factor for business success, may be difficult if you have to constantly change gears in terms of the people you work with.

Any feasible solutions to solve the puzzle are most welcome.

Reliance Industries would have been a much bigger player but for the split in the family that saw two brothers unable to see eye-to-eye on where the group should be headed. Tata Steel figures in the list primarily due to its acquisitions and not because of internal growth.

This brings us to the central question – what is the best method for growth and how far is it desirable for an organization to grow through acquisitions? While there cannot be a single or best answer to the question, some trends appear rather disturbing:

· Indian companies, perhaps in a hurry to make it to the big leagues, appear to be taking the acquisition route. The funds required for these acquisitions are largely from debt and very little from internal generation. Initially, this was confined to sectors like IT, biotechnology, and pharmaceuticals but is now spreading to commodities. IT companies have quadrupled revenues in a year through acquisitions. In the process, their share prices have tumbled down. Information today is ubiquitous; shareholders can easily see the dangers that a heavy debt burden can bring in its wake and are unforgiving of organizations that take this route. A similar trend can be expected in other sectors as well.

· Even more disturbing is the apparent lack of enthusiasm for R&D investments and for embracing concepts such as TQM and TPM. Although the concept of total quality was pioneered in the USA by the quality gurus starting with Deming, Japan was more agile in adopting the practices, and the country of origin label that was an embarrassment was soon transformed into a synonym for quality and reliability. Even with the problems that Japan has faced in the last few years, it is still commendable that 64 of the 500 largest companies emanate from the relatively small country. In a study conducted over a 11 year period, Ruth Lumb found (Indian Journal of Economics and Business, March 2006) that the perception of US consumers about Indian products was that they were technically less advanced; had a more common than exclusive image; were more for the middle and lower class than for the upper class, even while scoring better on reliability and recognizability.

· Despite having one of the largest pools of scientists and engineers, the concept-to-market cycle is too long for comfort. On the one hand, the Indian Space Research Organization recently celebrated the feat of placing a record number of satellites in orbit. On the other, the Light Combat Aircraft has been under development for over 20 years and by the time it is operational, the technology might be obsolete. The lack of a clear focus on policies affecting the nation and the consequent isolation from the rest of the world in areas of high-end technology have been primary drivers in this classic example of lethargy.

It is time that Indian industry woke up to the realities of a semi-globalized world and indulged in some serious introspection. In particular, the following dimensions are worth addressing in an accelerated time frame:

· Efficiency and capacity utilization: the waste levels for most industries are a cause for concern. Capacity utilization in key sectors is way below 70%. New capacity is not being created in vital sectors like energy.

· Quality: to be globally competitive, Indian companies must adopt the best practices in design, manufacture and services. Merely harping on the cost advantage may not take us far for long.

· Innovation: investment on R&D may hold the key to whether we remain an emerging economy or move on to be a developed country.

· Customer responsiveness: the lack of sensitivity among producers and service providers shows that we are yet to wholeheartedly accept the market economy concept.

· While acquisitions make sense during the shakeout stage of an industry, the desirability of this method as an engine of growth at other stages through debt requires serious reconsideration.

Organizations need to look at expanding their customer base and providing superior offerings if they wish to be significant players in the global arena.

When will we see 30 Indian companies on the list? Take a guess.

What does freedom mean to ordinary individuals? Does it mean freedom of speech, expression, and choice? As a young democracy, India has to learn a lot more in terms of striking a balance between the rights of individuals and the overall good of society and the nation. One of the major political parties has called for a nation-wide strike to protest against an incident that has happened in one state. Another set of parties is scheduled to call a similar strike to protest against rising prices.

The people most affected by such “forced stoppages of work” are also the most vulnerable sections of society – the daily wage earners, the small vendors, and the micro-entrepreneur. Is this an acceptable definition of freedom? The irony is that all this happens despite the highest court of the country having pronounced such strikes as illegal as they impinge on the rights of others.

Given the context, is it not time for us to also think of a universal set of obligations? David Resnik’s eight principles may form a good starting point:

• Non-malificence: Do not harm yourself or other people


• Beneficence: Help yourself and other people


• Autonomy: Allow rational individuals to make free and informed choices


• Justice: Treat people fairly; treat equals equally; unequals unequally.


• Utility: Maximize the ratio of benefits to harms for all people


• Fidelity: Keep your promises and agreements


• Honesty: Do not lie, defraud, deceive or mislead


• Privacy: Respect personal privacy and confidentiality

It is possible to debate the meaning of some of the terms. It is also possible that we would often face situations where one line of action, while upholding a principle, would contradict another. When faced with such dilemmas, after gathering information and exploring different options, a balanced decision could be made by evaluating the options in relation to the principles. This process has been called “moral reasoning” leading to a state of “reflective equilibrium” or balanced judgment.

Such an approach assumes significance in light of what we witness almost every day. Taking the lives of others whatever be the espoused cause or reason, violates the first principle. As a community, we have become so selfish that the thought of helping others rarely crosses our minds. State ownership of critical sectors robs people the right of informed choice. Justice is denied because it is delayed beyond reason. We have cases of thousands of people languishing in prison for over a decade without a trial. The rich and famous can get away with anything or so it seems.

Ten years after a fancy car mowed down a number of people sleeping on the pavement, we are yet to see justice delivered. Laws are enacted keeping in view “vote banks” rather than the welfare of the nation as a whole. Political parties make grand promises at the time of elections. The moment elections are over, the promises are conveniently forgotten. As for honesty, the less said the better. As a former prime minister once remarked rather (in) famously, corruption is a global phenomenon. And thanks to technology, every move that we make can be tracked.

Isn’t it time, even as we celebrate the spirit of freedom and all the positive attributes that freedom brings to individuals and to society, for us to ponder about our obligations as well and ensure that our duties and our rights always go in tandem?

• Focus: Bill Gates has demonstrated over nearly thirty years the importance of clarity of thought and execution. Unlike many of his contemporaries, he did not move away from the domain he understood better than anything else – software. He has pursued the objective of dominance in software in general and operating systems in particular that has few parallels. Venturing into unfamiliar territory may be fashionable but carries a high degree of risk. If ever a need arises for an absolute example for what Peters and Waterman called “Stick to the Knitting” and Hamel and Prahalad termed core competence, one needs to look no further than Bill Gates and Microsoft. Focus also means the ability to pursue one’s goals whatever the obstacles may be. Such a degree of perseverance is hard to come by.

• Thinking big: Along with focus, the ability to dream big and pursue that with single-minded determination sets Gates apart from other entrepreneurs. This is particularly true of entrepreneurs from emerging economies like India where an ultra-conservative attitude has stifled growth. Entrepreneurs need to develop confidence in themselves and their team that they can take on the world and come out winners.

• Passion: Simply put, if anything is worth doing, it is worth doing well. From a simple thank you note to a complex proposal, it is critical to place the stamp of excellence on whatever one undertakes. Equally important is the need to constantly innovate. Change is the only constant and the more agile and adaptive we are to change, the more successful we can be.

• Learning as a life-long process: Though dropping out of college to his dreams, Bill Gates has probably read and written more than most of us ever will. In the process, he has shown the limits of formal education. Important as formal education is, perhaps it is more important to realize that learning is a life-long process. Knowledge is infinite. Even if we keep assimilating it without a break throughout a lifetime, we would not have scratched the surface. Knowledge should lead to humility and wisdom – not arrogance and one-upmanship.

• Giving back to society: The Bill and Melinda Gates Foundation has provided a new dimension to philanthropy by addressing issues that are global in nature – malaria, cancer, AIDS. Feeling good by doing good may appear old-fashioned but this may yet be the best way forward in combating diseases that kill or maim millions of people every year. With friend and legendary investor Warren Buffet also joining hands, a formidable combination has been forged. Bill Gates has shown a remarkable degree of consistency both in his business goals and in his goals in philanthropy – he is a global citizen.

Although some Indian entrepreneurs have indeed espoused similar causes – Infosys Foundation, Azim Premji Foundation, and the House of Tata come to mind, a lot more can be done by successful Indian entrepreneurs. In fact, just 5% of the wealth of the 200 richest people can eradicate some of the most pressing problems that we face. Wealth should not be merely in terms of building the most flamboyant homes but in pursuing a higher calling. Where is the collective conscience of the rich who hav made it big due to the society that they are a part of?

As with any successful or great person, there will always be controversies. In an age where the distinction between means and ends is increasingly blurred, taking extreme positions hardly helps. One may not agree with Gates’ means for achieving what he has, but one would find it difficult to ignore his contributions to the IT industry. However, history and posterity will probably recognize him more for what he has decided to do – at a relatively young age – for the rest of his life. Combating hunger, fighting disease and educating the poor are truly lofty goals worth emulating by anyone who cares for humanity and for the quality of life on this planet. On this count, there cannot be many role models better than Bill Gates. The last thirty years have seen the emergence of an entrepreneur par excellence. The next thirty years will probably see the emergence of the greatest individual philanthropist – not necessarily in monetary terms – but in terms of the global issues addressed with dedication.

Since this is a discussion forum, two questions to readers:

• Why can’t governments spend 1% less on defense and use the money to improve living conditions for the poorest of the poor?

It seems paradoxical that two nations that have so much in common in terms of values and cherished ideals cannot see eye to eye on critical issues. For a start, we can consider the nuclear deal. Despite continued and stubborn resistance from the left, the present government gave indications yesterday that it would like to see the deal through. The US government on its part has stated that the deal needs to be completed by January 20, 2009, thus providing India a leeway of over six months. For India to even hope of becoming a developed economy, energy would be a critical resource. With adequate safeguards, nuclear energy is a viable alternative.

Contrary to popular perception, a reactor built with due diligence is safer than what most people think. Except for Chernobyl that claimed an unspecified number of lives and Three-Mile Island that caused a scare, there have been no disasters on the nuclear energy front. Fatalities in conventional plants due to negligence and accidents far outnumber those from radiation or other hazards. Even if the deal goes through, it is not as if the US is waiting to push Uranium or nuclear technology down India’s throat. Conservative estimates have said that it will take 10 years before the first reactor starts producing electricity.

The gap between demand and supply would have reached alarming proportions. Large parts of rural India receive electricity for just 4 – 6 hours a day. Do we want to go back to the dark ages? Why doesn’t common sense and trust get the better of political expediency and rhetoric?

On a different note, a report received on June 17 highlighted the sentencing of a scientist – entrepreneur of Indian origin for allegedly selling microprocessors to two Indian entities on the restricted list. There can be no question whatsoever that the law of any land needs to be respected and anyone found having transgressed the law deserves to be punished. However, as several commentators have noted, the incident appears rather bizarre given the fact that the light combat aircraft into which the microprocessors are supposed to have gone, has General Electric engines and advanced avionics from the USA. GE has its largest research facility outside the US right here in Bangalore, India. Most of the employees are Indians.

It has also been pointed out that the microprocessors in question could be bought from any store such as Circuit City at a dollar apiece and no one would be any the worse or wiser for it. The restrictions on certain entities may have been placed in a different context and a different era. A laptop today has microprocessors that are much faster and better than the ones in question. Isn’t it time to adapt to the changing environment and move on? This is not an excuse for wrongdoing of any kind but only an appeal to look at the motives and outcomes if any instead of merely looking at the letters of a rule or regulation.

At regular intervals, there are shrill cries about outsourcing and its possible effects on the US economy. In contrast, Indian engineers and technologists continue to garner the maximum number of H1B visas year after year. Institutions of higher learning like the Indian Institutes of Technology have become such centers of excellence that there have been instances of students who could not make it to these institutions obtaining admission along with scholarships into some of the most prestigious of US universities.

India has demonstrated, despite hiccups now and then that it is a mature democracy and is on a growth trajectory having embraced the broad contours of a market economy. With almost 1/6th of the world’s population, India cannot be ignored. It is a supreme irony that the only pre-eminent superpower in the world has not thought it fit to bestow MFN status on India. Almost in retaliation, India refuses to throw its doors open to investment in several sectors that could propel the country on the fast-forward track of growth.

It is time both countries realized that the ideals that both hold so dear can best be achieved through cooperation, not confrontation. It is also time to look at the “big picture” and stop nitpicking on trivial issues. Who will take the first step?

For decades, the Indian pharmaceutical industry was happily producing generic drugs and combination medicines of questionable efficacy and raking in huge profits. The phasing out of process patents in 2005 changed the landscape. The pharmaceutical companies were forced to look at R&D, something they had long neglected. R&D in pharmaceuticals is particularly difficult for two reasons – development costs that can run up to $300 million and time-to-market that can be as long as a decade. The risks involved are too high for anyone’s comfort. If a blockbuster drug is developed, the organization can make billions. If nothing is developed or what is developed is not approved by the regulator, the organization may sink. Faced with this situation, the big players started looking at acquisitions of companies that had a decent track record in R&D as the only way out of a possible crisis.

What was probably overlooked in the process was that not many path-breaking drugs have come out of small laboratories. Proprietary drug development is a big and serious business. It requires concepts like concurrent engineering that require major attitudinal changes (internal competition) and outlays that are multiples of normal R&D investments. As a result, nothing much of significance has come out of the acquisitions of small companies by Indian pharmaceutical players.

The other major problem that the industry has to contend with is fragmentation. A focus on generics has meant a spawning of entities – most of them small – that together churn out some 20,000 drugs – both single and combination. Compare this with the 200 drugs that the WHO has recommended as being vital for a nation’s well-being and you get an idea of the perils of needless proliferation. It is quite remarkable that a country like Bangladesh has been able to follow the WHO guidelines.

This brings us to the question – what is in store for the Indian pharmaceutical industry?

• We can expect a significant level of consolidation – a major portion of small players are likely to be wiped out.

• Many of the existing players are family owned businesses. No one should be surprised if many more deals on the lines of the Ranbaxy- Daiichi deal come through. It is the classic “bird in the hand” principle – if the founders can earn a few billions without too much effort, why should they spend hundreds of millions and ten years or more in trying to develop new drugs?

• The present scenario presents an excellent opportunity for multinational enterprises to establish manufacturing bases in India through the take-over route. The availability of talented scientists at a relatively low cost makes India an ideal location for manufacturing quality drugs. A word of caution is necessary though; such enterprises may have to follow a dual pricing policy, one for the local market and another for the global market.

• The Indian government would do well to take another look at its lop-sided policies. Where is the incentive for companies to invest in new drugs? The corporations engaged in R&D need tax breaks and innovative incentives.

Not long ago, in a scathing attack in Forbes magazine, Sramana Mitra termed India the back office for the global IT industry. Is the pharmaceutical industry the next in line for this rather dubious distinction? Or is this the revised version of a flat world: Indian companies eyeing the world for acquisitions, while global companies take over Indian companies. Time alone can provide an answer.

When the price of crude was reaching a boiling point, the government dithered, wavered, and did nothing to stop the colossal loss of $50 billion that the state-owned oil companies were projected to suffer. Finally, out of desperation, the price of petrol was increased by 50 cents a gallon yesterday along with the prices of diesel and cooking gas. The opposition could not have hoped for a better stick to beat the government with. The unprecedented increase is expected to push inflation to a 13 year high – into the double-digit zone.

To do a reality check on inflation and its impact on people, we conducted a study spread across five cities. The surprising finding is that there has hardly been any change in the prices of essential commodities in large retail outlets – organized retail for the developed world. The increase in prices has been sharper with stand alone retailers, including small vegetable and fruit vendors, often operating out of road-side kiosks or even in the open. How does one explain this anomaly?

The retail industry in India is a $320 billion industry, expected to grow to $600 billion in the next four years. Organized retail accounts for a dismal 4% of this huge opportunity. India’s score on this front is pathetic compared to China’s 20% and Russia and Brazil’s 35%. A report prepared by the Indian Council for Research on International Economic Relations has concluded that organized retail is not likely to have an adverse impact on stand-alone stores.
Ironically, the council was commissioned to prepare the report by the present government. Of particular significance is the finding of the council that less than 2% of small stores had to close down due to the competition provided by large retailers.

This finding is quite similar to the one in the United States where a study of the impact of Starbucks on “mom-and-dad” stores has demonstrated that with a few exceptions, the “mom-and-dad” stores have benefited from the establishment of a Starbucks outlet nearby.
Among the reasons given for this phenomenon are the waiting time, mind-boggling variety that often confuses customers, and perhaps most importantly, the personalized service that one experiences in “mom-and-dad” stores. A significant percentage of these stores have reported revenue increases of 25% and more.

The paradox in India is that while one can buy practically any product in any brand from exclusive outlets, policy makers have thought it fit to keep out multi-brand retailers in the guise of “protecting” local retailers.

It is time the government realized that small retailers are quite capable of protecting themselves. The kind of courtesy, service, credit facilities, delivery at your door step, and an affiliation for generations that the neighborhood store offers is hard to replicate for organized retail chains. Thus, the 12 million small retailers have nothing to fear.

At the same time, organized retail can bring in disintermediation that benefits both producers and consumers. Studies have shown that marginal farmers are able to get 25% more for their produce from organized retailers compared to what they were getting from intermediaries. Economies of scale, bulk purchases, improved logistics, and cold chains leading to increased shelf-life all have made it possible for corporate retailers to maintain prices stable even in the face of 8 – 9% inflation. One can even argue that corporate retailers can help small outlets to improve their efficiency and inventory management.

Any MNE that wishes to enter India would be well-advised to look at the failures in the organized retail sector. One of the earliest players to enter the field over 15 years ago is up for sale. Many have simply closed down. Among the reasons are poor inventory management, insensitivity to customer expectations, and reluctance to invest on human capital. In any service oriented facility, the interface with the customer is critical. One would be appalled at the level of ignorance and the almost total absence of a customer focus among sales personnel who need to directly interact with customers. Organized retail, to be successful, has to invest significantly on training the people and sensitize them to provide a great shopping experience for customers.

As pointed out in last week’s post on a different sector, customers must have the final choice. If a centrally controlled economy like China does not have problems in having large retail chains, it is difficult to understand why the world’s largest democracy with over a billion people, of whom some 350 million (more than the population of the USA) are supposed to have the purchasing capacity, should feel shy or be afraid of encouraging foreign investment in retail. Some form of checks and balances is fine – already the Competition Commission is there – to ensure that errant players are made to follow the rules of the game – fair play and customer first always. The government has an excellent opportunity to prove that good economics and good politics can work in tandem by courageously taking decisions that are in the best interests of the country instead of looking at the survival of a coalition alone.

Lest this be dismissed as an isolated incident, here are some other experiences as reported in the media today:

· A domestic flight to New Delhi was delayed by over three hours (the flight time is less than three hours). Passengers had to wait for two hours in the terminal building and another two hours in the aircraft before the flight took off. No explanation has been offered so far. One ingenuous reason given by a Cabin Crew member was that there was no water for the onboard washrooms.

· The official version is that there is too much traffic congestion in the air. If this is true, why was the existing airport shut down in a hurry?

· The ATC staff blame it on a shortage of manpower – too few people handling too many aircraft at one time.

· The authority managing the airport has stated that passengers are feeling claustrophobic in the waiting lounge due to too much of retail space and too little space for people to sit. Strange, coming from the people who designed and built the airport, and are now managing it.

· The acoustics at the airport is so bad that one can’t hear any announcements.

· Airlines have already started thinking in terms of avoiding short-haul flights: As an example, assuming that it takes two hours to reach the airport, an hour to check in, a 30-minute flight if it is on time, and another 90 minutes from Chennai airport to the city, many might prefer a 5-hour train journey.

On the positive side, the commuting is reported to be better than what was feared. The Transport Authority has introduced the latest Volvo buses from and to different points in the city.

Bangalore International Airport is not the first airport to be built nor will it be the last. The point that is difficult to explain is our reluctance to learn from the experiences of others. A few months ago, a distinguished columnist had written in her column the harrowing experience of a new terminal at London’s Heathrow airport. Here, we have the truly amazing situation of too many passengers waiting in an overcrowded lounge and too few actually in the air, while common sense would require it to be the other way around.

All our proclamations about the practice of management fly through the window in the face of such apathy: where is the customer focus or at the least concern? Does anyone care about the colossal loss of person-hours in commuting and waiting? And with the price of oil going through the roof, how does one justify the hundreds of thousands of gallons of fuel burnt due to the extra distance?

The biggest tragedy in all this is that the key stakeholders – customers – don’t get an opportunity to have their say. Even the advice proffered by the highest court in the country – to examine the option of operating two airports – existing and new – has fallen on deaf ears. Commercial interests reign supreme. In the process, if passengers are inconvenienced, who cares?

It is time that Public Utilities realized they exist for the people. Right now, their attitude appears to be one of doing a big favor to the people. For a start, a Minimum Code may be a good idea:

· Airlines: Promise of on-time, every-time or your money back

· Airport Authority: Courtesy, empathy, the recognition that customers come first, automation (for baggage handling), accountability (please stop passing the buck)

· Government / Regulators: Ensure good connectivity, hassle-free experience with immigration and customs (passengers don’t mind the security related issues since safety is paramount)

· Users: Be patient; don’t take too many relatives to see you off or to receive you.
A city that prides itself being the Silicon City of India deserves better. Any suggestions for improving the overall experience are most welcome.

• Fishermen in the Southern Indian state of Kerala routinely use mobile phones to ascertain the price of their catch before heading back to the shore.
• Stock Brokers use the device to exchange information about price movements in real time and make buy / sell decisions in seconds.
• Farmers know when to expect rain and can even be warned about any impending natural disaster such as a cyclone.
• Vegetable, fruit and flower growers are directly accessing market information bringing in the process an unprecedented level of disintermediation.
• The young generation finds it an absolute necessity to keep in touch with friends and of course with parents.

In all of this, the most notable feature is that the government has merely been a facilitator. Looking at similar success stories in IT and BT, one is tempted to infer that whenever the government decides to play only a facilitating role, the sector does very well. There is no dearth of either the entrepreneurial spirit or the willingness to take risks and take on the world on its terms. What is needed is a supportive environment.

When the mobile communication technology was introduced in the 1990s, the price of a handset was beyond the reach of an ordinary person. Call rates were as high as 75 cents per minute. Today, with both CDMA and GSM technologies complementing each other, one can get a handset with a pre-paid connectivity and a few hundred free calls for as little as $25. Call rates, including long-distance calls, are just about 2.5 cents per minute. As scale economies are exploited and a critical mass is reached, call rates may go down further.

This is not to say that there are no problems at all. At one extreme, mobile phones have been used from across the border to detonate bombs. It is worth noting that 49.5% of all terror attacks occurring in the world are in India. The reluctance of organizations like Blackberry to provide access to sensitive information may force the government to bring in regulation that the industry can do without. There is also the growing fear, as suggested in a recent paper, of the possible harm that excessive use of mobile phones could cause, including addiction, loss of hearing, and damage to the brain. These are untested waters and one has to tread with caution. Safety is a major concern – one is petrified to see people on motorcycles and scooters using a mobile phone while driving. Students’ using the device to send SMS even from classrooms is another area that needs to be addressed. Service providers would do well to bring in some form of self-regulation – one provider promises 40,000 ringtones and downloads: is this necessary? Cooperation among competitors is also critical – some resources such as relay towers need to be shared; there is just no space for every service provider to have a tower in every location and moreover such an approach may lead to unnecessary investments and increased costs.

Communication, like any technology, is a double-edged sword. Used with due diligence, it can improve the quality of life through enhanced productivity and efficiency. In the wrong hands, it can also cause destruction. The choice is ours. The number of mobile phones is expected to touch the 500 million mark in two years. That is good news for manufacturers, service providers, and customers. Even as the country prepares to embrace the next wave of technology, let us learn from the experience of other countries, and avoid the pitfalls that might confront us in the relentless pursuit of progress.

Myanmar is a country of great strategic significance to both India and China, thanks to its long borders with the south Asian giants. Myanmar is a significant example of how a nation’s interests often override basic human behavior. In the formative years, India made the mistake of pushing hard for democracy. Shunned thus by India, Myanmar fell into a Chinese embrace. Cooperation with the military regime of Myanmar can provide China access to both the Bay of Bengal and the Indian Ocean, not to mention South East Asia. Hence, in recent years, India’s call for democracy in Myanmar has been muted, to say the least.

It can be argued that the way to bring about change is not through isolationism but active engagement. Trade relations between Myanmar and India have been steadily growing and have reached the $1 billion mark. India is Myanmar’s fourth largest trading partner after Thailand, China and Singapore. India is Myanmar’s second largest export market after Thailand, accounting for 25% of its total exports.

Much of the transactions between the two countries have been at the governmental level in areas like agriculture, telecommunications, aviation and gas exploration. The Myanmar government is trying to entice Indian firms to invest in sectors like pharmaceuticals, cement, fertilizer, steel, IT and food processing. Indian firms are reluctant to invest, given the bitter experience they have had in Uganda and Fiji.

Whatever one’s reservations about the regime, the people of Myanmar deserve help. When we discuss other major problems confronting the world, we often find extreme poverty to be the root cause. What can be done?

· Improve multi-lateral trade; India can take the initiative by enhancing trade and bringing in its ambit products like bicycles and spare parts, life saving drugs, fertilizers, textiles, gold plated jewelry, fruits, pulses, tea, and gems. A significant requirement of pulses already comes from Myanmar whose 60% of total global supply is to India. Myanmar produces close to 100 million tons of tea annually. India can provide the technology to improve productivity. Myanmar is home to nine types of gems. Indian expertise in gem cutting and polishing can be harnessed to provide a boost to this industry.

· An agreement between the two designated banks – the United Bank of India and Myanmar Economic Bank, both having branches near the border would ensure smooth operations and lower payment and currency risks.

· There is a case for transport subsidies for both exporters and importers – these could be phased out over a period of time.

· Travel Documents need to be hassle-free and enable movement of people for bona-fide purposes.

· A road transport facility between the towns of Moreh and Mandalay can create opportunities for tourists from both countries.

Finally, we would do well to remember that people-to-people contact is a vital catalyst in bringing about any lasting change in the region. When suspicion looms large, very little can be accomplished. In fact, the mutual suspicion is a fertile breeding ground for illegal trade and insurgency. The world, through the United Nations, must engage the Myanmar regime in constructive dialogue without specifying pre-conditions. That probably is the best bet for a better quality of life for the people of Myanmar.