Democracy or dictatorship of consensus?

It was indeed a pleasure meeting and listening to you during the World Economic Forum, India Economic Summit 1999. The majority of the visitors share your views, but are not expressing themselves in public. Especially when you are working in India, being permanently around, one has to be careful with words. But nevertheless, it is good that the problems are called by their names.

With great interest and appreciation I have read your three articles and as far as it concerns the Indian situation: the democratic principles are killing all developments when it comes to economics, education, health-care and you just name every other sector. India is over-democratic. They require consensus on each and every subject, however, with a population of over 1 billion people, how can you ever reach consensus? The major hurdle is that the Indians are very proud of their“democracy”. The word is not correct, for India it is a “dictatorship of consensus”.

The words spoken by Atal Behari Vajpayee are promising, but within one week Cogentrix pulls the plug and stops the development of a mega power project. And that in a power starving nation. After seven years, $ 25 million in court cases and still nowhere close to anything, they decided to pull out of India. These actions send very wrong signals to investors.

The business community does not believe that India will change all that rapidly and only financially very strong companies with a kind of bulldozer tactic can succeed (Enron), but the question is: for how long? There are questions raised on the Power Purchase Agreement between Enron and Maharashtra State.

People are wondering why they have to pay Rs 3.45 per unit for power from Enron, whereas they pay Rs 0.70 per unit for power supplied by Tata Electrical. There is smoke in the air, and where there is smoke, there is fire. New court cases are in theoffing.

India is very well administered, but poorly managed. The very central organised economy is eating away into the income of the Centre. The majority of the PSU’s are loosing money like you wouldn’t believe. Tax deficit, oil pool deficit, states that are facing the bottomline of their financial, high expenditure for military hardware, this all makes the economical recovery very shaky. The government has to get their act together and impose some stiff measures to improve the financial situation.

Borrowing from the international market is falling into the debt trap. That is why the private investment in India is taking place very slowly and cautiously. Interest rates are very high in India. Projects on BOT, BOOT are very costly. The concession times rather short and return on investment is very difficult to predict. Paper has patience, but investors do not have patience. The Indian government should move away rapidly from an administrating government towards a managing government.

The IndianAdministrative Service (IAS), the top bureaucrats, should be replaced at the shortest possible notice with top managers. However, my great fear is that these steps will be strongly opposed by the administrative forces in India. It will touch the base, the fundamentals of their powers and they are not ready to give away those privileges.

The Centre should be only involved in the key issues of a government security, education, health-care, basic infrastructure, and the like.

There is much to do about the hype of information technology (IT) in India. What revolution are we talking about in a country where some 50 to 60 per cent of the population cannot read/write/lives below the poverty line? The IT revolution will take its time here in India. This country will remain for a very long time to come on their agricultural productions.

That is the basic element for the economy. The IT industry is having little impact on the majority of the population. Food production, that is the basic requirement. But all theproposals for improving the living conditions for the common man comes back to the basic issues: education and health-care.

I shall not touch the topic of corruption, that is all too well known about India. But it is a serious threat to the well being of mankind in India. The common man does not benefit from anything out of the corruption cases, as usual. To do away with all this, education and eradication of poverty are essential.

… But the major investments are coming from companies that do not require to go to the market for their money: Shell, Exxon Mobil, TotalFina, Unocal just to mention a few. Indian Oil is coming up with a new refinery in Paradip (East Coast, recently in the news because of the cyclone). The investments are linked with oil/gas/power generation.

Development of new ports is limited, due to the lack of cargo. With some modifications and improvement of production standard, the existing ports can handle more then two-fold the capacity they are doing presently. Here again, theoutdated laws from an over-democratic society is stopping all progress.

What to say on a labour force of 32,000 in Mumbai Port with only some 35 million tonne of cargo through out, of which a big portion is POL product?…

Ronnie’s Reply:
It is disheartening to learn that you maybe many others as well who know far more than me about India should share my concerns. Maybe you have the right approach; since democracy cannot and should not be replaced, India should find a system where the country can be managed and not just administered.

No human groupings, be they private or public, for profit or non-profit, can work without proper management. That is a simple fact that if it is not self evident, then Peter Drucker has told us about it. Leaders of the people, i.e. the government, should be elected democratically. Thereafter, those leaders must be allowed to manage the country. Too much checks and balances will get us nowhere.

Suffer a government for say four years and kick it out ifthe people want. But during the four years, let it do its job. Give the President the power to remove the government in the case of emergencies, and put the military under his control. This will prevent the Prime Minister from staying around if he is not re-elected. Without such commonsensical measures, democracy does not work. Indians should also be proud of their democracy, but should also be ashamed of their poverty. How to find a middle ground will test the true wisdom of the Indians.

By all means do not change India’s democratic system, but please change certain structures of the government so it works. If not, India will be mired in poverty for many more years to come. Do Indians recognise that there are structural problems which must be corrected if the economy were to take off? Any thoughts?

(Ronnie Chan heads the Hang Lung Development Company in Hong Kong, and was a key panelist in the recently concluded India Economic Summit)