Blue Sky Analysis

creating something from nothing

Mumbai the rude giant

The Reader’s Digest Survey on courtesy behavior in 35 cities across the world has evoked very strong reactions.And why not? It turns travellers’ lore on its head to claim that New York is the most civil.And is that Mumbai at the bottom? Then where does Delhi stand? No doubt among the unmentionables ranked even below? Indians undoubtedly would contest that finding- can any city best Delhi at incivility and a general adversarial approach to others?

I would want to know the survey design – how were the sampled cities chosen, what kind of survey questionnaire was administered, what behavior was studied and how was the cross cultural validity taken care of? For instance Jakarta’s 43 over Singapore’s 42 is inexplicable.As is Bangkok’s 47 relative to Seoul’s 40.

Having lived in this part of the world for a short period and travelled some, I would want to contest the findings. Anthonette, a Filipino friend says that for months she felt intimidated by the Chinese food stalls in food courts in Singapore as they appeared to be rude beyond measure. Lately she has realised that Hokkein can be a very expressive language unlike the languid sing song of Pilipino. As is the case with the Koreans who seem to have a very abrupt cast to their words until you see the fact that they keep smiling very gently to bely the tones. The Indonesians other than the extremely gentle and beautiful Balinese also seem to be charmless at first sight.

Netizen Kamla Bhatt expressed shock over the ranking of Mumbai. Several Indian-tagged blogs have done their own ranking of the Indian cities and in general Lucknow, my present hometown comes out tops!! Cheers!

June 30, 2006 Posted by | Blogroll, GEOPOLITY, Globalization, India | 1 Comment

We don’t do enforcement anymore!

Enforcement has become distinctly unfashionable–the new governance mantra is all about voluntary compliance, user friendliness, providing value to customers and localized solutions.Undoubtedly, this is good news for everyone. Or is it?

Governance is not just development activities. The enforcement agencies like the tax agencies, drug control departments, stock market watchdogs, environmental agencies are all involved in the exercise of the coercive power of the state. As Malcolm Sparrow , guru of the current thinking on the regulatory craft puts it across, ” the core of their mission involves the imposition of duties.They deliver obligations rather than services.” True, they too deal with citizens, but the value they impart to the polity is not in terms of the ‘good’ or ‘bad’ that they do to individual citizens but the deterrence they provide to the prospective lawbreakers. Proper performance of their roles leads to the distinction that the state makes between compliance and non-compliance of law, rewarding one and punishing the other. Also true, that not all aspects of the enforcement agencies roles requires coercive power.Yet the core mission and the competency of regulatory bodies, say for example, the taxation departments, cannot comfortably sit within the customer- satisfaction paradigm being applied to governance.

When governments raid tax evaders, or forcibly inspect shipments or factories, revoke permissions, shut down trading establishments for illegal practices, customer satisfaction is the last thing they can think of. The state mandates the temporary seizure of the normal civil liberties of such individuals, of course, within reasonable scope. It is clear that the government cannot perform these roles to the satisfaction of the targeted individual.

The other kind of total disconnect between the new reforms in governance and their application in the enforcement agencies is that outcomes of agencies are to be used to evaluate performance. So far as the education or civil supplies, health or even disaster relief¬† functions are concerned it is easy to eveluate performenace. What performance can we measure for enforcement agencies unless we take into account the direct and indirect effects the actual enforcement action unleashed? A legitimate question might be that this condition¬† would lead to performance appraisal never getting measured. Not so, because there are specific measures available with enforcement agencies to calibrate the effects of intended action–needless to say such evaluation techniques cannot be a part of the Balance Score Card or NEV or the PSV models. As Prof Sparrow says, ‘enforcement is about delivering justice‘.

On a similar footing is the heavily borrowed(from the private sector) concept of making each office a revenue generating outfit. Impossible – where your revenues are dedicated to the government treasury and you are mere purveyors- there lies no control over what you generate.

What has really happened in this kind of an across-the-board adoption of soft governance reforms is that the effectiveness of enforcement agencies has decreased indubitably. I work for a taxation department where there is a sullenness at the new demands of the role. The chains of command have loosened , morale is down and there is no consistency between desired outcomes and available inputs. Almost the entire workforce agrees that the eclipse of the enforcement deterrence has affected compliance in regular functions as well.

I cannot emphasise enough that this is not a panegyric to the days of tough, arrogant enforcement .Reform was definitely needed but of a somewhat different nature.The present reform springs from the customer focus of the private markets.The truth is that the private sector has no equivalent of the regulatory functions of the government that it could even prepare a blueprint of requirements. As is remarked humorously, can we function to ‘delight the customer so that they come back for more?”

The most important value for the government esp the regulatory bodies, is not that of efficiency but that of effectiveness- of both role performance and proper targeting of activities. Whereas an effective but inefficient tax agency may still find some reasonableness in its existence, an ineffective but efficient agency should have no raison’d’etre.

Who can fashion this kind of reform? Seeing the operational requirements of enforcement agencies, only they themselves can ask the relevant questions and generate the answers to come up with the reinvention and not some consultant from the World Bank or OECD

June 29, 2006 Posted by | , democracy, ECONOMICS, GEOPOLITY, India, International economics, Markets and Government, Regulatory issues | 1 Comment

Stock Markets..all fall down…at the Wall Street?

The global financial markets are dancing in unison; the dance, of course, is led by the US market and the Federal Reserve. The extent of the responsiveness of all markets is quite uncanny. Since Feb till May 2006, it seemed the boom would not end-almost all over the world markets. And then, consequent to the slowing down of the US economy, the monetary tightening and structural considerations surrounding the US current account deficit (about 6 percent of the GDP), markets took a tumble. Which was fine. And then, markets everywhere took tumbles. To take a few examples with which I am most familiar, Indian markets lost 20% of their value. Bangkok, Manila and Singapore lost sharply. The Chinese economy is caught in an upward growth spiral, yet the Shanghai Composite Index and Shenzhen Composite Index managed to lose ground. As did Sydney and Wellington.

Then in the beginning of last week, as Wall Street gained, Asian markets made their strongest advance in weeks, with Indian stocks surging nearly 7 percent and markets in Japan and Hong Kong posting healthy gains. Singapore, Bangkok, Manila, Sydney, Wellington, Shanghai and Shenzhen all recovered and posted increase in value.

As analysts of some of these markets will point out, there were internal inconsistencies in that market, which needed correction. The market stocks prices of Indian companies had raced ahead of their fair valuations and the market was peopled by FIIs with the retail Indian domestic investor preferring to stay away in the last two years.

The Chinese stock markets have recorded very good growth this year in keeping with the expansionary trend of the economy; other than the inherent structural weaknesses of the stock marketsin China, there did not appear to be much reason for that market to take a tumble just then.

The Singapore economy as well had recorded very robust growth in the last quarter and clearly, the internals were in no danger. The Japanese economy too has been on the upswing after many years of the recessionary damp.

What I am getting at is that the reason for such skittles effect in all markets to the rising interest rate in the US economy is because of two factors;

a) Its a sentiment based on the psychological 'bear run' factor; not really based on the basics because the economies themselves have very strong growth credentials right now. So, the markets just seem to be mirroring the Wall St sentiment and reacting to the suggested incipient slowdown in the world's strongest economy.

b) The growth in the international markets in the last two years had been led by the increased global liquidity due to the low US interest rates with the domestic investors perhaps not raising their stakes in the domestic companies. It may mean that FIIs are selling locally as part of their global strategy to reduce exposure to emerging markets.

If so, the present fall of the markets will be really useful and beneficial for the domestic investors(a window of opportunity) of all markets as it will allow them to move in participate in the growth stories of their own economies. The fall will make it more attractive for long-term investors than the short term.

It also means that the patterns of movement in the world financial markets are theoretically consistent with a global recession but this drastic outcome is not reflected in current growth forecasts; in fact the prognosis is that economic activity is going to go up than down.

While markets may move in unison, economies will not.And it may serve markets to not ride the FII tiger and rely on the economic essentials they are supposed to reflect.

June 19, 2006 Posted by | Blogroll, ECONOMICS, GEOPOLITY, Globalization, India, International economics, International Relations, Markets and Government | 4 Comments

A philosophical look at the need to colonize space aka Stephen Hawking

Stephen Hawking has a few days back expressed despondency with the future of the world and has advocated that the only hope is to colonize space which according to him is a distinct technological possibility now.Several blogs have articaulted that they do not feel any great interest in such prescriptions as the present is more important and critical than the future. Some blogozens also express that they would not feel unduly saddened by the end of humanity a few generations away.

The end of humanity as a philosophical concept is unattached to any emotion of either sadness or joy–as these are essentially related to existence.That said, why should we not, at least, care about the fate of humanity even if removed by ten generations?There are a number of reasons for this concern- for instance when life was short and brutish (which it still is in many places) intergenerational coexistence was not a common experience.Life expectancy has improved so much that it is quite usual to be able to see one’s fourth generation by the end of one’s life.

Where I dont agree with Stephen Hawking is the fact that he wraps within his prescription a despondence regarding the world population as well as geopolitical concerns.Now some of us may well argue that failing geopolity and population are interlinked. However when a thinker of Stephen Hawking’s stature advocates that the next necessary steps in science and technology can only be space colonization ,to me it appears that there is a need for him to clarify why.Why is it necessary to to colonize space-does he perceive it as an escape from the problems of this earth or does he see it as an opportunity. if he is concerned with putting forward a Noah’s Ark kind of view, I would say he does a great disservice to a very large number of the present world citizens who devote their lives to so called hopeless causes- to return peace to areas where other citizens are pulling in the opposite directions.

We must remeber that essentially a Noah’s Ark concept accepts that not all people are worth saving and that the only worth saving are the “best”, who in any case are more likely to survive on their own.

June 15, 2006 Posted by | Blogroll, GEOPOLITY, research, technology | 5 Comments

Business is war? or peace?

A month back I was talking to a marketing guy from Oracle when he claimed that Apple was about to close its recently opened production facilities in India. It sounded quite impossible as the month before had witnessed a gala launch. The same guy predicted that outsourcing to India had already peaked and that there was nowhere else to go but down.

The world of info technology has now heard of the decision of Apple Computers to close down operations in India.Of course NASSCOM in India has quickly claimed that the scale of intended operations has not really affected the industry and that Apple does stand behind its third party outsourcing commitments, while the techie-blogs have gloated over the end of the party for India.The truth, I imagine, would lie somewhere in between.

I do not claim to be a party to the dispute nor do I know enough about the subject to present a succint analysis.What appears important is the extent of rapid change that a globalised and an interconnected world presents. The globalization of the industry has resulted in the movement of jobs and capital with such fluidity and ease that exit and entry barriers are no longer issues.

What would cause such movement? Virtually anything that may cause the business to suffer in the short and medium terms. For example, the reservation of jobs in private sector (medium term), an adverse taxation measure (short term); both could urge the movement of businesses.

Two issues emerge out of this; that businesses are no longer ready to tolerate teething troubles or accept delayed returns on investment; and that the economic-political-governance ecosystem of all businesss destinations will continuously nee to be assessed.

These are not novel ideas and already such attempts are underway. However when we analyse the business environment of any country, there are literally hundreds of parameters and situations that could be taken into calculations. Why should it not include proxy indicators such as gun control (as indicative of law compliance),or democratic participation of people in municipal processes(as a measure of responsibility quotient of populace) or premarital sexual couselling (as indicator of better future human resources) besides the more acceptable oil price, pollution index and health indicators. Agreed that no model will be completely foolproof but markets are going to need such modelling to be able to decide the risk managment of their investments.

From the perspective of the countries, such assessment would mean that there exist between countries competetition to ensure a suitable business environment – provided of course all countries give priority to attracting investment-which as is known, is not always the major concern of governments in many parts of the world. But even if some nations do align their activities to constituting a good business environment, it might be necessary for those countries to ease off self destructive behavior. So might such business environment assessment, very indirectly cause world peace -proponents of the 'market' would like us to believe so.

There is one bit of practical observation which one has to accept even in the midst of this theorizing – that the primary beneficiary of all this are going to be transational business organizations and not the hundreds of small entrepreneurs who are the biggest movers of the market.

Multinational Corporations in the oil, precious stones, cash crops and textile businesses have been responsible for causing some ofthe longest drawn out and bloodiest conflicts in the world – would it be possible to see such business interests ensure peace instead of war in the geopolity of the future?

June 14, 2006 Posted by | Blogroll, democracy, ECONOMICS, GEOPOLITY, Globalization, India, International economics, International Relations, Markets and Government, Politics, research | Leave a comment

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