Thursday, December 25, 2008

Hope Persists Amidst Gloom in Jinnah's Pakistan

Media reports from Pakistan often portray a picture of doom and gloom, with the IMF bailout of the economy, terrorist training camps, Islamic radicals, horrible governance, and corrupt and inept politicians making the headlines around the world. The adjective of "failed state" is often used to describe Pakistan. Is there more to the story than the big headlines? Is there hope for Pakistanis amidst the doom and gloom? On Quaid-e-Azam M.A. Jinnah's 132nd birthday today, I think there is. The telecommunication, information technology, higher education, media and the middle class progress started during Musharraf-Aziz years continues to have its impact on the country founded by the Quaid-e-Azam more the 61 years ago. Here are a few things I found posted by a fellow blogger on Tech Lahore blog:

1. Pakistan is the most connected country in South Asia, with the highest teledensity. The Internet penetration in Pakistan is at 10% versus 5% in India, according to ITU.
2. Pakistan’s communications costs are lower than any other country in the region.
3. Pakistan has the world’s largest biometric database (NADRA); this system (not the data) is now being provided to allied countries.
4. Pakistan has the world’s largest WiMAX network.
5. Pakistan has one of the world’s most aggressive Fiber-to-the-Home (FTTH) rollouts.
6. Pakistan has one of the highest rates of cellular connectivity growth in the world (According to PTA 2007’s report the rate of growth in Pakistan’s mobile sector is fourth highest in the world).
7. Pakistan was the winner of the 2007 GSM industry association award.
8. The US is importing UAVs designed and built in Pakistan to protect America’s borders.
9. With WLL (CDMA), WiMAX, GSM and FTTH, Pakistan is pretty much leading the pack in terms of diversity and breadth of connectivity.
10. According to Gartner, Pakistan is a “first category” offshoring location; this ranking has grown by leaps and bounds.
11. Pakistani companies won several awards at Asia’s APICTA startup/innovation conference and were considered the most “interesting” and cutting edge in Asia.
12. The world’s youngest Microsoft Certified Professional is a Pakistani and so is the world’s youngest Cisco CCNA professional.
13. Pakistani students excelled in MIT’s global software talent competition.
14. Citations of Pakistani scientific publications are rising sharply.
15. Over two dozen Pakistani scientists are working on the Large Hadron Collider; the grandest experiment in the history of Physics.

The Wall Street Journal did a story in September 2007 on Pakistan's start-up boom that said, "Scores of new businesses once unseen in Pakistan, from fitness studios to chic coffee shops to hair-transplant centers, are springing up in the wake of a dramatic economic expansion. As a result, new wealth and unprecedented consumer choice have become part of Pakistan's volatile social mix."

In the absence of any visionary and pro-active political leadership in the nation, Pakistan will likely continue to be heavily influenced by external factors and events in the foreseeable future. The change in Washington and potential change in Delhi in 2009 will likely have a far greater impact on Pakistan than anything Pakistani leaders say or do.

I am hopeful that people of Pakistan, especially the young entrepreneurial and the professional classes, will continue to do their best to help extend the positive legacies of Musharraf-Aziz years. I believe it can be safely said that the communications revolution (accompanied by dramatic growth in the vociferous electronic and new media) as well as a significant enlargement of the middle class in Pakistan helped sow the seeds of the end of arbitrary actions by President Musharraf. In other words, Musharraf pulled a Gorbachev (a la perestroika that unleashed uncontrolled energies) by enabling powerful resistance to his arbitrary rule. Some of these changes that Musharraf brought are durable and I hope will make our rulers more accountable. There will still be abuse of power but the media spotlight will hopefully shine brightly on it to the detriment of the abusers. Eventually there will be real participatory democracy to serve all Pakistanis with appropriate checks and balances imposed by a much larger and more powerful and aware middle class essential for true democratic governance in Pakistan, or anywhere else.

Here are two video clips of Pakistan's progress in the last few years:

Related Links:

Pakistan's Foreign Visitors Pleasantly Surprised

Start-ups Drive a Boom in Pakistan

Pakistan Conducting Research in Antartica

Pakistan's Telecom Boom

ITU Internet Data

NEDUET Progress Report 2008

Pakistani Entrepreneurs in Silicon Valley

Musharraf's Economic Legacy

Should Pakistanis be Proud of Their Country?

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Wednesday, December 24, 2008

Pakistan Exporting UAVs to America

By Noah Shachtman

America's killer drones are getting all the attention, in the fight against Pakistani militants. But Pakistan's military has plenty of unmanned aerial vehicles, or UAVs, too. And they're being used to spy on suspected insurgents, and listen in on their phone calls.

Since 2002, Pakistan has dramatically expanded its robotic fleet in the sky, Defense News reports. The Pakistani Air Force has two UAV squadrons -- and is looking to build up to six.

"Al-Qaida and Taliban fighters use not just mobile and satellite phones for communication, but also sophisticated military radios," Defense News notes. So companies like East West Infiniti are building SIGINT [signals intelligence] for small drones and robotic blimps, to capture those conversations. Designed for militaries unable to afford high-end, dedicated SIGINT platforms, East West's Whisper Watch system can detect and monitor electronic emissions up to 250 kilometers away and then retransmit to a ground station located out of harms way.

Karachi-based Integrated Dynamics actually exports its Border Eagle surveillance drone to the United States for border patrol duties. The company also makes drones the turbojet-powered Tornado decoy, which can fly up to 200 kilometers, and emit false radar signals to "confuse enemy air defenses into thinking they are attacking aircraft," Defense News says.

Note: Pakistani UAV gear were on display in November, at IDEAS, Pakistan's big military trade show.

Related Links:

Pakistan Manufacturing Humvees?

Can India Do a Lebanon?

India, Pakistan Oppose Cluster Bomb Ban

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Friday, December 19, 2008

Internet Outage--Undersea Cables Cut Yet Again

Internet and telephone traffic between Europe and the Middle East and Asia has been seriously disrupted since Friday when three major underwater data lines were cut in the Mediterranean, according to media reports.

The main damage is to the four submarine cables running across the Mediterranean and through the Suez Canal. The damaged cables include Sea Me We 4 and Sea Me We 3 lines, which connect countries between Singapore and France as well as the Flag FEA cable route, which stretches from the U.K. to Japan, a France Telecom spokeswoman told Network World. A fault was also reported on the GO submarine cable 130km off Sicily.

France Telecom isn't sure what caused the cut, she said. "We have two assumptions. The first is that it could be an underwater earthquake," she said. "Or it could be simply a ship in the area which has cut the cable." The BBC says that some seismic activity was reported near Malta, where the break apparently occurred, shortly before the cut was detected Friday morning. Ships dragging anchors are also known to have cut submarine cables in the past.

The telecom company listed 14 countries affected by the current problem. The Maldives are 100 percent down, followed by India, which has 82 percent disruption. Qatar, Djibouti and the United Arab Emirates were the next most widely affected areas with about 70 percent service interrupted. Disruptions for Saudi Arabia, Egypt and Pakistan range from 51 percent to 55 percent. It should be noted that the Internet penetration in Pakistan is about 10% versus 5% Internet penetration in India, according to ITU.

Here are the details of impact from outages reported by France Telecom:

* Saudi Arabia: 55% out of service
* Djibouti: 71% out of service
* Egypt: 52% out of service
* United Arab Emirates: 68% out of service
* India: 82% out of service
* Lebanon: 16% out of service
* Malaysia: 42% out of service
* Maldives: 100% out of service
* Pakistan: 51% out of service
* Qatar: 73% out of service
* Syria: 36% out of service
* Taiwan: 39% out of service
* Yemen: 38% out of service
* Zambia: 62% out of service

Pakistani blogger Masud Reza is reporting that PTCL ITI (Information Technology Infrastructure) is running at 25% reduced capacity. Internet users are experiencing high latency and a degraded service level resulting in extremely low speed on downloads.

TW1 also has the same issue. TW1 (Tansworld 1) relies mainly on the SMW4 western segment.

The impact of the cable cuts is being felt much more in India than its neighbors. For example, 82 percent of India's voice traffic capability to Europe was out of service early Friday, although that situation has now improved, according to reports.

A maintenance boat is en route to the site of the cut, but it will not get there until Monday, and it will take as many as two weeks for the situation to return to normal, according to France Telecom.

This is the second time this year that the Internet services have been disrupted in parts of the Middle East and Asia after damage to undersea cables in the Mediterranean. In January 2008, there was disruption to 70% of the nationwide network in Egypt, a government official told Reuters. There was also disruption in the United Arab Emirates (UAE), Kuwait and Saudi Arabia. India also suffered up to 60% disruption, a national industry body told Reuters news agency in January of this year. Pakistan was affected with TW1 customers suffering the most. PTCL switched its Internet traffic from SMW4 to SMW3.

Jonathan Wright - director of wholesale products at Interoute which manages part of the optical fibre network - told the BBC that the effects of the break would be felt for many days.

"This will grind economies to a halt for a short space of time," he told BBC "If you look at, say, local financial markets who trade with European and US markets, the speed at which they get live data will be compromised."

"If you think how quickly trades can be placed, if they are suffering from bad latency times, then by the time a trade is placed, the market may well have moved on."

"We've lost three out of four lines. If the fourth cable breaks, we're looking at a total blackout in the Middle East," said Mr Wright, according to BBC report.

"These three circuits account for 90% of the traffic and we're going to see more international phone calls dropping and a huge degradation in the quality of local internet," he added.

"Normally you would expect to see one major break per cable per year. With four you should have an insurance policy. For this to happen twice in one year, on the same cable, is a serious cause for concern."

A second subsea cable to Malta is currently being laid.

More redundancy, multiple routes and better undersea cable protection should be explored to prevent the continuing negative impact of the repeat damage to the undersea cables.

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Thursday, December 18, 2008

How Far Will Karachi Stocks Fall?

Monday's removal of an arbitrary floor of 9144 points on KSE-100 imposed Aug 27 has sent Karachi shares plunging 16.21% in the first four days of trading, with KSE-100 closing at 7,785.26 points on Thursday.

The government and the exchange had hoped to be able to put together a 20 billion rupee ($255 million) stabilization fund to support prices once the floor was removed. However, some participating institutions balked at putting money into a falling market. Also, the International Monetary Fund, which recently agreed to advance Pakistan $7.6 billion to help stabilize its economy, is against using government funds to bolster share prices, reports the Wall Street Journal.

"Foreign portfolio investors who may have faced a liquidity crunch due to global events will offload their holdings in Pakistan," said Farhan Mahmood, a research analyst at JS Global Securities.

The trading volume at KSE has surged more than 50 times since Monday to over 50 million share a day. It had been less than a million shares a day average since Aug 27, 2008.

The 49% drop in KSE-100 this year still compares favorably with Bombay's Sensex index fall of 55% so far in 2008. Since the KSE's movement of shares and the index is still restricted to a daily limit of 5% either way, it is likely to see further volatility in the remaining two weeks of this year, unless Pakistan's government is able to restore some confidence in the economy after the IMF bailout. If the KSE does continue its decline, however, it could create an opportunity for smart investors to pick up some good, healthy Pakistani blue chip companies' shares at deep discounts.

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Tuesday, December 16, 2008

Will IMF Bailout Hurt Average Pakistanis?

The International Monetary Fund (IMF) has approved a 23-month, US $7.6 billion loan to Pakistan in November to avert a severe current accounts deficit and Pakistan's debt default. On November 27, the IMF released to Islamabad a first installment of $3.1 billion, in it first "bailout" of an Asian country during the current world financial crisis.

Prior to this news, Pakistan's President Asif Ali Zardari knocked on many doors and begged unsuccessfully for billions of dollars in assistance for months from "Friends of Pakistan" (FOP), a group of countries including China, Saudi Arabia and the United States. This was part of an effort by Pakistan's new president to avoid going to the International Monetary Fund (IMF).

Why did the FOP decline to help? Why was Mr. Zardari trying to avoid an IMF bailout? Let's try and examine the answers to these two important questions being asked.

Friends of Pakistan:

Being friends, the FOP know a lot about Pakistan and Mr. Zardari. They have been watching Pakistani economy's return to the bad old days. While each of the friends genuinely wants to help in stabilizing Pakistan's economy, they have major concerns about the need for transparency and fiscal discipline before committing their money to help their friend. Given Mr. Zardari's reputation as Mr. Ten Percent, they are reluctant to write checks with no strings attached. In other words, they want to trust but verify, an objective that seems achievable if the IMF is involved in closely supervising Pakistan's budget, spending and economy.

Avoiding IMF:

Mr. Zardari has tried to avoid borrowing from the IMF for several reasons. For example, he does not want any one watching over his shoulders as he transacts business as usual. Another reason is that the IMF imposes tough conditions and budgetary restrictions that are usually unpopular and hurt the democratic government's chances of staying in power. The IMF makes the system of political patronage in a feudal society more difficult, if not impossible. Pakistanis have bitter memories of the IMF austerity programs implemented by the PPP and Pakistan Muslim League (Nawaz) governments in the late 1980s and 1990s. Fearing a hostile public reaction and not wanting to accept a further loss of Pakistani "sovereignty" under conditions where the US is routinely carrying out military operations within Pakistan, the PPP-led government long hesitated in seeking a loan from the IMF. Earlier, President Musharraf's government had ended Pakistan's dependence on IMF by economic reforms that created confidence in Pakistan's economy and brought significant foreign investments to Pakistan. That confidence has disappeared after Musharraf's departure from the scene.

IMF's Tough Conditions:

1. Pakistan's central bank must tighten money supply. In order to pave the way for the IMF loan, Pakistan's central bank raised its bank lending rate in early November by 2 percentage points to 15 percent and the state bank has let it be known that a further 1.5 percentage point hike will be implemented in January. The justification for such high interest rates is the high inflation rate in excess of 20% in Pakistan, mainly due to high food and energy prices. Removal of subsidies is making it worse, in spite of declining world oil prices. Tighter money supply will almost certainly hurt businesses, consumers and overall employment, forcing a major recession. According to an Asia Times Online report, Anjum Nisar, the president of the Karachi Chamber of Commerce and Industry, has said, "Pakistan's industrial landscape may soon be marked with dead and sick units and there will be massive unemployment because of the devastating impact on businesses of the higher cost of bank loans arising from the interest rate increase." The liquidity crunch resulting from IMF's tough conditions will turn the already precarious situation of Pakistan's poor daily wage earners into a disaster. Increase in hunger and poverty will hurt Pakistani government's ability to fight Islamist insurgency and maintain peace and stability.

2. Pakistan government must cut spending and raise taxes. The IMF economic stabilization package calls for the government's annual budget deficit to "be reduced from 7.4 percent of GDP in 2007/2008 (July-June) to 4.2 percent in 2008/2009 and 3.3 percent in 2009/2010." The IMF added, "This fiscal adjustment will be achieved primarily by phasing out energy subsidies, better prioritizing development spending, and implementing strong tax policy and administration measures." This condition will also lead to a deep and prolonged recession in Pakistan.

3. The IMF wants Pakistan to raise tax revenue from the present 10 percent of gross domestic product (GDP) to 15 percent by 2013. Neighboring India's total tax revenue, including levies on income, imports and sales, also amounts to less than 10 percent of GDP now. In China, the figure is 20 percent, and among the members of the Organization for Economic Cooperation and Development it averaged 37 percent in 2001. As part of a plan to increase tax revenue, the IMF is pressing Pakistan for the introduction of a tax on agricultural income. Pakistan's large landowners have tenaciously resisted such proposals in the past. Should Islamabad ultimately impose a tax on agricultural income, it will only be after a bitter struggle within the Pakistani feudal ruling class over how to design it to be regressive to make small producers bear a disproportionate share of the tax burden.

4. IMF does not require defense spending cuts, further exacerbating the economic impact on ordinary citizens. The IMF, which is controlled by the US and other western powers, made no demands for cuts to Pakistan's massive military budget. Juan Carlos Di Tata, IMF senior special adviser for the Middle East and Central Asia, expressed concern about the rise in Pakistan's defense spending, but then added that the question of Pakistan's military expenditure had been excluded from the bank's negotiations with the country's Pakistan People's Party-led coalition government. "The issue of defense spending was not discussed during the program negotiations," said Di Tata. "Defense spending is basically an item that was determined by the government and included in the budget projections for this fiscal year. There was no discussion of this topic."

What's Next:

According to the IMF, even after last month's IMF loan, Pakistan will need another $20 billion "to get control over its imbalances." The FOP are scheduled to meet January 13-16 to decide on additional non-IMF assistance to Pakistan. Most likely, they will want IMF to continue supervising Pakistan's economy as a condition for their assistance.

While the US economic revival is planned with multiple stimulus packages, near-zero interest rates and tax cuts to increase liquidity for government, business and consumer spending, it seems the IMF prescription for Pakistan is quite the reverse. It is a basic economic fact that raising taxes does not increase revenue during a slowdown. Rather than close the budget gap, attempts to raise revenue cause a downward economic spiral. Instead of softening the impact on businesses and consumers, the austerity measures will clearly hurt the average and poor Pakistanis disproportionately and cause a great deal of suffering leading to greater political instability in the country. An unstable Pakistan is in no one's interest. But,what is good for the goose is apparently not good for the gander, according to the IMF's perverse logic.

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Monday, December 15, 2008

Kashmir Holds Key to Peace and Prosperity in South Asia

"India is not scared of the guns here in Kashmir -- it has a thousand times more guns. What it is scared of is people coming out in the streets, people seeing the power of nonviolent struggle," says the senior leader of the moderate wing of Kashmir's main separatist alliance, Hurriyat, and a key organizer of the civil disobedience campaign that began earlier this year, filling the air with chants of azadi. The number of armed attacks in the valley, meanwhile, has dropped to its lowest since the insurgency began in 1989, according to Indian officials.

How has India responded to the the peaceful movement for freedom in Kashmir? Not recognizing the reality of change on the ground, the Indian government has attempted to demonize the struggle as LeT led terrorism. Beyond that, it has continued to use force against unarmed, peaceful civilian protesters on the streets of Kashmir. Wall Street Journal reports the current situation in Kashmir as follows: Indian troops often resorted to lethal force, killing more than 50 Kashmiri civilians. Scores of protesters and separatist politicians have been thrown behind bars or placed under house arrest. Indian officials say these detentions are necessary to preserve public peace, and that the troops have to use force to maintain law and order. Some half a million Indian soldiers and policemen remain deployed in the Indian-administered part of Jammu and Kashmir, home to 10 million people. (About 5 million people live in Pakistani-held Kashmir.) Indian laws grant troops in Kashmir almost total immunity from prosecution, including in cases of civilian deaths. Srinagar, once India's prime tourist destination, is dotted by checkpoints, its indoor stadium, cinemas and hotels surrounded by sandbags and converted into military camps. Broadcast media are censored....As Kashmir descended into chaos after these killings of innocent civilian demonstrators, India responded with increasingly severe curfews and lockdowns that continue. Often they come without prior warning or formal announcement, as in Srinagar over the past weekend.

The events in Mumbai and the media spotlight on terrorism have obscured the reality of the 60-year peaceful struggle of Kashmiris ignored by the media and dismissed by India as Pakistan-backed terror in the Srinagar Valley.

In spite of the Indian government's efforts to mislead the world about the reality of Kashmir, there are some members of the media such as Yaroslav Trofimov of Wall Street Journal and activists like Arundhati Roy have made their efforts to help keep the Kashmiri freedom flame burning. Roy wrote recently for the Guardian newspaper as follows: Not surprisingly, the voice that the government of India has tried so hard to silence in Kashmir has massed into a deafening roar. Raised in a playground of army camps, checkpoints, and bunkers, with screams from torture chambers for a soundtrack, the young generation has suddenly discovered the power of mass protest, and above all, the dignity of being able to straighten their shoulders and speak for themselves, represent themselves. For them it is nothing short of an epiphany. Not even the fear of death seems to hold them back. And once that fear has gone, of what use is the largest or second largest army in the world?

Last 4 years in South Asia saw Pakistan ready to settle the Kashmir issue with no positive results due to the lack of any sense of urgency by India. With armed Muslim groups in Kashmir dormant since the post-2004 thaw and President Musharraf of Pakistan eager to make concessions, the world has seen an era of relative peace in Kashmir which appears close to shattering again. It is clearly a missed opportunity in South Asia.

In the context of Pakistan's anti-American public opinion, the country's ongoing crises, and the growing US demands on Pakistan, the future of US-Pakistan relations and the chances of success in the "war on terror" do not look particularly bright. The only solution to this darkening mood in both nations is a serious and sincere effort by each to improve their bilateral relationship based on a recognition of mutual interests and genuine needs. The incoming Obama administration has an opportunity to change the US tone with Pakistan in January 2009 to make the friendship genuine and useful to both partners in the war on terror. Barack Obama's oft-repeated position that Kashmir and India-Pakistan relations can not be isolated from the "war on terror" in Afghanistan, Pakistan and elsewhere in the world offers a good starting point for discussion.

As long as the Kashmir issue remains unresolved, Pakistan, India and the US can not win the "war on terror" and bring peace and stability to the South Asian region, including Afghanistan. Recent Mumbai attacks and the ostensible Kashmir link via LeT have confirmed that yet again. India's opposition to Mr. Obama's desire to mediate will test the Obama administration's resolve in seriously pursuing resolution of Kashmir.

Here is a comprehensive video on the origins of Kashmir dispute and the positions of various parties as presented by Pakistani Peace Activist Dr. Pervez Hoodbhoy:

Related Links:

Obama's South Asia Policy

Military Occupation of Kashmir

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Sunday, December 14, 2008

India's War on Hunger Takes a Back Seat

Calls to "do a Lebanon" to fight terror are being made vociferously by the Indian media as they have focused the national and international attention on Mumbai terrorist attacks that targeted two opulent hotels and a small Jewish center in India's financial capital. The need for war on poverty and hunger has never succeeded in getting the kind of media spotlight in India that now shines on the urge to punish Pakistan for its alleged misdeeds in Mumbai. Meanwhile, the daily death and injury toll from widespread hunger in India continues to be much higher than the tragic results of the murder and mayhem in Mumbai.

Indian author Arundhati Roy recently brought attention to the tale of two Indias and India's real problems in an OpEd piece for the Guardian newspaper in the following words: "On a day when the newspapers were full of moving obituaries by beautiful people about the hotel rooms they had stayed in, the gourmet restaurants they loved (ironically one was called Kandahar), and the staff who served them, a small box on the top left-hand corner in the inner pages of a national newspaper (sponsored by a pizza company I think) said "Hungry, kya?" (Hungry eh?). It then, with the best of intentions I'm sure, informed its readers that on the international hunger index, India ranked below Sudan and Somalia. But of course this isn't that war. That one's still being fought in the Dalit bastis of our villages, on the banks of the Narmada and the Koel Karo rivers; in the rubber estate in Chengara; in the villages of Nandigram, Singur, Chattisgarh, Jharkhand, Orissa, Lalgarh in West Bengal and the slums and shantytowns of our gigantic cities."

Ms. Roy was referring to the hunger index published each year by the Washington-based International Food Policy Research Institute to rank countries based on three leading indicators - prevalence of child malnutrition, rate of child mortality, and the proportion of people who are calorie deficient. India ranks 66th on the 2008 Global Hunger Index of 88 countries while Pakistan is slightly better at 61 and Bangladesh slightly worse at 70.

Indian media's headlines about the newly-minted Indian billionaires need to bring sharper focus on the growing rich-poor gap in India. On its inside pages, The Times of India has reported Communist Party leader Sitaram Yechury's as saying that "on the one hand, 36 Indian billionaires constituted 25% of India’s GDP while on the other, 70% of Indians had to do with Rs 20 a day". "A farmer commits suicide every 30 minutes. The gap between the two Indias is widening," he said.

"The major threat of hunger is in 33 countries including India," the IFRI report said, adding that rising food prices pose serious threats for malnourished people in these regions. The report calculated hunger levels for 17 major states in India, representing more than 95 percent of the population. Twelve states fall into the ‘alarming’ category and Madhya Pradesh was reported to have an ‘extremely alarming’ level of hunger. Four states — Punjab, Kerala, Haryana and Assam — fell in the 'serious' category. "Affluent" Gujarat, 13th on the Indian list is below Haiti, ranked 69. The authors said India's poor performance was primarily due to its relatively high levels of child malnutrition and under-nourishment resulting from calorie deficient diets.

"Despite years of robust economic growth, India scored worse than nearly 25 sub-Saharan African countries and all of South Asia, except Bangladesh," the report says.

Can the two major South Asian neighbors get their priorities straight to end terror and mutual conflict to focus on fighting hunger and poverty? I am hoping and praying that they do.

Related Links:

21st Century Challenges for Resurgent India

Mumbai's Economic Impact

India's Republic of Hunger

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Wednesday, December 10, 2008

Corruption in America, South Asia

When Barack Obama was elected president, Governor Blagojevich of Illinois saw opportunity in the vacancy created in the U.S. Senate. "I've got this thing and it's f------ golden, and uh, uh, I'm just not giving it up for f------ nothing," he allegedly said, according to U.S. Atty. Patrick Fitzgerald of Chicago. Fitzgerald has the governor's recorded conversations demanding $500,000 to a million dollars to sell the senate seat.

How ironic! The governor of a major American state that is sending its senator to the White House as president got charged with massive corruption on Dec 9, 2008, the day designated as International Anti-Corruption Day by the United Nations.

This latest corruption scandal in the United States confirms that corruption exists in all parts of the world to varying degrees, including the industrialized world. However, this report also illustrates that, unlike Pakistan and many other less developed countries, there is greater accountability in the West for the people in power. Official corruption is almost universal but the extent of corruption and the strength of anti-corruption enforcement measures vary widely. It is not the constitution or the laws on the books that make a difference; it's the independence of the career civil servants and the judiciary that differentiates the US system from what is observed in Pakistan and other developing nations. The US attorneys, for example, pursue investigations and prosecutions independently of the politicians who appoint them. The judges are appointed for life and they do not take dictation from politicians and their appointees either.

At the time of the recent India-US nuclear deal approval, members of India's parliament, including convicts released on parole, were offered all kinds of incentives to vote in a certain way. Both the government and the opposition tried desperately to entice them with promises of largess, influence and plum jobs in return for their vote. The BJP opposition, however, could not match the resources of the governing Congress party and the deal was approved.

There have been significant bribery allegations involving Indian politicians and officials and corporations such as Bofors, Enron and Xerox. The Swedish firm Bofors AB allegedly paid Rs.640 million ($13 million) in bribes to middlemen to get the contracts for the deal signed in 1986. Nearly a decade later, Enron India spent US$ 20 million in "educating" Indian bureaucrats about the role of private companies in power generation, an euphemism for bribes. Two telecommunications companies, Essar and Swisscom, were alleged to have paid a former minister, Sukh Ram, a hefty amount during early 1996 to help change the original license conditions, which it had signed with the Department of Telecommunications. Except Bofors, none have been prosecuted to any extent. Meanwhile, India's spending on defense procurement and infrastructure spending involving foreign companies has increased several fold without much scrutiny of how the deals are made.

Not only is there lack of accountability in the developing nations, it seems that corrupt politicians such as Pakistan's President Zardari, widely known as Mr. Ten Percent, get rewarded with high offices by the illiterate electorate living in a feudal society, with the assistance of amnesties arranged by the United States. It is what President Bush often describes as "soft bigotry of low expectations" when the West pushes for the pardon of corrupt politicians in countries such as Pakistan, in clear violation of the UN Conventions against Corruption. What is worse, such policies of condoning corruption are pursued in the name of promoting democracy in the third world.

The behavior of condoning corruption in the third world extends to the private sector as well, with American and European companies routinely engaging in bribery in Africa, Middle East and Asia. For example, Forbes reported last year on Siemens involvement in bribery in the developing world as follows: "The World Bank is looking at an electrical power plant project in Pakistan concluded in the mid-1990s, which was built and later partially maintained by Siemens and financed by the World Bank. The World Bank is concerned that Siemens' costs for the project may have been overpriced.Siemens is currently engulfed in a slush-fund scandal, in which prosecutors allege that managers siphoned off hundreds of millions of euros in company money to obtain foreign contracts.Siemens' own internal investigation uncovered 420 mln euros in suspicious payments going back to 1999 which may have been made to obtain telecommunications equipment contracts in a range of foreign countries. The Bavarian State Prosecutors office has said the sum is estimated in the triple-digit millions of euros." Subsequent to these reports, Daniel Noa, Siemens' top anti-corruption chief, stepped down after only six months at the company, with little explanation given.

There have also been reports from Munich about Siemens pleading guilty to bribing politicians and officials in Nigeria, Russia and Libya. Last month, Siemens said it would take a charge of about 1 billion euros ($1.29 billion) this fiscal year as part of a settlement of bribery investigations by authorities in Germany and the United States.I believe such reports represent only the tip of the iceberg of corruption involving Western multi-nationals and politicians and officials in developing nations.

There are definitely laws on the books in the West such as the Foreign Corrupt Practices Act (FCPA) in the United States. Almost all ethics classes taught in the Western management schools and company training courses cover this topic. However, the question is whether these laws are really enforced and how often are the companies held accountable? Or do they simply rely on the foreign governments to report misbehavior? It would be a fantasy to expect the officials and politicians on the receiving end to report incidents of bribery as they are the main beneficiaries. But I think the German, French, US, British and other governments of developed nations who claim higher moral positions should be cracking down on these reprehensible practices just to enforce their own laws and live up to their own higher standards. While it may be argued and it is like putting the shoe on the wrong foot, I see it as the only hope we have of containing such widespread corruption in developing nations that is robbing their people blind.

Related Links:

Corruption in Pakistan

Transparency International Survey 2007

Is Siemens Guilty?

Zardari Corruption Probe

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Saturday, December 6, 2008

Social Media: Blessing or Curse?

Of the two recent studies making headlines this week, one brings good news and the other warns of grave risks.

The good news first: New research shows that in a social network, happiness spreads among people up to three degrees removed from one another. That means when you feel happy, a friend of a friend of a friend has a slightly higher likelihood of feeling happy too. And the more connected you are to happy people, the happier you feel.

"We get this chain reaction in happiness that I think increases the stakes in terms of us trying to shape our own moods to make sure we have a positive impact on people we know and love," explains Professor James Fowler, co-author of the study and professor of political science at the University of California in San Diego.

"We've known for some time that social relationships are the best predictor of human happiness, and this (latest study) shows that the effect is much more powerful than anyone realized," Daniel Gilbert, professor of psychology at Harvard told CNN. "It is sometimes said that you can't be happier than your least happy child. It is truly amazing to discover that when you replace the word 'child' with 'best friend's neighbor's uncle,' the sentence is still true."

Earlier this year, President-elect Barack Obama's campaign rewrote the rules of successful presidential election campaigning as it embraced social networking and Web 2.0 technologies to reach out to young American voters across the nation. The dramatic success of the Obama campaign in fundraising and energizing young, affluent voters and on college campuses has been quite phenomenal. Obama significantly outraised funds by at least two to one, to the tune of $750m in small contributions, and defeated the powerful Clinton Democratic machine as well as his Republican opponent John McCain.

While almost no one questions the power of social networking in transforming the lives of under-30 Americans, there are concerns being raised about the risks of social networking. As the membership of social networks and the users of social media applications such as Facebook, MySpace, and Orkut grow dramatically to hundreds of millions in the US, Europe, Asia and Latin America, it seems that this phenomenon is still in very early infancy in Pakistan. As of now, there are about 200,000 Pakistanis on Facebook, about 100,000 on Orkut, and a few thousand on MySpace. There are smaller social networks such as that have a few thousand Pakistani members as well. While bills itself as a Muslim social network, it seems primarily focused on match-making. Recently Naseeb has started a Pakistani job-search site as well. Pakistan's middle class is estimated to be about 25m people, larger than the population of several European countries and Australia. With such a large middle class population, only a small fraction is participating in the social networking phenomenon. The reasons cited for this minuscule participation include the lack of access to the PC and the Internet, lack of familiarity, and shyness standing in the way of appropriate public self-expression. While I acknowledge that these might be contributing factors, I believe the main factor is the lack of a socially and culturally appropriate content and welcoming environment that suits the Pakistani sensibility and taste. It is something hard to describe but it is something you know when you see it. A new social network called PakAlumni Worldwide has recently been launched to serve this exact need and to encourage Pakistanis to participate in larger numbers. It is still in its early days with about 800 members but growing rapidly. The membership includes a large number of Pakistanis living in the United States, Europe, the Middle East and various parts of Asia. The social connections made via PakAlumni can easily turn into business connections and help build support for important social causes. PakAlumni can also help bring the Pakistani diaspora together to grow closer and more prosperous and help Pakistan achieve greatness in the process while improving its civil society and image.

As to the risks involved in social media participation, a recent hoax on MySpace led to the suicide of a 13-year old girl in Missouri. Megan Meier thought she had made a new friend in cyberspace when a cute teenage boy named Josh contacted her on MySpace and began exchanging messages with her. Megan, who suffered from depression and attention deficit disorder, corresponded with Josh for more than a month before he abruptly ended their friendship, telling her he had heard she was cruel and told her "the world would be a better place without you".

Lately, IT executives in large corporations have expressed fears that employees using social networking sites may download viruses that wind up on their employer's computers or reveal information about themselves on the networking sites that compromises their employer's business secrets. To prevent such problems, some companies, including Intel, ban their workers' access to social networking sites. Not only do employees put their companies at risk, they also expose themselves to identity fraud. McAfee's list of top 12 Christmas scams this year warns that people on some social-networking sites have been receiving messages that say "You've got a new friend." When clicked, the messages downloads software that steals their financial information.

Social networks and social media applications are like any other powerful tools at our disposal. They can be extremely useful in connecting us to the world and increase our wealth and happiness, but they can also bring serious harm to the lives of young people who tend to be more open to sharing personal information with strangers or clicking on malicious links.

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