In China, India, and Indonesia media confront corruption
Asian Roundup -- What's an honest business to do but bribe?
Most of the world can honestly face the problem of rent seeking. Yet in the West, few are familiar with the term. Not noticing a problem makes it hard to fix. Conversely, acknowledging deficiencies should mean the developing world is taking steps to correct them. We trim, blend, and append three 2009 articles from: (1) India Times of Jan 9 on Satyam by the editors; (2) Asia Times of Jan 10 on China’s rulers by Willy Wo-Lap Lam; and (3) Jakarta Globe of Jan 13 on Indonesian mining by Mita Valina Liem. Willy Lam, a Senior Fellow at The Jamestown Foundation, is the author of Chinese Politics in the Hu Jintao Era: New Leaders, New Challenges.
by editors and by Lam and by Liem
India Times: Satyam's LieWhen Chairman B Ramalinga Raju admitted Satyam Computers had for years inflated revenue figures, the software giant's stocks crashed 91 per cent. India’s Sensex tumbled and the rupee fell. The New York Stock Exchange put a trading bar on the firm.
Satyam reportedly began cooking its books after it began speculating in real estate. Promise of high returns in the city of Hyderabad may have lured Satyam to shift from its core competence in IT to land deals. It is necessary to expose the web of deceit that Satyam promoters and their political patrons spun.
A supporting cast enabled Raju's rise to prominence. His closeness to powerful politicians helped him gain legitimacy in business circles and policymakers. Former chief minister Chandrababu Naidu paraded Raju as the poster boy of IT before visiting state heads including Bill Clinton. Naidu's successor, Y Rajasekhara Reddy, backed Raju even after he generated controversy.
Indians perceive that the public sector is rent-seeking and venal. After Satyam, it appears true of the private sector, too.
A 2007 study on fraud's impact on international business by Kroll, the world's leading risk consulting company, found that four of five global firms faced in-house malpractice. But we can't relativize Satyam's criminal breach of trust by placing it in a global context. Corporate credibility is a foundational must for any emerging economy.
JJS: The role of land profiteering is not cited in the following but it is in many other news report since it spurs millions of Chinese to take to the streets. The following does echo the need for trustworthiness.
Asia Times: China's reluctance to reform
China’s President Hu Jintao is scheduled to deliver a keynote address at the Great Hall of the People later this month to celebrate the 30th anniversary of the reform era. Intellectuals and party cadres are taking advantage of the occasion to press for political liberalization.
Retired officials and senior academics are given more leeway by censors and state security agents to speak up. Among the most vociferous is economist Wu Jinglian, a one-time confidante of former premier Zhu Rongji. He estimated that rent seeking accounted for up to 30% of GDP. Wu complained that "building a country with rule of law" had yet to materialize. "A modern market economy needs to have the superstructure guarantees of constitutional government, democracy, and rule of law.”
Insiders, however, skip over broad reform in favor of internal reform. Peking University Politics Professor Yu Keping, deemed an advisor to Hu, while talking to China News Service, dwelled on the least controversial of the "reforms", eradicating corruption and allied economic crimes. "We should fight corruption at its roots," he told CNS. "More effort should be put on the selection and promotion of officials, putting limits on power, and [improving] the cadre responsibility system and policy transparency."
JJS: The below also fingers rent-seeking, while substituting minerals for urban locations as the source of revenue prized by major players.
Globe: Devil Is in the Details of New Mining Law
The new mining bill approved by the Indonesia’s House of Representatives on Dec 16 substitutes the old contract-of-work system with a new permits scheme. The new law also allows 20 years to exploit areas before extensions can be applied.
Industry players warn it could scare off investments in the sector. They argue the time is not long enough; big investors need more guarantees and long-term security. They say permitting works better in developed countries where bureaucracy is more streamlined and projects are not held up by rent seeking.
Hendra Sinadia, legal counsel at the Indonesian Mining Association, said that the old contract-of-work system had made regional governments feel left out. “The [centralized system] created a misapprehension in the [regions] that the revenues from coal were monopolized by the central government,” Hendra said.
Miners complained that regional governments were levying additional fees and taxes that miners had not agreed to in their contracts with the central government. These same problems could continue under the new mining law, they said.
However one big miner, Omar S. Anwar, Rio Tinto’s president director for Indonesia, noted the new law attempts to account for the interests of all mining stakeholders, including local governments and communities.
JJS: The way to cure corruption is to remove the inducement. That is, raise awareness of the social nature of the worth of Earth. Recover those values, by taxes or fees, and forgo taxing people’s efforts. Then instead of subsidizing (the rent-seekers, mainly), share those natural values. The policy is called geonomics and it has worked wherever tried.
Jeffery J. Smith runs the Forum on Geonomics.
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