"Hotel Kandhamal": From Rwanda to Orissa

In a country whose secular fibre is slowly deteriorating, the Khandamal district of Orissa has emerged as a new battleground for religious conflagaration. Ethnic conflict has broken out between the “converted” Christian Panas and the Hindu Kond castes. More than three-fourths of Kondhs are Hindus while 80 per cent of Panas are Christian converts. The British used Panas to collect Revenue from Kondh subjects. Thus, despite being a minority-19 per cent against 52 per cent Kondhs-they rose in status. A high proportion of Panas underwent conversion as it was looked upon favourably by the colonial master.s Now, an anti-Pana, anti-Christian crusade launched by the Kondhs threatens to take on proportions of a full-scale ethnic cleansing exercise a la Kosovo.
So, why does the title mention Rwanda? What could an Indian state and a war-torn African country possibly have in common? Well, in 1994, the majority Hutu launched a brutal ethnic cleansing campaign against the minority Tutsi community. In an eerie similarity to the Panas, the Tutsi were also a minority who were favoured by the ruling colonial power, Belgium to rule over the majority Hutu population. The policy of divide and rule by the British in Orissa and King Leopold in Rwanda becomes apparent.
The similarities don’t end here. In Khandamal, the Sangh Parivar banded all the Hindutva elements in the region under the RSS-VHP banner. In Rwanda, it was “Interahamwe”, the fundamentalist Hutu militant group. In Khandamal, the anti-conversion violence has driven many Pana youth to set up their own militias, similar to the rebel Tutsi RPF in Rwanda.
So, what is the key message that these similarities indicate? The inaction on part of the international community, especially French UN forces ( who are accused of actually aiding the Hutu offensive) resulted in large-scale killing with casualties ranging over 3,00,000 deaths. The events have been vividly described in the award-winning film, “Hotel Rwanda”. The Indian Government at the center seems to be toying with a similar idea by delaying the deployment of central forces (CRPF) despite repeated pleas by Orissa CM, Naveen Patnaik. The latter himself is accused of doing nothing to rein in his right-wing coalition supporters, the BJP from indulging in a Hutu-like offensive against the minority. He risks being portrayed by history as the second Romeo Dallaire, commander of the UN forces In Rwanda with good intentions but constrained actions that came too little too late.
One can only pray that we do no end up with a scenario that results in “Hotel Khandamal”

Press Note 1 : Give up the Ghost

BACKGROUND
“FIPB sets aside L&T objections clears former partner's plans” was the title of a headline news item in the 18thth December, 2008 issue of Business Standard. The article referred to the FIPB clearing investments in a wholly owned subsidiary by Ralf Schneider ignoring the objections by former Indian JV Partner, L&T. Naturally, one would wonder; what were these objections? FDI violations? Breach of contract? Tax evasion? And the answer, as is often the case in Indian company law, is obviously nothing so rational. The objections were based on Press Note-1, an archaic legislative relic (to be fair, the original was Press Note-18) purportedly to protect Indian companies in JVs with foreign companies from competition with the partner once the JV falls apart/expires
Press Note 1 is a guideline that requires foreign companies with joint ventures or technical partnerships in India to obtain a “no-objection certificate” from their Indian partners if they propose to set up the same or a similar line of business in India.
The term is “same or similar line of business in India” is critical because it restricts the provisions of NOC that were granted by the original more draconian Press Note 18 framed in 1998 wherein the Indian partner was given a wide mandate to prevent nearly any new investment by the foreign partner by refusing to grant the NOC.
In April 2005, Press Note 18 was scrapped and Press Note 1 which significantly diluted the earlier provisions to create a more level playing field for foreign investors and was considered as a major step forward towards improving the investment climate. One of the salient futures of the amendment, hailed by most industry bodies was the acknowledgement that parties in joint ventures post the press note may safeguard their interests through contract by provision of “conflict of interest” clauses.
ISSUES
However, as is typical in most cases, attempts to plug the loopholes by partial measures (rather than scrapping the press note altogether) has now resulted in a new litany of disputes many of them based on interpreting whether the partner’s new line of business can be considered similar. The case mentioned at the start, L&T vs Ralf Schneider is based on similar grounds with the German partner arguing that Press Note 1 was not applicable because the partnership had purely been technical and not financial.
Such ambiguity continues to lead to disputes amongst Indian JV partners. The spat between the Wadias of Britannia and French FMCG major Danone over the latter’s investment in a wholly-owned subsidiary in India has been one of the most high profile cases in recent times where Press Note 1 was a major bone of contention.
Press Note 1 has often been used by unscrupulous Indian promoters to stall critical new investments by foreign partners with significant adverse impact on the investment climate of the country. Members of co-operative housing societies would be painfully aware of how the concept of issuing “NOC” in the Indian legislative setup is frequently misused to stall essential transactions, arm-twisting and rent-seeking behaviour by the entity that is granted this right.
ARGUMENTS
Of course, there will be continue to be the usual arguments from some sections of industry for retaining the provisions of Press Note 1; That foreign partners have control over technology and much bigger packets; that even if safeguard closes are built into the contract, prevention is better than cure (of what?) because MNCs can violate the agreement and afford to stall proceedings in expensive international arbitration unaffordable by most Indian partners; that FDI policy should take “national objectives” into account, etc, etc.
And yet, this same section of industry is not shy of hailing land-mark cross border transactions like Tata Corus, Tata JLR, Hindalco- Novelis, etc that showcase how Indian companies have started to “dominate the global scene”, how they are more than a match for MNCs in terms of “financial and other resources”, etc. Not to mention the righteous wave of indignation against the nationalist comments by Arcelor prior to the formation of Arcelor Mittal and terming it as colonial “thinking of the past” that has “no relevance in today’s globalized world”. Notice the self-contradiction by this section.
CONCLUSION
Along the lines of a changing global order, where Indian companies clearly can and must stand on their own feet, the arguments for retaining such a regressive piece of legislation are very feeble Indeed. At a time, when most economies are struggling to attract capital from foreign investors, India can ill-afford such legislative impediments to investment which would render the very credibility of investment stimulus measures by the Government suspect.
(The writer is employed with Avalon Consulting India. Views expressed are personal)
REFERENCES:
1) “FIPB sets aside L&T objections, clears former partner's plans”, Anandita Dey and Nevin John - Mumbai December 18,2008, Business Standard
2) “Should Press Note 1 be scrapped?”, Shishir Sharma - 25 July 2008, Economic Times
(The author is working with Avalon Consulting, Mumbai as a consultant. Views expressed are personal).

WTO World Cup: 7 finals but no winners

This would probably best sum up the (ever) continuing discussions on the Doha round of trade negotiations kicked off in 2001. It was heralded as the next big thing for bringing to the developing world, the benefits of globalization.To take the unfinished business of Uruguay in 1986 to its inevitable conclusion. In this period (2001-present), we have seen 2 foot ball and cricket world cups reach their inevitable conclusion. However, in the WTO world cup, even 7 finals (minsterials and related negotiations) later, other than the 2 teams (US and EU v/s India and the developing world) no one seems to know who will lift the grand prize. In fact, no one is sure anymore if we even have a prize at the end of this near decade long tournament. A recent editorial in DNA suggested that delegates will be just as clueless in 2009 and beyond.
But, wait a minute. Why this talk of one country winning over others? Isn’t that against the spirit of multilateral negotiations? Isn’t that against everything the WTO stands for? Obviously the founding fathers underestimated the political hot potato of agriculture subsidies in developed and developing countries alike. Countries on both sides of the north-south divide have dug in their heels. The WTO's 152 member states remain mired in an impasse over the Doha round, which has failed to make significant headway since it was first launched in the Qatari capital in 2001. Talks are stuck because of disagreements between rich and poor countries over the removal of subsidies and trade barriers for agricultural and industrial products.
ISSUES
The issues are manifold. America is the highest-cost cotton producer in the world and yet the largest exporter. In 2005, US cotton farmers received $4 bn of subsidies for production worth $3 bn. Effectively, even if they sold their produce for free, they would have still made money. The effect on poor and marginal cotton farmers in Africa has been devastating. A similar story has played out in other commodities as well. The EU doesn’t have a better track record in this regard. Last year, under the CAP (Common Agricultural Policy), farmers in the EU, especially France and Germany received subsidies running into billions of Euros. Even if export subsidies are eliminated, domestic subsidies alone are more than sufficient to significantly distort the market against farmers from developing countries.
The current negotiations are hanging fire with the US and EU demanding their pound of flesh in the form of increased market access for industrial goods and services in developing countries in exchange for reductions in agricultural tariffs. The G-77 grouping of countries has alleged that the cuts offered are much too low on a very high base and frequently undone by America’s own domestic legislation. The Recent USD 209 Bn Farm bill is a case-in-point. Besides, any offers to increase market access for industrial goods and services must be matched by reciprocal gestures from the big 2 (US and EU). The latter (services) is of special significance for India’s IT/ITES industry. However, the possibility of the same happening is slim.

IMPLICATIONS & CONCLUSION
The failure in implementing the Doha agenda has raised serious questions about the relevance and effectiveness of multilateral trade institutions. While one might consider if agriculture could be dropped from the negotiating table, the mandate of the WTO means any negotiation has to be a package deal. So, does this mean that India should abandon the multilateral framework that WTO offers? Not really. It should be noted that issues like reduction of agricultural tariffs and removal of trade-distorting subsidies cannot be achieved through bilateral negotiations. Then same is only possible with a multilateral framework. This might be the best and last opportunity to push for agricultural market access in the developed countries.
If not, expect the world’s longest tournament to continue indefinitely.
(The author is working with Avalon Consulting, Mumbai as a consultant. Views expressed are personal).