Comparing corruption in India and Vietnam

My colleague David Pilling has written a great column in today's FT, arguing that, despite much hand-wringing, Indian companies are as much to blame for corruption as government officials.

India is said to grow at night while its government sleeps. The quip, beloved of Indian businessmen, is often invoked to rubbish a corrupt and incompetent state and to praise a supposedly heroic entrepreneurial class. But there is something wrong with this picture. In many sectors, Indian entrepreneurs make money not in spite of government interference, but precisely through colluding with a state that provides the land, licences and rent-seeking opportunities on which they thrive.

A number of Vietnamese contacts have persistently made the same point to me here: when it comes to corruption, it takes two to tango.

Many Western businesses are also guilty of double standards, criticising the dominance of the state in the economy, while themselves seeking patronage, licences and rents from the government.

Micro-credit bubbling over in South Asia?

Microfinance has been the in thing in the development world for quite some time, with Muhammad Yunus, who won the Nobel Peace Prize for setting up Grameen Bank, the man of the moment.

But an interesting piece in today's Wall Street Journal suggests that a microfinance bubble could be forming in India (the story is behind a paywall here but I've pasted the intro below).

The WSJ story seems to tally with what I heard when I was in Bangladesh back in June. One businessman who ran a charitable foundation told me that his organisation was having to move away from micro-credit provision because the market was so saturated.

While the idea behind microfinance was that it would provide poor entrepreneurs with access to much needed funding, in reality the rapid expansion of credit was driven by consumer spending on new TVs and mobile phones.

It's hard to argue that individual Bangladeshi or Indian farmers shouldn't be lent money to buy things that make their lives more enjoyable but we all know the risks of rapidly expanding credit to fund additional consumer spending.

RAMANAGARAM, India -- A credit crisis is brewing in "microfinance," the business of making the tiniest loans in the world.

Microlending fights poverty by helping poor people finance small businesses -- snack stalls, fruit trees, milk-producing buffaloes -- in slums and other places where it's tough to get a normal loan. But what began as a social experiment to aid the world's poorest has also shown it can turn a profit.

That has attracted private-equity funds and other foreign investors, who've poured billions of dollars over the past few years into microfinance world-wide. (See related article "For Global Investors, 'Microfinance' Funds Pay Off -- So Far" -- WSJ August 13, 2009.)

The result: Today in India, some poor neighborhoods are being "carpet-bombed" with loans, says Rajalaxmi Kamath, a researcher at the Indian Institute of Management Bangalore who studies the issue. In India, microloans outstanding grew 72% in the year ended March 31, 2008, totaling $1.24 billion, according to Sa-Dhan, an industry association in New Delhi.

"We fear a bubble," says Jacques Grivel of the Luxembourg-based Finethic, a $100 million investment fund that focuses on Latin America, Eastern Europe and Asia, though it has no exposure to India. "Too much money is chasing too few good candidates."

Iain Dale is wrong about Subhas Chandra Bose

Iain Dale is a prominent right-of-centre British political blogger whose musings I generally respect.

But he is wrong to condemn Labour MP Virendra Sharma purely for praising Subhas Chandra Bose, the leader of the Indian National Army, which fought alongside the Japanese and against the British in the Second World War.

Bose's legacy is clearly problematic but it is unfair to compare him to Nazi collaborators in Europe. He was an Indian nationalist at a time when his country remained under the colonial yoke of the British, not an anti-semitic, power-hungry Frenchman or Lithuanian desperate to jump into bed with Hitler and his murderous cohorts.

Bose's decision to join up with the Japanese appears to have been largely a pragmatic (if ultimately unsuccessful) one based on his estimation of the quickest path to independence for India.

Upon learning of Bose's death, Gandhi said that he was "undoubtedly a patriot, though misguided".

Iain serves up terms like "treachery" and "disgrace" but I think he would do well to get a more nuanced understanding of the INA and Bose (rather than just citing Wikipedia) before making such sweeping judgements.

Remember that many British officers and other officials abandoned the sinking ship that was colonial Malaya and Singapore as the Japanese advanced down the peninsula.

What loyalty did poorly-paid colonial troops who were the subject of institutional and personal racism of the most unpleasant kind owe to their colonial masters who had fled and left them at the mercy of the Japanese?

Many Indians held Bose and the INA in extremely high regard and the mass movement that coalesced around opposition to the post-war trials of INA officers undoubtedly helped to precipitate the British departure from India.

It is worth noting that even in Singapore, where the majority Chinese population suffered brutal treatment and massacres aplenty at the hands of the Japanese, there is a memorial to the dead of the INA in the old colonial centre of town.

History can be a powerful political tool but I feel that Iain does himself no favours by trying to generate Daily Mail-esque moral outrage over such a complex issue.

What the papers say, Bangladesh-style

To give you a flavour of what’s going on in Bangladesh, I thought I’d highlight some of the more interesting stories from the New Age, a local English-language paper.

• The clocks are going forward by one hour tonight in a move designed to ensure more daylight during business hours and reduce electricity – having experienced the incredibly frequent and frustrating rolling blackouts during my few days here, I agree that something needs to be done about the acute power shortage. However, I find it slightly disconcerting when governments start to mess with time.
• There is increasing opposition from the business community in Dhaka to the government’s plan to “whiten black money”, allowing the crooked and the corrupt to avoid legal sanctions if they fess up and pay tax on their ill-gotten gains, albeit at a lower rate than the normal income tax. Rouf Chowdhury, the industrialist I spoke to earlier this week, is one of the few open supporters of the amnesty. His view was basically that everybody is a little bit corrupt so it’s pointless having absolute standards.
• The New Age’s rather basic magazine supplement contained a good feature about a new extortion scam that is targeting Bangladesh’s many garment manufacturers. But, in a very Bangladeshi twist, instead of trying to force the manufacturers to hand over cash, the organized criminals are demanding jhoot, the material off-cuts that can be used to make mattresses and pillows. This is a serious business and those who refused to co-operate have received death-threats. It says a lot about a country when crime syndicates are willing to murder someone over a few bags of rags. The fact that there is a market for such products also says a lot about the resilience and ingenuity of the Bangladeshi people.
• The other story that caught my eye was the death of a cattle trader who was shot by an Indian border patrol, presumably while crossing between the two neighbours illegally. He was one of many that have met such a fate this year, in a sign of the persistent suspicion between these two nations. It’s a pretty extreme response to illegal border trade, of the kind that you’d expect from North Korea, not India.