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LATEST NEWS UPDATES | Next: Supply Side of Corruption by Arun Duggal

Next: Supply Side of Corruption by Arun Duggal

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published Published on Apr 28, 2011   modified Modified on Apr 28, 2011
Anna Hazare and the civil society won a crucial first battle in the war against corruption. There is a possibility that the Lokpal Bill could be passed by Parliament by August 15. However, that is by no means assured: a number of politicians, a part of section of political establishment and a section of bureaucracy will try to derail the Bill or dilute it so much that it is rendered ineffective. In fact, the financial stakes for them in perpetuating corruption are enormous. The war against corruption will be a tough and long, but it can be won. Effective Lokpal and Lok Ayuktas could transform the political and administrative landscape of India. They can give a clear message to criminal and crooked politicians that winning an election and becoming a minister is not a ticket to amass ill-gotten wealth with impunity. Media has played an active role in exposing many recent scams. The Supreme Court has been the leading light in the battle for improved governance , particularly through its oversight of the 2G probe and questioning the appointment of the Chief Vigilance Commissioner ( CVC )).

The early results are excellent , with many heads rolling. Importantly, Hazare has already highlighted the need for electoral finance reforms in order to clean up politics. There is a discussion about scraping the archaic laws and regulations that promote corruption. There is reason to hope. The focus so far has been largely on the demand side of corruption. Equally and perhaps more important is to control the supply side of corruption . In Hazare's civil society movement, the business community was conspicuous by its absence. In various scams and scandals, the business community has cut a sorry figure. In the 2G auction in 2008, 16 major telecom companies were eliminated. CBI alleges that this was due to "criminal conspiracy and criminal misconduct orchestrated by minister Raja and telecom ministry officials in collusion with eight company officials who won the licences" .

What is most surprising is that none of the 16 companies unjustly eliminated took the matter to the court. It was a PIL that exposed this corruption over a year later. Why? Is the business so deeply mired in promoting and financing corruption that no one dares to protest even if they are hurt by corruption and bribery? I do not think so; it is the 80:20 rule at work - 80% of corruption and bribery is orchestrated by 20% of corrupt companies. These companies use corruption as a business strategy to get competitive advantage and exceptional return on their investments (bribe). They finance elections , orchestrate appointment of pliable ministers, ensure bureaucrats beholden to them get powerful positions and exercise control over much of the media. On the other hand, a vast majority of companies are victims of corruption that distorts the business and competitive environment and acts as an additional tax on business. Some of these companies do pay bribes to protect their interests, but with resentment.

However, the mainstream business establishment is not motivated or brave enough to take on the major corrupt companies. Challenging corrupt companies - that is, the supply side - will be even harder than to fight corrupt politicians and bureaucrats, that is, the demand side of corruption. The reason is explained by the economics of corruption. Let us assume that in the 2G scam, the telecom minister made Rs 200 crore and perhaps bureaucrats involved made Rs 20 crore. There is a clear indication that corrupt businesses involved made several thousand crores, several in bribery. Corruption and bribery for these companies is a very lucrative investment. They are the ones who have siphoned of a large portion of India's wealth in offshore accounts of their promoters and crooked politicians and bureaucrats.

The Economic Times, 28 April, 2011, http://economictimes.indiatimes.com/opinion/comments-analysis/next-supply-side-of-corruption/articleshow/8104837.cms


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