Tuesday’s massive rally by Hezbollah in Beirut in support of Syria’s continued presence in Lebanon has truly set the cat among the pigeons. In one single grand stroke it has nailed the talk doing the rounds that all of Lebanon wants Syria and its state apparatus out of the country. No one with an interest in Middle Eastern affairs can afford to shut their eyes to this reality. Therefore, it comes as no surprise that the Bush administration has, in a major foreign policy shift, signalled it was ready to accept Hezbollah as a player in mainstream politics in Lebanon, as was reported by The New York Times on Thursday. Though the US has officially denied it, ground realities dictate it is time the superpower recognised that Hezbollah is a huge political force in Lebanon that could block Western efforts to get Syria to withdraw its troops.
Conventional wisdom says that it is time the West encouraged the Shiite group to focus more on politics now with the elections around the corner, which is all the more important since Shias form the single largest community in the politically fragmented country. This is specially so since no one can ignore the situation in Lebanon where the divide seems to be steadily deepening between what is being termed the government’s ‘opponents’ and ‘loyalists’. The 1.5-million-strong show of strength indicated the magnitude of the support the loyalists’ enjoy. It also reflected the considerable support for the regime that appreciates Syria’s role since 1976 and showed that a large percentage of the population supports that role and opposes any attempt to belittle the role the Syrian army has played to maintain security and stability over the past 30 years.
This should be warning enough for the West, particularly for the US and Israel, not to try to re-kindle a sectarian war in Lebanon.
It also underscores the need for others to understand that there are forces in Lebanon that stand against foreign intervention, the internationalisation of the issue and substitution of Syrian forces by others. These factors should be taken into consideration by the external “well-wishers” while also remembering that finding the truth behind the assassination of Rafiq Hariri and those who were behind it would be in the interest of the regime, the opposition and Syria. Also, it is incumbent on the present rulers to consider political reforms because overlooking them could lead to more frustration, which in turn would mean wider resentment.
This is an editorial published in Oman Tribune
Tuesday, September 9, 2008
Murder in Beirut
The assassination of former Lebanese prime minister Rafik Al Harriri on Monday in a bomb blast follows the familiar cycle of violence that has earlier visited luminaries like president-elect Bashir Gemayal in 1982 and Druze leader Kemal Jumblatt in 1977 during the civil war that left the picturesque country a near-wasteland. With the end of the civil war hopes were high a new Lebanon would resurrect from the ashes of the fratricidal violence. Among those who foresaw a new country was Hariri who had a vision when he took power in 1992. But his optimism on his ability to resurrect Lebanon as a financial and tourism hub was tempered by the ground realities of the religiously divided land, which had been the staging post for regional dominance by powers such as Israel and Syria. And the result of this was very much in evidence even after the embers of the civil war died down.
Friction with Pro-Syria President Emile Lahoud curtailed Harriri’s efforts to handle Lebanon's debt that ballooned during the postwar reconstruction project he spearheaded. Added to this was the mounting number of battles he had to fight with Lahoud loyalists over privatisation and other cost-cutting plans. When Lebanon was on the brink of a financial crisis in 2002, Hariri successfully persuaded France to host an international summit of lenders who pledged enough cash to avert a meltdown of the economy. Hariri leaves behind a mixed legacy. His admirers saw him as the architect of the country's post-civil war reconstruction programme. For his detractors he was a spendthrift, whose administration dragged an already feeble economy deeper into debt and used sky-high interest rates to stabilise the Lebanese pound.
But now it is the time for all Lebanese to ponder where they go from here. Murder has been for too long used as a tool to settle scores with political rivals in Lebanon. The list of luminaries eliminated by rivals has been a long one not seen in any other country in the region in the recent past. That things have stooped to such a level only shows how much the protagonists are prepared to go to achieve their ends in this fractured land. It is now time all the parties involved in the political tug-of-war realised that there are certain red lines that has to be kept in mind in terms of acts of violence against anybody who is involved in the political arena. The earlier it is understood the better for the country or it will be soon back to the dog days of civil war. Surely no sane man will ever want to revisit those loony days again.
This is an editorial published in Oman Tribune
Friction with Pro-Syria President Emile Lahoud curtailed Harriri’s efforts to handle Lebanon's debt that ballooned during the postwar reconstruction project he spearheaded. Added to this was the mounting number of battles he had to fight with Lahoud loyalists over privatisation and other cost-cutting plans. When Lebanon was on the brink of a financial crisis in 2002, Hariri successfully persuaded France to host an international summit of lenders who pledged enough cash to avert a meltdown of the economy. Hariri leaves behind a mixed legacy. His admirers saw him as the architect of the country's post-civil war reconstruction programme. For his detractors he was a spendthrift, whose administration dragged an already feeble economy deeper into debt and used sky-high interest rates to stabilise the Lebanese pound.
But now it is the time for all Lebanese to ponder where they go from here. Murder has been for too long used as a tool to settle scores with political rivals in Lebanon. The list of luminaries eliminated by rivals has been a long one not seen in any other country in the region in the recent past. That things have stooped to such a level only shows how much the protagonists are prepared to go to achieve their ends in this fractured land. It is now time all the parties involved in the political tug-of-war realised that there are certain red lines that has to be kept in mind in terms of acts of violence against anybody who is involved in the political arena. The earlier it is understood the better for the country or it will be soon back to the dog days of civil war. Surely no sane man will ever want to revisit those loony days again.
This is an editorial published in Oman Tribune
Kerala’s curse
THE dismissal of rebel Congress party leader Muraleedharan from the party in the south Indian state of Kerala amounts to too little, too late. Politics in India has been a family business for a long time and this family business has mushroomed all over the country. Though this is a new phenomenon in Kerala, the one involving Muraleedharan, his octogenarian father Karunakaran, and sister Padamaja has rendered the state’s politics into a scatological drama with a pungent stench, leaving the hapless citizens to live through it noses shut. The stench emanating from the nauseating show had not only halted governance in the state but also had a ruinous effect on the party’s fortunes in last year’s national elections where it failed to win even a single seat. What surprises most is that the party took so long to crack the whip on nincompoops like Muraleedharan. But then, waffling and shuffling is nothing new to the Congress High Command.
Karunakaran and his offspring are yet to prove their claims of mass support through the democratic process. What they have done so far is to hold public meetings of substantial sizes in major cities, which amounts to nothing considering the role of money and muscle in politics and the availability of crowds for rent. Muraleedharan, who literally parachuted into Congress politics and leadership, thanks to his father’s unmatched clout a decade ago, has yet to show the spark that makes leaders out of ordinary men. That ill-gotten wealth and the shady world of mafia connections have helped nurture and sustain politicians in the state is an open secret. And in this Karunakaran and his children are not alone, they have the entire political spectrum in the state for company. Sadly, this has been accepted as inevitable, given the way politics is run in the country. But what makes the trio stand out in this squalor is their unbridled flaunting of hubris and excess in the face of the need for restraint in any civilised society.
Politics, it is said, is the art of the possible. But sadly in Kerala it is mostly people who fail to make it possible anywhere else who end up in politics. Kerala is not immune to India’s curse of the full-time politician. But one wonders why the state, which boasts of being the ‘most literate state’ (not the most educated!), has to endure such ‘leaders’. Maybe it is a reflection of the people’s unvarnished love for base politics. Therefore, it is no surprise they get the leaders they deserve.
This is an editorial published in Oman Tribune
Karunakaran and his offspring are yet to prove their claims of mass support through the democratic process. What they have done so far is to hold public meetings of substantial sizes in major cities, which amounts to nothing considering the role of money and muscle in politics and the availability of crowds for rent. Muraleedharan, who literally parachuted into Congress politics and leadership, thanks to his father’s unmatched clout a decade ago, has yet to show the spark that makes leaders out of ordinary men. That ill-gotten wealth and the shady world of mafia connections have helped nurture and sustain politicians in the state is an open secret. And in this Karunakaran and his children are not alone, they have the entire political spectrum in the state for company. Sadly, this has been accepted as inevitable, given the way politics is run in the country. But what makes the trio stand out in this squalor is their unbridled flaunting of hubris and excess in the face of the need for restraint in any civilised society.
Politics, it is said, is the art of the possible. But sadly in Kerala it is mostly people who fail to make it possible anywhere else who end up in politics. Kerala is not immune to India’s curse of the full-time politician. But one wonders why the state, which boasts of being the ‘most literate state’ (not the most educated!), has to endure such ‘leaders’. Maybe it is a reflection of the people’s unvarnished love for base politics. Therefore, it is no surprise they get the leaders they deserve.
This is an editorial published in Oman Tribune
Boiling oil
The inexorable rise of oil prices to stratospheric highs has brought a collective cheer to producing countries, more so to the producers in the Gulf. That prices could break free from gravity with such vehemence was something unthinkable even a few months back. And the results are there to see. Most of the oil majors in the region, who had budgeted for oil at around $18-$24 for this financial year, have seen massive surpluses – in short a ‘problem of plenty’. And with no likelihood of oil climbing down from its present $54 threshold the problem of plenty is going to stay for some time, particularly with the winter demand in the third quarter likely to push prices further into the $60-plus region.
Sounds too good to be true for the Gulf producers, who only till six years ago were groping in the dark to escape the double whammy of a low oil price of $9 and galloping fiscal deficits brought on by the cradle-to-grave welfare schemes in much of the region. It was with this backdrop that Saudi Crown Prince Abdullah then famously said: “The good old days of high oil prices are over and will never return.” That was one of the reasons that brought in fiscal tightening and disciple to many of the regional producers used to profligate public spending. Also, it brought to light the urgent need for more reforms, transparency and steps to move the economy from the vagaries of oil prices, over which most of the time the producers of the region had not much control. Though Opec tried to bring in a band to control prices over the commodity it was the traders and hedge funds operating out of London and New York who determined the prices. And it is now more true than ever.
But the flip side to this sweet story for the Gulf Cooperation Council countries could be something bitter if one were to go by experience. Volatile prices could impact government revenues and could prove to be big challenge to their fond hopes of putting in place a monetary union in place by 2010. Sharp swings in prices could torpedo efforts at reaching an economic-convergence regime and also efforts to police fiscal discipline. And since the countries are yet to find convergence on the issue of fiscal deficit one can only imagine what a prolonged volatility in oil prices can bring about.
This is an editorial published in Oman Tribune
Sounds too good to be true for the Gulf producers, who only till six years ago were groping in the dark to escape the double whammy of a low oil price of $9 and galloping fiscal deficits brought on by the cradle-to-grave welfare schemes in much of the region. It was with this backdrop that Saudi Crown Prince Abdullah then famously said: “The good old days of high oil prices are over and will never return.” That was one of the reasons that brought in fiscal tightening and disciple to many of the regional producers used to profligate public spending. Also, it brought to light the urgent need for more reforms, transparency and steps to move the economy from the vagaries of oil prices, over which most of the time the producers of the region had not much control. Though Opec tried to bring in a band to control prices over the commodity it was the traders and hedge funds operating out of London and New York who determined the prices. And it is now more true than ever.
But the flip side to this sweet story for the Gulf Cooperation Council countries could be something bitter if one were to go by experience. Volatile prices could impact government revenues and could prove to be big challenge to their fond hopes of putting in place a monetary union in place by 2010. Sharp swings in prices could torpedo efforts at reaching an economic-convergence regime and also efforts to police fiscal discipline. And since the countries are yet to find convergence on the issue of fiscal deficit one can only imagine what a prolonged volatility in oil prices can bring about.
This is an editorial published in Oman Tribune
Lacklustre show
Indian Finance Minister Palaniappan Chidamabaram, who presented the budget for 2006-07, has managed to please everyone by doing little. His government, which needs the support of the Left parties for survival, has pledged to raise spending on health, education and rural infrastructure while at the same time promising to aim at fiscal prudence. The corporate sector is breathing easy as no new tax has been introduced. The middle class is happy, for they can look forward to owning small cars, for which the taxes have been slashed, and some of the auto majors have already promised to pass on the benefits to the customers. But it looks like Chidamabaram was loath to mollycoddle the middle class too much. Hence the proposal to treat services and goods on an equal footing. This means an additional 10 per cent service tax on mobile bills. A service tax on ATM (automated teller machine) transactions is also very much possible.
The finance minister expects the country to maintain the growth momentum at 8.1 per cent this year and plans to raise that to 10 per cent in the coming years. This he thinks is the best way to raise his 260 million countrymen, a quarter of its billion-plus population, out of poverty in the continent-sized country. “I believe that growth is the best antidote to poverty," he said. But though the government has accepted that export-oriented growth, as has been seen in China, is the best way of spreading wealth among the poor, the finance minister has not made any far-sighted proposal on removing the impediments to the country’s emergence as an export powerhouse -- poor roads, congested ports and shortage of power. Instead, the coalition, which came to power in 2004 on a ticket of lifting the poor out of poverty, is doing something on that front now that elections in five states are around the quarter, which could pit the collation partners against each other. Hence the finance minister’s thrust on increasing education spending by 31.5 per cent, health by 22 per cent and boost spending on rural infrastructure projects to Rs186.96 billion.
The budget is also short of any reform proposals for the labour market. That will keep the Communists happy -- their bread-and- butter is unharmed -- who cares for good investment climate as long as the unions have their way? And the stock market is also happy, it was not expecting much anyway. Thankfully, this no-surprises budget does not have anything that could upset the natural growth momentum of the economy. That is small mercy in an election year.
This is an editorial published in Oman Tribune
The finance minister expects the country to maintain the growth momentum at 8.1 per cent this year and plans to raise that to 10 per cent in the coming years. This he thinks is the best way to raise his 260 million countrymen, a quarter of its billion-plus population, out of poverty in the continent-sized country. “I believe that growth is the best antidote to poverty," he said. But though the government has accepted that export-oriented growth, as has been seen in China, is the best way of spreading wealth among the poor, the finance minister has not made any far-sighted proposal on removing the impediments to the country’s emergence as an export powerhouse -- poor roads, congested ports and shortage of power. Instead, the coalition, which came to power in 2004 on a ticket of lifting the poor out of poverty, is doing something on that front now that elections in five states are around the quarter, which could pit the collation partners against each other. Hence the finance minister’s thrust on increasing education spending by 31.5 per cent, health by 22 per cent and boost spending on rural infrastructure projects to Rs186.96 billion.
The budget is also short of any reform proposals for the labour market. That will keep the Communists happy -- their bread-and- butter is unharmed -- who cares for good investment climate as long as the unions have their way? And the stock market is also happy, it was not expecting much anyway. Thankfully, this no-surprises budget does not have anything that could upset the natural growth momentum of the economy. That is small mercy in an election year.
This is an editorial published in Oman Tribune
Infrastructure ahoy
The Indian finance minister put it very succinctly while presenting the National Budget for 2005-06: “India is not a poor country. Yet a significant number of our people are poor." Chidambaram’s Budget lays out a broad blue print to combat many of the ills plaguing Asia’s third-largest economy – poor infrastructure, lax tax compliance, poverty, high tariffs and also to boost corporate governance. Given the fact that about 260 million Indians live below the poverty line it is only natural that one of the thrust areas of the Budget was eliminating poverty and to give to every citizen the opportunity to be educated, to learn a skill and to be gainfully employed. Even today, around two-thirds of the population is dependent on agriculture. This is only one reason why funding to build up the country's rural infrastructure was also high on the agenda. The more pressing reason is the sorry state of the country’s urban infrastructure, be it highways, ports or airports. That the budget proposes to do something concrete on this by using a portion of India's foreign exchange reserves, currently about $133 billion, IMF objections notwithstanding, to develop roads, ports, airports and tourism is indeed good. The importance of infrastructure for rapid economic development cannot be overstated, as the minister pointed out.
India’s $600-billion economy is targeted to grow 7-8 per cent in 2005-06, compared with 6.9 per cent in 2004-05. As part of the rationalisation of the tax structure, rates will to be restructured, with top rates on personal tax reduced. This is something that will be welcomed by the salaried class. On the whole the budget exercise looks balanced. It is aimed at boosting industrial growth and for this corporate tax rate for domestic firms has been cut to 33 per cent, which has cheered industry and helped push up share prices on the Bombay bourse. The Bombay share index rose 2.19 per cent to a new closing peak of 6,713.86 points post-Budget.
Going by the initial reactions of industry captains, the stock market and also the common man it looks the minister has done a pretty good job given the fact expectations were on the higher side. The focus on the poor by the Congress-led coalition supported by Left parties, which was voted into power last May, is only incidental and need not be seen as pandering to the Communists. Hopefully the budget would assist in reducing the numbers of the poor in the country.
This is an editorial published in Oman Tribune
India’s $600-billion economy is targeted to grow 7-8 per cent in 2005-06, compared with 6.9 per cent in 2004-05. As part of the rationalisation of the tax structure, rates will to be restructured, with top rates on personal tax reduced. This is something that will be welcomed by the salaried class. On the whole the budget exercise looks balanced. It is aimed at boosting industrial growth and for this corporate tax rate for domestic firms has been cut to 33 per cent, which has cheered industry and helped push up share prices on the Bombay bourse. The Bombay share index rose 2.19 per cent to a new closing peak of 6,713.86 points post-Budget.
Going by the initial reactions of industry captains, the stock market and also the common man it looks the minister has done a pretty good job given the fact expectations were on the higher side. The focus on the poor by the Congress-led coalition supported by Left parties, which was voted into power last May, is only incidental and need not be seen as pandering to the Communists. Hopefully the budget would assist in reducing the numbers of the poor in the country.
This is an editorial published in Oman Tribune
Sensex superstar
For India, home to Asia’s oldest stock market, 2004 has been a year of records. And the New Year began with a bang with the benchmark Bombay index closing at a new high. The index on Monday rose 76.51 points, or 1.16 per cent, to close at 6,679.20, compared with the earlier record of 6,602.69 on December 31. Last year saw the index breaking the 6,000 barrier for the first time and also its largest intra-day fall, of 800 points, on Black Monday after the ruling party lost the elections. Since Black Monday the index has gained 50 per cent and 5 per cent in December alone. But even at these levels, most analysts feel the market is not overvalued.
The same year overseas funds invested a record $8.51 billion in Indian stocks, compared with $6.59 billion the previous year. The foreign funds have pushed the index 763.73 points or 13.1 per cent in 2004. The growing attractiveness of India vis-a-vis other emerging markets has seen the foreign funds riding on the booming economy and focusing on the growing attractiveness of the country as an investment destination. Experts are of the opinion the market could move up by 15-20 per cent from current levels -- at around 7,500-8,000 points within the next 12 months if the corporate sector can sustain the present growth rate, barring any unforeseen circumstances such as a sharp spike in crude prices and a bad monsoon. A poll of CEOs has suggested that over 27 per cent expected profit growth between 10 and 20 per cent, 17.24 per cent expect it to be between 30 and 40 per cent, and 13.8 per cent expected it to be between 40 and 50 per cent during this financial year. And if this trend is to continue foreign funds will continue to ratchet up the market for some more time and India is where the action is going to be for some time.
It is quite probable that 10 years from now people will all be reading about Indian corporates that grew big and prosperous in front of their eyes, like the Korean chaebols Of course sceptics, which India has one too many, who make a living from running down the capital markets as temples of greed and gambling, will continue to point to the laws of physics -- what ever goes up must come down. Maybe this time they are missing the picture. When the Dow Jones index crossed 500 in April 1956, it was at a 10-year high, having dizzily risen from the 50 levels of 1930s. Less than 50 years later that same index crossed 10,000. No investor could have foreseen that in 1956.
This is an editorial published in Oman Tribune
The same year overseas funds invested a record $8.51 billion in Indian stocks, compared with $6.59 billion the previous year. The foreign funds have pushed the index 763.73 points or 13.1 per cent in 2004. The growing attractiveness of India vis-a-vis other emerging markets has seen the foreign funds riding on the booming economy and focusing on the growing attractiveness of the country as an investment destination. Experts are of the opinion the market could move up by 15-20 per cent from current levels -- at around 7,500-8,000 points within the next 12 months if the corporate sector can sustain the present growth rate, barring any unforeseen circumstances such as a sharp spike in crude prices and a bad monsoon. A poll of CEOs has suggested that over 27 per cent expected profit growth between 10 and 20 per cent, 17.24 per cent expect it to be between 30 and 40 per cent, and 13.8 per cent expected it to be between 40 and 50 per cent during this financial year. And if this trend is to continue foreign funds will continue to ratchet up the market for some more time and India is where the action is going to be for some time.
It is quite probable that 10 years from now people will all be reading about Indian corporates that grew big and prosperous in front of their eyes, like the Korean chaebols Of course sceptics, which India has one too many, who make a living from running down the capital markets as temples of greed and gambling, will continue to point to the laws of physics -- what ever goes up must come down. Maybe this time they are missing the picture. When the Dow Jones index crossed 500 in April 1956, it was at a 10-year high, having dizzily risen from the 50 levels of 1930s. Less than 50 years later that same index crossed 10,000. No investor could have foreseen that in 1956.
This is an editorial published in Oman Tribune
Reprieve for Reliance
In his lifetime, India’s Reliance industrial empire builder Dhirubhhai Ambani created history by setting up manufacturing plants at record pace. Now his sons have set a record of sorts in creating geography – splitting the conglomerate in record seven months -- by no means a small feat considering the long-drawn messy issues plaguing many of the country’s family run industrial houses. The settlement of the issues between the two brothers, Mukesh and Anil, have resulted in an amicable split with the elder brother getting control over Reliance Industries (RIL) – the flagship company with interests in oil exploration, refining and downstream petrochemical. Anil gets telecom, energy and finance businesses.
The settlement should offer happy tidings not only for the family but for the nearly three million Reliance shareholders, for whom it has been a roller-coaster ride since the news broke. That the dispute, which had seen a lot of dirty linen being washed in public, has ended so fast shows the maturity with which the brothers approached the issue. While the settlement can be seen as a victory more for Anil, who quite apparently made sure the settlement came about with the equitable division of assets among all players. He played his cards well – having gained control over Reliance Infocomm, which was Mukesh’s pet project and Reliance Capital, while holding on to Reliance Energy, while having to relinquish his role in the flagship, though his role in RIL has been on the wane since the death of the group patriarch. Mukesh, on the other hand, while having had to concede more, must be congratulated for showing the large heartedness to go the extra mile for the sake of an amiable settlement. But then it should be no small consolation for him that he can lord over the money spinning petrochemicals giant built up by his father.
Now that the worries of the shareholders and the family have been set to rest, the only question that remains is: How did the government and its myriad arms perform in the drama in the light of the corporate governance issues Anil had raked up, particularly in Reliance Infocom. It is a shame that in India, despite the plethora of laws and the entry of foreign institutional investors, promoters still keep the investing public and the regulatory authorities in the dark over their shenanigans and use companies as personal property. The federal government has not covered itself in glory by not looking into the issues raised, something which is not surprising considering the relationship the conglomerate has with the ruling party, whose chief recently flew to Moscow in the company’s corporate jet.
This is an editorial published in Oman Tribune
The settlement should offer happy tidings not only for the family but for the nearly three million Reliance shareholders, for whom it has been a roller-coaster ride since the news broke. That the dispute, which had seen a lot of dirty linen being washed in public, has ended so fast shows the maturity with which the brothers approached the issue. While the settlement can be seen as a victory more for Anil, who quite apparently made sure the settlement came about with the equitable division of assets among all players. He played his cards well – having gained control over Reliance Infocomm, which was Mukesh’s pet project and Reliance Capital, while holding on to Reliance Energy, while having to relinquish his role in the flagship, though his role in RIL has been on the wane since the death of the group patriarch. Mukesh, on the other hand, while having had to concede more, must be congratulated for showing the large heartedness to go the extra mile for the sake of an amiable settlement. But then it should be no small consolation for him that he can lord over the money spinning petrochemicals giant built up by his father.
Now that the worries of the shareholders and the family have been set to rest, the only question that remains is: How did the government and its myriad arms perform in the drama in the light of the corporate governance issues Anil had raked up, particularly in Reliance Infocom. It is a shame that in India, despite the plethora of laws and the entry of foreign institutional investors, promoters still keep the investing public and the regulatory authorities in the dark over their shenanigans and use companies as personal property. The federal government has not covered itself in glory by not looking into the issues raised, something which is not surprising considering the relationship the conglomerate has with the ruling party, whose chief recently flew to Moscow in the company’s corporate jet.
This is an editorial published in Oman Tribune
Family business
Retaining control over the business and passing it on to the next generation is the driving passion for Indian entrepreneurs, according to a recent study. The study says 46 per cent of Indian businessmen feel their successor should be from the family. In comparison, only 22 per cent of North Americans and 24 per cent of Europeans subscribe to this view. And as many as 57 per cent of the 185 Indian businessmen covered say the shares in a company should be transferred only to family members. The study makes for interesting reading inasmuch as it shows how unprepared are Indian family-owned businesses for the respected distinction between family, ownership and management.
This study is all the more interesting in the backdrop of the Ambani-versus- Ambani battle being fought in full glare of the media. Reliance Group patriarch Dhirubhai Ambani, who started as a small-time trader, built a $22-billion industrial empire in his lifetime. During his period he placed his two sons in managerial positions, and oversaw the generational transfer of ownership and control. As many as 461 of India's 500 most valuable companies are family-owned enterprises; many of them were once under single ownership but with the break-up of families after the passing away of the first generation, they are now individual entities. And most are pale shadows of their past glory. The best-known business families, the Birlas, the Modis, the Bajajs, the Singhanias, the Walchands, the Shrirams and the Sarabhais have seen brother battling brother for control and ownership. With the collapse of these families, their business empires have splintered into smaller entities. Many have disappeared altogether. Clearly, business and family should not be mixed.
The more irritating part of the family business in India is the way it takes the investing public for a ride. Though businesses are run by families, most of the money to run the business actually comes from the public by way of equity investment and debt provided by government financial institutions, which again use public money. In fact, the contribution of most Indian promoters to the companies capital will not more than 10 per cent, which means the entire money used to run a family business comes ordinary people, who but have no say in the management of these companies. And history has shown repeatedly how such families have got away unscathed while their business rotted and their stocks crashed leaving investors with worthless paper, as was the case of Nocil, once a bluest of blue chip stocks on the Bombay Stock Exchange, run by the Mafatlals. And one cannot for sure say whether Reliance, which incidentally bought Nocil recently, cannot have a different fate.
This is an editorial published in Oman Tribune
This study is all the more interesting in the backdrop of the Ambani-versus- Ambani battle being fought in full glare of the media. Reliance Group patriarch Dhirubhai Ambani, who started as a small-time trader, built a $22-billion industrial empire in his lifetime. During his period he placed his two sons in managerial positions, and oversaw the generational transfer of ownership and control. As many as 461 of India's 500 most valuable companies are family-owned enterprises; many of them were once under single ownership but with the break-up of families after the passing away of the first generation, they are now individual entities. And most are pale shadows of their past glory. The best-known business families, the Birlas, the Modis, the Bajajs, the Singhanias, the Walchands, the Shrirams and the Sarabhais have seen brother battling brother for control and ownership. With the collapse of these families, their business empires have splintered into smaller entities. Many have disappeared altogether. Clearly, business and family should not be mixed.
The more irritating part of the family business in India is the way it takes the investing public for a ride. Though businesses are run by families, most of the money to run the business actually comes from the public by way of equity investment and debt provided by government financial institutions, which again use public money. In fact, the contribution of most Indian promoters to the companies capital will not more than 10 per cent, which means the entire money used to run a family business comes ordinary people, who but have no say in the management of these companies. And history has shown repeatedly how such families have got away unscathed while their business rotted and their stocks crashed leaving investors with worthless paper, as was the case of Nocil, once a bluest of blue chip stocks on the Bombay Stock Exchange, run by the Mafatlals. And one cannot for sure say whether Reliance, which incidentally bought Nocil recently, cannot have a different fate.
This is an editorial published in Oman Tribune
Family fracas
It’s boom time in India – the economy is doing well despite a not-so-encouraging monsoon, the stock market is shining and has crossed 6,000 points this week. Foreign portfolio investors are flocking to the country in droves – what was a trickle last year has turned into a torrent now. From a low 30-35 last year, the number of foreign portfolio investors has ballooned to more than 130 by the latest count.
Indian corporates are recording good growth in spite of the average monsoon and are making good profits and rewarding their shareholders well. Some of the big boys are casting their eyes abroad. Looks like India’s family owned conglomerates are turning into true-blue multinationals finally. But the flip side can be as bad. Indian corporates are now in the news for the wrong reasons. First it was the blue-blooded Birlas squabbling over the remains of the riches of a widow who gave away all her money and companies to an outsider. The Birla clan is now fighting it out in the courts, which could, well, take some time to reach a conclusion. In the meantime came the BPL family drama. The first-generation entrepreneur falls out with his son-in-law, accuses him of plotting to take away one of his companies. Accusations fly thick and fast. So much dirty linen was washed in the press and courts before the duo settled for an out-of-court deal.
Barely had the ink dried on the report of the BPL settlement comes the report of the schism between the two brothers running the Reliance empire, India’s biggest conglomerate. On Thursday Chairman Mukesh Ambani admitted to differences regarding ownership issues with his brother and vice-chairman Anil Ambani. At stake is the Ambani family's 46.67 per cent equity in Reliance Industries, now worth $7.92 billion (Rs 355.52 billion). According to Mukesh, Reliance is a strong, professionally managed company and has moved beyond any one, two or three individuals, including himself. So there is no reason for investors to panic. That is easier said than done since reports say the empire-builder, the late Ambani Senior, died intestate. The stock market reacted sharply on Friday. Shares on the Bombay market fell, led by a sharp fall in Reliance Industries, which closed 3.4 per cent lower. With the stakes so loaded in the unravelling Amabani family drama, is India Inc. just about to witness another round of sordid washing of dirty linen, particularly when the protagonists are considered among the cream of the Indian industry. Surely not something the old man would have liked and is best avoided.
This is an editorial published in Oman Tribune
Indian corporates are recording good growth in spite of the average monsoon and are making good profits and rewarding their shareholders well. Some of the big boys are casting their eyes abroad. Looks like India’s family owned conglomerates are turning into true-blue multinationals finally. But the flip side can be as bad. Indian corporates are now in the news for the wrong reasons. First it was the blue-blooded Birlas squabbling over the remains of the riches of a widow who gave away all her money and companies to an outsider. The Birla clan is now fighting it out in the courts, which could, well, take some time to reach a conclusion. In the meantime came the BPL family drama. The first-generation entrepreneur falls out with his son-in-law, accuses him of plotting to take away one of his companies. Accusations fly thick and fast. So much dirty linen was washed in the press and courts before the duo settled for an out-of-court deal.
Barely had the ink dried on the report of the BPL settlement comes the report of the schism between the two brothers running the Reliance empire, India’s biggest conglomerate. On Thursday Chairman Mukesh Ambani admitted to differences regarding ownership issues with his brother and vice-chairman Anil Ambani. At stake is the Ambani family's 46.67 per cent equity in Reliance Industries, now worth $7.92 billion (Rs 355.52 billion). According to Mukesh, Reliance is a strong, professionally managed company and has moved beyond any one, two or three individuals, including himself. So there is no reason for investors to panic. That is easier said than done since reports say the empire-builder, the late Ambani Senior, died intestate. The stock market reacted sharply on Friday. Shares on the Bombay market fell, led by a sharp fall in Reliance Industries, which closed 3.4 per cent lower. With the stakes so loaded in the unravelling Amabani family drama, is India Inc. just about to witness another round of sordid washing of dirty linen, particularly when the protagonists are considered among the cream of the Indian industry. Surely not something the old man would have liked and is best avoided.
This is an editorial published in Oman Tribune
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