Migrant Labor

Two recent conversations a few weeks apart got me thinking about the impact of immigrants on the development , economic and cultural  of the recipient region .

The first one was at a friends son's wedding. One of the guests  a Sikh who has large farm holdings in  Punjab was bemoaning the fact that the economic prosperity in India and the governments policy of providing guaranteed employment for a certain number of days to the majority of the population ,was making it difficult to find workers on his farm. Previously migrant labor from Bihar and other states would come to the prosperous states such as Punjab and Haryana during certain times of the year to find employment and it would be a "buyers market "for  the farmers.Also some of these immigrant labor would settle in Punjab and in some cases even convert to Sikhism.

Things have now changed. With the governments minimum employment programme, some of the migrant would prefer to stay at home even if they get paid slightly less. This  has caused problems in the farming states, as it  has now become a "sellers market " from the  job seekers point of view. The farmers representative now wait at the railway station and offer not just higher wages , but offer other incentives such as mobile phones, days off etc. to get the best workers. This particular  gentleman said that he had instructed his foremen to offer  twenty percent  above the market straight off,  so he was able to get the workers he needed. With one of the major input  now going up, together with the gradual removal of subsidies for other inputs such as  fertilizers, gasoline, diesel, electricity, are you surprised that the costs of your vegetables and grain are on a upward trend ? This is just the start. This will ultimately force the farmers to use more automation.

This is ironical because the youths in Punjab from the working class , and in some cases to the middle class all dream of going abroad - illegally if  necessary , and  where they are quite content to do manual labor in inhospitable climes. This  has been going on since the sixties but one would have thought that with the increasing prosperity and opportunities  at home, they would prefer to stay home, but that is not the case.

On the other hand the recent prosperity and the boom in land prices is enabling the harder working farmers to sell their land and with the same amount of money buy perhaps ten times or more farmland in places such as Canada and settle down there.The more adventurous have been  taking long term leases on farms in places such as Madagascar !!

This brings me  to the second conversation which I had over a dinner with a diplomat from Canada. We were talking about Japan and how the graying of the population in that country was the cause of the gradual decline of the second largest economy in the world. He said that during his posting he tried at various forums to convince the Japanese to open immigration but to no avail. According to him Canada allows in on an average two hundred and fifty thousand immigrants into the country and this enables them to grow. The United States , the United Kingdom and to a slightly lesser extent Europe have rejuvenated - if I may use the term , by opening their doors to immigrants from Asia, Africa , South America and now recently from Eastern Europe. They are willing to work at the bottom of the ladder. Over the decades this has caused problems in terms of the need of the immigrants to adhere to their own religions and their own cultures. Also the longer term impact is that with a higher birth rates they will change the character of the countries. I have written about it previously.

Unfortunately , as it happens during every economic downturn, the politicians make the immigrants the whipping boys and accuse them of  stealing jobs, which they were not interested in doing in the first place.In Arizona where the state police is now authorized to stop and search any person whom they suspect of being an illegal or in the United States  or Europe or the United Kingdom where you see random acts of " Paki bashing" or Indians getting shot or killed, purely for being who they are, which is very unfortunate.Fortunately in the long run they  will be overruled and the there will be integration whether they like it or not and they will find them selves in the minority.

What we all forget , if anthropologists are to be believed , is that we ultimately all came from one place - Africa and none of us are different.  Every country goes through a cycle of prosperity and decay depending on whom we select as a ruler. To think that there is a certain privileged class , as the Nazi did because of their race, is deluding yourselves.

Why Financing India's Infrastructure Is Not A Problem ?

Almost every week there is an article or some minister or a senior bureaucrat saying how we will need trillions of Rupees over the next decade to finance India's infrastructure ( used in a broad sense including power, toll roads, bridges, rail roads )  and  how difficult it is to obtain the funding.

Having seen the Asian economies grow in the eighties and nineties and being involved directly or indirectly in the financing of  some these projects I feel that the persons making these statements do not really know what they are talking about. The issue is not obtaining the money. The world is flush with liquidity.

At this stage however let me digress a little at this stage and take you back over a hundred years when American railroads where being built. At that time, Europe and particularly the United Kingdom  was the center of the world. Banks and investors in Europe financed the construction of the rail road systems. I also have bonds issued by the Kingdom of Siam and China during the late eighteen hundreds. I have no idea whether all of them were repaid or not. With the world now more linked together and with liquidity pools in the United States, Europe, the Middle East and now Asia and with  markets being more open,  funding is not the issue. The issue is transparency.

For any project financing , whether it is infrastructure or offshore production facilities or a real estate project, you have to recognize that they are capital intensive and that they are long tailed. The basic risk factors you have to take into considerations are as follows :

1. The reputation and financial standing  of the sponsors of the project
2. The reputation and financial standing  of the contractor
3. The political , regulatory and environmental issues
4. The reputation and financial standing  of the off taker or the end user market
5. The technology used and the reputation of the firm providing it

If you are able to tick off all of the above , you will have no shortage of funding.

I read a lot about how capital markets, particularly the bond markets, should be developed to finance infrastructure projects. While this attempt has been moderately successful in a small way, keep in mind that bond issues have to be rated. How do you rate a greenfield project, particularly in  emerging market countries including India,  when you know that the odds are very much in favour of the project not being completed on time, or it being over budget or running into political turmoil. In Asia the only country which seems to have had some success in financing project financing through the bond market  is Malaysia. I take my hats off to the local rating agencies there in their ability to rate these projects.However if you look globally in terms of infrastructure projects financed through the bond markets, you will  see that the number is extremely modest.

For the bond markets to be involved in the financing of infrastructure projects it will probably be in the form of a take out financing when the project has been completed and it starts generating cash. If you do want to go to the bond market right from the beginning the banks or the government agencies have to provide some sort of interim financing or provide a guarantee or a put which allows the investors to put the bonds in case the projects are not completed in the period agreed on with a allowed grace period. Also the initial proceeds of the bonds will have to be placed in a escrow account and released gradually. This will of course add to the cost of financing as the borrower will have to start paying financing from day one.

Obtaining   financing from banks is probably a better approach since banks have the  experience in project financing and the borrower has to pay only a commitment fee rather than full interest on borrowings. Banks  are better able to deal with restructurings then bond investors in case the project runs into genuine difficulties.

If the government wants to obtain overseas bank or institutional  financing for infrastructure it needs to set up a legal entity  which provides guarantees until the project is completed . The legal entity needs to have a very transparent set of guidelines and a strict list of  approved consultants, contractors, and water tight contracts which imposes penalties on  firms if deadlines are not met. It also needs to ensure that there is single window for all government approvals ( including environmental and other regulatory approvals) which are binding even if the state government changes, to avoid a project being stopped mid-way. It needs to ensure that the Equator guidelines are followed.

Finally the bank financing can be supplemented  with financing from the multilateral agencies and the export credit financing agencies if substantial equipment is imported from a particular agency.

With the above in place there should be no problem with obtaining financing for projects in India.

India's Noisy Silent Democracy

Prior to Prime Minister Wen Jiabao's visit to India,  the Chinese  ambassador made some comments about the fragile nature of the India - China relationship being affected by comments appearing in the India media.India's Foreign Secretary  Nirupama Rao's pushed  back saying our “Chinese friends” should get used to dealing with the “vibrant…noisy, nature of our democracy " . The New York Times in an article  dated January 19th,  on Manmohan Singh commented on India's " white noise of India’s raucous democracy". Sadly however the noise associated with our vibrant democracy exists only in the minds of the media or the mandarins of the Foreign Office.

The reality is that the voice of the population which represents the true voice of democracy is silent, as can been seen in the daily scandals in both the ruling party and the opposition ruled states with offenders going unpunished, and the average man or the aam admi on the street finding it increasingly difficult to deal with it on a day to day basis. The bureaucrats, the politicians, the enforcers, all participate in the smothering of the democracy.  The government also plays down the frequent intrusions by our increasingly belligerent neighbors in the interest of maintaining long term relationships and which are generally perceived as a sign of weakness.

The media of late has been making more of an effort to highlight the misdeeds of the corrupt bureaucrats, politicians and business men. However its credibility has been hurt by the leak of the Radia tapes where taped conversations between a  lobbyist and certain prominent media personalities have highlighted the nexus between politicians, media  and  business houses.

Also it appears that the media tends to  focus more on urban crimes where the misdeeds are against the middle class or upper middle class. Massacres, killings, rapes, mistreatment  of the rural poor are generally buried in small columns in the inside pages. In my opinion the media appears to have a short memory and feels that its job is done, once an investigation is started .The media needs to continue  pursuing  on the front page , major scandals and highlighting it if the perpetrators are let off, or where the various investigations fall asleep on their job or whitewash the results as is often the case.

 The television debates trot out the same cast of characters including party hacks, retired bureaucrats, and others who are "specialists "in numerous fields . They argue vociferously and then having played their roles probably go out and have a drink together. Looking at the media's role you are reminded of the lines from Macbeth that  their role  appears to be  that of " a poor player that struts and frets his hour upon the stage and then is heard no more " . It is " full of sound and fury signifying nothing " until the next scandal appears.

In the meantime the populace suffers in silence. 

Country Men Now Enemies

In the summer of 2009 my family was in Boston attending my daughter's graduation from Law School. One day we were taking a cab from her apartment to the hotel and started chatting with the driver who looked like he was from the sub-continent. I told him that we were from India . His response was "I am your enemy". This took us completely by surprise.

This was the first time ever  that we got  such a response from someone from Pakistan and it shocked me. My family are Sikhs originally from Gujarkhan near Rawalpindi in Pakistan. I have had friends, colleagues at school and work from Pakistan and have encountered nothing but warmth and support . I visited Pakistan on business  and there again was welcomed by my colleagues. I regarded this was a one off thing and I forgot about it.

In the last few years since the 26/11 incident  there has been a lot of hostility between India and Pakistan  which saddens most of the population except those with vested interests, as to how one country with the same culture , same history, same food, common  languages, have fought a number of wars and spend billions of dollars which could be better spent on alleviating poverty and improving education.

India and Pakistan are not the only such examples.Sudan is now the latest example of a country being split into two .

In a lot of cases it is the colonial masters who  are to blame, as they encouraged divisiveness and created a elite class of the minorities who were resented by the majority of the population and when the time came , wreaked vengeance  eventually leading  to civil war or to countries being split up.

The separation of India into two countries was encouraged by the British and the arbitrary borders which affected the lives of millions of people was drawn up in a matter of weeks. The state of  Pakistan was unviable from the start when they were separated not just by thousands of miles, but culturally and linguistically. This eventually led to the creation of Bangladesh.

In Rwanda the German and the Belgian colonial masters favored the minority Tutsis over the majority Hutus and lead to one of the worst massacres in history, when between half to a million  people were killed in the space of a hundred  days.

Similarly on the Korean Peninsula you have North and  South Korea separated initially by political ideology but now by a family with dynastic ambitions , refusing to give up control in the North.Once the "wall"comes down which in my opinion is a matter of time, we will see one Korea which will be a world economic powerhouse.

On the positive side look at Germany which after the war was separated by the Allies and the Russians  and now re-united and living peacefully . The separation will eventually be a tiny  footnote in history. Since the mid nineties Rwanda has enjoyed social and political stability.

One hopes that this will also be the case with India and  Pakistan but that is  wishful thinking . The country would be unmanageable and we will eventually see the balkanization into smaller states. If we could just live peacefully as neighbors and divert the funding used for the army to increasing interaction in the form of trade and culture  between the two countries it would be a dream come true for the majority of the population on both sides.

Are Men Bettter At Appreciating The Finer Things In Life Than Women ?

This thought was triggered while reading an article in the Wall Street Journal dated January 5th,2011 " To Dress Well a Woman Should Shop Like a Man " by  Christine Binkley. Her point was that men were practical and bought clothes which fitted well and are comfortable . Women place a priority on trendiness rather than comfort.

I had always thought that men in general  appreciated the better  things in life such as design, whether is is architecture, design, food or other things such as wine or art . And here was a third party and a woman  confirming that. I could not let this opportunity go without writing about it .I  recognize that I am treading on dangerous grounds  and will shortly be getting a earful from my wife and daughter.

If you look around whether it is chefs, architects, artists, designers, tailors,they are predominantly men. Some of you will  point out that  Zaha Hadid the well known architect  and Jancis Robinson the well know writer on wine are women and so on, but for every one Zaha Hadid there are ten men. Since 1926 there have been only four women chef's who have been granted a three star ranking in France. Doesn't that say something ? Perhaps the judges at Michelin are all men ? In the fashion field you see more women than perhaps twenty years ago, but in the other fields they are still a tiny minority.

Why is this the case ? Is it because until recently men made all the buying decisions and men had a better appreciation of what other men wanted ? With things beginning to change, will we now  see the emergence of women in these categories ? After all you are know seeing a gradual increase of professional  women CEO's ( not those who inherited it because of family reasons).Also the increasing number of working women professionals and  entrepreneurs who now have the spending power. I am not sure . I think men wear clothes for themselves. Women choose clothes  for others reasons  - to attract attention and  to be appreciated by members of the opposite sex or to be one up on their  friends and "competitors" .

It will be interesting to see whether the trends change over the next couple of decades

Short Notes On The Education System In India

The Mint newspaper dated December 30th, 2010 had a column by Anurag Behar (Co-CEO of the Azim Premji Foundation) .  I quote him ..."because by 2006, 98% of habitants in India had a primary ( up to Class V) school within 1 km, and 86% had an upper primary ( up to Class VII) school within 3 km....
That means a a staggering increase of schools. At the time of Independence ,India had about 130,000 schools. Today we have about 1.4 million. About 7.0 million work in our school education system.This is by far the largest education system in the world" 

On the other hand  I have seen a presentation titled India's Future dated November 12th,2009 by  Gurcharan Das, the former head of Proctor & Gamble in India .I think it  is  a well balanced presentation and talks about both the positive's and negatives of India. In one of the slides he mentions that 1 out 4 teachers  in government schools are  normally absent. 


Perhaps Anurag Behar's above sentence should read " About 7.0 million are employed ( but not necessarily work)  in our school education system. 

Assuming that both are right, then the solution is not to build more schools, but to make sure that teachers show up and do what they are paid to do. 

It was the best of times, it was the worst of times.....

"It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way." - A Tale of Two Cities -  Charles Dickens


Now that the year 2010 has come  to an end, one is reminded of the above quote.This best describes India in its present state. As I have said before India is going through the phase which Britain went through during the Dickensian era  and the United States in the early 1900's. 


At the risk of  repeating myself , India is in the sweet spot which comes not just in a lifetime, but probably in a millennium. Partly because of luck in the form of demographics which a few decades ago the doomsayers were saying would condemn India to  perpetual poverty and starvation, as predicted by Malthus a few centuries ago, but the young population  is now turning into a trump card for India

However not only did we overcome the food production ( with some help from the United States ) we are now in a position of exporting certain food grains. The rise in population instead of being  a ball and chain is being seen as boosters ( provided we can keep creating jobs) for our economic growth. 


This year has been the most eventful ( at least for the last five years since our return). On the positive side , the economy is predicted to grow at 9%. We hosted a successful Commonwealth Games . Indian athletes performed  well in the Commonwealth and Asian Games. All the major head of states Cameron, Obama, Sarkozy, Wen, Medvedev and others all visited India during the second half. With the exception of Wen, all of them said appropriately flattering things which made all of us feel good. 


On the negative side, the headlines also talked about the corrupt bureaucrats who organized the Commonwealth Games and reportedly diverted money to their own pockets, the Adarsh prime land scam in Mumbai, the 2G auction which apparently deprived the government of potential revenue of approximately $40.0 billion.. The Armed Forces which until recently had a relatively  clean image was also dragged into the mud because of the shenanigans of a former Army Chief. The Judiciary which is supposed to keep the rest of us honest found accusations being made against senior judges. Finally the media which prides itself on being unbiased was found to have feet of clay. Two of its  most prominent members had to defend themselves.Delhi  the capital of the country is becoming an increasingly unsafe place for girls at night. A recent newspaper item mentioned that four or five children go missing everyday from Delhi.  


I could go on and on about the positives and the negatives, but looking at the glass half full, I feel that perhaps we are reaching a point where thing will start to change. The very fact that all these issues are out in the open and being discussed is a positive sign. However what will convince me that the tipping  point has been reached  is when some of these scoundrels, politicians, bureaucrats etc who are accused are actually convicted and put behind bars without being granted any special privileges or allowed out for  frequent outings or supposedly  for medical reasons or on compassionate grounds. 

The Central Government should do what Nitish Kumar has just done in Bihar. He has passed a law where any government servant who is convicted has his ill gotten gains seized by the state and has started implementing it. Now if only other states could follow his example !!!