'Economic empowerment of people through public-private sector partnership is our main objective'

THE most important objective for the Commonwealth Business Council (CBC) is the economic empowerment of the people that can be achieved if most of the countries have higher economic growth rate but that for us can only be achieved by increasing the role of the private sector, so feels Dr Mohan Kaul, Director-General & Chief Executive of the Commonwealth Business Council. In an interview with Amitabha Sen, Dr Kaul said: "We are trying to achieve that by creating environment for greater flow of investments, by greater mobilization of internal resources and by creating conditions for promoting foreign and domestic investments". About the forthcoming Doha meet he strongly hopes "to see real progress in debt cancellation. There will be definitely some different movement on market access for the developing countries" and  unlike in the past, "the aid may not be linked to some policy changes that some of the donors are asking at this time". About the role of Indian IT industry in the execution of CBC's ICT Plan, Dr Kaul said that the "Indian IT sector is very much part of our work to reduce the digital divide that we are working on".

AS: Sir, you have "set a goal of achieving economic empowerment for shared global prosperity through the enhancement of private sector contribution to social and economic development". To what extent this dream is fulfilled so far, since you took over as Director General and CEO of CBC in October 1997

MK: Since last seven years we have really made progress but one would have liked to make progress at a much higher pace. If you look at 54 countries (of Commonwealth), 13 of those at this time have their economic growth higher than Europe. These are the fastest growing economies-all are the Commonwealth countries. That was not the case before and the role of the private sector in many of these economies either was minimal or negligent. We see now a real change. If we look at just 30 years or 25 years, most of the Commonwealth countries including Britain were centrally managed economies. The public sector then played a major role in those days. If we look at what has happened in last 30 years, then one would see most of these countries were market economies. In last six years significant changes have taken place. CBC’s aim was two fold: one was to see that Commonwealth countries adopt market economy policies so that they can open up their market to private sector. Second was to create a better climate for investment and help the governments to create atmosphere for better governance. Many of the countries had the problems in governance areas. We are in the right direct direction. We have made progress but we have still miles to go.

AS: What, according to you, are the three most important and immediate objectives you (CBC) plan to achieve?

MK: The first and most important objective for CBC is the economic empowerment of the people that can be achieved if most of the countries have higher economic growth rate but that for us can only be achieved by increasing the role of the private sector. CBC’s overall mission and goal is the economic empowerment. We are trying to achieve that by creating environment for greater flow of investments, by greater mobilization of internal resources and by creating conditions for promoting foreign and domestic investments. We are doing everything we can do to attract investments into Commonwealth countries- from within Commonwealth as well as from outside into the Commonwealth.

Our second objective is to help the developing countries increase their share of the global trade. We have seen countries who have liberalized their trade policies have reaped benefits whether it is India or UK or Malaysia or Singapore or even China. More we do for liberalizing trade by increasing the trade flow, more it increases the share of developing countries in the global trade. That will bring more jobs, more wealth to those countries.

The third objective is to create environment for good governance, good corporate governance. We are working closely with the governments and private sector in creating better corporate governance and in creating better governance in government itself.

AS: Closely linked with this is the issue of globalization which now seems to be the sine qua non for market economy that you are talking about. How would you like to see globalization in developing countries like India where public sector played a major role in building up its economy or in less developed countries?

AS: In India the public sector played a major role in skills development, in creating and brining in technology in the forefront. Same thing happened in other countries also. It happened in UK, it happened in Canada in a big way, it happened in South Africa and in other countries.The public sector at a particular point of time played an important role. I think that role will still be played in some selective way but much more benefits will be achieved if we get some of the public sectors managed in private sector way so that private sector is involved.

AS: But what about those PSUs which are making huge profits, which are considered as industry jewels?

MK: There are two issues in public sector: one is profitability and ownership and other is the management capacity. The ownership is not a major problem. I would like to look at it in a slightly different way. In Singapore, for example, many of the public sectors are not privatized still because the interference by government or political interference there is much less and therefore they are able to manage their public sectors in a much better way. If that was the case in other countries, then the ownership or privatization issue would not have come up.

The second issue is ownership. In some cases we say why the government should be in public enterprises when it is not their core business. It was their core business probably 20 years ago because that time it was creating a capacity but it is not the case now. Secondly, if the companies are very very profitable, I think what the government’s choice is to use those profits for the social and economic developments of the country. If a particular public sector unit is profitable, if I am running it profitable I want to sell part of it to use that resources for economic development now that is on education and health so that I can get the same prosperity few years down the line. I think that’s the choice we will have to make and the choice is very clear for the government. It is not that because some of the public sector is making huge profits therefore they should remain in the government. It's questionable. Because we are making profits we probably should use those profits somewhat differently.

AS: Are you in a way suggesting that the government should not be in the manufacturing sector and primarily it should play the role of a strategist?

MK: The government should be out of manufacturing, should be out of tourism, should be out of service industry for its not suited for that. It should definitely be in strategic areas, if it chooses to be. But the process of disengagement of the government from these sectors have to be managed. It is a process of management which is more important than the disengagement because in the process the jobs are involved, the capacity is involved. Questions is that do we have the local capacity versus international capacity and many such issues are involved. As a goal, as a strategy, the government should disengage itself from non-strategic sectors.

AS: While talking about globalization, don’t you think that there is basic difference between countries like India and UK, USA or Singapore where issues like poverty, unemployment etc are not quite concerning one?

MK: It is not only in India and other developing countries, unemployment in Europe too was a concerning issue. In terms of unemployment India is in a much better position at this time statistically. It is not that bad today but the main issue is what’s the best way for economic development. In no country government alone can make the change in development. This year there is going to be a UN conference on reviving the Millennium Goals for Development. Those Millennium Development Goals are unlikely to be achieved on the time table that the governments have set for. Why is that? In some cases because of lack of efficiency, lack of resources, they are not able to bring economic development. Therefore the best thing is to get the development by good public-private partnership, because the private sector is able to exploit the human skills in a much better way and productively so that the people benefit.

In India people are very entrepreneurial and skilled. If we give them the skills and bring them more into economy, there would be much more wealth generated as a result of economic liberalization and partnership with the private sector. Countries like India have nothing to fear because they have people who are entrepreneurial and skilled. All that we need is to break those shackles and give them the opportunities to work in a liberalized way.

But definitely globalization has not really been equal. It’s not the case in India alone, it’s everywhere. The people have become richer. Poor is not becoming poorer but the benefits of globalization was not even. No system is fair, not even the previous system. The question is which of the systems brings most prosperity to a larger number of people. That’s what we have to debate. The same is debated in China, in India, in Europe.

AS: To achieve economic empowerment of the people, you emphasized on sharing of resources and prosperity and to achieve that goal you are trying to draw the attention of G-8 nations also. What is the latest scenario?

MK: We are working very closely with the British government and other governments particularly in the area of trade, debt and aid. Particularly in the area of Africa, the Africa Commission which has been set up by Mr. Tony Blair. The meeting of G-8 in July is going to be a landmark meeting. You will see real progress in three areas.

You will see real progress in debt cancellation, I think there would be definitive movement on reduction or getting the debt waived by the the debt giving countries so that resources can be spent on health and education.

There would be definitely movement on trade. The UK govt. is trying its best to influence G-8, predominantly the European countries and the US, about market access for developing countries. So I think there will be definitely some movement on market access and particularly this meeting is quite important in the light of next Doha meet. There will be definitely some different movement on market access for the developing countries.

There will be movement on aid also. Countries will try to put more money on aid to reach the UN stipulated guidelines of 0.7 percent of their GDP. The second thing about the aid which is important for some of the countries is that the aid may not be linked to some policy changes that some of the donors are asking at this time. Some donors want the aid be linked with the areas specified or earmarked by them and cannot be used for any other sector.

We are also hoping that this would be a good catalyst and stimulus for more private sector involvement in developing countries, particularly in infrastructure. One of the major problems in India and in many other developing countries, is poor infrastructure which needs much higher level of investments. Both private sector and international finances either through agencies or the private sector investment flows, will have to be looked at. Our aim is to get those investment flows, the aid flows in the favour of developing countries. Our aim is to work with the developing countries that they take the advantage and exploit those opportunities for their benefits. Some are able to do it, some are not.

AS: While talking about Doha meet this December, do you think it would be a litmus test for developing countries led by India as expressed by the European Trade Commissioner also?

MK: European Union is looking towards leadership from India. In international trade there is a developed block and there is also a middle block comprising countries going towards development like India, Brazil, South Africa, China, Malaysia which are going to have a much higher part in the trade flows to increase their share. These are going to be important segment of international trade. As India has always been in the forefront of talking about the case of developing countries, the developed countries are expecting a role from India which does not mean it should give up its main principles what it has been propagating. They are expecting a change in India’s strategy, change in rhetoric. We would like India to be more pro-international trade rather than react. We are expecting a change in India’s strategy, tactics and rhetoric so that it will have a much better effect on how other developing countries will look at. That does not mean one should give up the negotiating power of getting the best out of the developed countries. It needs change in tactics, strategy and rhetoric and the way things are presented.

AS: But it seems Agriculture has become the major focus at Doha meet for developing countries led by India.

MK: Yes. Other issues like services, things are moving. In textiles things have moved a lot. The main thing remaining is agriculture. For developing countries like India, agriculture plays a crucial role. For Africa, it plays a very very crucial role. Eighty percent of the people in that country live on agriculture. It’s a question of investment into agriculture, how do we liberalize and take advantage of international technology. Some countries like India are able to do it on their own, some countries need help. If tomorrow all agricultural products are liberalized, it’s not sure that some of the countries will be able to take opportunities right away because there will not have the capacity to do it. Some will need investments for agriculture processing to value add some of the products. Lot of works have to be done to create capacities to take on the incentives. Agriculture is definitely the major issue for Doha talks although other issues like trade facilitation etc might figure in the discussions.

AS: So far CBC’s bilateral relations with regional bodies like SAARC and NEPAD is concerned, to what extent CBC could achieve its objectives?

MK: With NEPAD we have a very strong relationship. We lead the NEPAD Business Group. We are the contacts for the international NEPAD group. When we develop this kind of relationship, we have something in mind and that is we would like to use the diaspora from those countries which is best to the advantage of country like India . That was our main theme of developing relationship with SAARC Chamber of Commerce. We have a memorandum of understanding with SCCI.Our main theme in developing relations SCCI is to use the net work of businesses from diaspora from the South Asia which is very strong in Britain, US and other countries and use that to develop business opportunities in the region of South Asia and also in other regions. One of the areas where we are developing this relationship is not only to look at the companies who are international companies but also to develop a strong link up with diaspora . We hope to create South Asia Trade and Investment Network (SATIN), which is basically of companies of South Asian diaspora and work with them and see how we work with South Asia- India, Pakistan, Bangladesh, Sri Lanka. Our objective is to create regional network there using the regional or diaspora businesses in the UK and other countries.

AS: Information Technology today plays a crucial role in economic development of a country. CBC has chalked out an ICT perspective plan. Could you throw some light on this important segment of economy?

MK: We strongly believe that the development will be lot dependent on the technology, adaptability of technology, access to technology and use of technology. If we have to propagate globalization, we have to do globalization in a way that it benefits all. We will have to work along with the countries which are on the other side of digital divide to see how do we reduce the gap of the ICT. One way of looking at it basically is the private sector solution. We have a working group on e –governance. Many of the Indian IT companies are on that working group. We are working very closely on private sector solution on government and also on technology. We are also looking at community solution like providing access to the computers, help countries who do not have technology by providing low cost technology, getting ICT access to either small businesses or people etc. That’s how we are trying to reduce barriers to connectivity and access to technology.

AS: How you plan to coordinate the implementation of the ICT plan?

MK: For that we have created an agency called CBC Technologies. We are hoping to enhance the reach of ICT companies to other countries. We facilitate their contacts, we provide information on to them, we get them nearer to government, collecting lot of information on companies which could be outsourcing destinations. Commonwealth has another advantage. It is only the Commonwealth countries because of the English language, have become the destinations of BPO. It is India, South Africa, Canada, Australia, Singapore, Malaysia. We found there is a good advantage for us of working with Commonwealth companies because it’s only those companies which are providing the services. So we work closely with the government and private sector to facilitate that.

AS: What role you would envisaging for India as a global software giant in CBC’s ICT plan?

MK: Indian companies have lot to offer to the rest of the world in terms of their services and technology. The US market is where these companies are going. The UK market is expanding. We look at UK as an entry to the rest of the Europe. Europe is expanding and we are working with the Indian companies to come to the UK. We are facilitating their interaction. We look at countries like Malta and Cyprus which are now part of the Europe. Malta, for example, is only one hour flight from Libya , Algeria and Tunisia. They are very keen to get Indian companies into that Island so that they can service North African countries from that Island. They can still remain in Europe. We are working with these companies. We can work with these Indian companies in a way of giving areas of expansion of their activities.

Secondly, we are using expertise of these Indian companies. For example we have a working group that is working with countries like Zambia. We have a group of private sector persons helping the Zambian government to develop a good economic strategy for development. One of the members is an IT person from India. We are using Indian IT knowledge. They are part of the working group to provide information to the government, to the private sector on what can be done on community initiatives etc. So Indian IT sector is very much part of our work to reduce the digital divide that we are working on.

AS: Launching India Trade and Investment Forum early last month, Indian Commerce Minister Kamal Nath said "India in 2005 is a different India -- with its burgeoning middle-class, human resources, economic indices, India is in the departure lounge, ready to take off." How would you like to see India to day and in 1997 when you took charge of CBC?

MK: The difference we see in last few years is that the political message that is coming from the Prime Minister, Finance Minister or Commerce Minister is very consistent saying that India wants foreign investment, the country wants more of it and not less of it. 'India is open for you, India is doing everything to attract foreign investments'. This much of direct message was not earlier. Earlier people were making guarded messages and were not as open to say about it. This has made a difference in creating a confidence level.

Another message which is again a political message is that India is for globalization but we want benefits to go to lower rung of the society, the poor people. India is not doing very well in development sector, It has to do more on health and education. 'We want investment, we want globalization, we want liberalization but we also want investments for poor people' and that is appreciated by others outside India. Don’t forget, people abroad, investors and others want the standards of life of all Indians to go up because it is in their interest. Those kinds of messages are good for India. More investment in education, it is better for outsiders because they want more numbers in the middle class sector.

March 9  2005