Donating India Abroad

In 1975 a young man having tasted salt in the workshops of one of the biggest steel manufacturers of the world ,attended the advanced management programme at Harvard School Of Business,the mecca of management education .His stint at Harvard was to be soon followed by 26 years of painstaking work ,failed adventures and drowning companies until he tasted success after becoming chairman of one of the largest business conglomerates.The man was Ratan Tata,one of Indias most futuristic and prominent businessmen

In a spirit of philintrophy the TATA Trusts have decided to donate $50 million to Harvard School Of Business.A bit earlier another Indian Business Tycoon,Anand Mahindra had donated $10 mn to Harvard Humanities Department.The donations have been celebrated in the Indian media and sadly nobody seems to raise the obvious questions.Instead these multi million dollar donations are seem to announce the arrival of India in the big club.There was a time when India struggled to open premier institutes.Its best institutes like IIT's and IIM's were started with foreign donations and collaborations.50 years hence....the story seems to have reverted or is it?

The bigger question which seems to have missed everybody attention here is:Should a business house donate such extravagant sums abroad when more than 50% people in India do not even have access to primary education (Source:UNESCO).The 2010 budget estimated total expenditure on education sector at 4.1% of GDP.Yet we are ranked at lowly 82 in a pool of 150 counteries.India has just 2 universities in the world top 100 and just 3 in world top 500.The Government aims to spend more than Rs 1000 crore on development of new IIT's and IIM's to bridge the gap between quality technical education and industry requirements.So while India grapples for funds our biggest chose to donate abroad.

Before arguing on,let me first analyze the purpose of business in a free market society.Business in any society exists to create value,so that the added value flows back in form of profit and this profit can again be used for development of society.Seen in this light a bigger question that arises is :Should groups like TATA's and Mahindras be allowed to donate such big amounts when more than 80% of their profits come directly or indirectly from India.In essence,shouldnt this money be ploughed back in Indian economy?Further would these kinds of donations make entry of these business houses easier in the larger economies?Arent we acting like the proverbial slave who toils hard to work for the master for free.Here the masters are people in western countries and slaves ,Indians who toil hard to generate wealth only for their capitalist masters donating abroad for unknown reasons.

Perhaps,TATA's and Mahindra's feel with acquisition of companies like Tetley,Corus and Jaguar and land rover,it becomes their duty to act charitably for western economies.Perhaps then it means that these acquisitions are creating sustainable profit for their business groups or if not they are atleast paying back the high interest loans that were taken to fund these acquisiotns.,The answer ofcourse is an open secret.Any multimillion dollar donation would be justified had it been funded through profits in western counteries.Sadly this is not the case

From a finacial point of view,a 50 million dollar donation in a developing country has better utlization and reach than in a developing country.What do you think is better? Using 50 million dollars to educate a million poor people or using the same money to make 5 start buildings for educating CEO's of the world (the $50 mn donation at HSB would be used to make a new complex for executive MBA programmes).Isnt management education at top level supposed to be funded by corporates.An average executive programme at Ivey League Colleges costs close to 100,000 US dollars and would be attended by CEO's or top management who would soon go on creating new busts like Lehman and 2008 financial crisis.If purpose of any donation is to benefit the needy then it seems TATA group made its worst investment ever.

After deliberating all this it seems the only reasons such donations are being made is to make the name of the families immortal.Quickly after accepting the donation HSB announced it would be naming a new building at campus as TATA HALL and name of Humanities department be would be changed to incorporate Mahindra.Another luxury spending of the super rich ..is it?In yester year Kings were known to make grand masoulems and pyramids to make themselves immortal.Perhaps today the culture has changed..donate a few million to get yourself a page in history.Who would have remembered Alferd Sloan but for MIT Sloan or would have remembered Harvard but for Harvard University.If this is indeed the case,then I have no argument with Mr. TATA.Everybody has a right to spend his hard earned money.But then the tax slueths in Delhi ..do collect your Luxury Tax recievable from Bombay House

Corruption Without Games

As I write this article,the CBI and IT sleuths are busy raiding houses ,offices and other premises of various parties involved in the recently concluded 2010 Common Wealth Games.While there is no denying the fact that India messed up the games badly and the entire exercise of hosting games benefited nobody except the money laundering politicians and their accomplices.However the need of the hour is to deliberate and find out a way to avoid this embarassment in future.

The CWG games were hosted by India with the twin aim of developing sports and other infrastructure in Delhi as well as inform the world of arrival of New Delhi in the global economic world.The work and expenses of hosting CWG was jointly done and financed by the GoI and Delhi Government.In a typical example of 20th century socialist movement.DDA,GoI and CWG society took upon themselves the $8 billion project of creating and marketing the necessary infrastructure and games.

The result was disastrous with corruption allegations appearing from a motely $100 contract of leasing out taxies to multi million dollar scams surfacing in construction of games village.As I write this artcle the IT authorities just raided EMAR MGF (a global real estate firm) and accused them of being involved in a $200 mn scam with Delhi goverment

Corruption and government have been synonymous from time immemorial.The faliure of the USSR and fall of communist block are testament to success of the free markets and Adam Smith's Invisible hand theory. In India Public Private Partnership (PPP) and privatization has reaped huge benefits.

Contratst the development of Indira Gandhi International Airport with CWG.Thw former a PPP project was completed 6 months before schedule and represents a world class airport which can soon be London,Dubai or New Yorks envy.Built in a record time of about 3 years,the T3 is an engineering marvel and hopes to break even by 2012.

Is it possible that Indian Sports taste the fruits of privatization and PPP?.Can we repeat IGA exeriment with Indian stadiums?The answer is an emphatic yes

Before we go further let us first consider various activities needed to be carried out to promote Indian sports and events like CWG

1)Infrastructure Development including stadiums and sports villages

2)Sportsmen and other HR development activities

3)Development of support infrastructure like roads,cities etc

Let us now analyze each of the above individually and see the possibility of opening up the sports markets and making it more efficient and progressive

The biggest problem holding back India from making it big in world sports is the lack of proper infrastructure.Hockey the national sport of India has died out because of lack of astroturf stadiums.We have only 15 astrosturf stadiums compared to 200 of Holland.Till date the onus of development and mantainance of sports stadiums,grounds has been on government.Government intervention often brings with its customries like corruption,sub standard designs and poor mantainace.A better alternative to this might be opening up private sectors for development of stadiums and indoor sports complexes.Places reserved for such infrastructure objects can be auctioned at lower prices.The stadium so developed can then be used by private players to earn money.In order to make the business model sustainable ,government can allow such stadiums to be leased out to sports league ,corporate functions,marriages etc for a fees determinned by the private players.Also the stadiums can offer integrated services like gymnasium,sports coaching for fees.The advertisment and marketing carried out by private players would promote the culture of sports.Soon we might have playing games as a status symbol or a way of life.As the business model develops business players will start scouting for the bottom of pyramid.In a parllel way we would becoome a sports hungry nation and start seeing beyond cricket.Soon local sports leagues would develop providing a sustainable business model for sports to flourish.As the user size increases more and more companies would enter the Indian sports equipment industry.The huge indian population size would mean economies of scale and cheapest sports equipment.

The oppurtunities for private sector are huge.Events like CWG can be bid by private companies on behalf of government,The GoI's role should be limited to providing outside support in form of development of city infrastructure and security,Also the GoI should choose to act as a mediator and negotiator with various businesses to ensure success of these events.For examle the GoI could have acted as a mediator between Delhi International Airport Ltd and company conducting CWG games to ensure timely development of infrastructure.However the government should avoid being directly involved in any infrastructure development as it would just lead to inefficiencies and filling coffers of Swiss Banks.At best GoI can provide indirect funding by underwriting sports bonds issued by such companies to facilitate and lower costs.Also red tap-ism should be decreased and companies should be allowed to buy/sell stadiums like any other business asset.These stadiums could be listed on stock exchanges too .This would promote better corporate governance and lowering costs.

The above suggestions might seem radical.However ,the success of IPL and other profit sorting events like WWF proves that sports is a very profitable business venture.The biggest football clubs in world are private ventures being bought and sold like companies.The governments role should always be that of a facilitator.It should be an enabling factor for entry of young and dynamic enterpreunral minds to enter in Indian sports industry.However if all this is not done CWG 2010 may soon be followed by a corrupt 2020 olympics