Showing posts with label IIPM-Publications. Show all posts
Showing posts with label IIPM-Publications. Show all posts

Saturday, October 06, 2012

Another Lethal Blow for The ‘Celtic Tiger’

The Irish Policymakers Argue that the Country’s Economic Fundamentals are still better than That of Greece, Manish K. Pandey Analyses how Poor are they in Finalising the Rationale Behind Their Arguments

Ireland was the fastest growing OECD economy (averaging GDP per capita growth of 5%) since the mid-1990s until the recession hit its shores in 2007. While other OECD nations have at least managed to leave the strong recession winds behind, Ireland (thanks to its fragile banking system) is still at the midst of a deadly storm. What’s more? Ireland’s real GDP has contracted by more than 15% since the end of 2007 and is expected to shrink further. Even the yield on Irish 10-year government bonds has hit a record high of 8% so far this month, well above the 6.4% average reported in October 2010 and also above the 4% rate clocked just before recession in 2007.

Interestingly, Greek 10-year bonds had also traded around that rate before the recession, and then jumped by 780 basis points in the six months before the bailout in May 2010, after yields surpassed 12%. Though, yields on Irish bonds have risen by 370 basis points so far from their low in April, their continued strong upward movement is a clear sign of concern. It’s quite clear that the Emerald Isle economy was headed the Greece way (the first economy to tumble in Euro zone in May 2010) since quite sometime; and it’s quite unfortunate that the Irish policymakers waited till November 21, 2010 to wake up and apply post haste to EU’s European Financial Stability Facility and IMF for assistance. In two days, the international bodies approved a 90 billion pound package for Ireland, but under grilling austerity measures.

On the other hand, as Irish policymakers argue, the fundamentals of the Irish economy are much stronger than Greece’s at present as unlike Greece, the Irish government has enough cash in hand to fund operations through mid-2011. Moreover, the debt-to-GDP ratio of the Irish economy, which currently is 80%, perhaps seems more sustainable than the 130% ratio in Greece and in some sense, for the untrained eye, does not make a strong case for a bailout. As happened globally, even in Ireland’s case, the butler was to blame. The Irish banking system has almost but collapsed. The Economics Group of the US-based Wells Fargo Securities tells B&E through a communiqué, “The Irish banking system, which is being backstopped by the government, is essentially insolvent.” Ireland’s debt-crippled banks (which have already received a minimum of $61 billion from various government agencies) confirm that they are already in a dire situation. While AIB (Allied Irish Banks) admits that $16.39 billion – about 20% of its entire deposit base – has been withdrawn from the bank since June, 2010, BoI (Bank of Ireland) confesses that it had lost $13.66 billion in corporate deposits during August and September this year. In fact, one can understand the seriousness of the situation by the fact that Irish banks have lost a colossal $24.59 billion in deposits in September 2010 alone. Thus, unlike Greece, Ireland’s woes do not stem from government debt but from the government’s open-ended guarantee to cover the losses of the banking system out of taxpayers’ money, which sadly but inevitably will sink the economy whose fiscal deficit has already reached more than 30% of GDP.


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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Wednesday, August 29, 2012

“The government is trying its level best to control the inflation rate”

Oscar Fernandes, former minister and General Secretary AICC, on functioning of UPA-II and how the government plans to resolve the suffering of the common man. by Pramod Kumar

B&E: There is a constant hue and cry over the failure of proper functioning of UPA II? Your comments?
OSCAR Fernandes (OF): The UPA-II is completely devoted towards the social sector. Our first step was job guarantee through NERGA. Then the government started the Sarva Shiksha Abhiyan. There are several flagship programmes run by the central government. The impact is an increase in the purchasing power of Aam Aadmi. For example, a person who gets employment for hundred days can now purchase 50 kg of rice and wheat if he belongs to the BPL category.

B&E: Whatever the government had promised has not translated into reality? There seems to be a lack of attempts to reach the aam aadmi, who is suffering due to soaring prices...
OF: I don’t agree with this argument. The beneficiaries are increasing day-by-day. I can give you an example. Five years back, the number of vehicles in cities was much less. Now, the same cities are overcrowded in terms of number of vehicles. This shows that the purchasing power of people is increasing. Same is the situation in other cities too. People are by-and-large happy and contented. They are leading a comfortable life.

B&E: How can you justify rising inflation rate, Naxal problem and conflicts in Jammu and Kashmir?
OF: The government is trying its level best to control the inflation rate. However, at the same time hoarding and unnatural scarcity of food grains are also to be blamed. It’s the responsibility of state governments to check hording and black-marketing. Finance Minister Pranab Mukherjee has already justified this in the Parliament – even the increase of oil prices. The government is also concentrating on social sector and the welfare of people.


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Tuesday, August 28, 2012

How(l) do you do?

Pampered pooches ‘howl out aloud’ and ask for a life that they truly deserve. It’s time to train the trainers!

Ayesha was down in the dumps when she lost Toggle, her 5-month-old black Labrador puppy. To cheer her up, like a true dog enthusiast and a concerned friend, I got her Ginger, a female German shepherd puppy. Ayesha’s eyes filled with tears of joy as she hugged me and Ginger simultaneously! I felt she might go overboard with joy, and pamper her pooch to no end, so I gave her a few tips to raise a perfect puppy. Lost in the joyous moment and completely involved in Ginger, she nodded to whatever I blabbered and probably forgot everything as soon as I left.

Today, Ginger is a year old and has the right to climb-up on the couch, cuddle-up in bed and snatch anything she feels like from any of the members’ hands. She definitely is the pack leader. According to Ayesha, Ginger is the lady of the house and she commands/demands respect. “She need not go for a walk, because it’s too hot and we stay on the second floor. She needs a pedicure every month and has to visit the spa for her massage and hair grooming. I recently got these incredibly cute shoes for her from the pet shop and I can’t wait to order the organic towels for her, which I saw on the net the other day!” said Ayesha. Ayesha supposedly can’t get enough of Ginger, but has forgotten that Ginger is an animal, and probably deserves a life not as girlish!

Several dog owners’ never-ending whims and fancies lead to pooches being pampered silly. A booming industry is now tapping into the true potential of pet lovers in India. A certain few might stall at ‘Windsor’, Khan Market for picking up a mint chewy or a designer leash. Be it a relaxing aroma bath at ‘Scooby Scrub’ or a nice pool party at ‘Kennel 1’, people in most metros are splurging non-stop for their furry companions. All around the world this scenario persists. In China, dogs are being groomed to sport fashionable bright red or green fur on their tail or around the neck. Not only that, some people are shelling out extra bucks to give their pooches a panda-like look! Meanwhile, some insecure pet owners in the U.S. are happily paying-up a whopping $30000 insurance policy for their canine buddies!


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Thursday, August 23, 2012

A WHOLE NEW AGE OF CORPORATE DHARMA

BE IT LEE SCOTT, RICHARD PARSONS, AKIO TOYODA OR HOWARD SCHULTZ, CEOS OF THE WORLD TODAY CAN ONLY IGNORE STAKE HOLDER ACTIVISM AT THEIR OWN PERIL

It started as a movement and soon became an industry. Today the activism ‘industry’ is composed of individuals and organisations that, in fact, make a living from activism. In the middle of all this, organisations consistently face the heat whenever they make a wrong move; be it deliberately or otherwise. Larry Ellison, CEO, Oracle, once famously said, “A corporation’s primary goal is to make money. The government’s primary role is to take a big chunk of that money and give it to others.” But with the rise in activism globally, the expectations and calls for accountability by organisations have clearly grown. B&E takes a look at some of the prominent stakeholder groups globally that keep the activism torch burning bright.

Shareholder Activism: Boon or Bane

In this unquestionable era of globalisation, shareholder activism undoubtedly has a huge impact. These activists are strategically and operationally involved in the companies where they have vested financial interest. Managements of large corporations are severely constrained with their decision making on even short-term (and at times, day-to-day) operations when these activists enter the game. An activist investor may only need to secure a 10-15% ownership stake in large companies in order to place a disproportionate amount of pressure on management, especially considering the average attendance in shareholder meetings. Shareholder activism has been subject to a lot of criticism and a number of cases have been in the global limelight. In 2006, renowned shareholder activist Carl Icahn led a group that called for the breakup of Time Warner into four different companies, cost-cutting efforts and stock buyback worth $20 billion. Eventually the group won concessions, including the $20 billion stock buyback, $1 billion in cost-cutting measures and the appointment of a new board of directors. In another case where Carl Icahn was involved, Genzyme, the world’s biggest maker of enzyme drugs for genetic diseases was last year, was forced to close down production because of alleged manufacturing plant contamination. During the fourth quarter, Carl Icahn owned Icahn Capital LP more than doubled its Genzyme stake to 4.8 million shares, when they started dropping due to the factory problems.

A research conducted in 2008 by the Ohio University documents a 59% success rate for Carl Icahn with respect to achieving his stated goals in his target firms. In an article published by the Wall Street Journal titled ‘Why Carl Icahn is bad for investors’, Prof. Lynn Stout says, “Shareholder activists that corporate boards fear most today are hedge funds like Mr. Icahn’s: unregulated pools of wealthy investors who take large positions in a few select companies, use their ownership position to pressure boards into strategies they claim unlock ‘shareholder value,’ and then dump their stock as soon as the price rises.” He also confirms that a common goal of an activist campaign is to see to it that the target company is sold off to a private equity firm. This also leads to fewer good public companies to invest in for shareholders. Shareholder activism can at times be also healthy. A report published by IPREO in 2007 on shareholder activists shows that 50% of investors who participated in the survey believe that activism is helpful depending on the situation. In cases where the activist’s intent is right, they should work together towards a win-win situation.

Blog and Consumer Activism

Evelyn Murphy, who was the Lieutenant Governor of Massachusetts from 1987 to 1991, once quoted “Corporations will keep doing things the way they’ve always been done, unless they face ongoing public scrutiny, or a real threat to their reputation and self-respect.” Globally, ethical consumerism is a market on its own, and has been growing at 14% per annum. The latest edition of the Ethical Purchasing Index values this market at around $34 billion. Consumer activism is a very old phenomenon, as old as the origins of the word ‘boycott’ in Victorian Ireland. Such movements are known to spread geographically from an epicentre. And this epicentre is now increasingly moving online. The internet has taken consumer activism to new dimensions as information can be exchanged from anywhere. According to China Internet Network Information Center, China will overtake US in terms of Internet users in another five years. Similar is the case with other developing nations around the world where disposable incomes and internet penetration are on the rise. The latest example of backlash against a giant corporate house from the public is Starbucks. Banking on the boom in coffee houses, Starbucks became the undisputed leader. Due to corporate clout and deep resources it was able to overthrow many mom and pop coffee start ups that tried to make their presence felt. But in Kansas city, Starbucks is facing some heavy competition; simply because coffee lovers are now supporting the once struggling coffee start ups. It so happens that whenever there is a coffee shop that seems to be doing good business, it either is acquired by Starbucks or a fresh Starbucks outlet pops up in the vicinity. Starbucks says that it has no such strategy but some evidence does exist to indicate that this happens. This pattern is attested by the Specialty Coffee Association of America. Allegations that it does not pay coffee farmers adequately are also affecting brand equity.


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Monday, August 20, 2012

Clean track record until the RIL-RNRL fracas

While the upstream regulator has enjoyed a relatively clean track record until the RIL-RNRL fracas, the downstream regulator is yet to get really started by Virat Bahri

The entire process of privatization has been criticized on grounds of giving the shorter end of the stick to ONGC, but a former ONGC official also admits that ONGC would have been unable to tap hydrocarbon reserves in the manner that private players have done. The official also admits that DGH has also done admirable work since formation but needs more hands and powers. For instance, the DGH representatives that come on board for meetings with oil company officials are normally government officials on deputation as DGH doesn’t have the required manpower on its rolls. It is also suggested by legal experts that it should not remain a part of the ministry and be independent. Also, being answerable to the parliament instead is the better option, which should be able to check the possible misuse of powers as was seen during the RIL gas controversy.

India’s downstream regulator – Petroleum and Natural Gas Regulatory Board (PNGRB) – is a more recent phenomenon; and it was instituted in 2006 to regulate “refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas excluding production of crude oil and natural gas.” The aim here was to protect stakeholder interests ensure uninterrupted and adequate supply and promote competition. India began dismantling of its Administered Pricing Mechanism in 2002, as a result of which, it has permitted free imports for petroleum products except for petrol and diesel as well as free marketing of imported kerosene, LPG and lubricants by private parties. One of its key roles has been to institute a regulatory mechanism for the transportation and distribution of natural gas across the country. But as APM is still not a reality for petrol and diesel, the role of PNGRB remains quite diluted in terms of creating a competitive market for these two important products.

Considering it has been instituted so recently, PNGRB’s record with controversies is pretty strong. Moreover, lack of clear definition of its role has been a major failing. Unlike DGH, PNGRB hasn’t exactly been on excellent terms with the MOPNG. The ministry had circulated the idea of bringing up a separate natural gas authority last year. PNGRB opposed the move vehemently, perceiving a decline in its powers. In fact the ministry has not yet issued the notification that authorizes PNGRB to grant approvals for natural gas pipelines. And in this short period of existence, PNGRB has already faced a legal suite from government-owned Indraprastha Gas, which challenged its authority to grant licenses to retail CNG to automobiles and households. The fracas began when IGL, which was authorized to sell gas in Ghaziabad before PNGRB was set up, notified the New Delhi High Court about PNGRB evaluating bids for new licences in the city. The Delhi court restrained PNGRB from going ahead. Also, PNGRB’s own regulations grant 5 year exclusivity to companies when they successfully bid for one area. The board’s own members have reportedly criticized its decision to fix higher gas transportation tariffs for two pipelines owned by Gail and Reliance Gas Transmission & Infrastructure (RGTIL) without proper deliberation. PSU oil companies have also challenged the board’s power to regulate prices of products like motor spirit & high speed diesel. This regulator has lived a relatively listless life till now, and a clear definition of its powers is going to provide the first signs of hope.



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Tuesday, August 14, 2012

SRI LANKA: RAJAPAKSA VS FONSEKA

Neither has a clean record, yet the eventual choice wasn’t too surprising

On their relationship with India, being extreme in nature:
Rajapaksa: “India is our neighbour.
We must have good relations whether in war or in peace.”
< Fonseka: “Now we have a daunting task to protect our motherland from India”
Their views on Presidential election and results:
Fonseka: “Government violated election laws, manipulated & misled people.”
Rajapaksa: “This is why the people trusted us and continues to trust us. You should ensure its continuity.”

On freedom of Press, social justice and democracy:
Fonseka: “if elected President, will ensure that Sri Lanka enjoys democracy, social justice as well as freedom of the media.”
Rajapaksa: “We never subjugated the path of democracy. We did not believe in alternative routes and did not mislead the people by holding bogus referendums.”
Admittedly, the two opponents have drastically different agendas on their minds. And they clearly don’t have characters you’ll boast to your grandmother about (Fonseka is even a convicted rapist). But even if one assumes that both of them really do not mean what they speak, whom should India choose to side with? The answer is a clear no-brainer with Rajapaksa winning the sweepstakes.
Rajapaksa statements have – at the least – attempted to provide a sensible outlook to his people. After the election, when questioned on his work post the war, he said, “There is no point in having just peace, we need to be efficient and have fast growth... We have to build an efficient and productive country.” Compare that to Fonseka’s global agenda after the war, “I am not going to save anyone who has committed war crimes... The country has been suffering for too long. Now that the nation has got rid of terrorism, you cannot leave the country in the hands of a dictator.”
The crux is while Rajapaksa’s victory doesn’t make him the unanimous choice of common Sri Lankans, Fonseka was not a glorious choice for the future of Sri Lanka either, perhaps less so. Given that, as has been the rigmarole rote rule across the world, it is better to try one’s luck with an evil one has tasted, than with one right off the gates of hell...


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Tuesday, July 31, 2012

Stratagem-INTERNATIONAL

In the case of Apple, however, the opposite seems to be happening. Apple is finding ways to add its own flavour to a host of technologies through its vertical integration strategy and is using this to produce the differentiated products that we all love. One of its advantages is in its shorter lead-times, which are enabled by not having to talk to all sorts of suppliers before getting things done. Another advantage is its ability to design products containing its own components, a classical vertical integration strategy. This helps Apple turn received wisdom on its head. Google now appears to be trying to take a leaf out of Apple’s book by becoming more vertically integrated. Will it succeed?

This is a difficult call. But several arguments weigh against Google’s decision. First, Google is effectively following the herd (Apple) here. Playing a game of catch-up is always difficult, and particularly so when the firm you are trying to catch up with is as successful as Apple. Second, it is not clear Google can be a successful manufacturer of mobile devices. Unlike Apple, it lacks any background or experience in the production of goods and thus has not been able to build up the capabilities needed to be successful in that game. Firms, which outsource, need to have sufficient capabilities to monitor and manage their suppliers effectively. But firms, which vertically integrate activities, need a strong ability to undertake the activities on top of this. If they do not have this, they might be better off outsourcing the activities. Third, one way or the other, by becoming a hardware producer Google will start to compete with the other users of its Android mobile operating system, such as Samsung and HTC. It is difficult to see how that can make everybody happy at the same time, particularly if growth rates in the smartphone segment start to decrease, as they inevitably will, and Android manufacturers start to compete harder.

Finally, it is not clear whether there will be any consumer response to Google’s new strategy. Are consumers happy to buy a mobile device from a firm which already holds much of their data? With pockets as deep as Google’s you can probably afford a gamble financially, and the Motorola takeover will also give Google an interesting addition to its patent portfolio, but there is a downside to this particular deal that Google will hope does not materialise. If it does, outsourcing might have been better than vertical integration after all.


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Monday, July 30, 2012

Is the hype being built about Iran’s supposed nuke ambitions even real?

Be it through murders, Kidnapping, Virus attacks or sanctions, a careful and well coordinated stealth Programme is on to Jeopardise years of nuclear capability building by Iran. Is the US, along with its allies, drawing itself into another long drawn misdirected war? Is the hype being built about Iran’s supposed nuke ambitions even real?

UN (on December 23, 2006) banned the supply of nuclear-related materials and technology and froze the assets of key individuals and companies related to Iran’s nuclear program. On March 24, 2007, UN imposed an arms embargo and expanded the freeze on Iranian assets, which on March 3, 2008, was further extended to the activities of Iranian banks, aircraft and movement of individuals through their territory. The recent sanctions passed by EU (June 17, 2011) on Iran involve the prohibition of investments by EU countries in oil and gas projects, as well as the transfer of technology and equipment. The Obama administration has further imposed new sanctions (June 24, 2011) against Iran’s largest air carrier accusing it of supporting terrorism and nuclear activities.

Yet, there is no hard evidence that IAEA or the US has been able to present to the global community. There has been a lot of hype, statements and political posturing. But evidence (of Iran attempting to divert nuclear resources for weapons), as in the Iraqi misadventure, none! Pulitzer Prize winner Seymour Hersh wrote in The New Yorker in June 2011 that “the two most recent US National Intelligence Estimates on Iranian nuclear progress have stated that there is no conclusive evidence that Iran has made any effort to build the bomb since 2003.” Similar is the tune of former director general of IAEA and Noble Prize winner Mohamed ElBaradei, who said recently, “I don’t believe Iran is a clear and present danger. All I see is the hype about the threat posed by Iran.” Then why are the US and other agencies still bent on misrepresenting and perhaps even sabotaging Iranian nuclear ambitions?

The US fears that once a country like Iran has acquired nuclear know-how, to consider it to follow the Japanese path in rejecting nuclear weapon ambitions, would be both churlish and childish. The US believes that if not now, Iran will go ahead and arm itself with nuclear weapons in the future. The only way America thinks it would be able to move against future Iranian ambitions is to sabotage Iran’s currently peaceful nuclear energy generation attempts. This, combined with the false media hype about Iran attempting nuclear weaponization, would be enough for the US to force the UN to put a complete stop to Iran’s nuclear energy generation programme. In other words, expect very soon that the UN would move a resolution to this effect. Like we mentioned, Iraq redux!




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Friday, July 27, 2012

“More Regulation will have a Negative Fallout”

P. K. Mukherjee, MD, sesa Goa talks to Virat Bahri on The Company’s outlook post The Lifting of The Export ban and The Sfio Report

B&E: FY 2010-11 was an year where you dealt with relatively low iron ore realizations. In the light of that fact, what is your perspective on the results? Also, what are your expectations with respect to when these realizations will improve in the coming time?
PKM: Iron ore realization were good but volume was relatively low. The ban on export of Karnataka ore and even the procedural bottlenecks for moving ore for domestic consumption outside the state, extended monsoon in Goa along with transport time restrictions are the major reasons that came in the way of volume growth. Dispatch of quantities more than EC permissions done by some mine owners (particularly south Goa) that further restricted iron ore movement and the unprecedented increase in road freight in Goa were other challenges. Otherwise, we are quite confident of market being quite buoyant and expect price realizations to be range bound.

B&E: What major transformations have been done post the company’s acquisition by the Vedanta Group? What were the managerial and business related challenges and how did you overcome them?
PKM: Vedanta group acquired SESA in 2007 and then DEMPO acquisition came in 2009. Volume has doubled during this period. Strong Management Information Systems including motivation/push for operational excellence and more empowerment of executives with career growth opportunities for younger generations are few areas of transformation. We also challenge our own benchmarks continuously. The thrust is on continuous growth with sustainability.

B&E: Investors would be waiting for the time when you will be able to finally move towards steel production and export. What is your perspective on the same?
PKM: If the Indian steel industry can consume all the grades of iron ore as exported, miners would be only happy to sell it to them at market determined price. Exports of iron ore from India were never done by design but only because the miners in India were not left with any choice. As far as coming into steel production is concerned, well, it would come at its own time.

B&E: How critical is the lifting of the export ban from iron ore in Karnataka to your business?
PKM: The amount of iron ore produced in our Karnataka iron ore mine hasn’t got enough demand in domestic market; leave alone the issue of market determined price. Hence, growth of our Karnataka volume (as per environmental permissions) is critically dependent on effective lifting of the ban with the seamless issue of all permits required legally. 


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Friday, July 13, 2012

Grossly Disputed Product

Absoulte GDP and GDP growth rates are often correlated to overall economic prosperity of nations. However, their relevance in this regard is quite limited

George Orwell states in his famous book Nineteen Eighty Four in Chapter 3 that, “…the choice for mankind lay between freedom and happiness, and that, for the great bulk of mankind, happiness was better. That the party was the eternal guardian of the weak, a dedicated sect doing evil that good might come, sacrificing its own happiness to that of others…” This Orwellian concept is still very practically relevant but has been buried under the deceptive and manipulative economic parameters predominantly used for measuring economic prosperity.

Economics can be really deceptive. The deception goes wider and deeper with the increase in the number of economic variables that goes into a calculation. And one of those economic parameters that hide more than what they reveal is the much touted Gross Domestic Product a.k.a. GDP and GDP per capita. Both these economic parameters are taken into account while measuring the economic prosperity of a nation and its population at large, but sadly fail to reflect the real prosperity of a nation.

The economic prosperity of a nation does not automatically imply social prosperity. There is hardly any correlation between economic development and well-being of a nation. Take Luxembourg for instance. The fact that it tops the charts when it comes to GDP per capita (highest in the world, $108,952 per year) and features among the top countries in the Human Development Index fails to ensure human prosperity. In spite of being a top performer in two of the world’s most reputed economic indices, the country does not feature as a good performer in the c – that measures overall well-being of nation. This is evident from the fact that Luxembourg has one of the highest per capita carbon footprints and intentional homicide rates (1.45); well above nations like Egypt, Kuwait & China. Luxembourg has less than 5,000 guns per 100,000 popula tion but murder rates are much higher than nations with relatively higher rates of gun ownership!


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