Monday, February 28, 2005

future factories

The surprise is that India's manufacturing revolution is starting at the high end.

By Jason Overdorf
(This article appeared in Newsweek International in March 2005).

March 7 issue - At a factory in greater Noida, an industrial suburb of Delhi, workers step through a series of ''air showers" that blast the grime of one of the world's most polluted cities off their clothes. Then they pull on white coveralls, white hoods and plastic sandals before passing through an air lock into the ''clean room" of Moser Baer, the world's third largest manufacturer of optical media, including CDs, VCDs and DVDs. Inside, rows of machines silently inject, coat, harden, finish, flip and label the shining disks, as a few white-suited workers adjust dials. Clean, quiet, heavily automated and nearly depopulated, this is the look of a nascent manufacturing revolution in India.

To anyone familiar with the Subcontinent, this picture comes as a surprise. Not so long ago even Indian consumers believed that Indian-made products were shoddy. Before the country began to liberalize its economy in 1991, the so-called license Raj stifled competition with red tape and nurtured inefficient makers of second-rate products. Even by the late '90s, as India began to emerge as a global power in information-technology services, the country remained a laggard in manufacturing. But lately India's manufactured exports have risen, from about $37 billion in 2002 to about $54 billion in 2004, and they could reach $300 billion by 2015, analysts say, as multinationals invest more heavily in India as a manufacturing base. Something similar happened in China, of course. But in India the early players are interested in the talent pool of chemists, designers and engineers, not low-skilled labor.

Look at headlines from the past 12 months: Nokia and LG Electronics unveiled plans to begin handset production in India. Hyundai, which has already exported about 50,000 cars from India, said it plans to make India its export hub for auto components. Toyota opened a factory that will make manual transmissions for vans, SUVs and small trucks produced in Thailand, the Philippines, South Africa and Latin America. Last month, Siemens announced plans to invest more than $500 million by 2009 in new and expanded factories in India.

Even picky German engineers are coming to associate India with quality. Jurgen Schubert, who heads Siemens's operations in the country, says that for years the company's quality testers in Germany stamped his Indian-made products "inferior," no matter how good they were. So in the late '90s, Schubert stuck made in germany on a shipment of Indian parts, and they passed inspection. ''After I pointed that out to them," he says, ''we no longer had any problems."

Multinationals have helped raise standards by encouraging Indian suppliers to modernize. When the big players entered the local auto market after liberalization in 1991, they assembled vehicles in India but imported many of the components. Now most of them are building cars using 70 to 90 percent local parts and materials. ''If you come and look at our factories today, most of the work is done by brainpower, with computer-aided drafting, lots of automation," says B. N. Kalyani, chairman of Bharat Forge, India's largest auto-parts maker. "The IT boom essentially brought out the story that Indian engineering skills are good and Indian engineers can adapt to whatever the needs of the market are. That gives India an advantage over China in technical, skilled manufacturing."

That may be overstating the case. Few Western industrialists rank India ahead of —China in any manufacturing category. Yet few doubt that India is carving out a big role, as skilled manufacturing shifts to developing nations. If New Delhi makes the right moves, says McKinsey & Co. consulting, India could raise its manufactured exports to $300 billion by 2015, increasing its share of global manufactured exports from 0.8 percent to 3.5 percent, and leapfrogging other low-cost countries to become one of the top two exporters (along with China) of products like apparel, pharmaceuticals, specialty chemicals and auto components. India could also become a big supplier of consumer electronics, computer hardware, and domestic appliances. "It's India and China, as opposed to either India or China," says Shirish Sankhe, a McKinsey partner in Mumbai. "Countries that may lose out are those where they have smaller domestic markets or less talent, like Thailand, Mexico, some countries in Eastern Europe and so on."

The likely losers also includes the United States. In auto parts, for example, customers increasingly expect longer life and higher technology at less cost. ''The result is that American parts manufacturing has become extremely unprofitable," says K. N. Subramaniam, managing director of Gabriel India Ltd., the flagship of the Anand Group, which expects auto-parts exports to rise from $36.8 million in 2004 to $56.3 million this year. India's domestic sales look likely to cross the million-car threshold in 2005, achieving a scale that will justify heavy investment in technology and capacity, further increasing India's global competitiveness.

To match China's recent growth, India will have to eliminate some ill-considered policies, experts say. In order to encourage consumption in its domestic market, New Delhi needs to cut taxes on manufactured goods down to the Chinese level, which means a cut from as high as 30 percent to 15 percent. It also needs to slash import duties; improve roads, railways, ports, and the power grid; and develop the type of Special Economic Zones that have created clusters of booming industries in China.

Indian businesses are already finding creative ways to dodge these hurdles. To avoid crippling power outages, Moser Baer has built its own power plant. ''We generate about 80 megawatts of power every year," says Ratul Puri, Moser Baer's executive director. ''We don't even have a grid connection." Bharat Forge is located in the state of Maharashtra and ships out of nearby Mumbai, but also from Chennai (formerly Madras), Kochi (formerly Cochin) and Gujarat, in case of strikes and bottlenecks in Mumbai.

The Indian government is also becoming more responsive to industry. It has removed barriers to the internal transport of goods destined for export and simplified import-export procedures. At the urging of Moser Baer, the government constructed a container depot in Greater Noida that operates 24 hours a day and now ships 80 percent of the company's output. ''The government is listening," says Puri. ''Five years ago you couldn't even have that discussion with the government." And as China shows, in nations where government works for industry, factories grow quickly.

© 2005 Newsweek, Inc.

Monday, February 21, 2005

a black day for indian filmmaking

<>(This article appeared in Newsweek International in February 2005).

Feb. 28 issue - Indian director Anurag Kashyap expected "Black Friday" to strike a nerve. He hoped it would spark debate. After all, the film is the first feature to deal with the serial bomb blasts that devastated Mumbai in 1993, killing 300 people and injuring thousands. What's more, Kashyap's film seeks to explore the motives behind the attacks and attempts to show that India's opportunistic politicians—who thrive on a cycle of organized violence between Hindus and Muslims—bear a great deal of responsibility for the tragedy. But no matter how much controversy Kashyap anticipated, he was totally unprepared for the legal challenges by the alleged bombers that stopped the film's release last month.

Mushtaq Tarani, one of the men accused in the bombing case, moved the Mumbai High Court to suspend the release of the film, arguing that the dramatization of the crime would prejudice the trial against him. The court issued an interim stay, which the Supreme Court upheld, and now the filmmakers must wait for a ruling from the high court on whether the interim stay will be lifted. Tarani may have a point: "Black Friday" uses the defendants' real names. Tarani himself is shown planting one of the bombs, though Kashyap argues that the voice-over of a character undergoing police interrogation establishes the scene as just the point of view of another gang member. "It's based on a book that has been out there for two years," Kashyap says. "But [the court's] logic is that people don't read books but they do see films."

That's exactly why Kashyap and producer Arindam Mitra wanted to make the movie in the first place: to find out how Indians would respond to the idea that they, along with the politicians they support, are responsible for the Hindu-Muslim violence that culminated in the worst terrorist attack in their country's history. The question now is: when, if ever, will they get to find out?

—Jason Overdorf

© 2005 Newsweek, Inc.

airlines: brand india is taking off

The $375 million Jet IPO last week is just the latest sign that gloom has given way to euphoria in the Mumbai stock market.
By Jason Overdorf
(This article appeared in Newsweek International in February 2005)

Feb. 28 issue - The same day that "The Aviator" opened in theaters across India, homegrown flying entrepreneur Naresh Goyal debuted Jet Airways, India's first private air carrier, to rave reviews on the Bombay Exchange. In one of the first high-profile signs that Prime Minister Manmohan Singh's moves to deregulate India's aviation industry are beginning to excite investors, the initial public offering of 1.7 million shares sold out within minutes last Friday, raising at least $375 million.

The successful IPO comes as Brand India is taking off. In the first 17 days of February alone, foreign fund managers invested $1.5 billion, and market watchers expect the 2005 total to reach $12 billion, up from $8.4 billion last year and $6.7 billion in 2003. Now, with three billion-dollar IPOs last year and nearly 10 companies with market values in excess of $10 billion, the gloom that once shrouded the Indian market has turned into euphoria, inspired by Singh's reforms. Late last year, for example, his administration succeeded in raising the cap on foreign investment in the aviation sector to 49 percent from 40 percent, and allowed domestic carriers to begin flying abroad. No airline is better positioned than Jet to exploit these opportunities.

When India began opening the skies to competition 12 years ago, Jet became the nation's first private carrier. It is now the leading domestic airline, with a market share of 43 percent. Consumers regularly vote it first in India for service—one reason analysts say it should profit handsomely from an expected boom in air travel inside India, and be able to compete on international routes as well. Many investors see Jet as a way to invest in the growing spending power of India's middle class.

The risk: Jet is losing its first-mover advantage. It faces new private competition from Air Sahara and India's first low-cost carrier, Air Deccan. As many as five more discount carriers plan to open for business in 2005. They face hurdles to applying the discount model in India, where there are no airport slots left in or near big cities like Delhi and Mumbai, and costs for landing fees and jet fuel are extremely high. Still, a fare-price war may be coming. Jet says it's not worried, because it gets 80 percent of its revenue from business travelers who don't pinch pennies. And whether it helps Jet or not, the sight of thriving competition is sure to attract more foreigners to Brand India.

© 2005 Newsweek, Inc.

Sunday, February 20, 2005

the last word: narain karthikeyan

(This article appeared in Newsweek International in February 2005).

Feb. 28 issue - On March 5, 28-year-old Narain Karthikeyan will become the first Indian to compete in Formula One racing when he takes the wheel for Jordan Grand Prix, the F1 team started by Ireland's Eddie Jordan, in Melbourne. It's a huge achievement for Karthikeyan, known as the "fastest Indian on wheels." Born in Chennai, he has been fighting for a place in the biggest competition in motor sports

for nearly a decade. Now, as he starts his engine, his sponsors Tata Group, JK Tyre and Bharat Petroleum Corp.—Indian companies finally entering into the aggressive marketing world of F1 to compete with giants like Shell and Marlboro—are steering themselves into pole position too. NEWSWEEK's Jason Overdorf spoke to Karthikeyan about his achievements and ambitions, as well as those of his giant country. Excerpts:

OVERDORF: You've been struggling to make it into Formula One for a long time. How does it feel to finally make it?
KARTHIKEYAN: We were all waiting for the right opportunity. I'm really happy to be the first Indian Formula One driver. It means a lot to the motor-sports fraternity.

Aside from cricket, Indian sportsmen don't get much support, yet you've been successful in getting some of India's corporate giants to sponsor you. How did you attract their interest?
Tata is a global company, and Formula One has the right image for them to get brand exposure. Bharat Petroleum has everything to do with cars. It suited their package, so they came onboard. They're also my long-term sponsors. Tata has been supporting me since 1999. Now I need to make it work. First we just need to finish some races—Jordan is not capable of winning yet. Then we'll be looking for more Indian sponsors so we'll have the money to make the car more competitive.

How difficult is it for Indian athletes—aside from cricketers—to break into the big time?
You need to be a standout. If you're pretty good and you're getting results internationally, you'll get some sponsors, like me. But in the beginning it's very, very hard. Cricket has been getting all the support, but slowly that's starting to change. Hockey, tennis and motor sports—these are getting more and more support. You need more international sports persons in these fields. You need some icons like me in Formula One. As this happens, more and more sponsors are going to look at different sports, and more and more kids will take them up.

How popular are motor sports in India?
It's getting there. F1 was the second most-watched sport on TV last year. [Viewership] is pretty high on the satellite channels. Now that's going to go up a lot more because I'm there. There are going to be a lot more Indians watching Formula One. This is a start for motor sports to grow bigger in India.

How do you rate your chances at success?
We have to be realistic. The Jordan car is not the best, for sure. We can't expect to compete with the [Michael] Schumachers of the world. If we finish in the top eight in some race and get the points, that would be great. Even if we finish among the top 14 qualifiers [out of 20 competitors], that would be good. But first we have to bring the car home in every race. In this sport, finishing itself is a big thing. I've been successful in Formula Three and Formula Two and beaten some pretty good drivers when they were competing at that level, so I think I can be very competitive given the right equipment.

Which makes you more nervous, driving on the track or driving on Indian roads?
Driving on Indian roads, by a long way. It's really crazy in some places, though it's getting better. [Foreigners] always ask me, "Which side of the road do you drive on in India—do you have right-hand drive or left-hand drive?" I say, "Whichever side we want." It's pretty dangerous out there.

Formula One has been trying to increase its presence in Asia over the past few years, opening races in Bahrain, Turkey and China. What role can you play in building interest in India?
Formula One at some point needs to grow in more Asian countries, and India is the perfect place. It's going to take government support, and the Indian government should realize that it would be a great thing [to have more Formula One races in India]. It would be great for the image of the country and have a lot of spinoff effects. And China is already ahead of us. Now [that I'm driving] we'll have a lot of viewers in India, a major market with a lot of people.

For Formula One, India has not been exploited yet, so they need to see if they can get something out of it. A lot of Indian companies will be interested in getting global exposure, so there will be a lot of marketing opportunities.

Have you seen a leap in commercial offers?
I am getting some offers, but I need to choose the right ones. So far I've only done ads for my sponsors.

© 2005 Newsweek, Inc.

Tuesday, February 15, 2005

snap judgment: books

(This article appeared in Newsweek International in February 2005).

Feb. 21 issue - Q&A By Vikas Swarup
Delhi's latest literary sensation, Swarup is a diplomat who earned a whopping six-figure advance for his first novel. Titled "Q&A," the book recounts the picaresque adventures of Ram Mohammad Thomas, an ignorant orphan who makes off with the jackpot on a quiz show called "Who Wants to Win a Billion?" To explain how he knew the answers, Thomas must tell the story of his life, starting with the Roman Catholic priest who took him in and named him for each of India's major religions. Too cute, perhaps, but "Q&A"—sold in more than 15 countries, with a movie in the works—certainly has its charms.
—Jason Overdorf

Angry Wind By Jeffrey Tayler
In an epic overland journey, Tayler, a travel writer, offers himself up as a sounding board for disenfranchised Muslims of central and west Africa. While he listens to their grievances against U.S. foreign policy, their own governments and the merciless landscape, a latent rage and potent despair come sharply into focus. Though Tayler locates the occasional oasis—his time with the nomadic Tuaregs stands out as joyous—he spends more time in Africa's windswept and conflict-ridden badlands. Comparing parts of the continent to Afghanistan, Tayler warns that the West ignores Africa's strife "at [its] own peril."
—Aaron Clark

Beyond the Great Indoors By Inguar Ambjornsen
Elling and Kjell Bjarne, two dysfunctional middle-aged men, meet at a psychiatric hospital and bond over their unhealthy relationships with their parents. After being released, they move into a flat in Oslo and struggle with everyday tasks like shopping and making small talk. But gradually the roommates gain confidence; they buy two kittens, Kjell Bjarne gets a girlfriend and Elling discovers poetry. One of Norway's most popular writers, Ambjornsen—translated here into English for the first time—has a talent for making the men's neuroses accessible and even appealing.
—Ginanne Brownell

© 2005 Newsweek, Inc.

a factory of one's own

Rather than buying gadgets, toys and clothes ready-made, consumers may one day prefer to download the designs and make them at home.
By Rana Foroohar
(This article appeared in Newsweek International in February 2005)

Feb. 21 issue - Neil Gershenfeld has boundary issues. As a teen, he irked his parents by asking to attend the local trade school rather than the mainstream academy for bright kids like himself. "I was good in science, but I also wanted to learn to make stuff," he says. "I didn't understand why those things had to be separate." At Bell Labs, he ran into trouble with the unions when he tried to use machine tools to fabricate vacuum chambers he needed for his research. So it's no wonder that Gershenfeld, who now runs the Center for Bits and Atoms at MIT's Media Lab, is once again trying to bridge the divide between the digital and the physical. As the inventor of the Fab Lab, a $20,000 mini-factory that can fit into a small room, Gershenfeld aims to bring high-tech manufacturing to the masses.

A Fab Lab (short for fabrication laboratory) is essentially a collection of high-tech factory parts, including readily available open-source software programs, computers and manufacturing equipment such as laser cutters and milling devices, which can be directed through a simple-to-use computer. With such a factory, you can design and make almost anything—from plastic toys to circuit boards and solar panels—out of just about any material. As part of a $14 million project funded by the U.S. National Science Foundation, Gershenfeld has deployed Fab Labs in India, Ghana, Norway, Costa Rica and the United States over the last two years. Already, Norwegian herders have built wireless antennas to track their reindeer; kids from inner-city Boston, Massachusetts, have crafted salable jewelry; Indian farmers have made and sold machines to locate groundwater, and West African students have developed solar cooking devices. "Forget about digital communication," says Gershenfeld. "The next big thing is digital, personal fabrication."

The Fab Lab may portend a new kind of manufacturing. "What if we could some day put the manufacturing power of a Ford factory in our own garage?" writes Gershenfeld in his upcoming book, "Fab" (Basic Books). In the future, rather than buying products, we might download their designs and produce them ourselves. The idea that people might be able to make pretty much anything has provoked a range of emotions from excitement, to dismay over potentially busted business models, fear of terrorists' exploiting the equipment and, conversely, hope that Fab Labs could help spread prosperity. "What's clear is that this technology is going to be disruptive," says Michael Jensen, a director at the National Academy of Sciences.

The roots of the Fab Labs are in both high and low technologies. In the digital age, Gershenfeld reasoned, there's no reason computing and manufacturing couldn't be integrated into one process, or even be done by one person. In his work on another project, Gershenfeld came into contact with Vigyan Ashram, a rural Indian development group, which needed a way of obtaining sensors to detect spoiled milk, devices for tuning diesel engines, machines that could help farmers locate groundwater and other gadgets. The problem was that nobody was mass-producing these products, and it cost too much to have them custom built. What the Indians really wanted was personalized fabrication technology.

Gershenfeld and his MIT colleagues kitted out the Ashram with a 3-D milling ma—chine, an industrial tool for making machine parts and a scanner hooked up to a PC. Local engineering students then helped them design circuit boards to be used in groundwater-locating machines, made on-site. The products not only helped the farmers, but have led to a new business. "We've sold more than 60 of these machines, and we're fully booked to carry out groundwater tests in the area for the next six months," says Yogesh Gulkarni, executive director of Vigyan Ashram. In Ghana, students designed a machine to pound cassava and plantain into fufu, a local dish.

Fab Labs aren't without their challenges. For starters, they require experts of some sort to help out, and in many communities such experts simply aren't available. At Vigyan Ashram, for example, work on the milk sensors and diesel-engine timers ground to a halt after the supervising engineer left during the restructuring of another MIT program in India. For these reasons, the most successful projects may be those that don't require complex computer-design work. Size is another problem. Currently, the tools in the Fab Labs can't make anything larger than themselves—more than a square meter or so. Gershenfeld is trying to develop robotic laser cutters that could drive themselves over large surfaces, creating things like big solar panels. Even if Fab Labs aren't likely to have the range of mainstream manufacturers, however, they may give some poor communities a way to start businesses and raise living standards.

The big question now is who will fund the growth. So far, Gershenfeld has been paying for Fab Lab deployment with his NSF grant. Now he's trying to interest governments and organizations like the World Bank, for whom Fab Labs could be an alternative to aid—a sort of manufacturing version of micro-finance organizations like the Grameen Bank, which encourage locals to bootstrap their own businesses.

Meanwhile, Gershenfeld has been preaching personal-fabrication technology to the likes of HP, Sony, Samsung and Microsoft. A few weeks back in Davos, he made predictions of home-based fabricators that would allow consumers to make their own gadgets, toys and clothes. That vision has a few stumbling blocks (how do you get rid of fumes from milling machines and how do you reduce the lab's cost from $20,000 to $2,000?), but it's easy to imagine companies using Fab tools to craft items for just-in-time shipping rather than storing a large inventory. Gershenfeld recently briefed Jeff Bezos, CEO of Amazon.com on this very idea. Fab Labs might one day bring more choice to both the poor and the prosperous.

With Jason Overdorf in New Delhi and George Nayakene in Ghana

© 2005 Newsweek, Inc.

Monday, February 07, 2005

why save the forests?

fear of big waves is no reason to plant mangroves

By Jason Overdorf and Eric Unmacht
(This article appeared in Newsweek International in February 2005).

Feb. 14 issue - In the aftermath of a natural disaster like December's tsunami, some stories have happy endings. V. Selvam's began when the giant waves came crashing into the mangrove forest of Pichavaram on India's Tamil Nadu coast. Selvam, a biologist who had been working to restore the forests, made his way to a nearby village as fast as he could, expecting the worst. Instead, he found relieved villagers regaling him with anecdotes. Eyewitnesses told Selvam that the mangroves had channeled water into lagoons and through canals, sparing the settlements meters from the shore. "I couldn't believe it," he says.

Similar anecdotes from all over the tsunami-affected region have had a special appeal to environmentalists and conservationists, who argue that if it weren't for the destruction of mangroves and coral reefs, which form natural barriers to waves, the death toll might have been far lower. Some of the hardest-hit countries have taken this admonition to heart and made mangrove restoration a pillar of their restoration efforts. Indonesia has promised to spend $22 million to replant 600,000 hectares of mangroves along its damaged coastline. The state of Kerala in southern India announced a plan to spend $8 million to create a protective barrier of mangrove plants. And forest officials in Thailand, Malaysia and Sri Lanka are evaluating similar schemes. The problem is that the idea of developing physical barriers, natural or otherwise, to protect against future tsunamis is "pie in the sky," says Doug Masson, an oceanographer at Southampton University in England.

There's no denying that mangroves did save some villages, like those on the Indonesian islands of Sabang, Nias and Simeulue, which were spared the worst damage even though they were close to the earthquake's epicenter. The faulty logic comes in generalizing these experiences to the entire region. For one thing, mangroves don't grow everywhere—only 10 to 12 percent of India's coastline and 25 percent of Indonesia's, for instance, naturally support mangroves. If 20 percent of these forests had been lost to development between 1980 and 2000, as the United Nations' Food and Agriculture Organization says, or even 50 percent, as some conservation groups insist, that would have left only a small fraction of coastlines vulnerable.

The forests, too, cannot be planted just anywhere. The Indonesian government is considering laying a belt of the trees around the entire province of Aceh, which was devastated by the tsunami. But mangroves flourish only in high-salinity soils common to areas that combine an inflow of tidal water and an outflow of fresh river water; they die in sandy soils, which make up the lion's share of beaches. Several efforts by NGOs to plant mangroves in Indonesia have failed. "These are very well-meaning projects, but people [tend to] throw one species in the mud, and basically, after two or three weeks, they're dead," says Jan Steffen, a UNESCO expert in coastal development. Says the FAO: "Planting of mangroves where they did not previously exist is rarely going to work. There is a reason why they were not there in the first place."

Even if it were possible to ring the entire Indian Subcontinent with mangroves, the strategy still wouldn't work in all cases. Because the size of a wave hitting the shoreline depends to a great extent on coastal geology, the tsunami took on different shapes in different places. Locals in Indonesia reported seeing rolling, riverlike waters flooding some areas and 30-meter-high, bulldozer-like walls of sea flattening others. A 50- to 100-meter band of mangroves might have made a difference where the ocean floor slopes gradually to the shoreline and the wave traveled only a few meters inland. But in places like Lhok Nga in Aceh, where valley walls funneled the waters up to 35 meters high and the tops of palm trees were snapped off "like matchsticks," says Steffen, a few mangroves wouldn't have helped.

In the absence of any definitive studies on the effect of mangroves on waves, it would be wiser, says Southampton's Masson, for Indian Ocean nations to invest instead in civil-defense plans that include educating the public about what to do if such a disaster recurs, and a regionwide early-warning system like the one that exists in the Pacific. Still, protecting and restoring mangrove forests would provide habitats for juvenile fish, crabs, shrimps and mollusks; nesting sites for hundreds of bird species, and shelter for the Royal Bengal tigers of India and Bangladesh, among other endangered animals. Those are worthy enough reasons for planting trees.

© 2005 Newsweek, Inc.

Saturday, February 05, 2005

travel: a boat away from home

<>
By Jason Overdorf
(This article appeared in Newsweek International in February 2005)

February 14 issue--Tired of wearing yourself out resting up? There's one vacation that will force you to throttle back and relax: a houseboat holiday. Try meandering along beautiful waterways or exploring a scenic lake—then dropping anchor and bunking down. tip sheet explores some great winter getaways:

Amazonia, Brazil: Swallows and Amazons Tours offers all-inclusive boat trips down Brazil's Amazon and Rio Negro. The company's riverboats sleep eight—in hammocks—while the posher houseboats have six air-conditioned cabins that each sleep two. Enjoy bird watch-ing, fishing for piranha and swimming—but keep your eyes peeled for alligators. A cook provides home-style meals including local fish, tropical fruits and regional vegetables. (Seven nights, $1,050 per person; 11 nights, $1,450 per person; swallowsandamazonstours.com)

Kerala, India: There's no better way to see the idyllic backwaters of India's southern tip—a huge network of canals, lagoons, lakes and rivers—than by houseboat. The huge, creeping barges, called kettuvalloms, that now serve as luxury houseboats once carried rice and spices. The boats have all the creature comforts of—and some advantages over—a good hotel. For one, you can angle for fish from your balcony. Casino Group, a well-known Indian hotel and tour company, offers various Spice Coast Cruises. ($275 per couple per night in peak season; casinogroup.com/spiceboat_home.htm)

Lake Wanaka, New Zealand: Just an hour north of Queenstown, Wanaka is a beautiful lake at the base of New Zealand's snow-capped Southern Alps. You can enjoy the breathtaking scenery from the rooftop deck of the fully kitted Lady Pembroke while you grill some freshly caught trout. The houseboat sleeps 10 and comes with kitchen, bathroom with hot shower, TV, video and stereo system. Be sure to take a break from the water and explore Mount Aspiring National Park, a wilderness reserve where ancient Maori trails crisscross high mountains and river valleys. ($710 per day; houseboats.co.nz)

Rain Forest, Costa Rica: A cruise down the Rio Colorado, Rio San Juan or Rio Indio Rica on the luxurious Rain Goddess offers anglers the chance to catch some of the world's most exciting sport fish—including tarpon, snook and machaca—without hiking through the jungle or sleeping rough. The boat, which can accommodate 12, has two staterooms on the main deck and four on the upper deck, 24-hour air conditioning and hot showers; onboard cell phones are available for those who need to keep in touch with the office. But why would you want to? (Five days and four nights, $1,795 per person for anglers, $850 for non-anglers; wheretofish.com)

Wednesday, January 26, 2005

outsourcing jobs...to europeans

By Jason Overdorf
(This article appeared in Business 2.0 magazine in January 2005).

With hundreds of employees yakking into headsets, Tecnovate's New Delhi office looks like a typical Indian call center, except for one thing: Nearly 100 of these workers aren't Indian. Call it "multilingual outsourcing" or "Eurosourcing" -- Tecnovate is leading a new trend in call-center hiring. Taking advantage of the 20-somethings who flock to India for postcollege sojourns, the firm is hiring workers from Germany, Norway, Sweden, and the like. The Europeans get an exotic year on the subcontinent, while Tecnovate gets a polyglot staff to serve its 15 travel, financial, and telecommunications clients. The imports work for Indian wages -- $5,000 to $8,000 a year, about 25 percent of what they'd earn at home -- but live like royalty. With an employment package that includes housing, a housekeeper, and time off to travel, Tecnovate has attracted more than 200 European workers since testing the program in 2002. Some have fallen in love with India and renewed their contracts. "Getting to know the culture and the way of living is something you don't see as a tourist," says Tea Westerlund, a Tecnovate staffer from Finland.

CEO Prashant Sahni says the privately held firm's profits have more than doubled every year since the nine-language model launched. Now other companies are taking notice of the young European workforce. A new employment firm called LaunchOffshore recently placed six Brits in Indian jobs and is looking to recruit a large number of multilingual Europeans in the coming year. That's an opportunity in any language.

Tuesday, January 25, 2005

the poor problem

The war on poverty is gaining momentum, and will figure high on the agenda at Davos this week, against a sobering backdrop: the war is not going as well as many thought.

By Karen Lowry Miller
(This article appeared in Newsweek International in January 2005).

Jan. 31 issue - A different war is now competing for the world's headlines—the war on poverty. British Prime Minister Tony Blair has made fighting African poverty a cornerstone of his leadership of the G8 this year, and will devote the March Finance ministers' meeting to it, while Chancellor of the Exchequer Gordon Brown is pushing a Marshall Plan for Africa. Both men are featured players at the World Economic Forum summit in Davos, Switzerland, this week; there, poverty will stand high on the agenda, fast on the heels of an ambitious blueprint released last week by the United Nations, aiming to revive its Millennium Development Goals, a project launched in 2000 to halve global poverty by 2015.

These efforts emerge against the backdrop of a sobering realization: the war is going worse than thought. The consensus view among the elites who gather in Davos has been that, no matter what street protesters and U.N. do-gooders may say, globalization is good for the poor. The recent boom in international trade and finance has reversed the course of history, shrinking the number of poor for the first time ever.

The statistical cornerstone of this world view is the work of Columbia University professor Xavier Sala-i-Martin, who has calculated that as global trade, travel and communications have boomed since 1970, the number of poor people worldwide has fallen by between 300 million and 500 million; between 1970 and 2000 the minority who live on less than $2 a day dropped from 29.6 percent to 10.6 percent. The problem, or so it was thought, was that the gains against poverty were mainly in the export powerhouses of Asia, while large swaths of Africa and Central Asia, held back by war, isolation, poor governance or a lack of natural resources, lay beyond the enriching reach of globalization.

It turns out that progress is much more spotty than that picture suggests. In December, the U.N. Food and Agriculture Organization (FAO) released a study claiming the number of hungry people worldwide rose in the second half of the 1990s, particularly because of India, where the number of hungry people rose by 18 million, and stalled progress in China. The claim is widely disputed. Sala-i-Martin calls the FAO methodology "bogus." But some Indian authorities do not dispute the basic trend: they say the number of poor people is rising in absolute terms, though not as a share of the population. Even World Bank senior development research adviser Martin Ravallion, who argues that the number of poor people in India is falling by about 1 percent a year, says the rate of poverty reduction is lagging far behind economic growth, which is now better than 7 percent. "The pattern is not as pro-poor as it potentially could be," says Ravallion. "It will constrain the ability of the poor to participate in growth and ultimately constrain India from growing."

The obvious conclusion is that opening national borders to globalization is not enough. Parts of Indian states like Bihar, Uttar Pradesh, and Orissa are as removed from international trade as Africa or Central Asia, and as badly governed. Agricultural economist M. S. Swaminathan says that 30 percent of rural Indians have no land, no fishponds, no assets of any kind. "Our problem of undernutrition... is a lack of purchasing power," says Swaminathan. "We need to create jobs in rural areas."

Swaminathan, who chairs a commission on hunger reduction, and other Indian analysts believe the new government, led by Prime Minister Manmohan Singh, is on the right track. It is looking into such measures as a guarantee that at least one member of a rural family has at least 100 days of employment each year, and that schoolchildren receive a mid-day meal. It is looking at food processing for the first time, because some 25 percent of the milk, fruit and vegetables produced for domestic consumption end up spoiling.

India's moves reflect a widespread questioning of the "Washington consensus," which places a priority on free markets and unrestricted capital flows. In December, the U.N. General Assembly resolved to pursue the Millennium goals under the rubric of "fair globalization." What that means in essence is that the war on poverty will be waged as Sweden (not the United States) might do it: with a focus on social programs to fill the gaps where the free market doesn't reach.

The Millennium report has targeted problems causing poverty, such as poor health care and education, and wants rich countries to pony up an extra $50 billion or so in aid per year to make it happen. Jeffrey Sachs, the Columbia professor who led the Millennium review, hopes the ideological debate is over. He wants to concentrate on practical solutions: roads, water wells, mosquito nets. "This is not a morality story," he says. "Globalization has bypassed people caught in the poverty trap." And there are far too many of them.

With Jason Overdorf in New Delhi


Friday, January 07, 2005

tide of grief

Tsunami: The Earth shrugged, and more than 140,000 died. A story of unimaginable tragedy and heroism

By Evan Thomas and George Wehrfritz

(This article appeared in Newsweek in January 2005).

Jan. 10 issue - If, on the Sunday morning after Christmas, you had been like some all-seeing, all-knowing deity, able to peer down through the ocean depths off the western coast of the island of Sumatra, here is what you would have seen:

Two giant tectonic plates, which have been pushing against each other for millennia, suddenly shift. The left plate has been sliding under the right at the rate of a few centimeters a year, but now the top plate suddenly springs up, lifting perhaps 60 feet along a 1,000-mile ridge. Above, ocean surface hardly ripples. In planetary terms, the movement is "utterly insignificant," says geologist Simon Winchester, author of "Krakatoa," a recent best seller about a volcano that exploded off Sumatra in 1883, killing 40,000 people. "The earth shrugged for a moment. Everything moved a little bit."

The quake jolted the Earth's rotation enough to trim a couple of microseconds off the clock. Relatively speaking, it was a small blip in the long, violent history of a planet with a molten core, where entire continents have vanished and then reformed. But the seismic bump was enough to displace trillions of tons of water in a few seconds. Silently, invisibly, the water pushed outward at the speed of a jet plane. As it neared shore, the speed slowed, and large waves formed, in some places very large ones. Usually, a tsunami does not look like the massive, cresting mountain of water in "The Day After Tomorrow." Still, it's not a sight you would ever want to see while standing on a beach.

As the waters receded last week, the death toll kept rising: 20,000, 40,000, 80,000, 100,000 ... and doctors warned of epidemics still to come. Suffering was indiscriminate in the luxury resorts and poor fishing hamlets along the Indian Ocean coast. "Kids missing and sharks washed ashore and people worrying about their Christian Dior shirts and jewels while people were being thrown against rocks. It was just so random," said Vikram Chatwal, a Manhattan hotelier vacationing in the Thai resort of Phuket. There were the tabloid-titillating survivor stories, like the rescue of Petra Nemcova, cover girl of the 2003 Sports Illustrated swimsuit issue, who clung to a tree for eight hours. Or the escape of the Harrow School cricket team, which had the pluck or luck to climb up on a pavilion in Sri Lanka as the waters swirled across the pitch. Less heralded, but bitterly mourned by their parents, were the 20 boys playing pickup cricket on Marina Beach in the south Indian city of Chennai, all swept away by a single wave. Lost: a whole church, as its parishioners worshiped on a Sunday morning. Found: a 20-day-old baby floating on a mattress, crying but alive.

There were some heroic tales. Casey Sobolewski of Oceanside, Calif., and his mother, Julie, were sailing off the Thai coast when the wave roared by. They began pulling aboard survivors sucked toward them by the undertow. Casey jumped into the dinghy to rescue some nearby floundering children. Julie was discouraged to see other boats hanging back, their passengers fearful of getting involved. The scene evoked images of the sinking of the Titanic, when all but one of the lifeboats stayed away as the great ship went down, lest they be overwhelmed and perish, too.

Helpless awe was the more prevalent emotion. TV images of shocked vacationers running before surging floods on sea coasts from Thailand to Sri Lanka were followed by scenes of utter devastation in the remote outreaches of the Indonesian archipelago (known as the Ring of Fire for its deadly seismic history). Slowly, the rest of the world realized the magnitude of the disaster (in the Bush administration, perhaps a little too slowly). If there was a single tragedy repeated over and over again, it was the failure to act—usually, the inability to act—until it was too late.

At Hawaii's Pacific Tsunami Warning Center, shortly after 3 p.m. on a quiet holiday afternoon, one of the scientists on duty, Stuart Weinstein, noticed a spike on the seismometer in the Cocos Islands, south of Sumatra in the Indian Ocean. The initial reading was for an earthquake registering 8.0 on the Richter scale. Quakes of such magnitude are not all that unusual. At 3:14, Weinstein and a colleague sent out a routine notice of the quake and a message: THIS EARTHQUAKE IS LOCATED OUTSIDE THE PACIFIC. NO DESTRUCTIVE TSUNAMI THREAT EXISTS BASED ON HISTORICAL EARTHQUAKE AND TSUNAMI DATA.

Over the next half hour, the seismic data kept streaming in to the Hawaii center, and the estimated size of the quake increased—fivefold, to 8.5 on the Richter scale. Time to call in the boss: director Charles McCreery was summoned by phone. Now a more ominous message was sent out: THERE IS A POSSIBILITY OF A TSUNAMI NEAR THE EPICENTER.

In fact, a tsunami had already smashed into remote North Sumatra, almost instantly killing thousands. The tsunami watchers in Honolulu had no way of knowing: there are sea-level wave monitors in the Pacific, but not the Indian Ocean. Set up after a tidal wave killed more than 150 people in Hawaii in 1946, the Hawaii tsunami center is responsible only for warning the 29 countries along the Pacific Rim, where tsunamis are frequent. In the Indian Ocean, tsunamis were unusual. Governments there have fewer resources. There is no warning system.

In Jakarta, Indonesia, some 5,000 miles to the east of Hawaii—and about 1,200 miles from the epicenter—Prih Harjadi, director of data gathering at Indonesia's Bureau of Meteorology and Geophysics, got his first inkling of danger in a phone call from his nephew. A quake had shaken the city of Medan, on the island of Sumatra. Harjadi rushed from his home to his office to learn of the unfolding disaster along the Sumatran coast. He was crestfallen. His government had discussed setting up a tsunami-warning system back in 1992. But an official request for aid from Japan "got lost" in the bureaucracy, Harjadi said. The cost of the plan never approved: $2 million.

The Thai coast, some 300 miles from the quake, was the next to be hit. The area has some of the most beautiful beaches in the world; tourists flock there. Coming off a recent divorce in Britain, Jack Davison was looking forward to sun, romance and adventure during his Christmas holiday in Thailand. The 57-year-old retired schoolmaster was walking near Patong Beach on Sunday morning when he noticed a crowd of Western tourists and locals staring curiously out to sea.

The water seemed to have vanished from the shore. Then the crowd noticed a small wall of white water about a mile out. Within seconds, the wall loomed larger and began tossing yachts and fishing boats like toys as it barreled in. The people around Davison began to scream. Too late, Davison and the others turned to run. The Briton was pinned beneath a car as both he and the vehicle were swept away. "It went totally dark, and the only thing I could see was the wheel of the car on top of me and the exhaust pipe. I thought that was it," recalled Davison. Suddenly, he was wrenched free and came up gasping. He watched in horror as a young European couple, completely naked, washed out of the window of their ground-floor room at the Sea Gull Hotel just before a car smashed into the window frame.

One of the young Europeans was a 29-year-old Italian named Dario Tropea. He and his female companion had been abruptly awakened by a torrent of water in their hotel room. In five seconds, the water level had risen to within inches of the 10-foot ceiling, leaving the trapped couple no choice but to link arms and dive through the window. Tropea lost consciousness. "When I woke up, I couldn't see the hotel, and I thought it had collapsed." Tropea found his shocked, naked companion, and they started back to look for friends—when they saw a second wave. "People were screaming, calling out for us to run, and car horns jamming as they crashed into the hotel," recalled Tropea, as he sat, dazed and injured but alive, in a hospital room two days later.

It took the tsunami less than two hours to cross the Bay of Bengal to India. In the small town of Nagapattinam on India's east coast, K. P. Selvam, a wiry, weathered, 43-year-old fisherman, was relaxing under a shade tree after Sunday mass, mending some nets. On this perfect day, he was thinking about going fishing with his mates. His wife was cleaning their house, a tile-roofed, mud-and-brick hut a hundred yards from the sea. Their small daughter and two sons played outside. Suddenly, Selvam heard a distant purr, a sound he had never heard before.

The sea had always been Selvam's sustainer and his friend. But the noise bothered him as he gazed into the clear sky and limitless horizon beyond. Then he noticed something that made his stomach churn. A thin black border had appeared on the horizon; it seemed to be thickening, growing. "I stood up and started shouting at my wife to run ..." Selvam recalled, speaking feebly. "I clung to a tree but soon realized that the huge tree had been uprooted." He survived. But his wife and three children, his home and many of his friends were gone, and he was surrounded by corpses—"some," Selvam said, "had their heads smashed."

Many of the fishermen and their families, swept away by the tsunami that rolled over the east coast of India, were squatters. Unable to afford houses in town, they had built huts illegally on public beachfront. Marimithu, a retired fisherman who works as a night watchman, says next time he will build a house with a brick foundation, though he must be aware that bricks and mortar did not save his neighbors. His children, who barely survived with him, now wake up screaming, "The wave is coming!" Vasturi, a 50-year-old grandmother, saw her daughter and two grandchildren swept away. Her daughter, Saraswati, managed to survive, but she cannot stop weeping. Three days after the death of her children, Saraswati's face was etched with deep, angry scratches that could only have been self-inflicted.

Tsunamis do not slow down or lose much power until they reach shallow water. This tsunami hit the coast of Africa some four or five hours after the quake. Back in Hawaii, the time was a little after 7 p.m. At the Pacific Tsunami Warning Center near Honolulu, Stuart Weinstein sat looking at his seismic readings, watching TV and, as he put it, "kind of feeling like a schmuck." Surrounded by technology, but lacking a warning system for the Indian Ocean, he had been reduced to typing in "tsunami" on Google to keep track of the death tolls as they were posted on the wires. The numbers started small—one dead in Phuket, 150 in Sri Lanka—but it was dawning on Weinstein that a disaster was happening, and there was nothing much to do about it. Weinstein and his colleagues, Barry Hirshorn and the center's director, Charles McCreery, realized that they were dealing not with a localized quake, but a gash stretching for hundreds of miles along the Indian Ocean floor. The seismology center at Harvard, the gold standard for earthquake watchers, was now estimating the strength of the quake as 8.9 (later revised to 9.0). That was a monster quake, capable of generating killer waves. The tsunami watchers wrestled over whom to call. They were on the phone to the U.S. embassies in Madagascar and Mauritius at about the time when the waves struck there. It was already too late.

The relief effort would become global and vast (including millions raised privately on the Internet). But it started with painful slowness. In the province of Aceh on the island of Sumatra—the area closest to the epicenter and the worst hit—the Indonesian government was barely in control. A rebellion had been spluttering and flaring for years. One of the groups that managed to get to Aceh after the tsunami was the moderate Islamic organization Muhammadiyah. Somewhat akin to the Christian Coalition in the United States (though much larger), the 35-million-member group has the clout to put politicians in office and runs a chain of colleges.

It took 72 hours for a Muhammadiyah relief mission to reach Aceh. The airport could accommodate only two cargo planes at a time. Arriving on a plane donated by budget carrier Lion Air (along with cases of donated instant noodles and strawberry milk), the Muhammadiyah team, accompanied by two NEWSWEEK journalists, secured an SUV belonging to the local military-intelligence chief. The man's riding crop, left on the back seat, provided a moment of levity. One Muhammadiyah staffer joked about his cell phone, punching buttons and saying in English, "Nokia is NOT connecting people." But the mood quickly chilled. Just beyond the airport, soldiers were filling mass graves with wrapped corpses. Across a bridge, at the edge of town, trees, brush, roof beams, scraps of clothing caked in mud—all lined the roads like dirty snow. Then they saw the bodies: naked, bloated, leaking, baked into putrescence by three days in the sun.

The Muhammadiyah team pulled on masks as their car pressed farther downtown. The driver had to slalom through the corpses as they drew close to the Muhammadiyah headquarters. They passed a 50-foot fishing boat, lying on top of a bridge. Buildings had been crushed. Whole neighborhoods had vanished. The car stopped before a pile of bodies. The group stepped out, looking somber, uncertain. Rizal Sukma, the secretary of Muhammadiyah, declared, "Turn back. Our headquarters is destroyed." Nearby, on a lamppost, hung posters of the missing.

The group retreated to the Grand Mosque, still standing but its minaret riddled with cracks. Built more than a century ago, the mosque was a bastion of resistance against Dutch colonial rule in Indonesia. When the tsunami hit, the holy place became a refuge. Many people fled before the rising waters into the main prayer hall, but the waters followed. Many drowned beneath the ornate pillars and gilded chandeliers.

Two days later the floor was still slick, the stench overpowering. A skinny man with a cane and stiff black hat, identifying himself as Zulkifli, went up to the group. "This is punishment from the gods," he said. "Because there is no justice, because our leaders are oppressive. They don't care about the poor." Where was the imam? He had not been seen since the quake. No one knew if he was dead or alive.

CONTINUED>>

Din Syamsuddin, the president of Muhammadiyah (he has a doctorate in political science from UCLA), took charge. A short, clean-shaven man with a slight paunch and calm, grave manner, he ordered teachers and school administrators to sweep the streets for corpses, set up soup kitchens and prepare camps for refugees. One problem: the locals had been reluctant to bury victims until they could be washed and wrapped in white cloth, according to Muslim practice. But in Jakarta, Islamic leaders have issued a fatwa, a religious edict, declaring that during the crisis period field burials would suffice.

In 1883, when the volcanic island of Krakatoa blew up, it not only killed tens of thousands of people but spread political fallout across the archipelago. The cataclysm contributed to "militant, anti-Western Islamic movements" on the main island of Java, wrote Simon Winchester, leading to a full-blown revolt against the Dutch in 1888. Now the government of Indonesia, already on shaky ground with separatists on Sumatra, will be sorely tested to provide relief—and avoid taking the blame for the suffering meted out by an angry God.

Indonesian politicians are not the only ones with something to lose. More than 10,000 miles away, at the Bush ranch in Crawford, Texas, the president of the United States was beginning to feel some political heat. For the first three days Bush stayed out of sight, on vacation. "The president doesn't like the idea of empty gestures," a White House spokesman told NEWSWEEK. At first the administration pledged $15 million in humanitarian aid, and by Tuesday the ante had been upped to $35 million. By Wednesday, Bush was appearing before reporters in an airplane hangar to express his condolences. Then he was off in his pickup truck to clear brush. White House aides were defensive about Bush's slow reaction, but officials made it clear that the United States will play a prominent role in a multibillion-dollar global relief effort. By the weekend the administration had increased its pledge tenfold, to $350 million.

The Tsunami Warning Center in Hawaii is normally a pretty relaxed place. Headquartered near Pearl Harbor under some palm trees, the low-slung white building could pass as a pool house. The staff lives in houses just yards away. But the Warning Center staffers have not been getting much rest. They have been churning out a timeline demanded by the White House, which apparently wanted a better fix on the center's efforts to warn other nations.

McCreery says he's received some hate mail. "It's along the lines of 'You moron, I got on the Web and I found phone numbers. You could have started to look up numbers of hotels on the beach to warn them'." For a moment, McCreery looked as if he would just brush off the suggestion. But then he said, "You know, looked at calmly, it's not a bad idea. It's better to save some people than no people." Short-circuiting the chain of command, however, never occurred to them, and in truth, how many hotel managers would have listened to warnings from a frantic scientist half a world away on a calm and beautiful Sunday morning?

Still, McCreery tortured himself. "In retrospect, it's partly because we just didn't realize the scale of the thing. In some ways, I'm going to feel a responsibility my whole life." McCreery teared up, then regained his composure. "Sorry. The things we should have done were not done from last week, but things we should have done over a bunch of years" to set up a network in the Indian Ocean. McCreery was strung out; he'd barely seen his family in days. When he got the call on Sunday, he had been about to put together the bicycles he had bought for his twin 4-year-old girls for Christmas. The bikes were still sitting in their boxes.

Grief circled the globe. At a pagoda in Thailand visited by a NEWSWEEK reporter on Tuesday, the coffins were stacked eight feet high. But the coffins had run out, and aid workers had started wrapping bodies in tarps and blankets. Then they ran out of those and just laid the bodies in a grassy area. The faces on the bodies were frozen in grimaces of suffering. Hundreds of volunteers had come out to help, but many visibly gagged as they moved about the bodies. The bodies kept arriving.

With Sudip Mazumdar and Jason Overdorf in India, Joe Cochrane in Thailand, Eric Unmacht and Paul Dillon in Indonesia, Andrew Murr in Hawaii, Jamie Reno in San Diego, Eve Conant, Holly Bailey and Steve Tuttle in Washington and T. Trent Gegax and Julie Scelfo in New York

Sunday, December 05, 2004

the curse of red ink

An ex-government minister attacks India's bureaucracy

By Jason Overdorf
(This book review appeared in Newsweek International in December 2004.)

Dec. 13 issue - Arun Shourie, who has captained a half-dozen different ministries, knows what ails India's government. But reading his latest book, "Governance, and the Sclerosis That Has Set In" (262 pages. Rupa & Co.), one gets the feeling that it was his experience as minister of Disinvestment—charged with selling off India's sick state-owned companies—that motivated the journalist turned politician to pick up his pen. Resistance to the sale of state companies ran deep, even though none of the ailing firms had made a profit for years. In the end, political infighting guaranteed the minister would fail. But he realized that it wasn't ideological disputes that tied government after government into knots of inaction: it was the system of governance itself. As he puts it, a sclerosis had set in.

Shourie begins this compendium of examples of stupefying bureaucratic obstructionism with a hilarious one. Two officers in the Ministry of Steel set off shockwaves when they appended comments to an official document in red and green ink. Their worried superiors consulted the Department of Administrative Reforms and Public Grievances: "Can officers use inks other than blue or black?... Are there Guidelines on the question? If so, could these be forwarded to the undersigned..." In resolving this quandary, the department took 18 months and consulted the Directorate of Printing (experts on ink), the Department of Personnel and Training (experts on rules), the National Archives of India (experts on longevity) and the Ministry of Defence (experts on hierarchy). The result is outlined in two conflicting paragraphs appended to the hallowed Manual of Office Procedure, and can be summed up roughly as follows: some people can use red or green ink some of the time, but nobody can use red or green ink all of the time.

The red tape extends far beyond red ink. Shourie outlines how internecine disputes not only helped prevent many state-owned companies from ever turning a profit but also made it nearly impossible for the government to sell its loss-making firms, since nobody would bid on them without a clear statement of their assets and liabilities. Likewise, he shows how the government's move to adopt new telecommunications was slowed by conflicts not over the actual policy but over who should be deciding that policy. And the public remained in grave danger because debates over which authority should be held accountable—rather than what needed to be done—prevented environmental legislation from being enforced.

This is an admirable exercise in truth-telling. But it's hard to share Shourie's cautious optimism that the disease can be cured by "wielding the axe" to limbs of government that don't function. The patient won't lie down on the table. Whose responsibility is it to decide which table and which axe? And should it be an axe or a scalpel? That, too, is a matter for careful consideration.

© 2004 Newsweek, Inc.

Tuesday, November 30, 2004

india: playing its last card?

By Jason Overdorf
(This article appeared in Newsweek International in December 2004).

Having been sidelined by its election loss in May, India's Hindu nationalist Bharatiya Janata Party jumped at the chance to get back in the headlines last week after the arrest of the country's foremost religious leader, Shankaracharya Jayendra Saraswati, a.k.a. the Kanchi seer. BJP leaders denounced the jailing of the 70-year-old holy man—who was charged with arranging the killing of an employee who had worked at the seer's Hindu temple in southern India—and went on a three-day fast to demand the seer's release. BJP-associated far-right Hindu groups alleged the arrest was a "Christian conspiracy against Hinduism" perpetrated by the Congress party, led by Italian-born Sonia Gandhi.

The issue was not just religious, but political too. Observers say the BJP is scrambling for an issue to help them recover from the election, and playing the Hindu card has become their best option. BJP hard-liners claimed the party lost because the party strayed from its traditional Hindutva message—an ideology that seeks to transform India into a Hindu state. "They're trying to use the arrest to reintroduce the Hindutva agenda," says Kamal Mitra Chenoy, professor of comparative and Indian politics at Jawaharlal Nehru University. "They have no other agenda. Both [the Congress and the BJP] are doing economic reforms [and] trying to improve ties with Pakistan. Hindutva is the only differentiating factor they have." Last Wednesday BJP president L. K. Advani admitted as much, saying the seer's arrest could help mobilize support for his ailing party. It's worked before. In the early 1990s, the BJP galvanized Hindu support by casting itself as the protector of Hinduism in the midst of nationwide Hindu-Muslim riots. Just a few years later, in 1998, it gained control of the government for the first time.

Monday, November 22, 2004

india: commies vs. capitalists

Manmohan Singh's economic ambitions could be strangled by the leftists in his governing coalition
By Jason Overdorf
(This article appeared in Newsweek International in November 2004).

In a pitch at the New York Stock Exchange in September, Indian Prime Minister Manmohan Singh asked U.S. investors for $150 billion in foreign direct investment. His country desperately needs the money for infrastructure improvements over the next 10 years. While India's recent economic growth has been strong, Singh argued, his country has barely scratched the surface of its potential. An economist credited with helping to launch India on the path of economic reform in 1991, Singh claimed that annual GDP growth over the next five years could average 8 percent a year—up from a 6 percent average over the last decade—if the country stuck with its reform agenda. Added the prime minister: "No power on earth can stop an idea whose time has come."

Except maybe his own ruling coalition. Bound by his Congress party's weak showing in the most recent elections (a mere 145 seats in Parliament out of 542) to an alliance with the communists and other leftist parties, Singh's reform ambitions are fragile, to say the least. Shortly after his NYSE appearance, communist M.P.s attacked Singh over the presence of so-called foreign experts in consultancies working with the national Planning Commission, the government agency that determines India's long-term strategic priorities. (All of the supposed foreigners were Indian nationals, but the leftists argued that their ties to foreign companies and organizations—including McKinsey & Co. and the World Bank—made their intentions suspect.) In the end, Singh disbanded the consultancies altogether, sending the pro-business "foreigners" and more leftist compatriots packing.

The tiff is a microcosm of the challenges facing Singh as he tries to accelerate economic growth while mollifying millions of voters, many of whom felt left behind by the liberalization policies of the former Bharatiya Janata Party government. On the one hand he has new allies among India's business elite, who are now influencing not just local but national politics and policies; on the other, he is hemmed in by his coalition partners, whose rhetoric and actions are themselves often at odds. It's not quite the capitalists vs. the communists, but the tug of war is real—and potentially the greatest drag on India's growth.

The economic-policy skirmishes have already started. Singh's reform plan has three key components: selling stakes in upwards of 35 state companies, raising the caps on foreign investment in key industries like telecommunications and insurance, and loosening the country's inflexible labor laws. Already, Singh's cabinet has approved an increase in the limit on foreign investment in India's aviation sector from 40 to 49 percent. But the left has so far blocked a proposed 25 percent increase in the FDI cap on the telecommunications and insurance sectors. In late October, Finance Minister P. Chidambaram told a meeting of business leaders that political pressures from coalition leftists would not stop the government's march to a market-oriented economy. He announced that a "reconstruction board" to advise the government on the sales of loss-making public companies would be set up soon, adding: "Some [state] companies will be closed down or sold."

The privatization issue is extremely sensitive. "Let privatization go to hell," Communist Party of India chief A. B. Bardhan said after last May's national election. On Oct. 27, the day before they were to meet with the prime minister, Bardhan and the Communist Party of India Marxist General-Secretary Harkishen Singh Surjeet told reporters that they were aware of government efforts to sell stakes in state companies such as Power Grid Corp. and Power Finance, both profitable last year. The Communists oppose the move, calling it "privatization through the back door."

The political left particularly opposes selling off parts of India's navratnas, or nine jewels, which are major state-owned industrial and energy companies. Markets have been hoping for years that the government would sell stakes in Bharat Petroleum Corp. and Hindustan Petroleum Corp. Last year the Cabinet Committee on Disinvestment decided to do just that—but the decision was overturned by the India Supreme Court, which said that such equity sales must be approved by Parliament. Later, the Communist Party forced the government to disband the Disinvestment Ministry, although Chidambaram's recent comments suggest it will be reincarnated soon. The Finance minister has denied that he wants to sell all nine jewels, saying "a line must be drawn" between those that are candidates for government "disinvestment" and those that aren't. He hasn't stated which criteria will be used.

Leftists claim their opposition to raising the caps on foreign investment is similarly nuanced. They maintain that selling foreign companies majority stakes in telecommunications firms, for instance, could have negative implications for national security. On the privatization issue, Prabhat Patnaik, a left-wing economist, contends that it's wrong for the government to sell state companies to private investors who must borrow from banks to finance the purchase, when the companies themselves could do the same to help boost their competitiveness. "It's absolute nonsense from my point of view," says Patnaik.

The intensity of leftist resistance is in some ways a testament to the clout India Inc. now holds in New Delhi after several years of healthy growth. At the local level, executives—many educated or formerly employed in the United States—have promoted capitalism aggressively in such cities as Mumbai, Hyderabad and Bangalore, home to the country's booming information-technology industry. They've also begun to make their presence felt in the halls of government. Business leaders, for instance, have managed to cut through red tape at the Ministry of Telecommunications to set up a new high-speed satellite uplink that can be shared by a number of software houses. IT tycoons have played a key advisory role in Bangalore, in particular, applying modern business-management techniques to the local government, boosting its transparency and modernizing its record-keeping.

Nationally, a growing, U.S.-style respect for corporate titans—fed by glowing profiles in magazines like Business Today and TV shows like CNBC's "India Business Hour"—has made stars of top executives like Reliance Group's Mukesh Ambani and Infosys India's Nandan Nilekani, and the bureaucrats are taking notice. "Twenty years ago, business and government would talk at cross-purposes," says Jerry Rao, CEO of the outsourcing company Mphasis and president of India's National Association of Software and Service Cos. "But over the last 10 years we've established a dialogue with each other, and in the last five years have included civic bodies in the conversation."

Several corporate high fliers, for instance, sat on the government's Kelkar Commission on tax reform. It recently recommended the elimination of some income-tax exemptions for individuals, a reduction of corporate taxes and the elimination of a corporate-tax loophole related to how firms define depreciation. The commission also advised the government to ax its many service taxes in favor of a single value-added tax that would drastically reduce the tax on retail goods.

None of the recommendations have yet been implemented, but they are under discussion within cabinet agencies. In the past, such policy changes would be bogged down in bureaucratic infighting for years. There is still some of that, to be sure, but with the corporate sector showing how to cut through red tape and get things done, ordinary Indians are now demanding more accountability from their government representatives. "Today, every government department is very conscious that political survival depends on economic progress," says M. K. Sanghi, president of the Associated Chambers of Commerce and Industry of India.

The executives aim to press their case by pointing to specific success stories. "Whether it's at the state level or the central level, there's a general receptivity to ideas from business," says Infosys CEO Nilekani. "It's not necessarily that all the ideas get implemented. But the receptivity is pretty decent across the board, with all governments." Analysts note, for example, the great increase in services available from the insurance industry since 2000, when the sector, long dominated by two state firms, was opened to private competition. The industry now has more than a dozen firms.

Business leaders also point to the transformation of West Bengal state, which was long notorious as a hotbed of trade unionism and economic nationalism. West Bengal's chief minister these days is a communist, but he's adopted a strong pro-business stance to attract industry and investment. The minister, Buddhadeb Bhattacharjee, likes to boast that Japan's biggest foreign investment is in technology firms based in his state. Indeed, he's so bullish that he's taken advantage of an unusual law to ban strikes in the thriving IT sector.

Most of Bhattacharjee's leftist brethren will still require convincing, however. Y. K. Modi, president of the Federation of Indian Chambers of Commerce, a group made up of mostly family-run firms, says that "many [leftist] political leaders are still living in the 1960s and 1970s, and don't realize that if we're to provide employment for all, growth needs to be stepped up to 10 percent." Saumitra Chauduri, economic adviser at the credit-rating agency ICRA Ltd., says that the left still tends to equate foreign investment with "imperialism," adding: "That is an illogical view."

The question is whether Singh, a political novice, can convince his partners that the voice of India Inc. should be more closely heeded. As Chaudhuri says: "[Singh] made it clear at the New York Stock Exchange that he has to have a relationship with the left, because this government has to last for four or five years. He'll use consultations and try to convince them [to back his plan]." Though Chaudhuri and others foresee difficulties ahead, Singh is not the only developing-country leader walking a political high wire. The president of Brazil, Luiz Inacio da Silva, has faced similar pressures—and so far he's kept Brazil headed in what the smart money believes is the right direction. There's no reason that the pragmatic Singh cannot do the same. India's economic future depends on it.

© 2004 Newsweek, Inc.

Thursday, October 14, 2004

past perfect

Ha Jin's latest novel is a solid read, but won't meet readers' high expectations of this writer's work

By Jason Overdorf
(This book review appeared in the Far Eastern Economic Review in October 2004).

War Trash by Ha Jin. Pantheon $25

A NOVEL LIKE Ha Jin's Waiting, which won the National Book Award in the United States and elicited comparisons with Russian masters Anton Chekhov and Isaac Babel, can become a heavy burden on a writer's subsequent work. Though impressive, Ha Jin's fourth book, War Trash, does not meet the same lofty standard.

Set in 1951-53 and written in the form of a memoir by Yu Yuan, a Chinese soldier captured and imprisoned by American troops during the Korean War, the book offers an intriguing view of that conflict. But perhaps because it reads so much like a memoir--the book hinges on Yu Yuan's political development--War Trash lacks the drama needed to make it a successful novel.

Apart from the setting, the story of political disillusionment is well-trodden territory for Chinese authors writing in English. Though Yu Yuan does not begin as a communist, he realizes quickly that he must ally himself with the communist leaders in the prison camp if he is to have any hope of returning to the mainland, rather than emigrating to rival Taiwan. Because he has an elderly mother and a young fiancée waiting for him at home in China, he fights off the overtures of the Nationalists and cooperates with the communist-led agitations at the prison, which include not only hunger strikes and other nonviolent resistance but also the clever capture of the American general in charge of the prison camp.

Yu edges closer and closer to joining the party himself. But his class background as an educated graduate of the formerly Nationalist-run Huangpu Military Academy holds him back. The more he observes the decisions of the camp's party leaders--symbolic struggles to fly the Chinese flag, for example--the more he comes to believe that their faith leaves no room for humanity. "I was ambivalent about the attempt to reseize the flag," Yu reflects. "On the one hand, I admired the courage our men had displayed, and in a way I'd been awestruck by their passion and bravery, which I have to admit I didn't share. On the other, I doubted whether it was worth losing a man's life for the sake of a flag, which, symbolic as it might be, was just a piece of nylon cloth." Making explicit the striking parallel between fervent communism and religious fanaticism, Yu concludes: "I had noted there was a kind of religious fervour in some of these men, who were capable of laying down their lives for an idea."

By the end of the novel, of course, Yu has become a cynic, ready to mouth the party's platitudes if that will get him home--but fully aware that every political machine grinds on without a care for the people who fuel it and even thrives on their destruction. "Without such obliteration of human particularities, how could one fight mercilessly? When a general evaluates the outcome of a battle, he thinks in numbers--how many casualties the enemy has suffered in comparison with the losses of his own army. The larger a victory is, the more people have been turned into numerals. This is the crime of war: It reduces real human beings to abstract numbers."

This passage has resonance today, as the world's collective thinking about political issues again falls victim to the foolish polarity of a theory of a clash of civilizations. But these are not new ideas, nor are they expressed well. All of Ha Jin's books have dealt with modern China's baffling combination of idealism and brutality. But Waiting, and to a lesser extent his other fiction, was remarkable foremost for its understanding of human relationships, not political ones. He captured the sweet tragedy of our frail loves and petty hates with sensitivity and wisdom.

And though he himself once served in the People's Liberation Army and sometimes writes of soldiers, Ha Jin's best stories have, like Chekhov's, always been about love. The chief interest of War Trash, in contrast, is in its value as history. The Chinese prisoners' perspective on the war in Korea and their American captors is not one with which many foreign readers will be familiar, and though the novel's thematic conclusions are thin gruel, the prisoners' machinations make good reading. But these are not the usual pleasures we expect from fiction.

Monday, October 11, 2004

phone power

On the cheap: Asians are buying up U.S. digital networks
By Rana Foroohar
With Jonathan Ansfield in Beijing and Jason Overdorf in New Delhi
(This article appeared in Newsweek International in October 2004).

Pity the poor western telecom. The digital networks on which American carriers spent billions in the late 1990s are being snapped up in fire sales by foreigners—and Asians are leading the pack. Since last year Global Crossing has been purchased by Singapore's ST Telemedia, Flag by Reliance of India. Now Tata of India is bidding for the network built by scandal-ravaged Tyco.

The buyouts, some of which have been done for a mere 10 cents on the dollar, are only part of the story. Asian telecom manufacturers are also gaining steam, with Chinese companies like Huawei and ZTE challenging Western rivals such as Cisco and Siemens. The new reach of Asian telecoms has two dramatic effects: cheaper calls worldwide, and a boost to the regional economy—from Indian call centers to Chinese and Korean manufacturers. "Instead of being small players who have to pay big fees to use the international networks of companies like MCI or AT&T or France Telecom, some of the Asian telecoms can now sit down as equals and simply swap the use of the networks for free," notes OECD economist Sam Paltridge. The result, he says, is "cheaper calls for all of us."

With more traffic routing through countries like China, a political backlash is inevitable. Manufacturers like Huawei, which reportedly has strong links to the Chinese military, are racking up new contracts in Africa (where it is now the lead player), the Middle East and Europe. U.S. authorities prevented Hong Kong magnate Li Kashing, owner of Hutchison Whampoa, from buying a big stake in Global Crossing last year, saying they were concerned about Li's ties to the Communist Party.

But it will be tough even to see who's handling all the traffic. "There are just so many routes into and out of a country now that it will be difficult for politicians to maintain control," says Tim Kelly, head of strategy for the International Telecommunications Union. Each acquisition will in the meantime fuel growth. "The better networks will further increase Asian manufacturing competitiveness, allowing them to deal with customers more efficiently, and boost the Indian call-center phenomenon, which depends on strong IT connections to the West," says Andrew Odlyzko, director of the digital-technology center at the University of Minnesota. Translation: America's loss is Asia's gain.


Thursday, September 23, 2004

yet another cross to bear

A new state law that seeks to extend the reservation of jobs for low-caste Indians from the public sector to private companies has business worried that the government is turning back the clock.

By Jason Overdorf
(This article appeared in the Far Eastern Economic Review in September 2004).

THIS SUMMER the Congress Party-led government of the Indian state of Maharashtra--home to Mumbai and many of India's largest companies--vowed to enact sweeping affirmative-action legislation that would force private corporations to reserve 52% of all jobs for low-caste Indians.

The move came in the run-up to state elections. But many business leaders nevertheless interpreted it as a sign that the Congress Party meant to make good on its promises to temper reforms designed to unfetter Indian industry with measures to ensure that business doesn't leave the poor behind. Notably, the Congress-led United Progressive Alliance federal government elected in May listed a call for a national dialogue on the expansion of affirmative action to the private sector in its mission statement.

Maharashtra's new law--the first of its kind--was passed in January, but the state government has yet to frame the rules for implementing it. The furore that resulted when the government promised to begin enforcing the law by July 30 (a deadline it failed to meet) arose partly because of the all-encompassing nature of the legislation. The law mandates quotas in "any government-aided institution: those that are recognized, licensed, supervised or controlled by government," which can be interpreted to mean that it applies to virtually all companies operating in the state. The first major companies to see the sword looming over them could be those whose government-land leases are about to expire.

"We've already been suffering under many constraints, like socialist economic planning and labour restrictions," says Rahul Bajaj, chairman of Bajaj Auto, the world's largest manufacturer of scooters and motorcycles and one of India's largest companies. "If we implement reservations, we'll have no way to become internationally competitive."

"An employment-quota system is only perpetuating the caste system in India," says Mukesh Ambani, chairman and managing director of Reliance Industries, one of India's largest corporations. "It is also perpetuating benefits for a 'creamy layer' amongst the backward and scheduled castes and tribes."

India first implemented an affirmative-action programme for members of what the constitution calls "the scheduled castes and scheduled tribes" in the 1950s. Essentially, the scheme reserved a percentage of jobs in government departments and government-owned companies for tribal peoples and castes once thought of as "untouchable," who'd long been victims of discrimination under the Hindu caste system.

Many say the constitution intended reservations as a temporary measure. But the rising political clout of low-caste Indians (who make up some 50% of the population) prevented the programme from being discontinued. Instead, it was expanded to include Indians from lower-middle positions in the caste hierarchy, now known as other backward castes, or OBCs. Now, as India dismantles its socialist-style economy and sells off more and more of its public-sector units--drastically shrinking the number of reserved jobs--calls to expand the scheme to include private-sector companies have become more strident.

Bajaj and other business leaders--though sympathetic--believe that discrimination is fading away and it is time for a relaxation of labour restrictions, not further constraints. "There are poor people," says Bajaj. "The scheduled castes and scheduled tribes are suffering. Nobody says nothing should be done about it. We must do something. But we can't correct one wrong with another wrong . . . Most of us do not have that prejudice [against low-caste Indians]." He adds, "Of Bajaj Auto's 10,500 employees today, 28% [are from scheduled castes and scheduled tribes]. Where is the discrimination?"

Likewise, Nandan Nilekani, chief executive of Infosys Technologies, India's billion-dollar software-services giant, said in a statement, "We compete with the best in the world and recruit people who are the best, without any consideration for age, gender or caste. We believe that to retain its competitive edge, the country has to invest in training and developing our talent for the global market place."

In a more candid television interview, Nilekani sympathized with plans to help create a more equal society. "There is no substitute for economic growth and globalization to remove people out of poverty," he said. "The point is, how do you make sure that the wealth creation is funnelled into social causes? Clearly we need to have affirmative action. We really need to give people an opportunity. But I think the focus has to be on education and making sure that we create high-quality education opportunities for everyone and then provide, obviously, the jobs that can absorb them. Reservation in a company, per se, may not be a great idea." Ambani agrees. "A more equal society in India can be created by an intense investment in education for empowerment and employability, combined with creating employment on an unprecedented scale," he says.

If India's employers are so committed to social reform, why is the opposition to affirmative action so strong? Just as in other countries with such policies, like the United States or Northern Ireland, there is a huge gap in opinions about how much discrimination exists, especially between the privileged and the disadvantaged. Many of the elite, like Bajaj, believe much of the prejudice has been eradicated.

But even successful "untouchables"--who now call themselves Dalits, or the oppressed--believe discrimination is still so prevalent that it defines every social interaction. While industrialists think the government should focus on uplifting the poor regardless of caste, low-caste leaders believe such a shift in emphasis would mean only that the lion's share of the benefits poor, low-caste Indians now enjoy would be transferred to poor members of the higher castes.

Anand Teltumbde, a Dalit who moved from state-run Bharat Petroleum to become managing director of Petronet India, a private-sector company, says this debate reveals a fundamental misconception about the reservation policy. Most people believe the policy is intended to uplift the poor, rather than to offer redress for 2,000 years of discrimination. "There is never an iota of reference to the intrinsic disability of Indian society to treat all people equally and justly," he says. "It is not the disability of the Dalits but the disability of Indian society that necessitates reservation."

When industry suggests that requiring companies to fill positions with Dalit personnel will erode efficiency, it implies that Dalits are by nature incompetent, he argues. "I would say the very tone and tenor of these reactions against reservations from the corporate leaders constitutes reason enough for reservation in the private sector."

POTENTIAL FOR VIOLENCE

Opinions differ as strongly about how effective reservations in the public sector have been in uplifting the targeted groups and what the costs have been to performance. Dalits, especially, believe that reservations are the only useful step India has taken to undo the damage done by the caste system. "It is the only effective action that the government has taken," says Udit Raj, president of the Indian Justice Party, a political organization that represents Dalits and minority groups. "Otherwise, I don't see anything, any progress."

Other high-caste Indians think government-sector reservations have been too effective in enriching low-caste Indians and disastrous to the performance of the government. "There are so many so-called backward castes. Take the Nadars [a South Indian caste]. They're filthy rich and yet they get preference over [higher-caste] Brahmins everywhere in Tamil Nadu. For all the things Brahmins did [to the lower castes] 100 years ago, you can't keep penalizing them," says K. Mahesh, chairman and managing director of Sundaram Brake Linings.

These differences of opinion can translate into vitriol--even violence. The last time India increased the scope of its reservation policies, when former Prime Minister V.P. Singh decided to extend job quotas to include not only the scheduled castes and tribes but also Indians from "other backward castes," fanatics burned themselves to death in protest and riots broke out across the nation, eventually leading to the collapse of Singh's government in 1990. To some, Singh's reforms made a mockery of the affirmative-action policy, entitling over 90% of the population in some states to reserved jobs.

"A lot of people feel there is this class of people that are being pampered . . .," says Narendra Jadhav, a Dalit who is principal adviser in the department of economic analysis and policy at the Reserve Bank of India, speaking for himself. "Most people do not recognize that in every single walk of life the extent of implementation of reservations has been extremely poor."

Dalit leaders allege that high-caste officials responsible for recruitment and promotions leave positions vacant rather than hire or promote those they view as inferior, then justify themselves to superiors by claiming they couldn't find suitable low-caste candidates.

Regardless of the merits of those claims, the numbers hardly suggest that reservations have turned the scheduled castes and tribes into a pampered new elite. Although they make up about a quarter of the population, the scheduled castes and tribes hold only 10% of the top group A positions, 13% of group B positions, 16% of group C positions and 21% of group D positions in central-government services. Meanwhile, 44% of the sweepers come from scheduled castes.

Perhaps the haphazard and incomplete enforcement of reservations in the public sector offers a clue to the likely fate of the Maharashtra law. In the end, it might only apply to companies in which the government holds a stake.