Friday, November 15, 2013

ABC analysis of Business Deals - The primary role of bribes

I often come across Mr Sanjit during my morning walks. He is a fresh MBA, having completed his course during  the 2011-2013 academic years from SRM Univ campus within the city. He had attended campus interviews, and he claims that he got a job offer from a insurance company, but did not join. He informs that out of the total students in his class, almost 50% got offer letters through campus interviews/selection. Within three to four months of  joining ,except for three or four, all others were again in the job market trying their luck. The placements through campus selection were in sales , and the employers were marketing companies associated with banks and insurance companies. The  target fixed for the first month was Rs.3 lakhs. This almost all achieved , courtesy  relatives and  friends. The second month the target was lowered to Rs. 2 lakhs. None could achieve this target, and the employers refused salary for the  new recruits. After being in the job for one more month without pay, all left the job . Sanjit has teamed up with his uncle, and is trying to sell building materials, to bulk users like flat promoters. His uncle is already in the building hardware business and owns one such  shop within the city.

Suppose if we do a ABC analysis of clinched Business Deals. The business deals of high value in the A category is dealt at the highest level involving ministers (politicians), capitalists, bureaucrats and rich bankers.  The winner is usually the one paying the highest bribes and other entertainments and adept at keeping the ‘transactions’ highly confidential.  Then comes the B category. This will be shared by the close relatives of ministers and top bureaucrats, crony capitalists, businessmen  with the help of party officials in the lower rungs of the hierarchy etc. This business is mostly through contacts and networks. Here also bribes, kick-backs  and other favors will be  the main consideration, but the scale will be a bit lower. The business in the C category is left  for the underdogs to pounce upon. These days this class is drawn from the lot of fresh MBA’s  and other graduates comprising the lowest level, and middle-level managers ,miserable beings who have to break their heads and slog it out, to squeeze out that last drop from the market. In such situations they may dearly long for their fore-fathers occupation, ie farming or other such traditional calling. The C category business act, is mostly  a façade put up by many businesses. It helps in turning black into white money.(Money laundering)

 The above business scenario happening worldwide , is corroborated by  a news report in today’s (15/11/2013)  The Hindu, which fully describes or rather exposes the manner in which big  international business deals are clinched.   If it is happening in China, then India will also not be insular to such business practices. That in part explains the huge funds in the hands of politicians of all hues. Eg. Take the case of the two Volvo buses which caught fire, one yesterday and the other a fortnight ago on the Bangalore –Mumbai & Bangalore-Hyderabad route respectively. Regarding the Mumbai bound bus quote from the Hindu  about ownership “The bus belonging to National Travels, owned by a former Minister and Janata Dal (Secular) legislator B.Z. Zameer Ahmed, had left Bangalore around 8 p.m. on Wednesday.” The Hindu quote regarding the ownership  of Bangalore-Hybd bus “Even as the bus accident on the National Highway near Kothakota in Mahabubnagar district stunned people, a preliminary investigation has revealed that the bus was registered in the name of J.C. Uma Reddy, a close relative of former Minister J.C. Diwakar Reddy.” The  way to entrepreneurship is through politics.  See (1) http://www.thehindu.com/todays-paper/tp-national/7-die-as-bus-hits-median-and-bursts-into-flames/article5353266.ece (2)http://www.thehindu.com/news/national/andhra-pradesh/bus-registered-in-the-name-of-diwakar-roadlines/article5299677.ece?ref=relatedNews

NYT: JPMorgan gave ‘lucrative contract’ to Wen’s daughter

ANANTH KRISHNAN

United States banking giant JPMorgan Chase secretly hired the daughter of former Chinese Premier Wen Jiabao, paying her consulting firm $1.8 million (Rs. 11.38 crore) over two years as the bank looked to expand its interests in China, according to a Thursday report by The New York Times .

The newspaper said the bank had agreed a lucrative $ 75,000-a-month contract with a little-known Beijing consulting firm, Fullmark Consultants, which comprised only two employees — Wen Ruchun, the then Premier’s daughter, and a friend.

The NYT report said authorities in the U.S. were looking into JPMorgan’s relations with Ms. Wen “as part of a wider bribery investigation into whether the bank swapped contracts and jobs for business deals with state-owned Chinese companies”.

The report suggested that the U.S. bank courted Ms. Wen for her connections at a time when her father — who served as Premier between 2003 and 2013 — served as the top official in charge of economic and regulatory affairs.

Its efforts, the NYT suggested, paid off: in one instance, Ms. Wen’s firm, Fullmark, claimed in a confidential letter that it had secured a lucrative deal for the U.S. company with the government-run China Railway Group.

Courting ‘princelings’
A number of foreign investment banks and private equity firms have, over the past decade, courted the children of influential Communist Party leaders — known in China as “princelings” — to further their connections — and business interests — in the country.

The amassing of wealth by Party princelings has emerged as a source of increasing resentment in China, prompting, in recent months, a campaign by dozens of activists calling on officials to disclose the assets of their families, as well as renewed calls from economists to reform influential and opaque State-owned enterprises.

The NYT , in a separate investigation in 2012, reported that the family of the former Premier had amassed a fortune in excess of $ 2 billion, hidden through a web of investment vehicles.

Ms. Wen, the newspaper said, had adopted an alias — she went by the name Lily Chang in her business dealings — to avoid attention.While the newspaper said it did not discover anything illegal in Ms. Wen’s dealings with JPMorgan, its findings are certain to raise difficult questions both for the bank and for the Chinese leadership.


The NYT reported that the bank had also held stakes in a private equity firm co-founded by Mr. Wen Jiabao’s son, Wen Yunsong, and owned nearly $ 1 billion worth of shares in the Ping An insurance company — one of China’s biggest firms — where the Wen family held a stake, through a murky web of investment vehicles, that was valued at more than $ 2 billion in 2007, according to the newspaper’s 2012 investigation.

Link http://www.thehindu.com/todays-paper/tp-international/nyt-jpmorgan-gave-lucrative-contract-to-wens-daughter/article5353230.ece

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