Rep. Rahm Emanuel (D-Ill.), who joined Kirk in developing a $4 billion Great Lakes cleanup bill now stalled in Congress, said the administration has spent $4.5 billion on water projects in Iraq.
October 31, 2005
A must read article. Detailed and well informed.
From one perspective, Iran is a country dominated by a small clique of hardline revolutionaries who keep the young population disenfranchised by manipulating a false democracy. In another, the Islamic republic has been granted legitimacy by its people, who regularly turn out to vote in large numbers, and ensure that enough interest groups are represented in decision-making to give balance to the state.
At the very top, the system is opaque. The Supreme Leader, Ayatollah Ali Khamenei, holds ultimate authority. He inherited the role from the charismatic Ayatollah Khomeini on the latter's death in 1989. Under Iran's system of Vilayat-e Faqih rule of the jurisprudent power is vested in the clergy because they can best interpret God's intentions for mankind.
Under the Supreme Leader is the elected government the President with his cabinet, and the Majlis, as the parliament is known. Arch-conservatives took control of the Majlis in February 2004 after an election many Iranians thought was rigged by the banning of reformist candidates. Mr Ahmadinejad then won the presidential election this summer, promising to improve conditions for Iran's poor by better sharing the $37bn (£21bn) of oil revenues earned last year.
But a series of other groups have a stake in the process too. The Islamic Revolutionary Guards Corps has grown in power in recent years, and many Iranians believe it controls most of the voices around the Supreme Leader, to whom it expresses total devotion. Mr Ahmadinejad is a former guardsman, as are many of the new Majlis deputies.
The force, 150,000 strong, receives all the best military equipment, and has started to play a significant role in Iran's economy, bidding to take over big oil engineering projects. It is also in charge of the Islamic Basij militia, formed during the 1980-88 war with Iraq as a volunteer unit comprising young boys and old men who wanted to seek martyrdom for the revolution. It was block voting by the millions of Basij members that ensured Mr Ahmadinejad's June election victory.
at 12:50 AM
October 30, 2005
at 11:29 PM
French pastries, and Spanish citrus have left lasting impressions on Mexico's cuisine. Now Japanese fast-food noodles, first imported here in the 1980s, are filling pantries across the country.
Time-pressed schoolchildren, construction workers, and office drones have helped turn Mexicans into Latin America's largest per-capita consumers of instant ramen. Diners here slurped down 1 billion servings last year, up threefold since 1999, according to a Japanese noodle association.
Urban convenience stores do a brisk trade selling ramen ''preparada," providing customers with hot water, plastic forks, and packets of salsa to prepare their lunches on the spot.
People in the countryside also developed a taste for it. As part of a food assistance program, the Mexican government distributes ramen to commissaries in some of the most remote pockets of the country, where it is supplanting rice and beans on many tables.
The product is so pervasive that a national newspaper recently dubbed Mexico ''Maruchan Nation."
Purveyors say you don't have to strain your noodle to figure out why. Nearly 60 percent of Mexico's workforce earns less than $13 a day. Instant ramen is a hot meal that fills stomachs, typically for less than 40 cents a serving. The product doesn't need refrigeration and it's so easy to make that some here call it ''sopa para flojos," or ''lazy people's soup."
Sold here mainly in insulated, disposable containers that resemble styrofoam coffee cups, instant ramen starts as a clot of precooked dried noodles topped with seasoning and dehydrated vegetables. Boiling water turns it into tender strands of pasta in broth, ready to eat in three minutes.
That's a profane act for some Mexicans whose relationship with food is so sacred that their ancestors believed humankind was descended from corn.
Food here is history. It is religion. It is patrimony. Ask anyone who has savored such delights as ''chiles en nogada," poblano chilies stuffed with spiced pork and topped with creamy walnut sauce and pomegranate seeds to replicate the green, white, and red colors of the Mexican flag.
It's also passion. In Laura Esquivel's popular novel ''Like Water for Chocolate," the sensuous alchemy of Mexican cooking unleashes a family's ravenous desires.
Small wonder that defenders of the nation's cuisine, such as Gloria Lopez Morales, an official with Mexico's National Council for Culture and Arts, are appalled that Mexican palates have been seduced by this ramen import.
Lopez is leading an effort to have UNESCO recognize Mexican food as a ''patrimony of humanity" that should be nurtured and protected. She worries that globalization is disconnecting Mexicans from their life source, be it US corn displacing ancient strains of maize or fast food encroaching on the traditional ''comida," or leisurely afternoon meal.
''For Mexicans, food is basically culture. The act of eating here in Mexico is an act of enormous significance," she said. ''We have entered a period of threat, of crisis."
Nutritionists likewise are alarmed that instant ramen, a dish loaded with fat, carbohydrates, and sodium, has become a cornerstone of the food pyramid.
With the majority of the population now urbanized and on the go, Mexicans are embracing the convenience foods of their neighbors in the United States while abandoning some healthful traditions. The result is soaring levels of obesity, diabetes, and heart disease, particularly among the poor.
''It's cheap energy," said Dr. Gustavo Acosta Altamirano, a nutrition specialist at Juarez Hospital in Mexico City, of the nation's growing addiction to soft drinks, sugary snacks, and starchy foods such as ramen noodles. ''But it's making us fat."
at 5:01 PM
It was a bad weather' fortnight for Bangalore. It began with a lot of heat being generated over former Prime Minister H D Deve Gowdas remarks that Infosys chairman and Bangalore airport project chief N R Narayana Murthy had contributed little to the mega project. Murthy quit the project in protest, but Gowda went ahead and charged Infosys with landgrabbing and political interference. Then the city was lashed by heavy rain. Roads and colonies were inundated, lakes overflowed and our Silicon Valley's infrastructure collapsed, raising the question: As other major metros go all out to woo IT and FDI, why is the IT hub in a seeming state of collapse? Is the great Bangalore dream over?
Not if you believe the growth statistics. Texas Instruments made its bow in 1984. That grew to 13 companies and software exports worth Rs 5.6 crore in 1991 and 1,457 firms and Rs 18,100 crore in 2004. On a roll, still.
So what's the fuss about? Bangalore is creaking under the weight of its boom: the city's population has doubled in the last 18 years, the number of vehicles has spiralled, as has the cost of living, and the infrastructure simply hasnt kept pace.
Traffic is a major bellyache. As Fortune magazine notes in its recent issue, In Bangalore, executives visiting the immaculate campuses of software firms like Infosys and Wipro marvel that while their data can travel to- the other side of the earth at the speed of thought, they must crawl along in bumper-to-bumper traffic for more than an hour to get back to their hotels.
Techie Manish Chok says when he came to Bangalore five years ago, it was a dream city but now the one-and-ahalf-hour commuting time to his workplace irritates him. And George Kuruvilla, urban planner, believes Bangalore still lives on past glory. There will be first a decline and then demise, unless things turn around. You need proper traffic planning.
It has indeed been a swift journey that Bangalore has made in just over a hundred years from a small garrison town, which bored the young Winston Churchill enough to make him read books by the dozens and collect butterflies to a city where Mamas serve breakfast to children in traffic jams on the way to school. The Rama Rajya, as Gandhi described Bangalore's advanced environs in the 1930s, is unable to cope with the Information Age. For a city with about 100 years of technical expertise, lodged in the state that was the first to get electric power in Asia, enterprise doesn't come at a premium. Unlike many other world cities, Bangalore grew not on the strength of traditional wealth, but its professional repertoire.
The key is in a business plan for the city. A killer application for the infrastructure bug. As James Heitzman, author of Network City: Planning the Information Society in Bangalore, puts it: There is no upper limit on the population of the city in the 21st century, and we may reasonably expect the number of people living in Bangalore to double within the lifetimes of our children. This challenge may seem daunting to some long-time residents, who remember the good old days when traffic was less and face-to-face interactions were standard. In fact, for a nation the size of India, a population of 12-15 million in the largest metropolis in the southern Deccan would seem appropriate. So far, Bangalore has demonstrated the ability to attract and support large populations, even if the opportunities of many citizens remain limited. By the standards of the South Asian city, this is success.
Dipti Nambiar, an IT professional who recently moved to Bangalore from Pune, gives Bangalore 7 points on a scale of 1 to 10. I come from Pune, which is smaller and more manageable...
True, it isn't easy to do business in a city where the domestic airport is not of international class, as Kean Walmsley, senior manager, DevTech, Autodesk, points out. It doesn't look good when CEOs and decision makers come here... Im sure some companies are considering other places. It's difficult to buy a house and difficult to travel around the city....
Yet the argument that major firms are packing up only because of Bangalores poor civic infrastructure, can only be half true. IT, after all, is business: if a particular design doesn't work, the manufacturing unit is shut down; if a product doesnt do well in one sphere, other avenues are explored. And costs, benefits and concessions matter as much.
At the same time, there seems to be little response to frequent complaints by the IT industry about how the citys infrastructural flaws create bottlenecks for it. Thats ironic because in many ways, the industrys own rapid growth led to the boom that now has Bangalore bursting at the seams.
Infotech in Bangalore has transformed from an independent and selfsufficient enterprise to a giant industry that needs an efficient, well-run city. An industry that also needs a congenial environment for its practitioners to express themselves culturally.
But the political leadership both local and national has failed to come up with a compelling vision for Bangalore, or stay ahead of the curve.
Ramesh Ramanathan, campaign coordinator of Janaagraha, a people's movement for participatory budgeting in Bangalore, points out that knee-jerk and band-aid reactions wont do. Saying that we should build a flyover is solving yesterday's problem. Its not planning for the future. We should get into a proactive, not reactive mode. Else Bangalore will go the Mumbai way in the next five years.
From the administrations point of view, the rubber has met the road not only in catering to the IT sector but to Bangalore's seven million-odd citizens. The political class has rained on the parade with its blow-hot blowcold approach.
The fact is, IT will make inroads wherever its convenient. If Hyderabad, Chennai, Gurgaon and Pune are in line, it is a reflection of a global paradigm anywhere is home.
But in terms of sheer volume of software exports, Bangalore still remain king. And Brand IT Bangalore will be a trademark hard to erase. Just as Bollywood is to Mumbai.
(With inputs by Sharmishta Koushik)
The cumulative figure is an estimate of damage done to property, life (in terms of compensa- tion) health-related issues. Giving out a comprehensive details at the BCC council meeting on Saturday, commissioner K Jothiramalingam said that a memorandum inclusive of all reports would be submitted to the state government, as per the dictum of CM Dharam Singh. This memo would in turn be submitted to PM Manmohan Singh on Monday.
Of the Rs 300.85 crore, the east zone has had damages amounting to Rs 100 crore, west, Rs 92 crore and south zone Rs 94.36 crore, as also Rs 8 crore for public health. The weeks rain has ensured that a total of 3,329 persons were distributed cheques as they were affected by either losing houses or had been displaced. The cheque amount alone stands at Rs 62.66 lakh.
The BCC would also be taking up remodelling of storm water drains and valleys in the CMC areas, as per government orders. Because of the intensive desilting work taken up since April on Koramangala and Challaghatta valley, areas in the BCC have not been as acutely affected as they would have been otherwise said Jothiramalingam.
Losses elsewhere: The heavy rain that lashed the state recently will bring down the targetted food crop production as 20,764 hectares of paddy, sugarcane and ragi cultivated land have been inundated. Cultivated lands have been affected more in Mysore, Mandya, Chamarajnagar, Haveri, Raichur, Kolar, Bangalore urban and rural districts.
city on the world IT map. They invited MNCs and investors with open arms. The city flourished. Other cities looked at it with envy. Its share in the state GDP rose sharply. Now, when Bangalore is bursting at its seams, and its infrastructure crumbling, no one is coming to its rescue. And those who led the city to its present state are now blaming everyone but themselves.
The powers that be in the coalition government choose to blame the mess on the IT industry. They accuse it of congesting the city, grabbing land, and not contributing towards its upkeep. When the industry protests, they charge it with carrying on a whispering campaign to destabilise the government. They even play urban versus rural and language cards to divert the issue. When the industry offers to participate in public-private partnerships, they suspect motives. And when a well-meaning IT czar tries to bring about a rapprochement and makes suggestions to set things right in Bangalore, he is humiliated and forced to retreat.
It is sad that those who matter look at Bangalore with blinkered eyes. If Bangalore earns, the state progresses. Such is its status in the IT arena. The citys contribution to the state exchequer is high. But it needs to be cared for. Its infrastructure has not kept pace with the citys growth. The population has risen manifold. So too has the number of vehicles. Citizens go through a harrowing time everyday due to badly maintained roads, traffic jams, choked drains, waterlogging during rain, and erratic power and water supply. They do protest, but their voice is not heard. When the powerful IT sector protests, the authorities at least wake up and react, if not act.
Take the case of the downpour a few days ago that paralysed Bangalore. The entire city was waterlogged. Sewage and rain water entered houses. Buildings collapsed. Tanks and lakes breached. Roads were flooded causing traffic jams. Power and drinking water supply were badly affected. Many localities lay inundated for days. Civic agencies looked on helpless. The policemen did their best, but in vain, to streamline traffic. VIPs who visited the affected areas tried to derive political mileage by attacking their rivals, offered lip sympathy, made hollow promises, sought hefty compensation from the Centre, and disappeared.
Who then is to blame? Everyone. From political rulers, officials, builders, encroachers to citizens. Bangalores undulating topography prevents it from being flooded. But, the city was allowed to develop haphazardly, flouting all norms of
proper infrastructure. Natural valleys and lakes, which took in excess rain water, were encroached upon. Most of the 2,789 lakes in and around Bangalore at one time were converted into stadia, commercial complexes, bus stations and layouts. Now, when Bangalore is in the pits, the very persons responsible for the mess are trying to pass the buck.
It is no use crying over spilt milk. We cannot turn the clock back. But we can certainly stop further deterioration, and make sincere efforts to improve infrastructure. Put politics on the backburner, identify problems, find solutions, fix deadlines and appoint go-getting officials to implement them. Encourage publicprivate partnership. Proceed fast on short- and long-term plans. Come down heavily on encroachers. Bangalore must be protected and developed at any cost for the good of the state.
PA RT I N G S H OT
Finally, Nature had to intervene to let those who call the shots in the state realise the depth to which Bangalore has sunk in terms of infrastructure. Who knows, they may find a hidden hand here too. Like in the case of Narayana Murthy, they may accuse the rain gods of conniving with detractors to destabilise the coalition government!
ITS organisers are calling it a victory for people power. They even invoke the name of Mahatma Gandhi, icon of India's independence struggle. For economic reformers, however, it is a depressing defeat: by making a huge fuss and refusing to pay their bills in full, Delhi's middle class last month persuaded the local government to withdraw an increaseof about 10%in the residential electricity tariff.
The protesters alleged they were being robbed by rigged meters and forced to pay exorbitant first-world prices for an unimproved, erratic third-world service. They had a point. But if not even well-off citizens in the capital will pay an economic rate for their power, what hope is there for the rest of the country, where politicians habitually offer free power to farmers in the hope of winning their votes? And while electricity boards continue to rack up huge losses, what chance is there of finding the money so desperately needed for investment in new generating equipment? More fundamentally, where will the fuel come from?
Power cuts are a way of life in India, at least in parts of the country lucky enough to regard them as an interruption rather than the norm. There is a worsening shortage. Over the past decade, electricity generation has grown at a compound annual rate of 5.5%, but demand has grown even faster. Peak demand exceeded supply by 11.3% in 1998 and by 12.1% in the last financial year (ending this March).
That, moreover, is to define demand in the narrowest of senses. The countryside, where more than two-thirds of India's people live, accounts for no more than 13% of electricity consumption. India's 1.1 billion people use on average just 526 units (kilowatt-hours) of electricity a year, compared with 1,247 units in China. Where electricity is available it is often only for a couple of hours a day, unusable for industry and of such poor quality that power surges routinely wreck equipment.
Yet India wants electricity to reach every village by 2008demanding the electrification of 110,000 villagesand every household by 2012. At present, 56% of India's households, and just 44% of those in rural areas, have connections to the grid. Meanwhile, it is hoped that India's economy, already growing at an average of more than 6% for the past 15 years, will expand even faster, meaning more electricity-intensive manufacturing and air-conditioned shopping malls. The government talks of adding 100,000 megawatts (MW) of new generating capacity over the next ten yearsa virtual doubling.
Indian industry, long used to the failings of the national grid, has survived by building its own captive generating plants. Azim Premji, chairman of Wipro, one of India's information-technology stars, senses that the electricity shortage is coming to enough of a crisis now that we have to fix it, like we fixed telecoms.
T.L. Sankar, an energy expert at the Administrative Staff College of India in Hyderabad, likewise draws succour from past successes in other fields, such as the near-doubling of food production in India during the green revolution of the late 1960s and 1970s. Something similar, he argues, is needed now.
Crisis may be the wrong word for such a long-standing shortage, with its origins in every link in the electricity supply-chain, from fuel through generation, transmission and distribution. But crisis is how it has sometimes felt during the last few months, because of a combination of factors. Manmohan Singh, the prime minister, has often spoken of the seriousness of the needs, and has set up a committee to tackle them. This summer, too, the oil price has soared and worries have mounted about a shortage of coal, which fuels about 60% of India's electricity, compared with about 26% from hydro-electricity and 11% from oil and gas.
A.P.J. Abdul Kalam, India's president and a much-respected scientist in a largely ceremonial post, has put the electricity shortage into the broader context of insufficient supplies of energy. In his speech on the eve of Independence Day on August 15th he called for efforts to make energy independence our nation's first and highest priority.
Always the worst season for power-cutsair-conditioning provides respite from the sweltering heatthis summer has been particularly bad in some places, notably Maharashtra, India's wealthiest and second most populous state. Meanwhile, the row in Delhi has highlighted the mess that is India's electricity distribution.
Lost in transmission
Delhi had been held up as a model of successful power-sector reform. An Electricity Act in 2003 had achieved little, perhaps because it was so ambitious. Part of the difficulty lies in India's federal system, under which electricity is a concurrent subject, where both the central government and the 29 states have a role.
Except in a few cities that remained exempt, distribution was monopolised by state electricity boards (SEBs). The act called for the unbundling of generation from transmission and distribution, which was to be opened to private competition. Independent regulators would adjudicate tariffs, and the cross-subsidies that penalise industry to the benefit of the domestic consumer and farmer were to be removed. At present less than 42% of electricity is sold to industrial and commercial users, but that yields more than 70% of the SEBs' annual revenues.
Only two statesOrissa, in the poor east, and Delhihave privatised distribution. The Delhi government claims that privatisation has brought big benefits. The two private firms involved, affiliates of the big national conglomerates, Reliance and Tata, succeeded in cutting losses to theft from about 50% of supply to about 40%the national average. The government claims electricity was on its way to being self-sustaining.
This picture of healthy progress, however, does not match popular perceptions. Reliance, in particular, is accused of having behaved badly. Much suspicion has centred on new digital meters. Reliance denies they run too fast, arguing they are more sensitive than the old mechanical ones. So electricity bills would have risen sharply anyway.
The timing of the furore in Delhi is unfortunate. Electricity reforms have stalled, and may slip into reverse. Communist parties, on whose votes the government led by Mr Singh's Congress Party relies for a parliamentary majority, want to water down the 2003 Electricity Act. Jealously protective of the interests of public-sector workers, they oppose unbundling and privatisation, and support cross-subsidies.
Already, Congress-led state governments have been among the worst offenders in using electricity to buy votes and popularity. Some of Maharashtra's troubles, for example, can be traced to elections held last year, when the government offered farmers free power for irrigation pumps. Maharashtra was forced to remove the sop this June, but other Congress-led governments, most recently in Punjab, have offered the same handout.
One consequence of failing to fix the SEBs is fiscal. Their average tariff has risen by 20% since 2000, compared with a rise in the cost of their supplies of just 4%. But still, tariffs, on average, are just three-quarters of supply costs. Some estimates suggest that the SEBs lost 10 trillion rupees ($215 billion) over the past decade. This has damaged their ability to add distribution capacity, and even to carry out basic maintenance. The Planning Commission has pointed out that more than 90% of the investment in the power sector goes into generation and transmission rather than distribution, akin, it argues, to building a superstructure without a foundation. Still, the money needed for new generating capacity is hugeestimates range between $10 billion and $15 billion a year.
Efforts to attract private investment, including from abroad, into power generation have been largely unsuccessful. The most spectacular failure was the impressively modern 2,200MW Dabhol power project in Maharashtra, which started operation in 1999, only to shut in 2001 after a row between its promoter, Enron, a collapsed American energy giant, and the SEB. Years of legal wrangling have ensued, with damaging effects all round. Many Indian observers drew the lesson that privatisation and foreign investment in power did not work and meant high prices. Foreign firms wondered whether power-purchase commitments signed by bankrupt SEBs were worth anything. Only now is the project restarting, having, in effect, been nationalised. It will be at least a year before it is producing electricity.
Despite Dabhol and a huge gas-fired plant that Reliance is building in Uttar Pradesh, a northern state, coal is expected to remain India's mainstay fuel for decades to come. Its proven reserves, of 92.4 billion tonnes, are just over 10% of the global total. But it is of low quality, with a high ash content and low calorific value. It is also, by international standards, expensive (perhaps twice the cost of South African coal), and production is not growing fast enough. Rajiv Sharma, a senior official in the Ministry of Coal, blames this on underinvestment in the 1990s, when coal became a condemned fuel, because of its polluting effects and contribution to global warming.
Coal India, the state's near-monopoly, was unprepared when demand took off in 2003. So India has been importing more coalnearly 11m tonnes last year. Vipul Tuli, of McKinsey's, a consultancy, predicts a massive shortage of 100m tonnes by 2011-12. Domestic coal usage is constrained and made more costly by an inadequate rail network. Imports are hampered by a lack of capacity at the ports.
Recent months have seen a scramble by India to secure fuel supplies. There is talk of pipelines to bring gas from countries such as Turkmenistan, Bangladesh, Myanmar and, most controversially, Iran. Meanwhile ONGC, a state-owned oil exploration and production company, has teamed up with Lakshmi Mittal, a steel tycoon, to bid for foreign oil assets.
India's nuclear industry, which at present supplies about 2% of electricity, received a big boost in July, when Mr Singh went to Washington, DC, and secured an American offer of help for it. Despite having nuclear weapons, which it tested in 1998, India has never signed the international non-proliferation treaty. So this was a diplomatic coup. Mr Singh has suggested India could have 30,000 to 40,000MW of nuclear capacity for the next 20-30 years. But that optimistic figure is still a fraction of requirements.
There may be more potential in hydro-electricity, which already produces a quarter of India's needs, in renewable forms of energy, and in moderating demand by enhancing energy-efficiency. India has an estimated 120,000MW of untapped hydro-electric potential. Big dams are controversial, but much of this could be realised through small, run-of-the-river projects. It is hoped to increase hydro's share in production to 40%. The most significant strategic goal set by Mr Kalam in his Independence Day speech, however, was to increase the share of renewable energy in generation from around 5% now to 20-25%. Wind power already accounts for about 2%. Solar power is negligible now, partly because of the high capital cost of solar plants, but the president was optimistic that new technology would soon bring the cost down. He estimated, moreover, that 30m hectares of wasteland in India are available for the cultivation of bio-fuels, such as Jatropha, an oil-producing shrub.
An obsession with energy security may not be wise in a world where, in Mr Singh's words, borders are becoming less relevant. But it must make sense to look at options other than coal and imported hydrocarbons. The impediments to meeting India's needs through increases in thermal-power generation seem likely to dog the country's progress for years. They lie not just in the present shortages of fuel and capacity, but in the structure of an industry too long governed by political rather than economic concerns. They are not insuperable. But they are so complex and daunting that one leading industrialist privately argues that the only solution is for electricity to be declared a national emergency. That way, the general recognition of the scale of the challenge might actually turn into action.
at 4:47 AM
As the crustaceans became harder to find, canned lobster ceased to be profitable. Live lobsters, by contrast, grew in status as they became dearer. A meal that cost $4 (in today's money) in the 1870s cost $30 or more a century later. What was once a manure substitute is now a prized delicacy. What the lowliest servant once refused, the swankiest restaurateur now offers with pride. Mr Jones's menus may reveal something about the historical fate of fish, crustaceans and molluscs. But there is no accounting for that peculiar land-based mammal that eats them.
at 3:51 AM
An excellent article. Very blunt and beats around no bushes. Expands on the term "India has a democratic govt and communist economy".
Sustained growth in India would be all the more impressive if the government could pass its reforms. But the road is blocked by politics.
Out of this IT infrastructure has grown a huge business in “outsourcing” almost any business process that can be performed remotely, from answering a call in a help centre to interpreting an X-ray. The largest outsourcing firm relaunched itself in September as Genpact, partially disguising its origins as the Indian back-office of General Electric, and expects to exceed $1 billion in annual sales by 2008.
These service businesses have thrived because they have capitalised on India's strengths—computer skills, fluency in English—and are not hostage to its weaknesses. Yet those weaknesses are all too obvious, and are the reason why India on many counts still lags behind its neighbour-rival, China. India has lousy infrastructure, bumbling and burdensome regulation and restrictive labour laws. And economic reform now appears to have stalled in political recriminations.
Last year's election gave no party a clear majority. A delicate arrangement allowed Manmohan Singh, of the left-of-centre Congress party, to take office as prime minister, while a committee was set up to negotiate policy between Congress and its coalition partners (together called the United Progressive Alliance or UPA) on the one side, and the Left Front of Communists and other left-wing parties on the other. The committee, however, has not managed to meet since June, though on October 26th there were rumours that it was about to. Meanwhile, the Communists—without whom the coalition has no majority in Parliament—are getting truculent. They staged a four-month boycott of the co-ordination committee to press their policies and then, in concert with the trade unions, called a one-day general strike on September 29th. It was ignored in many places, but the banks, along with the Communist stronghold of Kolkata (Calcutta), were paralysed.
When Mr Singh was finance minister, in the 1990s, it was he who pushed through the measures that kick-started reform in India. Without the support of the Left Front, however, he can do nothing more. His most significant legislative achievement to date has been a law that guarantees 100 days' employment to every household in India's 200 poorest districts. Though the Left Front loves it, many economists reckon that much of the money—as much as 1% of GDP, by some estimates—will be wasted or stolen.
The Left Front, which draws most of its support from organised labour, does not greatly care. Its eyes are on state elections due next year in West Bengal (whose capital is Kolkata) and Kerala, the two biggest states where the Communists are strong. Those who are losing out from unreformed labour laws are hundreds of millions of people now marginally employed in the countryside. These people need jobs in manufacturing if India is to improve its record on poverty, as well as growth. Jobs could be found in the labour-hungry textile industry, especially now that, with the ending of the developed world's protectionist Multi-Fibre Arrangement, India's textile exports are booming. As it is, a jobless boom is going on in manufacturing, which is growing at 7% annually, but without increasing employment.
Touches of xenophobia
India's antiquated laws are not only preventing it from exploiting the textile boom as successfully as China (whose textile businesses are so successful that they provoke retaliation). They are also pushing it far behind China in terms of foreign direct investment. FDI has been the most important driver of China's growth, not just because of the money involved (more than $60 billion last year) but also because of the technology, expertise, marketing relationships and much else that this money represents. India's showing has been far less impressive: about an eleventh of China's haul last year (see chart 3).
One chief reason for the discrepancy is that India imposes caps on FDI in a host of economically important, or politically sensitive, sectors: insurance, aviation, coal-mining, media and much else. Chief among these is retailing. Though franchise operations are allowed, foreign direct ownership is banned, which explains why even Delhi's smartest shopping areas are scruffy and chaotic places with limited stock.
Mr Singh's government would like to raise the caps, and had some success at first. It proposed in February, for example, that the cap for telecoms investment should be lifted from 49% to 74%, and this has just, at last, been approved. But the Left Front is violently opposed to any tinkering with the rules for FDI in retailing. Its leaders appear to accept that the advent of, say, Wal-Mart would generate many jobs, since much of what the company sold would be domestically produced (Wal-Mart spends $15 billion a year in China). But they worry that millions of small retailers would be put out of work. For those who want to move out of farm work, a small shop is often their first choice.
Mr Singh remains optimistic, but on slender grounds. With the Left Front so adamant, nothing is likely to happen. And the same is true of privatisation, or its younger sibling, disinvestment, the selling of minority stakes in state-controlled companies. From the very start of its tenure, the government was forced by the Left Front to agree not to privatise nine so-called “crown jewels”, or leading state-owned companies. But the Left has taken advantage of its position to go beyond what was originally agreed. When, in June, the government announced plans to sell a 10% stake in Bharat Heavy Electricals, an engineering firm, the Left Front vigorously objected. Although the sale does not require legislation, and so could be enacted by the minority government, the government shows no stomach for doing so.
Another disappointment—though the word is perhaps inappropriate, since no one ever expected a Congress government to have the necessary courage—is the failure even to attempt to do anything about the mountain of subsidies that distort the Indian economy. Often badly targeted, benefiting middle-class people more than the poorest, they consume a shocking 14-15% of GDP.
Worst of all, Indian politics may actually be retreating to its bureaucratic past. Take oil pricing, a complex statist rigmarole that had been moving from the hands of government to those of a regulator. Under Mr Singh, price decisions are again being taken by the government.
The prime minister's instincts are sometimes depressingly bureaucratic. Faced with obvious and longstanding problems, he commissions a study on them. The latest strategy document appeared in September from a specially convened National Manufacturing Competitiveness Council. It listed the most pernicious difficulties for manufacturers: power shortages, taxes and the “inspector raj”. No one was surprised by these, or felt much hope they would be fixed.
Removing the brake
It may seem odd, if reform is so important, that the economy is doing so well without it. There are a number of reasons. The biggest is that the Indian economy is so strong, structurally and cyclically, that it can ride out a period of wobbly policy. India's young population gives it a fast-growing workforce and a declining proportion of dependants. Over the next few decades, that will be good for savings and investment. Industry, meanwhile, has recovered from a splurge of over-investment in the mid-1990s. It has improved efficiency and is now both reaping the benefits and investing again in new capacity.
The government started to get out of business's way in the 1980s and, especially, after a balance-of-payments crisis in 1991. At that point Mr Singh, as finance minister, was given the freedom to bring in reforms by an unexpectedly brave prime minister, Narasimha Rao. Since then, government has been unable to put an absolute crimp on growth. Many important reforms—especially trade liberalisation, but also the dismantling of the “licence raj” of bureaucratic obstacles to enterprise—are well in train and not in reverse.
Too many are still losing out
Almost every budget since 1991, including this year's, has cut import tariffs and freed more industries from “reservation” for small firms, a big hindrance to competitiveness in businesses that might benefit from economies of scale. This year, moreover, saw the introduction of one long-planned reform, a standardised value-added tax imposed at state level. Typically, politics meant that not all states fell into line, and implementation has been patchy. Yet the tax may eventually not only bring new fiscal stability, but also reduce the burden of cascading excise and sales taxes that is one of the biggest handicaps facing manufacturers. Modest, piecemeal reform, in other words, is not quite dead.
The government's priorities—investment in infrastructure, agriculture, basic education and primary health care—are also right, given that the big macroeconomic stuff was mostly done in the 1990s. But they all need money, and that requires fixing the budget. India's fiscal deficit is now 8% or so of GDP if both state and central governments are counted—an improvement after six years of double-digit deficits, but still too high. Public finances have been in a mess for so long that it seems almost impolite in government circles to mention them.
The deficit, which goes largely on interest payments (40% of recurrent spending), defence, subsidies and civil-service wages and pensions, leaves little room for big capital investments. Some new airports, ports and roads are being built, and the “Golden Quadrilateral” highway, linking India's four biggest cities, is being expanded to six lanes. But Mr Singh wants a good deal more. Improving India's infrastructure, he says, is his top priority. Hence his government's zeal for “public-private partnerships” to finance and construct it.
A standard concession agreement is to be produced soon, modelled on successes with toll roads, where concessionaires have put in competitive bids for government grants. For some projects, the government does not need parliamentary approval and can proceed anyway. Other projects, however, such as airports, will run into objections from the left. It is therefore hard to see these partnerships making much of a dent in what Montek Singh Ahluwalia, the prime minister's chief planner, calls India's “infrastructure deficit”.
Might the left-wing parties ever become less obstreperous, and realise that reforms like these are of benefit to all Indians? It is possible. Jairam Ramesh, a Congress member of parliament who played a big role in writing the “common minimum programme” that defines relations between the UPA and the Left Front, floats the interesting theory that, now that Congress has enacted the Employment Guarantee Act that the Left was so keen on, the Left may prove a little keener on asset sales. They would, after all, be a way of paying for all those jobs.
From the Left Front come faint signs of accommodation. Prakash Karat, the general secretary of the CPI (M), the most important party within the group, is, like Mr Ramesh, adamant that full-scale privatisation of profitable public enterprises is not on the agenda. But he says the party is “ready for a discussion” on how to raise resources for spending on the poor.
Among the most eloquent advocates of a re-think is, in fact, a senior Communist, Buddhadeb Bhattacharjee, chief minister of West Bengal, a state of 82m people run for 28 years by the Communists and their allies. On September 30th, the day after Communist-affiliated trade unions had brought his capital, Kolkata to a halt, he could scarcely conceal his exasperation. He told The Economist that the trade unions—and many of his party comrades—had become “one-dimensional”, representing only the interests of the 30m or so workers in India's “organised” sector.
Mr Bhattarcharjee concedes that some of his colleagues in Delhi do not seem to grasp that economic reform could benefit a much bigger number of workers than those who belong to unions. If they do, they perhaps see political benefits in ignoring it. But “Here, we are running a government. We have to fulfil the aspirations of the people.” To that end, he is trying to turn Kolkata into a hub for the information-technology industry by declaring it a “public utility” where strikes are banned, and has started going abroad to bang the drum for inward investment.
Jobs for the poor
Such enthusiasm may start to shift the political balance back towards reform, but it looks unlikely. For the foreseeable future, both left-wing intransigence and lack of decent infrastructure—in particular, a chronic shortage of electricity—will constrain India's growth. An average annual rate of 6-7%, as in the past decade, does not seem a tall order. But a gear-shift to a durable growth rate of 8-10% still seems out of reach.
Without it, that burgeoning workforce may seem less of an advantage. Shankar Acharya, a former government economist now at a Delhi think-tank, worries that between now and 2051 nearly 60% of India's population increase will come from four “populous, poor, slow-growing northern states with weak infrastructure, education systems and governance”.
China has sucked surplus agricultural labour into factories by the tens of millions. India's manufacturing industries, by contrast, have progressed by becoming more productive. They are still not a big source of rural employment. As a good liberal economist, Mr Singh says he does not believe in having an “industrial policy” or picking favourites. Create decent infrastructure, and industry will come—and he sees huge potential, as do many others, in food-processing. His finance minister has spoken of 12m new jobs in the textile sector alone in the next five years.
They are sorely needed. India's information-technology firms are world-beaters, but the entire IT and office-service industry employs only about 1m people. None of the Asian tigers, not even Singapore, managed its rapid climb into the ranks of middle-income and rich countries without a boom in export-oriented manufacturing. India is unlikely to be different.
When he speaks of following the “Chinese model”, Mr Singh seems to admit this. But it remains sadly true that the free market that has helped the tigers so much often works better in Communist China than in India—not least thanks to India's own democratically elected Communist politicians.
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The severity of the situation has created an opening for environmentalists in and out of the government. Environmentalism is a chic issue for college students, who have participated in garbage cleanups and joined the growing number of nongovernment organizations focused on pollution. The once-meek State Environmental Protection Administration, or SEPA, has become more aggressive in identifying and going after polluters and calling for reforms.
But the political and practical obstacles are formidable. Car ownership has become part of the Chinese middle-class dream, and the car industry has become a major contributor to tax coffers and a force in the overall economy.
Industrial pollution is difficult to control because local officials often ignore emissions standards to appease polluting factories that pay local taxes. SEPA has closed factories, only to see them reopen weeks later. To make a serious reduction in air pollution, experts say, tougher, enforceable standards are needed, and many factories would need new pollution control equipment.
"There has to be the political will," said Steve Page, director of the E.P.A office of air quality planning and standards. "The challenge they face is how will these plants be lined up and told this will happen?"
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Sitting on a grassy expanse outside of one of the main buildings, Olivia Akullo, a 21-year-old business student, said she usually gets to class at least an hour early just to secure a seat. She laughed as she watched students sitting on window ledges, their legs dangling outside.
"It's really scary because this school represents Uganda and Africa," Akullo said. "We want to show the outside world that we are something. But there are 300 people in some of my classes. We can't even meet with the professor if we don't understand something."
Two computer science students stood in the hall of Lumumba talking about how hard it was to get computer time.
"There are 20 students per one computer," lamented Issac Jugume, 21, who had handwritten his latest paper -- on computer programming. "I think computers are the best way to get a job. But it's really hard to learn about them when we have to wait a week to get on one."
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October 29, 2005
By LIZETTE ALVAREZ
Published: March 11, 2004
Three months ago, Mr. Herala, a theater director with a yen for therapy, took it upon himself to bring ''anger venting'' classes to Helsinki on the theory that his famously silent and stoic compatriots were about to combust from repressed emotion.
Finland, while infinitely livable and likable, suffers from some of the world's highest rates of suicide, depression and alcoholism. ''How to control and express anger safely,'' read his classified advertisement in a local newspaper.
He has had few takers. An organization that handles domestic violence called to enlist, as did a smattering of individuals. But it was so odd a notion -- tutorials in how to get angry -- that Mr. Herala made headlines in the largest daily newspaper here.
''Yes, it has been difficult to get people to sign up,'' he said over a glass of white wine at a local bar, pleased nonetheless at all the attention. ''Anger in Finland is a bigger taboo than sex.''
Psychologists and academics here said they were not surprised that Mr. Herala's advertisement would attract attention as a novelty, and then go largely ignored.
''Self-control is very important in Finland,'' said Dr. Liisa Keltikangas-Jarvinen, a professor of psychology at the University of Helsinki. ''You cannot show anger; it means you can't cope. If a person is very temperamental and alive, expresses emotions like anger and happiness, the person is seen as infantile.''
Even among Nordic peoples, the Finns' stolid nature stands apart.
Ben Furman, a psychiatrist who until recently was the host of a popular, but very serious, television talk show here, was pilloried last year for suggesting that the government should stop paying for psychotherapy sessions. As he prepared to defend himself in interviews, over and over again, Mr. Furman said the one piece of advice he consistently got was ''don't get angry, no matter how much you are provoked.''
''People would assume I was guilty if I got angry,'' said Mr. Furman, co-director of the Brief Therapy Institute here. ''I had to rehearse and behave in a way where no emotion was shown. A normal person would react emotionally to these charges. If I was in Italy, I believe I would receive the opposite advice. You must be guilty because you are not reacting emotionally enough.''
Here, experts say, a car accident brings, not blame and insults, but a polite exchange of information. A bus breakdown causes no complaints; rather, the Finns on the bus will file off and try to push it to the next stop. It is no coincidence that 80 percent of women who give birth here refuse pain-killing epidurals, according to one study. In America, 90 percent of women ask for them.
But Dr. Keltikangas-Jarvinen said suppressing anger in Finland was only one piece of the country's entrenched cultural code.
Here, it is not unusual to walk into a restaurant and spot most people eating dinner in silence, content to chew and not chatter. Silence is a sign of wisdom and good manners, not boredom and half-wittedness.
Some would say this taciturnity has served Finland well, particularly during the cold war, when the Soviet Union was literally a short tank roll away. ''For 30 to 40 years there,'' Dr. Keltikangas-Jarvinen said, ''it was politically very wise to be silent.''
Finns also cringe over compliments. They don't dole them out and they don't take them in. As part of a group therapy exercise, Dr. Furman asked the participants to name one thing they each could do well, he recounted. No reply. Then, he asked the people in the group to give someone else a compliment. They couldn't.
Stumped, he broke them up into groups and asked them to say one nice thing about someone outside the circle. Finally, they did. ''We needed to back up a couple of steps, to teach people how to talk positively about one another,'' he said.
Ingrained with modesty, Finns are almost physically unable to boast or show off. In an era of unattenuated hype, they cannot self-promote. ''It is considered a sin,'' Dr. Furman said, with a laugh.
Dr. Keltikangas-Jarvinen said she receives American résumés, and sometimes cannot help but view them suspiciously. To her, they throb with hyperbole. ''I feel shame when I read these 'excellent' portfolios,' '' she said.
The flip side of this modesty, Dr. Keltikangas-Jarvinen and others say, is that Finns, despite their many advances, particularly in the technological field, seem to suffer from a self-esteem crisis. Theirs is such a consensus-driven, homogenous culture that a free exchange of ideas sometimes proves difficult.
''I mean, the president has something like a 90 percent approval rating -- please,'' Dr. Furman said. ''For our country to keep up with competitiveness, we need to respond differently.''
Mr. Herala, the ''anger teacher,'' said much would be solved if people could just learn to say what they think and express their emotions, be it ''I am angry because,''or ''I love you because,'' he said.
''We are,'' he said, ''the Finnish version of the Japanese character.''
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Shoot for 1-Ton Mark
Scales, Rules of Nature;
Gaining 40 Pounds a Day
By SUSAN WARREN
Staff Reporter of THE WALL STREET JOURNAL
October 29, 2005; Page A1
Producing the biggest and best fruit and vegetables has long been a staple of county fairs, but in recent years growing giant pumpkins has evolved into a fiercely competitive garden sport. Fanatical growers carve out half of the calendar year to devote to their pumpkin patches, working to bend the rules of Mother Nature by nurturing their monsters with thousands of gallons of water, stinky soups of manure and seaweed, and complex pruning techniques.
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October 28, 2005
In 1949, when Harry Snyder was hired to head up the training of Saudi Arabs for Aramco, James Terry Duce, a company executive in New York, told him what was expected:
|Your task at Aramco is to train Saudis as quickly and as soundly as possible to operate the Saudi oil industry. Inevitably, the Saudi Arab Government will eventually nationalize the industry. When that occurs, we want the young Saudis to have attained the proficiency that will enable them to operate the oil industry efficiently and with goodwill toward Aramco. Thus they will be serving their country's best interests and will be protecting the interests of our parent companies.1|
This vision of the training mission and its ultimate result might have appeared reasonably attainable if recruits were available from local schools, knew a bit of English, and had some exposure to industrial practices. But those conditions did not exist when the concession agreement was signed in 1933, nor in 1949 as the postwar development of Saudi Arabia's petroleum resources gathered momentum. Tom Barger, a geologist who arrived in Arabia in 1937 and rose to board chairman before retiring in 1969, recalled many years later:
|[One] aspect that impressed me was the enormous, inordinate poverty of the inhabitants. As I found out later, nearly everybody was hungry most of the time. . . . There's no education, obviously. The few people who could read and write largely had taught themselves. And there were some very learned men, as a matter of fact, among this population, although most of it was illiterate. They had practically no mechanical skills. We had new employees who couldn't get out of a room because they didn't know how to use a doorknob."2|
B. C. Nelson, who served Aramco in employee relations for many years, recalled in 1965 what it had been like for Saudis recruited to Aramco in the early years of the enterprise:
|Word spread to the desert and townspeople that in exchange for some physical effort the blue-eyed foreigners would give a man a handful of silver! And so they flocked to Aramco's budding oil centers . . . Imagine the effect on a recruit to be plunged into the mechanical age -- none of which fit in with his prior orientation or culture -- with little or nothing in his experience to help him adjust. The most amazing thing about these times in terms of one small facet of an Industrial Relations problem -- absenteeism-was not that, when they were handed their bag of money, they returned to their tribe with their glad tidings, but rather that they ever came back to work. Industrial discipline was practically unknown, so the amazing thing was that there was only a 75 percent turnover in the first few years.3|
On-the-job training began on an informal basis in the 1930s and was soon complemented by rudimentary industrial training in classrooms. But without English, Arabic literacy, and basic arithmetic, there was a limit to the progress Saudis could make in job performance and advancement. In 1944, with operations revived after a wartime suspension, the Jabal (meaning "mountain" or "hill") School was opened in Dhahran.
|Surely in 1944 no one expected history to remember the humble Jabal School. Yet the little company school endures as a symbol for development -- not for the development of an oil company, but for the development of a generation of very special young men. Many Saudis were introduced to the mystery of letters and numbers at the Jabal School. Among them were future scholars, successful businessmen and powerful executives.4|
The Jabal School was the beginning of an ever-evolving, structured program of job-related training and general education that replicated under corporate auspices what an American might have experienced in public institutions, with grade school-junior high (company classrooms in-Kingdom), high school (assignments abroad, often Lebanon), and college (primarily in U.S. institutions).
One Jabal School pupil learned to type at 100 wpm and expressed an early aspiration to become Aramco's "first Saudi secretary." A Bedouin boy, he had been attracted to Aramco in the first place because of the opportunity for schooling, joining in 1947 at the age of 12. Not long after he returned from the U.S. in 1963 with two degrees, including a Stanford M.S. in geology, his name appeared in a lengthy Wall Street Journal article about Aramco. At the time only one Saudi had risen as high as department manager. Asked this time about his aspirations, the 30-year-old Ali Naimi replied, tongue-in-cheek, "Becoming the first Saudi president of Aramco." That was to transpire in 1984, and in 1995 he was named Saudi Arabia's Minister of Petroleum and Mineral Resources.
Naimi's Jabal School classmates, and many who followed later on increasingly sophisticated training and education tracks in modern facilities, began filling jobs at all levels of the company, gradually populating all of the supervisory and upper management positions in addition to drilling the wells, loading the ships, and manning the refinery and other plants, as they had been doing for many years. Throughout the process it was a matter of qualifying for positions, often an arduous, step-by-step progression, in a system of meritocracy.
In 1983 alone, a record half billion dollars was budgeted for training. In that year, 85 percent of all Saudi employees attended training classes, and the company was sponsoring 1,300 Saudis for university studies.
An Evolving Concession
Two provisions of the original 1933 concession agreement were never questioned or changed. One required the concessionaire to employ Saudi Arabs exclusively if they were qualified and available. The other said the company was not to interfere with administrative, political and religious affairs within Saudi Arabia.
But the terms of the original concession agreement between the Kingdom and Standard Oil Company of California were modified and amended for other reasons, mostly involving money and concession area, at the initiation of one or the other. The first alteration was a supplementary agreement signed in 1939 -- commercial quantities of oil had been discovered the preceding year -- that agreed to various additional payments to the government and extended the concession area to its maximum historic size, about 673,000 square miles, and lengthened the concession period from 60 to 66 years.
But by far the most important of the changes was the so-called 50-50 agreement, under which the company agreed to pay income taxes (the original agreement exempted the company from all taxes):
|By this agreement [signed in 1950] the Saudi government's income from Aramco's operations came to be linked primarily not to the number of barrels produced and sold, as before, but rather to how much profit the company made. After 1950, therefore, the government showed increasing interest in the prices charged for oil, the cost of running the business, and the accounting methods used in determining these things . . . At the same time, as the government was increasingly successful in developing a group of technically trained oil experts in its Ministry of Petroleum, it also became more and more interested and involved with the actual operations of the company-such things as exploration programs [and] drilling practices . . . 5|
By this time, the California Arabian Standard Oil Company (CASOC), the subsidiary to which the concession was assigned by SOCAL, had brought in three other American majors to what had been renamed in 1944 as the Arabian American Oil Company. The Texas Company (later Texaco) was the first, in 1937, with Standard Oil Company of New Jersey (later Exxon) and Socony-Vacuum (later Mobil) joining in 1948.
The keen interest that the Saudi government now had in how Aramco ran its business on a 50-50 basis was expressed in several ways. The company, at the government's request, moved its headquarters from New York to Dhahran in 1952. The government began auditing Aramco's books on a regular basis. And, in 1959, two Saudis were appointed to Aramco's board of directors.
The first sign that the concession was not going to live for its full 66-year period came in 1968, when Oil Minister Ahmed Zaki Yamani first raised the issue of Saudi "participation" in Aramco, whereby the Kingdom would buy into the company in increments, purchasing for itself rights to certain quantities of oil it would market on its own as well as becoming active in management decisions. The first 25 percent interest was acquired by Saudi Arabia in 1973.
At no time did the drive for Saudi ownership imply that something was broken and needed fixing, although increased pressure was now applied on Aramco to accelerate Saudi hiring and training, and for replacement of Americans with Saudis in top management positions.
Full 100 percent ownership of Aramco was reached in 1980, with beneficial financial effect from 1976. In part to reassure the work force that no drastic change was in store, the government did not displace Aramco with its own national oil company immediately -- waiting a full eight years. As symbolic reinforcement that past and present were being merged seamlessly, the government announced that the new entity created in 1988 was to retain the old acronym and be known as "Saudi Aramco." Now the Saudi company was to invite Americans to join its board of directors as the American company had done with Saudi appointments 30 years earlier. The Americans included Harold Haynes and James Kinnear, the retired heads of Chevron and Texaco respectively.
While during the course of the concession there were on occasion sharply divergent positions on the Aramco and Saudi government sides, few left permanent scars, and only once was it necessary to resort to outside arbitration (when Aramco resisted, successfully, the government's interference with the company's prerogative of determining whose tankers would carry oil exports: the Aristotle Onassis dispute). As former Oil Minister Yamani summed up the relationship: "In a closed room we sit down and quarrel, but finally we reach an agreement."6
Character of the Saudi-American Relationship
The fact that Aramco brought on its own redundancy by training and educating Saudis to eventually displace Americans and other nationals was the most important factor in a concession relationship that was generally amiable. Another factor was the nature of the communication between the two parties. Most routine contacts with the government's municipal, provincial and ministry offices were channeled through the company's Government Relations organization. This insured a uniform approach to presenting and resolving problems. Mutual confidence grew out of the Americans making "courtesy calls," when no pressing business issues were tabled, and by the fact that individual American "relations reps" and individual Saudi counterparts would deal with each other over a period of many years, sometimes rising in their respective hierarchies together.
In addition, Aramco found itself fulfilling the role of a quasi-governmental body in its areas of operations because Saudi Arabia, at least until the late 1950s, lacked the money, expertise and structure to implement and manage public works. By this time there was a dual tension at work. Aramco knew the immense magnitude of the oil reserves embraced by the concession and wanted to preserve its exclusive access to them. Saudi Arabia recognized that Aramco had the expertise and personnel on the ground to deliver infrastructure and services beyond what had been envisioned by either side in the concession agreement. Both sides played on advantage and need.
Pressured by the government and prodded by its Saudi employees, the company embarked on an expensive program to build -- and pay the operating costs for -- public schools in the Eastern Province in a number that would accommodate on an ongoing basis a pupil population equal to the number of children of the company's Saudi employees.
There were other of these "community citizenship" programs undertaken by Aramco in the early years, most of them undoubtedly in its self-interest, such as medical care for employees (and, later, their families); health education in surrounding towns and villages; malaria control; trachoma research; farming operations; loans and technical assistance to local contractors and industry; and support for public utility development.
The early Saudi workforce was made up to a large extent of Bedouins drawn off the desert by wages and opportunity, and in the early days they lived without their families in bachelor housing, which contributed to high turnover. To address this problem, the company introduced a home ownership program that, in addition to subsidized loans and free lots, involved creating housing developments complete with utility lines and streets.
Bonds between Americans and Saudis in general also grew over time, in large part because Aramco was a company in its own right, not a consortium made up of staff seconded from member companies for short terms of one to three years. For Americans hired up until the late 1970s, remaining on the payroll was virtually assured -- poor performance cases and cyclical cutbacks excepted -- and careers of 20 to 30 years in the Kingdom were common. Business decisions were no doubt influenced by this "home town" bias, since Aramco management in Dhahran would be more inclined than the shareholder companies in the U.S. to see the value of deploying capital into non-oil activities such as public school construction. Local management could lobby successfully for "good citizenship" expenditures by arguing that such investments prolonged a lucrative investment. On a personal level, friendships and family associations formed in this environment have lasted into retirement for Saudis, Americans and other nationalities, and there are Saudis and Americans in the company today whose parents and grandparents worked together in Aramco.
The Continuing Saudi-American Energy Industry Partnership
The Saudi-owned and run company is a far more complex and far-flung enterprise than the American-owned Aramco. Aramco explored for oil, drilled wells, processed oil and gas, then filled the oil and product tankers that arrived at its loading ports. Saudi Aramco retains all of those functions, while assuming responsibility for all crude oil, gas and product marketing internationally and domestically. Saudi Aramco bought or built 21 tankers through its Vela International Marine subsidiary and entered into joint venture refining-marketing operations in the U.S., Philippines, South Korea, and Greece.
Saudi Aramco maintains business relationships with all of the former "Aramco Four." Its first joint venture abroad (through its U.S. subsidiary Saudi Refining, Inc.) was in 1988 with Texaco in what was named Star Enterprise, which included refineries and a network of Texaco gasoline stations. (Later, Star gave way to Motiva, a partnership with Shell Oil Company, and Texaco was bought out as a consequence of federal regulations relating to the Texaco-Chevron merger.) Continuing associations with former Aramco shareholders include a joint venture refinery in Yanbu (originally with Mobil, now ExxonMobil), joint ventures for in-Kingdom lubricating oil production and distribution (originally Mobil, now ExxonMobil), and an on-shore concession agreement in the Saudi Arabia-Kuwait Neutral Zone (originally Texaco -- which had bought out Getty -- now ChevronTexaco).
In 1998, Crown Prince Abdullah invited bids on projects to develop the Kingdom's natural gas resources in what amounted to competition with state-owned Aramco, fracturing the long-held assumption in the industry that inviting international oil companies to return to upstream involvement was taboo. ExxonMobil has the lead role in a proposal for developing the South Ghawar Area, potentially a multi-billion dollar project if negotiations move forward successfully.
Much has been written about the sheer size of Saudi Arabia's oil industry, its 100-plus years of oil reserves, and the excess (and costly) oil production capacity that it can deploy to moderate price shocks, as demonstrated during the 1991 Gulf War. Yet the more compelling story is how these assets have come to be managed in such a brief span of time by a previously unindustrialized people.
The definitive study of human resource development across Saudi Arabia up until the mid-1980s was written by Joy Winkie Viola, who was Dean of the Office of International Affairs at Northeastern University when her book was published in 1986.7 In it, she quotes Oil Minister Yamani in his foreward to Aramco's 1982 Annual Report: "Relations between the government of Saudi Arabia and Aramco, like all complex associations, were not without their ups and downs, but wisdom and rationality have always dominated." The Minister went on to recount "the creation [by Aramco] of a Saudi staff who are pioneers in the understanding of the mysteries of the petroleum industry."
Viola went on to observe:
|These are not the words of an embittered government, nor are they the angry charges of a government that sought to nationalize its natural resources without compensation to the company that developed them -- as has been the case in more than one developing nation. . . . . As many scholars have attested, the Aramco experience remains the one single collaborative effort and force that cemented the economic foundation of a new nation in the 1930s and vastly contributed to the "special relationship" that still exists between Saudi Arabia and the United States today.|
1. James Terry Duce speaking to Harry Snyder as recounted in Saudi Aramco and Its People: A History of Training, Aramco Services Company, 1998, p. 42.
2. The Mulligan Papers, Special Collections, Georgetown University Library, "Presentation on International Oil," speech by T.C. Barger, Shreveport, LA, April 1977.
3. Notes provided by B.C. Nelson to R. L. Norberg.
4. Saudi Aramco and Its People: A History of Training, p. 19.
5. Aramco and Its World, Arabian American Oil Company, Washington, D.C., 1980, p. 235.
7. Human Resource Development in Saudi Arabia: Multinationals and Saudization, International Human Resources Development Corporation, 137 Newbury Street, Boston, MA 02116. Also see Saudi Aramco and Its People: A History of Training, Aramco Services Company, Houston, Texas, 1998.
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