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KOLKATA?This is not the best city to talk about governance. West Bengal's capital has been ruled by a communist left front for the past 30 years and they created governance codes that are acceptable only in this bastion of the left.
Kolkata and Kathmandu are getting indistinguishable. Kathmandu is reeling under power cuts that are similar to Calcutta in the 1980s. The only area where we are better is at least we know when the power will be cut. Similarly, a red light is a suggestion for the traffic to stop just as in KTM. The gradual induction of distributive economic policies have created a state that will still love to limp while the rest of India wants to run. And, of course there are the endemic labour problems.
The $1 billion scam that Satyam Computers pulled off has rocked investor confidence in India. The promoters of the company with the blessings of the political elite (who are hastily distancing themselves) and the love of the masses for financial results created a company that rode not only the Mumbai bourse but also the NASDAQ.
The promoters literally 'minted' money by getting into real estate, where they did not have core competencies. Be it swinging the metro train deal for Hyderabad or the fast rise of Maytas, their private real estate operations, their greed knew no bounds. A share that was trading at over Rs 500 in good times, is today not worth the paper that the share certificates are printed on. Of course, it opens up opportunities for 'vultures' to attack the company and take over but the delusion for the common investor would remain for days to come.
For Nepal, we should take this up as a wake-up call. This is not another opportunity for the current government to prove why capitalism is wrong, but learn lessons on how we need to regulate the markets. In Nepal, while scams of such a scale has never happened there have been incidents in the past where companies like Necon Air, Nimrod Pharmaceuticals and others who took money from public and vanished but the government remained a mere pectator.
The Big One will hit us when banks begin to rupture. Our banks have been opened for the promoters to cash in through pledging of their promoter shares and using the money for mostly real estate deals. Just like Satyam computers, websites exist for promoter share purchases in contravention of the Securities Regulations but the government seems happy with banks sprouting like mushrooms and couldn't be bothered with regulation. Unlike Satyam, where only investors and employees were hit with the scam, a banking sector collapse in Nepal would result in a breakdown of society.
The Satyam auditors PricewaterhouseCoopers in India may go the Andersen way in post-Enron USA. The Satyam debacle should also be a wake up call for chartered accountants in Nepal who have till now lobbied hard to get the government not to open the audit sector for international firms. No CA has ever been found guilty in Nepal though numerous complaints are filed against them with the Disciplinary Committee. So the fraternity has one good opportunity to introspect and mend their ways.
There are always lessons to be learnt in every crisis that hits the market. The global markets have matured with successive crises and the law of nature suggests that one can't avoid an Enron or Satyam. But the key issue is to ensure that the circumstances in which these firms duped the investors will not be repeated in Nepal.
