More big business won't reduce poverty

Robert Weissman

By most accounts, UK Prime Minister Gordon Brown is genuinely passionate about reducing global poverty.
   But he is not willing to challenge the structures of the global economy that generate poverty, or the corporations that build, benefit from and maintain those structures.
   Nor, apparently, is he immune to gimmicky notions of corporate leadership to support development, or the lure of high-profile summits to shed light on new plans to do - very little.
   Thus, in early May the UK was treated to the spectacle of the Business Call to Action summit, which Brown's office co-sponsored with the UN Development Program. More than 80 CEOs of large companies gathered with Brown and other luminaries to discuss how they could help meet the Millennium Development Goals, which aspire to reduce global poverty by half by 2015. Roughly two dozen of these CEOs - from Anglo American, Bechtel, Citigroup, Coca-Cola, De Beers, Diageo, FedEx, Goldman Sachs, GE, Merck, Microsoft, SAB Miller, Wal-Mart and others - have signed the Business Call to Action, which states, "as leaders from the private sector, we declare our commitment to meet this development emergency."
   The premise of the event, as Gordon Brown said, was to advance "a new approach - moving beyond minimum standards, beyond philanthropy and beyond traditional corporate social responsibility - important though they are - to develop long-term business initiatives that mobilize the resources and talents that are the central strengths of global business."
   The mantra of the event was for corporations to "explore new business opportunities that use their core business expertise" and that also help spur development.
   Taken at its face value, this was, um, not exactly inspiring. Says Peter Hardstaff of the UK-based World Development Movement, the CEOs "have all agreed - to do more business."
   But the problem goes way beyond the fact that business as usual - or even a little bit of new business initiative with a development-conscious orientation - is not going to do much to reduce global poverty. The real problem is that business as usual is a central part of the problem.
   "Instead of holding these companies to account for their actions," says John Hilary, executive director of War on Want, a UK-based anti-poverty group. "Gordon Brown has allowed them to portray themselves as allies in the fight against poverty. The prime minister should be working to address the poverty and human rights problems caused by business, not giving the companies a free ride."
   War on Want focused attention on the harmful development impacts of many of the corporations signing the Business Call to Action. The group has campaigned against mining giant Anglo American. It has documented how Anglo American has benefited from human rights abuses associated with civil wars in Colombia and the Democratic Republic of Congo (DRC). Local mining communities in Ghana and Mali have seen little economic benefit from Anglo American's operations (or the spike in the price of gold); instead, says War on Want, the company's mines harm their environment, health and livelihoods.
   Other corporate signatories to the Business Call to Action have directly hurt poor people through their "core business" more than can be offset by development-tinged ventures (even assuming such ventures succeed). Wal-Mart contracts with sweatshops.
   Simultaneous with Brown's business summit, Action Aid UK pointed to a major systemic abuse by multinational corporations that undermines development: They don't pay their taxes. The group released a report looking at tax payments of 14 corporate signers of the Business Call to Action. It found that these companies combined are underpaying taxes by more than US$6 billion a year, as compared to what they would pay if they paid at the statutory rate in the United States and UK. The group did not suggest any illegal activities by the companies - there are enough legal tax avoidance strategies.
   Money lost to developing countries through capital flight and tax avoidance is many times greater than aid flows into poor countries, says Jesse Griffith, the lead author of the Action Aid UK report.
   Tax avoidance is a key issue because it strips money from national treasuries that would otherwise be available for social investment, and because it reflects structural problems that could and should be cured without any need for global philanthropy or aid.
   The World Development Movement issued a 10-point challenge to corporations that claim an interest in promoting global development. It called on companies to stop using their political influence to promote policies that undermine development. It urged companies to: stop lobbying to open up developing country markets, and let developing countries "use the same trade policy tools industrialized countries used to get rich"; stop demanding rich country-style patent rules for the poor; support radical government action, starting in rich countries, to address climate change; support binding codes of conduct for multinationals, including respect for labor rights; end support for privatization and deregulation, including particularly financial deregulation; stop lobbying for and exploiting tax loopholes; and other measures.
   This is not exactly an agenda that global business leaders are likely to take up soon.
   On the other hand, it's not exactly likely that global business leaders are going to lead the way to end global poverty.
   Among other things, that's going to take a global movement, led from the Global South, to implement the policies implicit in the World Development Movement call.
   -Third World Network Features

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Holiday Desk

Sayeed Hossain Chowdhury, chairman of ONE Bank has strongly denied reports published in a section of the media accusing him of holding shares of the bank in others peoples' names, and said that he had not violated any law.
   At a meet-the-press-programme of the National Press Club last Sunday, he said the reports were fabricated and without basis.
   According to reports published in a section of the media, Sayeed Chowdhury holds shares of ONE Bank worth Tk 26 crore in other peoples' name involving five companies and five persons.
   Explaining he said that out of the reported five companies, three are owned by him and the other two by non-resident Bangladeshis, he said.
   'The shares held by those companies have now come into my possession after I bought them, but even then I own less than 10 per cent of the bank's total shares. And holding less than 10 per cent of the shares is very much legal,' he asserted.
   According to the Bank Company Act, a person or a family or a company can hold a maximum of 10 per cent of the total paid-up capital of a bank, he said and added that the authorities in 2000 had investigated some media reports and cleared him of the allegation of illegally acquiring shares through unfair means.
   Sayeed Chowdhury said, eight years later history is being repeated by certain people, and their intention is best known to themselves.
   He pointed out that a bank is owned by the public and as an entrepreneur without any political affiliations, he thought it was his responsibility to clarify the situation.
   Replying to a question, he said that the Bangladesh Bank did not contact him or issue any letter in this regard.
   First vice-president Zahur Ullah, director Shahidullah Khan Badal, managing director Forman R Chowdhury, company secretary John Sarkar and other officials of the bank were present at the meeting.
   Explaining how he became involved with the bank, Sayeed Chowdhury said a director of the bank Asoke Das Gupta had approached him in 1998 to join him as a sponsor director and requested him to find some other investors for the bank. The bank was incorporated on May 12, 1999 and began functioning as a full-fledged commercial bank from July 14, 1999, with six local Bangladeshis and five NRBs as directors, after obtaining the banking licence from the Bangladesh Bank, he added.
   Sayeed Chowdhury further told newsmen that he became a director of the bank on June 12, 2001 at the request of the then finance minister, Shah AMS Kibria, by transferring his wife's 25,000 shares. Kibria felt that the bank would benefit from his experience and active involvement, he added.

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Dealing with reason in the stock market

Share Shah

No one likes to admit being mentally small, so occasionally small people want to take on bigger people in order to prove that they are not small. The task of making any observation about small people with small minds is generally avoided because few want to get into any controversial subject. There is no payoff. It is so easy to say no in the guise of national interest. It is so easy to say that we are better than others. That we have potentials and given the right ingredients we could have done it. It is so easy to say all these things.
   But how many doers have we produced? How do we know that we are better than others? I do not find much difference from the mutterings of our economist and the practitioner of occult sciences. There thoughts and deeds are shrouded with word play none can understand. Double meaning eventual reinforces the false sciences and people keep coming back. I have always suspected that our economists are more tuned to be Dr. No than have any positive impact on our lives and economy.
   Perhaps they are missing the core aspect of human decision making which often goes beyond rationality. This assault on rationality is also our failure to perceive the real world. Then again the philosophers will tell ask what reality, to which I have no answer. Perhaps this entire fault is in our DNA, in our evolutionary history that does not make us perfect. Thus the logic of reality is often lost to our social perception built in our genes.
   Persons with bigger minds have started understanding people and how they look at things and how they make decisions. They have not solutions sitting in their Ivory Tower but have gone and seen and observed people. Some of the solutions have been used it in the super market to guide our choices others use this research to make more responsible decisions. Why do we care more about losing money, being risk averse than about making more money? Why do we eat more from a bigger plate than a smaller plate?
   Why do we think a one Taka mutual fund is cheap to buy at Taka 25 when its real valuation is around Taka 2.50? Why does the regulator think more mutual funds will help the market when more mutual funds will actually gobble whatever shares are around at high prices? Of course with new mutual funds there will be lesser number of shares on the counter. Why does the regulator think that mutual funds should get a booster shot by way of quota on IPO when the mom-dad investors are really fighting hard to get some shares? The mutual fund operators, who have done well because of the market and regulatory concession, no sweat on their part, will talk of the US market and the number of managed funds. But what they will not talk about is the substance of these US funds which also invested in other areas outside the secondary market such a real estate, commodities etc. The test of truth is that none has come up with a money fund and the reasons are obvious because none of the fund mangers is a true fund manager.
   An ancient adage is never to tell how much money you have made on the stock market. In fact the ancient book-"Arthshastra" talks about ways and means of concealing wealth. The eventual means was though the instrument of 'benami' transactions in order to hide one's property. In fact such transactions were acceptable under our securities regulation until these were changed in 1987. With the introduction of the beneficial ownership concept such transactions are no longer valid or acceptable.
   However one can set such accounts offshore which of course is beyond the ability of our mom-pop investors. The famous Al-Baraka Bank take over is a solid example on how to set up shell companies at home and abroad. Until recently the merchant banks were running similar operations in the guise of the omnibus accounts and having a great time in collecting IPO gains. But the fact is that an orderly and harmonious market cannot afford to be let loose. Democratic principle must also apply for the distribution of anything which is in demand by the public.
   To show favour to institutions are generally not accepted and should be shied by the regulators. On the other hand the regulators and operators should ensure that the system is clean and is not being infected by accounts which are in reality surrogates. Such practice has to be stopped and can only be done if the regulators can develop and implement a fair system to weed out the defaulters. No doubt a better approach would be to improve software architecture instead of whipping the stock brokers for issues which are beyond their control.

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