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Rahul Bajaj underlines need for new institutions to manage globalisation

Leading industrialist and chairman of Bajaj Auto, Rahul Bajaj, agrees globalisation is irreversible, but says the developments of the past 12 months have put the concept of globalisation, under attack and reconsideration, leading to a perception of global capitalism being in retreat.

''It now seems to many that the world was so absorbed in this process that not enough attention was given to where it was leading us and to the kind of structures needed to manage the process of globalisation,'' Bajaj said in his keynote address at the 26th annual convention of the Institute of Company Secretaries of India in Pune, Maharashtra.

''We need to address the issue of institutions required to manage the new economic and financial reality that has emerged as a result of globalisation,'' he said. ''We have to define the mission and the modus operandi of the international financial institutions so that they are accountable and transparent.''

He said the major issue 12 months ago was the east Asia crisis which many thought would be cured by the stiff medicine from the International Monetary Fund which would ensure that the affected countries would follow the discipline of global capitalism. It was thought that the region would be drought back on the track by the end of this year. Instead, what has happened is a global economic crisis, which has exposed the vulnerability in the international financial system.

There was still the hope 12 months back that Russia would recover and would integrate itself into the world economy. Instead, the Russian economy collapsed this summer.

The very notion of open markets has suffered a severe attack in public perception, as the situation of average citizens continues to deteriorate, he observed.

He said the world has to assess the effectiveness of the recapitalisation and restructuring the banking sector in Japan which is essential for putting the world's second largest economy bank on a path of growth. The Japanese recovery is crucial to help the east Asian economies emerge from their recession, which is badly hurting the people in every country.

Liberalisation of the global financial markets and unlimited mobility of capital has become almost an article of faith identified in a way with the process of globalisation, he said adding that the crisis has now exposed how massive shifts in short-term capital flow and unmonitored activities of hedge funds could become a time bomb for the global economy.

Hong Kong, Taiwan and Malaysia have each felt compelled to resort to measures which are contrary to free market orthodox in order to protect themselves from these forces.

Just as the developed world and other corporations would have to determine their policies as actions required to restore capital and investment flows to developing countries, so should ''we determine our policies and actions keeping in mind our limitations'', he said.

He said India should ensure that she does not make mistakes which many of the southeast Asian countries made regarding extensive short-term foreign borrowings and crony capitalism leading to unregulated loans by the banking sector. ''Fortunately, the one mistake we did not make was making the rupee fully convertible''.

The CII committee on corporate governance, which he chaired, had made 17 recommendations. Companies need to function not not only within the laws of the country but ethically, in a way which gives confidence to all shareholders, creditors, employees and other stake-holders.

''We need guidelines and a code of conduct which do not hinder or delay decision-making but which ensures transparency and accountability,'' he said.

Care should be taken so that the corporate governance does not run out of control. It should not become a disruptive measure in business and should not create additional bureaucracy, he said. This could happen in companies which follow the form rather than the real meaning of corporate governance.

He said there is no unique structure of corporate governance in the developed world nor is one particular type clearly better than others. Hence, our code of corporate governance for Indian companies has been finalised after studying other codes like those of Cadbury and Hample committees while simultaneously keeping in mind the conditions, which exist, in the Indian corporate sector.

The Securities and Exchange Board of India Chairman D R Mehta said the market regulator would be coming out with regulations on collective investment schemes, credit rating agencies and amended takeover code.

Mehta said that the SEBI would like to associate the Institute of Company Secretaries of India in its various activities. The capital market has been made transparent, competitive (in terms of infrastructure, best practices, etc) , safe and investor friendly.

Indian markets, in spite of ups and downs, are least volatile in Asia and even the world. This was because of the regulatory framework, Mehta said.

Corporate governance, he observed, has to be improved and refined as a matter of accountability to shareholders. Compliance culture has to grow and consolidation of accounts, postal ballot and similar other issues have to be considered, he added.

UNI

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