Ghali's rules for economic reforms

DAVOS DIARY

Reform-minded members of the Manmohan Singh government could learn a lesson or two from what Egyptian Finance Minister Youssuf Boutros-Ghali told a gathering of business leaders here on how to manage the pain of economic reforms.

While Pakistan Prime Minister Shaukat Aziz, another panelist, waxed eloquent on how the government should make the people own the reforms programme by seeking their involvement and devising a coherent philosophy behind it, Boutros-Ghali decided to do some plain speaking by sharing the few tricks of the trade he learnt during the 15 years he was in the government.

Rule number one, according to him, was to give out the bad news all at once without any delay, while the good news could be delivered in dribs and drabs.

Rule number two was even more pragmatic. "Always have a scapegoat in the wings in case it all goes wrong," said the Egyptian finance minister. And the International Monetary Fund was a good scapegoat to have on such occasions, he added. Tapping the pyramid base

Management guru C K Prahalad (professor of business administration in Michigan University), may have addressed fewer sessions at the WEF annual meeting this year, but his impact on the participants was still considerable.

This year he harped on the need for companies to explore the business opportunities that were lying untapped at the bottom of the pyramid.

How large was this bottom of the pyramid? Prahalad's numbers were impressive. An estimated 78 per cent of the five billion people living in the emerging markets (including India of course) were worth $15 trillion in terms of purchasing power parity.

This was larger than the United Kingdom, Italy, Germany and Japan combined. These people living on less than $2 a day were young and would readily adopt new technologies. The challenge for the global companies was to tap this market, Prahalad said.

ICICI managing director and CEO K V Kamath elaborated this further by citing his own initiatives as an example.

ICICI sold weather and disability insurance to farmers and used kiosks to reduce transaction costs. It already had 85 million customers and the potential was around 200 million. Surviving the dinosaurs

Brian Tempest, Ranbaxy Laboratories managing director and CEO, described his company as a scampering mammal and also dispelled some wrong notions about his company and the Indian market. And his prediction was that scampering mammals like his company would soon overtake the "lumbering dinosaurs".

Who were these dinosaurs in the pharmaceuticals world? No names were given, but the reference was to the merged pharmaceutical giants. Taking part in a session on innovation at the WEF annual meeting, Tempest also sought to dispel a wrong impression about the Indian drugs market.

The world believed that Ranbaxy was working in an environment where the strategic advantage was the lower cost of manufacture.

The fact, however, was that Ranbaxy's real advantage was that its cost of innovation was 20 per cent of that in the US. This was simply because the scientific manpower pool was very strong in India.

Globalising press concerns

Media came in for some attack at the just-concluded annual meeting of the World Economic Forum. At a session on India, a politician suggested that there should be some law to regulate the media so that it did not slow down the decision-making process. The suggestion, however, did not find much favour among the participants.

At the closing plenary, media figured twice. Once the Polish president squarely blamed the media for being far too obsessed with "news-worthy" issues such as the term of his presidency or the date of the next elections, while ignoring larger issues like climate change, equitable globalisation, poverty and problems in Africa.

Later, Novartis chief Daniel Vasella suggested that media company heads should be involved in WEF annual meetings in a bigger way to get more sustained media attention to global issues of concern.