An IDC Analysis 


New Delhi, 11 April 2004

India is in the grip of election fever. The BJP led NDA government has done reasonably well, and appears convinced that given five more years in office it will change the face and economy of India. Lee Kuan Yew, Singapore’s longest serving prime minister once said that a political party must use every trick in the book to ensure that it came to power, but once in power it must do what is good for the country.

In this vein the BJP have tried to demean Sonia Gandhi and the Congress party by all means possible, including her foreign lineage. Now to their good luck or by design the Bofors scandal, which had derailed her husband Rajiv Gandhi, is on the front burner again.

Seema Mustaffa of Asian Age travelled to Geneva to speak to Sten Lindstrom, the Swedish cop in charge of the Bofors investigations. Whether this event was coincidental or engineered is not clear to us but the facts are worth recalling. Lindstrom raked up old issues of money taking by AE Services’ Major Wilson and Quatrocchi and the Hindujas and no doubt wished to embarrass Sonia Gandhi and the Congress. It is well known that Sonia stayed with Quatrocchi in New Delhi before marrying Rajiv Gandhi and continued to be good friends thereafter.

Quatrocchi was alleged to have received the largest amount of kick back money and the reverberations of this are resounding. In his book recalling his days as Cabinet Secretary, BG Deshmukh had given a clean chit to Rajiv Gandhi, but since someone in power did help Quatrocchi, the BJP wants to harp on it. Politics the world over and more so in India is a dirty game. India like most developing countries is known for people in power pushing vested interests and indulging in corruption at the cost of national interest. Most Asians have a streak of corruption in their veins.

In South East Asia, especially in Indonesia, Thailand and Malaysia the system is accepted and appears to have been legitimised. In these countries the cost of international deals and projects are over projected within acceptable limits (five to 10%), to pay off people. A fee is charged for a better than normal service in these countries. The person who tops the cream, the bribe, the fee or commission or whatever you wish to call it, delivers. He is reasonable in his demand and refunds the fee if he fails to deliver. He seldom squeals. It is done with great suave. South East Asian leaders, Mahathir of Malaysia and Suharto of Indonesia, refined this art. They lasted in office a long time, and the projects they initiated were stories of national success. In South Korea presidents have recently had to face death penalties for corruption and nepotism.

In Singapore Mr Lee Kuan Yew, the ex PM whose tenure lasted 25 years, ensured high salaries to the bureaucrats and set personal standards to keep most corruption out. His wife earned for the family by running a prosperous Law firm. Singapore enlists into the Peoples Action Party educated leaders who realise they can make legal money by enriching the nation whilst big brother Mr Lee known as Harry, watches over the Nation. Their Armed forces sing the song “ You can count on me”. It is said that in Singapore the policeman goes on duty without any money in his wallet, so that he can never be accused of being in possession of money.

In the Philippines corruption is common like in India, but the people are emotive and forgiving. The Marcoses plundered the treasury and now Mrs Marcos is willing to return some of the assets for a deal. In Thailand corruption exists but the Buddhist way of life ensures that by and large no individual living being is hurt or robbed in the process. The leadership, mainly military, has dedicated itself to economic progress, whilst pursuing personal business. Prime Ministers and leaders resign when the game is up. If things get too hot they live abroad for a while.

In Japan, Prime Minister Tanaka resigned and went to jail for accepting a bribe in what was the Lockheed scandal, giving credence to a premise that corruption is a world wide disease. It is however more commonplace in developing countries, which calls for some control. Military deals are especially tempting; because of the secrecy that surrounds them. Governments use the proceeds for political aims and salve their conscience.

Arms Bazaar Deals

Arms deals world over have a tinge of corruption. In the Arms bazaar big money and big power-play is at stake. It is well known and many countries use this source to fund the political party or regime in power. In the UK, the media has openly insinuated that Mark Thatcher, son of ex Prime Minister Baroness Margaret Thatcher, received kickbacks involving millions of pounds from the Saudis. It also involved Mr Aitken, once Minister for Defence Procurement. Since it was the Almara Project and earned for UK some £1.5 billion, the Parliament feebly inquired into the deal but let the Auditor General's enquiry die an ignoble death.

In the recipient nation eyebrows are raised higher and India has always been a buyer nation. Unfortunately, arms scandals are seldom solved. It is rumoured India's Defence Minister late Shri Jagjivan Ram accepted stones (diamonds) in bags from arms suppliers for deals made in the late 60s and the early 70s. His collection was known as 'Rams Collection' in Holland. The modus operandi that arms suppliers use to legalise diamond purchase entries in their books is by narrating them "as diamonds for tool cutting''. These diamonds are then handed over to their customer and written off the ledgers. In such cases Swiss banks and Panamanian go-betweens are avoided and Indian customs never check a Minister, never one who brought in stones anyway. Diamonds can be conveniently used for payoffs. That’s why Diamonds are forever!

In India, as in many countries in the East, there have been hints of corruption in all government deals, especially in the oil sector. This area was the largest spender in the 70’s, mainly for import of equipment and rigs for oil exploration. A cozy relationship between the oil agency ONGC, the Government officials, the foreign suppliers and their agents grew as India's oil finds increased.

Some years later, in the early eighties, an arms purchase called the HDW German Submarine deal erupted into a scandal. Late Sanjay Gandhi's name along with the Swaraj Paul group of UK and some other names of bureaucrats and service officers were bandied about. An inquiry followed but nothing came of it. Highly placed Indians receiving bribes used Non Resident Indians as conduits since they are immune from the income tax laws of India in respect of their overseas earnings and assets. Then came the Airbus deal when these airplanes were bought, overriding the professional choice to go in for the Boeing 767s or the 757s. Another scandal and many other names followed. Indians thus began to live with this malaise. Investigative reporting was however making inroads into the deals, and a bombshell dropped just when corruption by people in power was becoming blatant, and no real culprits were being caught.

The Bofors Scandal

The Bofors scandal waylaid India from 1987 to date. As Hemmingway said, "journalism is the end of a good story." But it must be evident that Defence Services operate national assets and use these assets to the limits of their capability. Purchase of such assets must be related to real Defence needs. Spending big money on Defence purchases merely for aggrandisement would be a national crime, and Tehelkha tried to prove it but the Government was able to muzzle and quell the matter. Accepting a commission after making a correct decision would be in order, as is accepted in the arms bazaar. However, what has happened regarding the Bofors deal seems to be unprecedented. That the bureaucrats involved acquiesced and the military played along is a shame on that band of people on whom the nation reposed its faith.

The story goes like this. Once upon a time in 1975 the Indian Army embarked on a proposal to buy a number of 155 mm long-range field Artillery guns, which would serve into the 1990s. Every major Army has need of these guns to attack an enemy target accurately, 30 to 40 km away, an action that is referred to as ‘softening up’. The agent for the Swedish gun was late Win Chaddha, a US green card holder who collected winding up charges as commissions were banned (but are allowed now). Revelations from diplomatic notes indicate that the brash and portly Mr Arun Nehru who recently joined the BJP, a cousin of Rajiv, then the powerful Home Minister of India, met Swedish officials including Nobel's Managing Director Martin Ardbo in 1985 and the Swedish Ambassador in New Delhi for some important parleys on the Bofors issue. On 3rd August 1985 an ex British Army Major turned solicitor named Bob Wilson entered the scene. His company AE Services signed a 3% commission agreement with Bofors on 15 Nov 1985, which turned out to be worth SEK 252.3 million. Strangely the contract stated that Bofors would not pay the commission to AE Services of UK if the Govt of India did not award the contract for the guns by 31 Mar 86 –– a strange clause, but true. The schedule for the deal, involving supply of 410 pieces of the gun and its subsequent production in India, was now akin to a cul de sac, and agents abroad were waiting to make hay while the sun was shining on Rajiv Gandhi, hailed as ‘Mr Clean’.

In 1987 the Bofors gun began to make smoke and on 17 April the Swedish Radio charged Bofors with paying senior Indian politicians and key Defence figures through secret bank accounts code-named Lotus to get the deal. All hell broke loose in the media and Parliament. It came to light that on 14 Mar 1986, Arun Singh had met the Swedish Ambassador in New Delhi and informed him that the Howitzer gun deal had gone to Bofors but suggested that the new Prime Minister, Inqmar Carlson should not be informed since Rajiv Gandhi would be meeting him the next day at Palme's funeral in Sweden and would give him the news personally. At the burial of Palme, the two Prime Ministers met and the worlds largest ever gun deal was concluded.

Why have corruption levels in India risen to such heights is a moot question? VS Naipaul, author of ‘India, a Million Mutinies’, is the only writer who has depicted India with a perspective and a sense of honesty, which is not easy to digest. He writes with stark reality that in the Gandhian spirit Indian people soon after Independence, in both high and low places, felt proud of being poor!

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