10th Samf Book

A SAARC Recognized Body
MANAGEMENT FOR GROWTH AND DEVELOPMET
South Asian Management Forum Change and Continuity :

Management Prospects and Challenges
Papers accepted for the AMDISA 10th South Asian management Forum 2009 9th - 10th April 2009 Thimphu : Bhutan
assOCiatiON Of maNaGEmENt dEVELOpmENt iNstitUtiONs iN sOUtH asia
ASSOCIATION OF ManaGEmEnt DEVELOPMENT INSTITUTION IN SOUTH ASIA
AMDISA, University of Hyderabad Campus, Central University Post Office, Hyderabad 500 046, India Association of Management Development Institutions in South Asia, 2009 First published by the Association of Management Development Institutions in South Asia, 2009 South Asia Management Forum - Change and Continuity : Management Prospects and Challenges Proceedings of 10thSAMF 2009 Designed and printed in Kuensel Corporation, P.O. Box 204, Thimphu : Bhutan.
Published by AMDISA, University of Hyderabad Campus, Central University Post Office, Hyderabad 500 046, India Ph: 91-40-64543774, 64545226, fax: 91-40-23013346 e-mail:amdisa@ amdisa.org www. amdisa.org and Royal Institute of Management Sector : Thimphu P.O. Box 416, Semtokha, Phones: +975-2-351013, 351014, 351255 Fax: +975-2-351029 Email: karma_tshering@rim.edu.bt Website: www.rim.edu.bt
Message from the Chairman, SAMF Advisory Committee.....................................................viii Foreword by the Chairman, SAMF Organizing Committee..................................................... ix Manuscript Reviewers.................................................................................................................... x Advisory and Organizing Committee......................................................................................... xii
List of Paper Titles and Contributors MANAGEMENT OF CAPITAL MARKETS 1
Future of Global Capital Markets : A Study of Volatility of Select Indian and Other Stock market. ....................................................................................................... 2 Prof. R. P. Banerjee, Director, Eastern Institute of Integrated Learning in Management, Kolkata, India Capital Budgeting Practices : A Survey of Pakistan firms............................................................ 43 Dr. Mohammed Nishat, Professor, Economic and Finance, Institute of Business Administration, Karachi & Mr. Zia -Ul-Haq, Asst. Professor, Institute of Business Administration, Karachi, Pakistan Management of Stock Market Risk - Implication for Regulator and Stock Exchange....................................................................................................................... 54 Dr. Mohammad Saleh Jahur, Associate Professor, University of Chittagong, Chittagong, Bangladesh
DEMOCRACY AND GOVERNANCE
61
Problem with Agency Coordination and Lack of Peoples Deliberation in Land Acquisition for Infrastructural Development.................................................................................................. 62 Dr. Bhaskar Chakrabarti, Asst. Professor, Indian Institute of Management, Kolkata, India The Effect of Media Freedom on Corruption: A Re-examination................................................. 71 Dr. Gour Gobinda Goswami, -Associate Professor & Chair,Department of Economics and Mr. Badrudozza Shahid Rajib, North South University, Dhaka, Bangladesh Glocalization : A Theoretical Analysis.......................................................................................... 86 Dr. Mohammad Shamsuddoha, Asst. Professor, University of Chittagong, Chittagong, Bangladesh Implication of Washington Consensus: A Case of Social Safety Net in the West Bengal State of India............................................................................................................. 94 Prof. R.K. Mishra, Director, Institute of Public Enterprise, Osmania University Campus, Hyderabad, India
BANKING
105
V
Customer Trust vs. Relationship Marketing in Indian Banking Sector....................................... 106 Dr. Gurdip Singh Batra, Professor & Dr. Narinder Kaur, School of Management Studies, Punjab University, Patiala, India
CONTENTS
CONTENTS
Technological Management and Moblie Business Service in India :A Futuristic Approach.................................................................................................. 121 Dr. KVM Varambally, Director, Manipal Institute of Management, Bangalore, India and Dr. P.S. Athal, Director, srinivas Institute of Management Studies, Mangalore, India An Appraisal of Nationalized Commercial Banks (NCBs) of Bangladesh.................................. 140 Prof. Tanbir Ahmed Chowdhury, Dean, Faculty of Business and Economic, East West University, Dhaka, Bangladesh
CONTENTS
BUSINESS REFORMS
149
Doing Business Reforms in South Asia : An Assesment............................................................. 150 Dr. Basant Kumar, Reader and Placement Officer, Utkal University, Bhubaneswar, India & Prof. Brajaraj Mohanty, Dean, Xavier, Institute of Management, Bhubaneswar, India Institutional REforms in the Fiji Sugar Industry......................................................................... 161 Dr. Narendra Reddy, Head of School of Management and Public Administration, The University of South Pacific, Suva, Fiji Implementation of Universal Design and its Opportunities in Indian Market............................ 171 Ms. Nisha Prajapati (PhD student) & Tatsuo Asai (Vice-president), Nagaoka University of Technology, Nagaoka, Japan
ManaGEmEnt Education
179
Integrating Sociology in Management Education: Trends, Trajectories and Possibilities...................................................................................................... 180 Prof. Manish K. Thakur , Professor, Indian Institute of Management, Kolkata, India Globalization and Quality of Management Education: The Challenge of Changing Scenario.................................................................................................................. 189 Dr. Anil Rao Paila & Prof. Dr. P.S. Rao, Dean, Welingkar Institute of Management, India Effect of leadership and Academic Culture on Implementation of Self Assessment Manual in Public Universities of Paskistan.................................................. 200 Dr. Niaz Ahmed, Director, Mr. F. Jalil and Mr. M U Awan, Institute of Quality & Technology Management, University of the Punjab, Lahor, Pakistan Future Challanges in Higher Education in India: Factors Influencing Quality......................... 222 Dr.Vishnuprasad Nagadevara, Professor, Quantitative Methods and Information Systems Area and Mr. Rishikesha T. Krishnan, Indian Institute of Management, Bangalore, India
OrGaniZation ManaGEmEnt And CulturE
231
VI
Learning New Management Viewpoints: Recontextualizing Strategic Leadership in Global and Regional Context............................................................................... 232 Dr. Hasan Sohaib Murad & Mr. Ahmed Raza, University of Management and Technology, Lahore, Pakistan The Relationship Between Psychological Contract of Telecom Executives and the Working Environment: A case of Citycell and Teletalk in Bangladesh................................................................................................................. 239 Prof. Nazrul Islam, Professor & Mr. Md.Wahidul Habib, Department of Business Administration, East West University, Dhaka, Bangladesh
Antecedents of Firm - Customer Relationship Quality: The Bangladeshi Evidence....................................................................................................................................... 251 Prof. Ahmed Shahriar Ferdous, Professor and Prof. Abdul Hannan Chowdhury, School of Business, Dhaka, Bangladesh. Gender in Bhutanese Organizations: Is the Sterecotype Changing?. .......................................... 261 Ms. Sonam Chuki, Lecturer, Royal Institute of Management, Bhutan Trips and Protection of Traditional Knowledge.......................................................................... 271 Prof. Sanjeev Mehta, Professor, Royal Thimphu College, Bhutan Effects of Organizational Change on Managerial Trust in the Context of an Employee Buy-out in India.......................................................................................................... 285 Mr. Binoy Joseph, Lecturer, Rajagiri College of Social Sciences, Kerala, India
EntErprisE dEvElopmEnt and maNaGEmEnt
293
Factors Motivating Consumers Buying Behavior towards Bottled Water in Bangladesh : A Multivariate Analysis........................................................................... 294 Mr. md. Wahidul Habib, PhD Research Scholar, Jadavpur University, Kolkata, India, Mr. Abdullah Iftikhar, South East University, and Mr. Sharmin Ahmed, Bachelor of Economics (Hons), Student, South East University, Dhaka, Bangladesh Enterpreneurial Competency Mapping : A Study of Youths in Tribal Region............................. 302 Dr. Hanuman Prasad, Faculty of Management Studies and Ms. Neetu Kala (Research Scholar), Asst professor, Faculty of Management Studies, Mohan Lal Sukhadia University, Udaipur, Rajasthan, India Enterpreneurship Education in Bangladesh: A Study based on Program Input ........................ 310 Dr. M.Tahlil Azim, Asst. Professor & Muzahid Akbar, Sr. Lecturer, Independent University, Dhaka, Bangladesh
INSTITUTIONAL RENEWAL AND MANAGING CHANGE
321
The Future of Knowledge Corporate........................................................................................... 322 Dr. Seema Arif, Asst. Professor, Punjab College of Business Administration, University of Central Punjab, Lahore, Pakistan India trade Union Movement : Challenges and Prospects......................................................... 331 Dr. Muna Kalyani, Faculty, Department of Business Administration, Uktkal University, Bhubaneswar, India Bhutan and India : Inflation and Dependency. ........................................................................... 341 Mr. D.S. Kharka, Executive Director, Druk Holding and Investments and Ms.Sonam C. Namgyel, Ministry of Foreign Affairs, Bhutan Demystifying the Management of Change Processes: The Diamond Model. ............................. 359 Mr. Jose Mathews, Sr. Lecturer, Gaeddu College of Business Studies, Gaeddu, Bhutan
CONTENTS
VII
MESSAGE FROM THE CHAIRMAN
MESSAGE FROM THE CHAIRMAN

South Asia is one of the cradles of civilization in the world and is the home to one fifth of the worlds population. It has admirably managed to blend its traditions with modernization despite challenges and complexities. Today, the world recognizes the vibrancy and success of democracy in South Asia guided by the wisdom of ancient cultures, industrious people and the enormous economic potential in an emerging global market. South Asia has undergone metamorphic changes over the years in evolving itself into a region of potential economic hub. The future changes are foreseen to pervade the region with bigger momentum as we enter the arena of regionalization, globalization and information age. Therefore, it is pertinent that our policy makers, executives and academicians conceptualize the challenges and opportunities of the new global environment facing us, take cognizance of such pertinent changes and develop appropriate strategies to position South Asia as one of the leading regions in the 21st century. To this, South Asia needs a new and compelling vision a vision that can transcend geographical boundaries, materialize socio-economic development and enhance happiness for our people. The Association of Management Development Institutions in South Asia (AMDISA) with its noble mission of promoting management excellence has provided a wonderful platform culminating into a confluence of cascading knowledge and ideas and thereby illuminating the glory of the region. The 10th South Asian Management Forum 2009 with its theme Change and Continuity: Management Prospects and Challenges, will facilitate leaders from the public and corporate sectors, practitioners and academicians in forging a stronger synergy in promoting the development of South Asia by bringing them together and sharing of new knowledge and the best practices from Asia and around the world. On behalf of the Organizing Committee of the AMDISA and the Royal Institute of Management, I would like to welcome and acknowledge the contributions and support of the AMDISA Executive Members, sponsors and delegates to make this important forum a grand success. Warm Greetings and Tashi Delek!!!
(Bap Kesang) Chairman 10th SAMF Advisory Committee
VIII
South Asian Management Forum (SAMF) provides an opportunity for academicians and practioners of the region to come together and interact on issues of significance in the region. This collection of papers is a distilled version of the current research on management in South Asia. This is in a way, a celebration of academia as they share their work with others. The Theme for this year, Change and Continuity: Management Prospects and Challenges generated a wide interest. Papers were received from a wide range of academics from students, Lecturers and Professors. Papers on various interesting topics were received. Unfortunately, there is only so much that can be fitted in a two-day forum. The Editorial Committee was hard pressed to select abstracts. Each completed paper was then sent to reviewers. The reviewers reviewed more than 50 completed papers. Time was a luxury that we could not afford. Hence, these reviewers exceptional professional inputs helped the Editorial Committee to come to the final decision. The Editorial Committee had initially identified nine Sub-themes Management of Capital markets, Democracy and Governance, Banking, Business Reforms, Management Education, Organization Management and Culture, Enterprise Development and Management, Institutional Renewal and Managing Change, and Corporate Governance. Surprisingly Corporate Governance had no papers and had to be dropped. This year, Management of Capital Markets is included reflecting the interests generated by the global financial crisis. Management Education continues to feature, maybe indicating our own reliance on management education to provide us with solution and solace. Democracy and Governance is a new addition. Banking sub-theme has continued to feature. Organization Management and Culture sub-theme has the maximum papers six numbers. Broadly, though the areas of focus is similar to the previous years, the thrust in the papers has changed reflecting the change at hand. It deserves a special mention that the publication of this book have been possible because of the sincere and untiring effort put in by the authors, reviewers and the Editorial Committee for several months. Congratulations for the job well done. It is our hope and expectation that the published papers would not only help provide wider perspectives and options but also generate further research and discussion on the theme leading to advancement of management know-how in the region.
Tashi Delek!
Karma Tshering Chairman SAMF Organizing Committee
Thimphu, Bhutan 3rd April, 2009
FOREWORD
FOREWORD
IX
MANUSCRIPT REVIEWERS
Abdul Mannan, Professor, School of Business, University of Liberal Arts, Dhaka, Bangladesh Abdur Rab, Pro Vice Chancellor, Eastern University, Dhaka A H Kalro, Executive Director, AES Post Graduate Institute of Business Management, Ahmedabad Ajantha Dharmasiri, Faculty Member, Postgraduate Institute of Management, Lesley Ranagala,Colombo A N Danishmand, Dean, Faculty of Management Sciences, International Islamic University, Islamabad, Pakistan Anil Chaturvedi, Management Development Institute, Haryana Arif A Waqif, Adjunct Professor, ICFAI School of Public Policy, Hyderabad Ashoke Rao, Dean, IFIM Business School, B Kineera Murthy, Former dean of Studies, Administrative Staff, College of India, Hyderabad Bajraj Mohanty, Professor, Xavier Institute of Management, Bhubaneshwar, Orissa B. Raja Shekhar, Reader, School of Management Studies, University of Hyderabad, Central University, Hyderabad Chandana Perera, University of Moratuva, Colombo C. Madhavi, Professor & Dy. Director, Centre for Organization Development, Hyderabad Deborah Blackman, University of Canberra, Australia Dhanapati Mishra, Sr. Lecturer, Royal Institute of Management, Bhutan D. Narashimha Reddy, Ex Dean and Professor, Unicersity of Hyderabad, Central University, Hyderabad Gurdip Singh Batra, Professor of Management, Punjab School of Management Studies, Punjab University, Patiala Indraman Chhetri, Sr. Lecturer, Royal Institute of Management Janine OFlynn, Research Fellow, Crawford School of Economics and Government, The Australian National University,Canberra 0200 Australia Jit Tshering, Sr. Lecturer, Royal Institute of Management J V M Sharma, Head, Department of Economics, University of Hyderabad, Hyderabad K C Bijay, Dean, South Asian Institute of Management, Lagankhel, Katmandu, Nepal Khawaja Amjad Saeed, Principal, Hailey College of Banking and Finance, Lahore Mark Truner, University of Canberra, Australia Marry Jessica, Reader, School of Management Studies, University of Hyderabad Mathew J Manimala, Professor, Indian Institute of Management, Bangalore M Chandrasekhar, ASCI, India MG Jomon, XLRI - School of Business & Human Resources, Jamshedpur - 831001 India
M Z Mamun, Director, Institute of Business Administration, University of Dhaka, Bangladesh Niaz Ahmed, Director, Institute of Quality and Technology Management, Lahore, Pakistan N. Subrahmanyam, Professor of Finance, ICFAI Business School Pema Wangdi, Sr. Lecturer, Royal Institute of Management P. Jyothi, Reader, School of Management Studies, University of Hyderabad, P. S. Rao, Dean, Quality Systems and New Business Initiatives Prin. L N Welingkar Institute of Management Development and Research, Matunga, Mumbai Rajan Saxena, NMIMS University, Mumbai Ram Kumar Mishra, Director, Institute of Public Enterprise, Osmania University Campus, Hyderabad Sonam Chuki, Lecturer, Royal Institute of Management Sonam Choiden, Sr. Lecturer, Royal Institute of Management S Mallikharjuna Rao, Reader, School Management Studies, University of Hyderabad Srinivas Gunta, Indian Institute of Management, Bangalore Sudarsanam Padam, Former Dean and Professor, ASCI, Hyderabad Suresh Ghai, Director, K J Somaiya Institute of Management Studies and Research, Vidyanagar, Mumbai Syed Zahoor Hassan, Former Vice Chancellor, Lahore University of Management Sciences, Lahore Umeshwar Pandey, Director, Centre for Management Education, Administrative Staff College of India, Bella Vista, Hyderabad Y K Bhushan, Vice Chancellor, ICFAI University Meghalaya, Mumbai
AMDISA Secretariat
C. Ramakrishna Executive Director Associate of Management Development Institutions in South Asia (AMDISA) University of Hyderbad Campus, Central University Post Office, Hyderabad 500 046, India T Ganeswara Rao Secretary - South Asian Quality Assurance System (SAQS) Associate of Management Development Institutions in South Asia (AMDISA) Central University Post Office, Hyderabad 500 046, Indai
XI
ACKNOWLEDGEMENTS
Advisory and OrGaniZinG CommittEE

Advisory Committee RIM Board of Directors Dasho Bap Kesang, Honble Chairman Dasho Meghraj Gurung, Honble Member Dasho Dr. Pema Thinley, Honble Member Mr. Daw Tenzin, Honble Member Mr. Pema Wangda, Honble Member Mr. Karma Tshering, Member Secretary Organizing Committee Mr. Karma Tshering (Chairman) Mr. Jit Tshering Ms. Sonam Choiden Mr. Thinley Namgyal Ms. Sonam Chuki Mr.Karma Tobgyel Mr. Tashi Wangzing Mr.Kuenga Jurmi Mr. Indraman Chhetri (MS) Editorial Committtee Mr. Jit Tshering (Chairman) Mr. Indraman Chhetri Mr. Dhanapati Mishra Ms. Sonam Chuki Ms. Sonam Choiden Mr. Pema Wangdhee Mr. Pema Wangdi Mr. Kuenga Jurmi Mr. Lebo (Programme Support) Mr. Ugyen Lhendup (Programme Support) Reception and Guest Support Sub-Committtee Ms. Sonam Choiden (Focal) Ms. Lungten Dem Ms. Karma Geley Ms. Namgay Dem Mr. Tenzin Dorji Mr. Lebo Ms. Sonam Choden Ms. Dema Mr. Pema Dorji Ms. Sangay Wangmo Ms. Kinley Tshomo Ms. Karma Yangzom Administration and Finance Sub-Committtee Mr. Thinley Namgyal Mr. Dorji Wangdi Mr. Bhim Prasad Mr. Sanjeevan Mr. Pema Thinley Mr. Jamba Choeda Mr. Chandra Mr. Yeshay Publicity, Promotion & Fund Raising SubCommittee Ms. Sonam Chuki (Focal) Mr. Karma Tobgyel Mr. Pema Wangdhee Ms. Kesang Dechen Mr. Phurba Mr. Kinley Tshering Mr. Ugyen Lhendup Mr. Singhye Wangchuk Entertainment Sub-Committee Dasho Sonam Rinchen Mr. Tashi Wangzing (Focal) Mr. Namgay Wangchuk Khenpo Ngawang Loday Mr. Wangdi Mr. Yeshay Travel and Tour Support Sub-Committee Mr. Karma Tobgyel (Focal) Mr. Tenzin Dorji Mr. Mani Tshering Mr. Pema Drupchen Mr. Tashi Phuntsho Ms. Chhimi Om Ms. Karma Tshomo Souvenir Sub-Committee Mr. Kuenga Jurmi (Focal) Mr. MP Sharma Mr. Karma Nidup Ms. Kinga Y Om Mr. Ugyen Tsehring Mr. Sonam Choki
XII
CHAPTER
MANAGEMENT OF CAPITAL MARKETS
FUTURE OF GLOBAL CAPITAL MARKETS: A STUDY OF VOLATILITY OF SELECT INDIAN AND OTHER STOCK MARKETS
Dr. R. P. Banerjee Director, Eastern Institute for Integrated Learning in Management, 6 Waterloo Street, Kolkata 700 069
Whereas, deleveraging has been the focus of the giants in the market during the recent periods with the flight of debts and strong push for cash, financial institutions are finding it increasingly difficult to borrow from the commercial sector and depending more on the states. Investments have gone down, jobs trimmed, current assets run down and opportunities becoming grimmer day by day, the world is caught in a syndrome to raise some fundamental issues related to our thoughts and lives. Anatomy of the collapse The crisis began with the highest housing and credit bubbles in the history of USA. United States housing prices, on an average, went down by significant percentage by the end of October 2008. There are expectations of further drop in the prices and demands. There is a perception that with sharp fall in corporate profit, the equity fundamentals are going to experience a great hit. The prospects of making gains through investment in equity are declining very sharply leading to a continuous withdrawal of investors from the market. On the other hand a fear about corporate bankruptcies have prompted the investors to remain either indifferent to or to withdraw from corporate bond investments. The crisis could be termed as Perception Driven Reality, originally prompted by the perception of sharp fall in prices and index values across capital markets. The corporate sector started acting conservative on one hand and investors and consumers became conservative on the other. Liquidity is supposed to have dried up through the impact of perception in the global market. According to Euro Moneys observation: Analysts at JP Morgan suggest that prime money market funds, which had $2 trillion of assets under management in early September and are a leading provider of short-term liquidity to the banking system, suffered between $350 billion and $400 billion of redemptions after the Prime Reserve fund broke the buck following losses on its $385 million holdings of Lehman commercial paper (Euro Money, October 2008, volume 39, number 474, page 9). It sounds like an enhanced repetition of the October Phenomena, referred to as 1987 Black MondayTuesday. The massive crash of indices during October 19th 1987 and following period is recorded in the memory of global finance with pains and possibilities of prospects. Labeled as a Black Swan Event, the 1987 crash led to raising of certain important questions about the rationality about the Efficient Market Hypothesis. The speed of market movements, up and down suggests that the investors are in trouble and dilemma regarding their expected behaviour in the market. The extent of loss in the value of products in the capital market can be estimated at around US$ 3 trillion. The salvage package announced by several
A short term solution around liquidity will pull back the resources from being pumped into the activity, thereby, damaging the long-term prospects to a great extent. The need of the hour is to initiate speedy actions for the long-term and revolving the conditions of reality through a process of reversed engineered perception. Confidence building through economic activities will surely play a major role in this. Broad money alone cannot reduce the gap between the perception driven reality and reality. Broad basing economic activities can best accomplish it. The present study The present study has a focus on a select range of stock markets in general for a brief period of 3 months from August 1 to October 31, 2008. The study was undertaken on behalf of The Bombay Stock Exchange (BSE) to understand the extent of volatility in the price trends of the leading products in major Indian Capital Market and the following markets: 1. Leading Capital Market in Japan, 2. Leading Capital Market in Singapore, 3. Leading Capital Market in Hong Kong, and 4. Leading Capital Market in South Korea. The study has been focused primarily on markets mentioned above but extended to the following markets in addition. 1. Leading Markets in USA, 3. Leading Markets in Germany, and 2. Leading Markets in UK, 4. Leading Markets in Australia.
The idea is to have an understanding of the relative position of volatility in Indian market and trying to understand the functional causative factors behind such behavior. The study has been conducted on the basis of price data reflected in the electronic-web-media either from the official site of the concerned market or from relevant sites available on the subject matter. Quick look at volatility For the financial product or instrument, volatility is often referred to as uncertainty and/or risk in the outcomes of investment in the market. It refers to the amount of uncertainty or risks a product or an instrument is exposed to being into the market with respect to relevant parameters and factors of expectations. Volatility is an extent of fluctuation between the expected behavior of the price in the market and the actual performance. The statistical measures of the dispersion of the returns give an idea about the measures of volatility of a given security or index. One of the key features in the financial market is that they are always changing and consciously seeking to defeat human effort to contain them. Major theories of the market have assumed volatility as such a parameter in the absence of which the market is expected to remain calm and steady. Harry
governments, particularly, in America, Europe and other regions put together will make good a small part of it only. The gap that will remain will hit the government and economy continuously. With the job cuts, fear in the consumptions and investments, wide spread pressures on the available financial assets, the problem is getting further worsened with the increasing thoughts of government interventions and controls. Thoughts have emerged saying a Sovietization of the Americans is going to rescue the world from the financial debacle. This is possibly an extremist view. Solution of the problem lies on the other side, whereas increasing government involvements are needed to maintain short-term liquidity in the economy, enhanced government control will definitely jeopardize the process of broad basing the economy through redistribution of wealth.
Markowitz and William Sharpe who were awarded with Nobel Prize in 1990 for their contribution towards financial theory in the financial market have argued in favor of price equilibrium in the market in absence of the factors of risk. In simple words the theory tells about the quality of all returns in the market for respective assets on a risk adjusted basis. Volatility can be measured by watching the historical behavior of any particular market by using mathematical and statistical tools. There are cases where quantum and rate of volatility changes over significant point of time. There are either cases where it may change very abruptly for a financial instrument whose price follows a Gaussian Random Walk or the Weiner Process. The volatility is expected to increase with the passage of time. When we study the historical behaviour of an asset in the financial market, basically we look at the effective returns on the investment in the asset. There are mathematical and statistical tools to understand the effective volatility that prevails in the market. Most of the tools are applied on the historical data to get a measure of the relationship between the ceiling and the floor of the market prices at a given point of time. In the events of booms and recessions, getting hold of either the cap or the floor becomes extremely difficult on the constant scale of time. Reuters in Hong Kong reports in a study by Kevin Plumberg, 29th October 2008 quoting Dariusz Kowalczyk chief investment strategist with CFC in Hong Kong, saying, given the severe recession into which the global economy is slipping, it is likely that we have not seen the bottom of the stock market yet, and this weeks recovery presents a good opportunity to sell. Another observation would define the current situation in more clear term. The Chicago PMI (Institute for Supply Management Chicago) hints at deeper-than-normal recession, said Dustin Reid, Senior FX Strategist at RBS Global Banking and Markets in Chicago (Reuters- Wan Feng Zhou, October 31, 2008). Stock markets have always been volatile throughout the world from the very inception. But the phenomenon of an abrupt recession of the magnitude and velocity which the financial markets globally have experienced in the recent period can be considered as highly unusual. A brief look at almost all the markets during the period of last few months could establish this. Methodology, period of study and source of data Both mathematical and statistical tools have been used to conduct this present study. The period of study was August 1 to October 31, 2008. For the purpose of this present study we have calculated data from the websites of the respective markets as also either relevant electronic and print sources. Tool Standard Deviation and Variances have been used to measure the first level of volatility in the markets. Since the period of observation is small, 3 days moving average has been calculated for the indices during the period. The following indices have been selected for the study. Sl. No. 1 2 Name of the Index Nikkei 225 Hang Seng 50 Kospi 11 Market in the Country Japan Hong Kong South Korea Reference Ref [8] Ref [6] Ref [1]
4 5 6 7 8 9 10 11 12
Straits Times Index 30 BSE Sensex 30 S&P CNX Nifty 50 NYSE NASDAQ Composite S&P FTSE 100 DEX 30 ASX 200
Singapore India India USA USA USA UK Germany Australia
Ref [11] Ref [4] Ref [9] Ref [10] Ref [7] Ref [12] Ref [5] Ref [3] Ref [2]
The mean of the daily opening and closing on one hand and mean of the daily high and low on the other have been taken as a reference. Relative Measure of Risk We have done a calculation of the Beta ( ) and Lambda ( ) wherein is the measure of relative risk and can be considered as market price of risk. Whereas an investor wants a higher priceearning ratio a higher value of will satisfy his / her investment concerns. im Where i = Standard Deviation of the particular asset m m = Standard Deviation of the market index = E (R m ) R F = m i
im = Correlation Coefficient between both i and m

Where E (R m )= Expected Return on the Investment in the market R F = Risk free rate m = Standard Deviation of this market
The basic data on the basis of which the competition and analysis have been made are given below: Findings on Variance and Standard Deviation on the index outcome from the indices under study run as follows:
Table 1 : Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 Table 2:
Variance and Standard Deviation of the Mean of the daily Opening and Closing of indices in selected capital markets Name of the Index Nikkei 225 Hang Seng 50 Kospi 11 Straits Times Index30 BSE Sensex 30 S&P CNX Nifty 50 NYSE NasDaq Composite S&P FTSE 100 DEX 30 ASX 200 Country Japan Hong Kong South Korea Singapore India India USA USA USA UK Germany Australia Variance on O/C 9.023148996 14.04126929 8.299574994 4.067434453 9.626539263 5.531584929 6.229956868 7.791106897 5.580982047 5.406636437 7.610491207 3.849813514 Standard Deviation on O/C 3.003855688 3.74716817 2.880898296 2.016788153 3.102666476 2.351932169 2.495988155 2.791255434 2.36241022 2.325217503 2.758711874 1.962094165
Variance and Standard Deviation of the Mean of the daily High and Low of indices in selected capital markets Country Japan Hong Kong South Korea Singapore India India USA USA USA UK Germany Australia Variance on H/L 9.796613305 14.46061199 9.812022728 6.081471537 11.85168485 9.926458683 8.66485145 8.016618176 7.487934904 6.637196087 7.610491207 4.182873788 Standard Deviation on H/L 3.129954202 3.802711137 3.13241484 2.466063977 3.442627609 3.1506283 2.943611973 2.831363307 2.736409126 2.576275623 2.758711874 2.045207517
Sl. No. Name of the Index 1 2 3 4 5 6 7 8 9 10 11 12 Nikkei 225 Hang Seng 50 Kospi 11 Straits Times Index 30 BSE Sensex 30 S&P CNX Nifty 50 NYSE NASDAQ Composite S&P 500 FTSE 100 DEX 30 ASX 200
All the indices included in the Table-2 have their positions and hold in the respective economies. Though Dow Jones Industrial Average has a wider acceptability in USA, we have taken into account the combination of NASDAQ and NYSE to obtain a view that impacts the equity markets more. In Indian context, we have considered the BSE Sensex and S & P CNX Nifty50 combined as the representatives. Graphical Study Among various modes of graphical analysis a moving average has been selected to understand the volatility profile of the indices after it is partially smoothen through a reasonable mid-week level of smoothening. We have adopted a 3 days moving average to get a proper depiction of risk smoothened position of indices in the respective markets. The following 3 days moving averages of the markets in the same sequence will show the partially smoothen behavior of indices in the respective markets. Figure 1: 3 Days moving average of mean of the daily opening and closing of Nikkei 225 is given below and the same for other Indexes is given in the Appendix-I.
Inference Moving Average (MA) has the twin power to predict and smoothen. It shows the support and resistance levels as well. This is used to emphasize the direction of a trend and to reduce the noise levels in prices and volumes in the trends. A 3-day moving average ideally looks into the noise factors within the week. This study includes 3-day MA on the mean of opening and closing and mean of high and low for the days. Comparison between these two would depict the extraeconomic impacts on the price-volume behaviors in the market for the period.
Comments
Figure 2:
3-Day moving average of mean of the daily high and low of Nikkei 225 is given below and the same for other Indexes is given in the Appendix-II.
Inferences 3-day MA of the mean of daily high and low depicts the pattern of uncertainty and risk occurring during day and tries to smoothen factors for the week. Figure 3: 3-Days moving average of Mean of the Combined (daily High & Low and daily Opening and Closing) of Nikkei 225 is given below and the same for other Indexes is given in the Appendix-III.
Comparison between the 3-day MA of OC and HL shows the following: Australian market has witnessed a consistent and the highest departures among the sample markets between MA on OC and MA on HL signifying intra-day fluctuations for a longer period. This signifies consistent impact of short term economic factors on the financial sector. Singapore and Korean markets in Asia, London and New York markets in the west have witnessed significant departure of the two trends during the month of October 2008. The behavior reflects partially uneven effects of the same influences in the markets at different points of time. S& P CNX Nifty 50 and BSE Sensex show departures between the two during September and October 2008 signifying the presence of similar occurrences during this period. Figure 4: Candle stick analysis using the daily price data of opening and closing and high and low in the respective markets for all the indices of Nikkei 225 is given below and the same for other Indexes is given in the Appendix-IV.
Inferences NYSE candle stick show long white and long black on one hand and hammer and inverted hammer on the other. There are some white and black Marubuzus as well. This shows a very erratic movement of the market. Trend for reversal potentials are hidden in the market as the longer bodies are mixed with the shorter. Pattern shown by NASDAQ is somewhat different with respect to the reversal potentials. S & P almost conforms to the patterns revealed by the NYSE. DEX does not reveal any significant pattern for future potentials. KOSPI, Strait Times and Hang Seng are showing a pattern of sustained downfalls and upheavals during the last half of the period of study. ASX has come back to senses with a short gap between mid Septembers to mid October 2008. FTSE has marked black candles with multiple repetitions supported by the white candles referring to the prospects of recovery of the market.
Inference
INDIAN MARKET The pattern revealed by S&P CNX NIFTY 50 shows (shown in appendix-V) a mixture of the Black Marubozu, long and short hammers, a few case of Doji and white candles. a combination of all these in a particular market reveals the presence of tug of war between buyers and sellers on one hand and mixed prospects of reverse trends on the other. BSE Sexsex 30 candle stick features closely support the candle features as revealed by S&P CNX NIFTY 50. Inference A strong possibility of reversal of the market lies in the Indian context with suitable interventions from certain market making authorities. To explore this behavior further, we are making the following studies. 1. A study of the stock (= Market Price of Risk Units in a given condition of the market) and composite during the period of observation. A study of weekly (= Unsystematic Risk of the portfolio with respect to the 2. Systematics of the Market under given conditions prevailing) of all stocks and the portfolio for each week during the period of study. 3. Standard Deviation (= Measure of the dispersion of average price data) of stocks on weekly basis during the period of study. The data for Sl. No. 1, 2 and 3 as mentioned above are given in the Appendix-V Conclusion The comments on the respective analysis have been furnished in the appropriate sections above. It appears from the study of the market during the period from August 1 October 31, 2008 that the impact of volatility is wide spread among all markets under review. American markets reveal strength of fundamentals to a certain extent but are actually deluged by the impacts of sentiments and perception. Markets in Australia, Asia and Europe again reveal the same pattern as above with an added feature of the derived influence from American markets. While conforming to the trends as mentioned above, the Indian market reveals the inbuilt prospect of trend reversal. A detail analysis of , and in the context of Indian market reveals a definite possibility of reversals in the market.
Final Comments Though the markets in India suffered a huge setback in the lines of the other markets under review the possibility of a strong and definite reversal lies in it. Normal actions of economic and market management would turn the prospect of reversal in reality. About the author A former faculty of IIM Calcutta, Dr. R. P. Banerjee has visited and lectured profusely in ten US and European universities. Author & co author of 14 books and 200 papers, he is currently the Director & Professor of Finance, Ethics of EIILM.
10
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
eng.krx.co.kr/ www.asx.com.au/ www.boerse-frankfurt.de/ www.bseindia.com/ www.ftse.com/ www.hangseng.com.cn/ www.nasdaq.com/ www.nni.nikkei.co.jp www.nseindia.com/ www.nyse.com/ www.sgx.com/ www2.standardandpoors.com/
- Stock Market of South Korea - Stock Market of Australia - Stock Market of Germany - Stock Market of India - Stock Market of UK - Stock Market of Hong Kong - Stock Market of USA - Stock Market of Japan - Stock Market of India - Stock Market of USA - Stock Market of Singapore - Stock Market of USA
3-Day moving average of mean of the daily opening and closing Figure: AI-1
Reference:
11
12
Figure: AI-3
Figure: AI-2
Figure: AI-5
Figure: AI-4
13
14
Figure: AI-7
Figure: AI-6
Figure: AI-9
Figure: AI-8
15
16
Figure: AI-11
Figure: AI-10
Moving Average (MA) has the twin power to predict and smoothen. It shows the support and resistance levels as well. This is used to emphasize the direction of a trend and to reduce the noise levels in prices and volumes in the trends. A 3-day moving average ideally looks into the noise factors within the week. This study includes 3-day MA on the mean of opening and closing and mean of high and low for the days. Comparison between these two would depict the extraeconomic impacts on the price-volume behaviors in the market for the period. 3 -Day moving average of mean of the daily high and low. Figure: AII-1
Figure: AII-2
Inference
17
18
Figure: AII-4
Figure: AII-3
Figure: AII-6
Figure: AII-5
19
20
Figure: AII-8
Figure: AII-7
Figure: AII-10
Figure: AII-9
21
Figure: AII-11
Inferences 3-days MA of the mean of daily high and low depicts the pattern of uncertainty and risk occurring during day and tries to smoothen factors for the week. Super Imposed Comparison of the 3 days moving average of the Opening and Closing and 3 days moving average of the High and Low. Figure AIII-1
22
Figure AIII-3
Figure AIII-2
23
Figure AIII-4
Figure AIII-5
24
Figure AIII-7
Figure AIII-6
25
Figure AIII-8
Figure AIII-9
26
Figure AIII-11
Figure AIII-10
27
Inference Comparison between the 3-day MA of OC and HL shows the following: Australian market has witnessed a consistent and the highest departures among the sample markets between MA on OC and MA on HL signifying intra-day fluctuations for a longer period. This signifies consistent impact of short term economic factors on the financial sector. Singapore and Korean markets in Asia; London and New York markets in the west have witnessed significant departure of the two trends during the month of October 2008. The behavior reflects partially uneven effects of the same influences in the markets at different points of time. S& P CNX Nifty 50 and BSE Sensex show departures between the two during September and October 2008 signifying the presence of similar occurrences during this period.
Candle Stick Analysis The sample indices have been taken to do a possible candle stick analysis using the daily price data of opening and closing and High and Low in the respective markets for all the indices contained in the sample. An analysis of these candle stick chart would depict the behaviour in the short-run with respect to the macro factors influencing upon. The following chart would reveal the pattern in the form of candle stick to depict the connections between the short term results and the relatively longer duration influencing parameters. Figure AIV-1
28
Figure AIV-3
Figure AIV-2
29
Figure AIV-4
Figure AIV-5
30
Figure AIV-7
Figure AIV-6
31
Figure AIV-8
Figure AIV-9
32
Figure AIV-11
Figure AIV-10
33
Inferences NYSE candle stick show long white and long black on one hand and hammer and inverted hammer on the other. There are some white and black Marubuzus as well. This shows a very erratic movement of the market. Trend for reversal potentials are hidden in the market as the longer bodies are mixed with the shorter. Pattern shown by NASDAQ is somewhat different with respect to the reversal potentials. S & P almost conforms to the patterns revealed by the NYSE. DEX does not reveal any significant pattern for future potentials. KOSPI, Strait Times and Hang Seng are showing a pattern of sustained downfalls and upheavals during the last half of the period of study. ASX has come back to senses with a short gap between mid Septembers to mid October 2008. FTSE has marked black candles with multiple repetitions supported by the white candles referring to the prospects of recovery of the market.
INDIAN MARKET The market has shown an overall effective down turn to the extent of 33.22%. The value of calculated on the basket of the composites of Sensex on the basis of the weights distribution across have been computed on a weekly basis to get an appropriate view of the market price of risk units in the context of the prevailing market. This data have been computed week-wise on the following framework. 1. Pattern of weekly of the composite with respect to the relevant weekly 2. Pattern of weekly of the composite with respect to the weekly 3. Pattern of weekly of the composite with respect to the weekly Table AV-1: Pattern of weekly of the composite with respect to the relevant weekly BSE 30 SD Aug 01-10 Aug 11-17 Aug 18-24 Aug 25-31 Sep 01-07 Sep 08-14 Sep 15-21 2.4594 2.64087 2.0943 2.37638 2.88798 2.51761 3.76229 Lambda -1.813647 -5.54807 -4.706565 -2.93691 -2.763342 -5.691713 -0.988848 Sep 22-28 Sep29-Oct05 Oct 06-12 Oct 13-19 Oct 20-26 Oct 27-31 BSE 30 SD 2.34792 3.6792 5.20034 6.02691 6.74227 6.71902 Lambda -6.450905 -2.669004 -3.894831 -3.52714 -3.643885 1.3485062
34
Inference This particular study shows a persistent negative value of with respect to the corresponding . The investors have lost their investment money on account of Capital Gain except for the last week under observation. The gap between two extremes is around +3 on the scale of . The week during September 2228 has shown the highest departure from the risk free rate per unit of risk. The study reveals a wild behaviour of the market during the period of study but shows an enduring condition of the market leading to a process of reversal.
Table AV-2: Pattern of weekly of the composite with respect to the weekly BSE 30 SD Aug 01-10 Aug 11-17 Aug 18-24 Aug 25-31 Sep 01-07 2.4594 2.64087 2.0943 2.37638 2.88798 Beta 1.017441369 0.993606714 0.993786749 0.988647227 0.988343984
Figures AV-1
35
Sep 08-14 Sep 15-21 Sep 22-28 Sep29-Oct05 Oct 06-12 Oct 13-19 Oct 20-26 Oct 27-31 Figure AV-2
2.51761 3.76229 2.34792 3.6792 5.20034 6.02691 6.74227 6.71902
1.000773882 0.989996602 0.993053489 1.006244196 0.990218324 1.00896666 1.012450521 1.000947972
Inference The study shows a very little possibility for the portfolio to gain in the market. Market behaviour has been quite interesting with the risk and return prospects thoroughly margin less across the expected patterns of behaviour. This study again reveals the prospects for market reversal.
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Table AV-3: Pattern of weekly of the composite with respect to the weekly BSE 30 Beta Aug 01-10 Aug 11-17 Aug 18-24 Aug 25-31 Sep 01-07 Sep 08-14 Sep 15-21 Sep 22-28 Sep29-Oct05 Oct 06-12 Oct 13-19 Oct 20-26 Oct 27-31 Figure AV-3 1.017441 0.993607 0.993787 0.988647 0.988344 1.000774 0.989997 0.993053 1.006244 0.990218 1.008967 1.012451 1.000948 Lambda -1.81365 -5.54807 -4.70656 -2.93691 -2.76334 -5.69171 -0.98885 -6.45091 -2.669 -3.89483 -3.52714 -3.64388 1.348506
Inference The relationship between and is very interesting. Conceptually this shows a relation between a prospective risk and a prospective valuation of risk.
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In this study we have observed that during the period of first 2 months the market behaved in such a fashion that perceptions dominate over the real. The argument can be extended up to the relationship between fundamentals and technicals of stock data during a period of study. Relationship here that the risk valuations have been more of perceived category than based on factors drawn from reality. It shows that the perception about future of market has dominated over the actual position of the market.
Table AV-4
Aug 01-10 Aug 11-17 Aug 18-24 Aug 25-31 Sep 01-07 Sep 08-14 Sep 15-21 Sep 22-28 Sep29Oct05 Oct 06-12 Oct 13-19 Oct 20-26 Oct 27-31 Lambda -1.81364659 -5.5480704 -4.70656487 -2.93690951 -2.76334198 -5.69171299 -0.98884806 -6.45090537 -2.66900446 -3.89483053 -3.52714003 -3.64388477 1.34850617 e 0.163058 0.003895 0.009036 0.053029 0.063081 0.003374 0.372005 0.001579 0.069321 0.020347 0.029389 0.026151 3.851667 log10 Absolute 1.813646585 5.548070401 4.706564868 2.936909507 2.763341976 5.691712991 0.988848061 6.450905368 2.669004463 3.894830533 3.527140031 3.643884766 1.34850617 log10 0.2585527 0.744142 0.672704 0.4678906 0.4414346 0.755243 -0.0048704 0.8096207 0.4263493 0.5904886 0.5474227 0.5615646 0.1298529 Beta 1.017441 0.993607 0.993787 0.988647 0.988344 1.000774 0.989997 0.993053 1.006244 0.990218 1.008967 1.012451 1.000948 SD 2.459402266 2.640866064 2.094298017 2.376378907 2.887983911 2.517606696 3.762293897 2.347917899 3.679204822 5.200344208 6.026909937 6.742266795 6.719024897 log10
SD Aug 01-10 Aug 11-17 Aug 18-24 Aug 25-31 Sep 01-07 Sep 08-14 2.459402266 2.640866064 2.094298017 2.376378907 2.887983911 2.517606696 3.762293897
SD Sep 22-28 Sep29-Oct05 Oct 06-12 Oct 13-19 Oct 20-26 Oct 27-31 2.347917899 3.679204822 5.200344208 6.026909937 6.742266795 6.719024897
0.258552663 0.744141963 0.672704049 0.467890565 0.441434634 0.755242992 -0.004870434
0.809620671 0.4263493 0.590488566 0.547422702 0.561564634 0.129852938
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Sep 15-21
Table AV-5 SD Aug 01-10 Aug 11-17 Aug 18-24 Aug 25-31 Sep 01-07 Sep 08-14 Sep 15-21 Sep 22-28 Sep29-Oct05 Oct 06-12 Oct 13-19 Oct 20-26 Oct 27-31 2.459 2.641 2.094 2.376 2.888 2.518 3.762 2.348 3.679 5.2 6.027 6.742 6.719
e
2.766 2.701 2.701 2.688 2.687 2.72 2.691 2.699 2.735 2.692 2.743 2.752 2.721
Figure AV-4
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Figure AV-5
Table AV-6 Beta Aug 01-10 Aug 11-17 Aug 18-24 Aug 25-31 Sep 01-07 Sep 08-14 Sep 15-21 Sep 22-28 Sep29-Oct05 Oct 06-12 Oct 13-19 Oct 20-26 Oct 27-31 1.017441369 0.993606714 0.993786749 0.988647227 0.988343984 1.000773882 0.989996602 0.993053489 1.006244196 0.990218324 1.00896666 1.012450521 1.000947972
log10
0.258552663 0.744141963 0.672704049 0.467890565 0.441434634 0.755242992 -0.004870434 0.809620671 0.4263493 0.590488566 0.547422702 0.561564634 0.129852938
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Table AV-7
Beta Aug 01-10 Aug 11-17 Aug 18-24 Aug 25-31 Sep 01-07 Sep 08-14 Sep 15-21 Sep 22-28 Sep29-Oct05 Oct 06-12 Oct 13-19 Oct 20-26 Oct 27-31 1.017441 0.993607 0.993787 0.988647 0.988344 1.000774 0.989997 0.993053 1.006244 0.990218 1.008967 1.012451 1.000948
2.76611 2.70096 2.70144 2.6876 2.68678 2.72039 2.69123 2.69946 2.73531 2.69182 2.74277 2.75234 2.72086 41
Figure AV-6
42
Figure AV-7
A Survey of Pakistani Firms

Mohammed Nishat, PhD Professor of Economics and Finance Institute of Business Administration (IBA), Karachi Email: mnishat@iba.edu.pk And Zia-ul-Haq Assistant Professor Department of Economics and Finance Institute of Business Administration (IBA), Karachi Email: zhaque@iba.edu.pk
The objective of this study is to identify the present application of quantitative capital budgeting methods followed by Pakistani firms. The capital budgeting practices include cost of capital and cash flow estimation, risk analysis and application of real options approach, among these firms. The study is based on empirical survey of shareholding firms both in public and private sector of Pakistan. The findings of our survey indicate that the most popular capital budgeting techniques in Pakistan are NPV and IRR. Most of the large size firms always use these techniques, whereas, smaller firms use payback as their main criteria (always) in evaluation of capital budgeting proposal. We have also considered strategic consideration for large scale projects by some of the Pakistani firms employing techniques like sensitivity analysis, scenario analysis, and simulation techniques as also use of sequential decision making analysis, consideration for real options and social cost benefit analysis for large scale projects. Our learning outcome of the corporate finance techniques being used in Pakistani firms indicates the use of cash flow discounting at the weighted average cost of capital in case of expansion type of projects and rarely a use of a project specific rate depending on the risk of the projects. Although the use of multifactor CAPM model for ascertaining cost of capital is non existent, a single factor CAPM model is used by large firms for ascertaining cost of equity. Key Words: Capital budgeting, discount rate, project valuation, survey 1. INTRODUCTION The financial reforms and institutional development in financial sector of Pakistan observed during 1990s and early 2000s provided many opportunities for corporate firms. The incentives and government policies created a chance for Pakistani companies to do business on the global market. The supportive policies resulted in vast expansions of capital investment projects as many companies broadened the production capacities in Pakistan. These investments took the form of production equipment purchases, investment in and an expansion of production of goods and services facilities and large investment through privatisation in Pakistan. Given the importance of capital investment several methods to evaluate capital investment decisions are used in developing countries (Drury and Tayles, 1996; Epps and Mitchem, 1999; Farragher,
2 Capital Budgeting Practices:
43
Kleiman and Sahu, 1999; Graham and Harvey, 2001; Neils, Smid and Yao, 2004;) and developing countries (Epps and Mitchem, 1999; Bierman, 1993; McDonald, 1998; Stanley and Stanley, 1984; Neils, Smid and Yao, 2004; Hall, 2004; Lazaridis, 2004; Sandhal and Sjogren, 2003 and Ledifa and Silvije, 2007). In Pakistan during last many years we have observed a series of financial reforms and institutional development in corporate sector to boost the investments and attract new capital. However, only few studies have highlighted the pattern of corporate sector behaviour (Nishat, 2008; Nishat and Walliullah, 2009; and Walliullah and Nishat, 2009). No work is directly undertaken to explain the capital budgeting practices in Pakistan. Knowing the importance of capital in Pakistan for creation of shareholders wealth for individual firms, there is a need to investigate the practices used to evaluate these investment projects in Pakistan. The objective of this study is to investigate the capital budgeting practices in Pakistan and compare them with practices followed by other developed and developing countries. The rest of the paper is organized such that section two describes the research methodology and survey design followed by discussion of survey findings in section three. The summary and concluding remarks are given in section four. 2. RESEARCH METHODOLOGY AND SURVEY DESIGN The survey was undertaken to learn about the current status of Corporate Finance practices in the Pakistani firms. Several such studies have been undertaken in US and other developed and developing countries. We were motivated for this study for 1) large number of Pakistanis working in the local firms have degrees in Business Administration from North American Universities and also from Pakistani Business Schools of matching calibre. The quest was to ascertain if what taught in corporate finance in these schools is being practiced by these graduates, and whether the change
is substantial and of any consequence towards betterment of financial decision making or this practice is still on a climbing learning curve and a real qualitative change - still a dream. To make the comparison, we selected two reported corporate financing practices (i) Graham and Harvey (2001) of US firms and (ii) Ledifa and Silvije Orsaje of Croatian firms with our own firms in Pakistan.
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We selected a random sample of 100 Pakistani firms out of a total of about 700 firms listed on Karachi Stock Exchange (KSE). The questionnaire was mailed to the respondents, appointments were obtained from the respective CFOs and responses were obtained by a team of IBAs graduating class (in face to face interviews) who were specially trained to conduct this interview survey. Out of the 100 selected firms, we were able to approach 74 firms; other 26 either showed no interest in our survey or were not available to our interviewing team. Considering this being the first such effort in Pakistan, we hope to improve our sample size and also our questionnaire to include other corporate financing practices in Pakistan. Our surveys presented below indicates the various sectors to which our respondents belonged to.
Karachi is the corporate capital of the country and the most prestigious Pakistani companies are listed on this stock exchange irrespective of the location of their operational facilities. Fortunately almost all firms listed on KSE have their head offices in Karachi. it was convenient for us to conduct interview based survey so as to increase the credibility of collected data. the other two surveys referred above used mailed questionnaire technique. The response rate for US firms was 9%, whereas the same for the Croatian firms was about 25%, our response rate of 74% was achieved because we learnt a great deal from these surveys as to their response rates.
The Sample
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3. DISCUSSION OF SURVEY FINDINGS CAPITAL BUDGETING PRACTICES One of the major objectives of this survey was to know the capital budgeting technique being used by the Pakistan companies. They were asked to rate each technique on the scale 0-4, 0 indicating no use of a particular technique whereas 4 indicating that these firms use this techniques always. The firms use different capital budgeting techniques as indicated below: 3.1 NET PRESENT VALUE The table below indicates that 48% of the Pakistani firms always use NPV as one of the capital budgeting methods for evaluation of expansion or diversification projects. This makes it most popular capital budgeting technique amongst Pakistani firms. However about 10% of the firm somehow never use NPV as a method of evaluation of capital expenditure proposal. This is in contrast to 42% always Croatia and 76% in USA. Pakistani firms are indicating an inclination towards the use of this technique, not necessarily as a sole criterion, but as a must use criterion along with other methods of evaluation of capital expenditures.
3. 2 INTERNAL RATE OF RETURN The Table below shows that IRR is second most popular technique. About 40% of the firms always use IRR as must use method (always) for evaluation of capital expenditure. CFOs have a particular liking for this, because it is a single number evaluator i.e. so much percent implicit rate embedded in the projected cash flows, which is also popular amongst the CEOs and Board Members as well. About 40% of the respondents indicated this as a always used method. This compares with 59% reported in Croatia and 76% as indicated by US firms (Graham & Harvey, 2001).
46
However 7% of the firms never used IRR. This makes an interesting contrast, 48% of Pakistani firms use NPV as against 76% in USA and 42% in Croatia, 40% of Pakistani firms use IRR as against 76% in USA and 59% in Croatia, indicating that the IRR is relatively less popular in Pakistani firms when compared to Croatian firms and greatly less popular compared to US firms. a. ADJUSTED PRESENT VALUE (APV)
The figure below indicates that only 4 % of the Pakistani firms always use APV as against 10% reported by Graham & Harvey (2001) for US firms, indicating a low consideration or no inclination of Pakistani firms towards the benefit provided by particular financing decision towards value generation for the firm.
b.
PAYBACK PERIOD
The payback and discounted payback method suffers from a same drawback; i.e ignorance of cash inflows occurring post payback period which at times could be substantial. The survey indicates that smaller firms are more inclind to use these methods. we found that almost 30% of the respondents always use payback as a method of evaluation of capital budgeting proposal. This compares to 56 percent in Croatia and about 57% in USA as reported by Graham and Harvey (2001) survey of 392 CFOs.
47
c.
DISCOUNTED PAYBACK PERIOD
About 27% of Croatian firms almost always use discounted Payback period method (DPB) as against 29% reported by G&H (2001), around 17% of the Pakistani firms, always use DPB method as a always method for evaluation of capital expenditure proposal whereas 20% never use this method indicating less inclination of Pakistani firms towards this method of capital budgeting.
d. PROFITABILITY INDEX The results obtained under this category of capital expenditure evaluation method in Pakistan indicate 17% always use Profitability index as standard evaluation technique (always), this is in comparison to 13% for Croatia and about 12% G&H (2001) reported for US firms.
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3.7 ACCOUNTING RATE OF RETURN In Pakistan a large number of CFOs have accounting background (Chartered Accountants), despite of this only 9% of the firm always use ARR as against 5% reported by (S&D) for Croatian firms and 30% reported by G and H (2001) for US firms.
3.8 SENSITIVITY ANALYSIS This technique is more popular with US firms where about 52% of the firm use What if method of evaluation of capital expenditure proposal, compared to 10% firms in Pakistan, (S and D) also report 10% of the Croatian firms use sensitivity analysis for the project risk assessment.
49
3.9 SIMULATION ANALYSIS 32% of the Pakistani firms never use simulation, but 10% always use this technique to have a good estimate of expected NPV. This compares to 5% firms in Croatia and about 13% in USA as reported by (S&D) and G&H (2001) respectively.
3.10 CONSIDERATION OF REAL OPTIONS 13% of the Pakistani firms just do not rely on NPV of the COF and CIF, but also consider the futuristic real options as against this 27% of US firms consider real options. Although not recorded but our interviewing teams reported inclination towards social cost benefit analysis of the projects in those firms where real options embedded in the projects are considered and analysed. 3.10. DISCOUNTING OF CASH FLOWS
The survey focused on knowing the techniques employed by the firms for ascertaining the cost of capital. It was found that firms use a mixture of historical returns or common stock, use of single factor CAPM for knowing the cost of equity. Survey also indicates that large firms keep targeted capital structure in view while deciding weighted average cost of capital for projects in the expansion or same risk class as the original business. However, the firms evidence towards adjustment of cost of capital to particular risk class of the project in not convincingly significant.
50
A comparison of capital budgeting practices in Pakistan, Croatia and USA as reported by above referred papers is indicated in the figure below.
51
4. SUMMARY AND CONCLUDING REMARKS Our survey indicates that the most popular capital budgeting techniques in Pakistan are NPV and IRR. Most of the large size firms always use these techniques, whereas, smaller firms use payback as their main criteria (always) in evaluation of capital budgeting proposal. We have also considered strategic consideration for large scale projects by some of the Pakistani firms employing techniques like sensitivity analysis, scenario analysis, and simulation techniques as also use of sequential decision making analysis, consideration for real options and social cost benefit analysis for large scale projects. Our learning outcome of the corporate finance techniques being used in Pakistani firms indicates the use of cash flow discounting at the weighted average cost of capital in case of expansion type of projects and rarely a use of a project specific rate depending on the risk of the projects. Although the use of multifactor CAPM model for ascertaining cost of capital is non existent, a single factor CAPM model is used by large firms for ascertaining cost of equity. REFERENCE Bierman, Harold J. (1993), Capital Budgeting in 1992: A Survey, Financial Management, 22, 24. Drury, Colin and Mike Tayles (1996), UK Capital Budgeting Practices: Some Additional Survey Evidence, European Journal of Finance (2), 371-388. Epps, Ruth, W. and Cheryl E. Mitchen (1999), A Comparison of Capital Budgeting Techniques with Those used in Japan and Korea, Advances in International Accounting, 7, 205-214. Farragher, Edward J., Robert T. Kleiman and Anandi P. Sahu (1999), Current Capital Investment Practices, Engineering Economist (44), 2, 137-150. Graham, John R. and Campbell R. Harvey (2001), The Theory and Practice of Corporate Finance: Evidence from the Field, Journal of Financial Economics (60), 2-3, 187-243 Hall, J. H. (2004), An Empirical Investigation of the Capital Budgeting Process, draft: http://papers. ssrn.com/paper/abstract. Lazaridis, Ioannis T. (2004), Capital Budgeting Practices: A Survey in the Firms in Cyprus, Journal of Small Business Management (42), 4, 427-433. McDonald, R. L. (1998), Real Options and Rule of Thumb in Capital Budgeting, Innovation, Infrastructure, and Strategic Options, M. J. Brennan and L. Trigeorgis (eds.). Neils, H, Peter Smid, and Lu Yao (2004), Capital Budgeting Practices: A Comparison Study of the
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Netherlands and China, draft, http://som.rmg.nl/
Pan-Pacific Business Association Conference XXV, 2008. Nishat, M. and Walliullah (2008), Dynamics of Capital Structure in Pakistan Industry Level Analysis, draft. Sandahl, Gert and Stefan Sjgren (2003), Capital Budgeting Methods among Swedens Largest Groups of Companies. The State of the Art and Comparison with Earlier Studies, International Journal of production Economics (84), 1, 51-69. Stanley, M. T. and Stanley B. B. (1984), A Survey of Multinational Capital Budgeting, The Financial Review, 19, 36-54. Walliullah and M. Nishat (2009), Capital Structure Choice in an Emerging Market: Evidence from Listed Firms in Pakistan, draft
Nishat, M. (2008), Financial Development and Capital Structure Pattern in Pakistan, Proceedings
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3 MANAGEMENT OF STOCK MARKET

Mohammad Saleh Jahur Associate Professor Department of Finance and Banking University of Chittagong, Chittagong, Bangladesh
RISK- IMPLICATION FOR REGULATORS AND STOCK
Risk taking is essential to an active market. Regulators and stock exchange are to play a vital role to minimize risk. The study has critically evaluated the existing risk management system and tested the effectiveness of different risk management measures. It has found that some of the measures such as automated trading system, prudential limit, circuit breaker, demutualization, and changes in regulation have been found very effective in managing stock market risk. The remaining measuresdematerialization, existing corporate governance practice, financial reporting, IPO process and role of depository participant, have been found ineffective to some extent. The study has suggested some important measures-standardization of IPO process, revising depository act, effective practice of corporate governance etc. for making the risk management system in stock market of Bangladesh most effective. Keywords: Stock Market, Risk, Regulators, Regulation, and Effectiveness. 1.1 INTRODUCTION Risk and return are important criteria of making investment decision. Investors irrespective of individual and institutional should make a trade off between risk and return while making both short and long term investment decisions in any area of businesses. They are also required to make a compromise between these two in managing investment in different outlet in practice. Failure to manage between these two gives birth to either higher risk or low profitability. Investors or Portfolio managers are exposed to risk arising out of failure to make a trade off between risk and return. Risk taking is essential to an active market and legitimate risk taking should not be unnecessarily or unduly stifled. Regulators cannot be expected to prevent nor can it prevent absolute failure of market intermediaries but the risk of failure can be and ought to be minimized (Hull, 2007). And, the Regulator should seek to mitigate the impact of any failure, if and when it occurs. For this purpose, what is required is effective Risk Management system, continually monitored and up graded as warranted. The size and complexity of the market will dictate the kind and the level of sophistication of the system. In security market, every one involved is subject to risk. It not only facilitates trading of shares and securities, but also enables parties in making trade off between risk and return in the process. Parties to the stock market are stock exchange, brokers, dealers, security and exchange commission, investors- individual and institutional-merchant bankers, central depository system etc. Investors are required either to diversify risk or to hedge risk or to reduce risk through the application of risk management tools and techniques. On the other hand, Regulator-CSE and Stock exchanges-DSE and DSE have to play important role for creating a level playing field in the stock market environment for all categories of investors by imposing either direct administrative and regulatory measures or punitive (financial) measures. This is how, stock market can bring the confidence of investors back in the stock market. The present paper is an attempt to look into risk management in stock market and implications for stock exchange and SEC.
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The principal objective of the study is to critically evaluate the risk management system in stock market in practice. To accomplish this objective, following specific objectives have been covered: a) To highlight the different bases of stock market in Bangladesh; b) To examine the different measures such as administrative, technological and legal for management of risk in the stock market in Bangladesh; c) To evaluate the effectiveness of present risk management system in stock market of Bangladesh; and d) To suggest some important policy measures for making the risk management system in Bangladesh effective. 1.3 HYPOTHESIS OF THE STUDY The following hypothesis has been tested against the objective-C set forth above: Ho: Existing risk management system in the stock market of Bangladesh is not effective in managing risk. Ha: Existing risk management system in the stock market of Bangladesh is effective in managing risk. 1.4 SCOPE OF THE STUDY The Study has covered the whole stock market in Bangladesh. It has covered all structural measures used in managing stock market risk in Bangladesh. 1.5 METHODOLOGY OF THE STUDY The Study has been both theoretical and empirical one. Both primary and secondary data have been used in this study. 1.5.1 Selection of Sample: The Study has selected samples from all the parties involved in stock market conveniently. It has selected 104 sample respondents 4 regulators, 10 executives from two stock exchanges, 20 members of brokerage houses, 10 executives of merchant banking, 50 investors, and 10 researchers in the field of capital market. 1.5.2 Collection of Primary Data: For collection of primary data, a structured questionnaire has been prepared. Researcher has collected primary data following both direct and indirect approaches with the help of structured interview guide. Finally, he has received usable questionnaires from 83 respondents such as- 2 regulators, 10 executives from stock exchanges, 14 members of brokerage houses, 6 executives of merchant banking, 44 investors, and 7 researchers in the field of capital market. 1.5.3 Collection of Secondary Data: The study has consulted relevant literature, existing guidelines, booklets, laws and regulations of SEC as well as of Stock Exchanges, news papers, websites, remarks of speakers in the different seminars and workshops substantially for collection of secondary data. 1.5.4 Analysis of Data: The data thus collected has been tabulated first. Then, all administrative and regulatory measures have been critically analyzed with reference to available literature and the consultation made with the respondents while conducting interviews. The opinion collected from the respondents on effectiveness of risk management measures has been analyzed by employing chi-square test.
1.2 OBJECTIVES OF THE STUDY
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2.0 ANALYSIS OF THE FINDINGS Effective administrative and legal measures are said to be two important pillars of sound risk management system of stock market. The analysis has been carried out in the following paragraphs in line with this direction. 2.1 Stock Market in Bangladesh Stock in Bangladesh has been developing over the passage of time with respect to base, scope, products, members and investors. This has two stock exchanges, a good number of brokers, sub brokers, 273 listed companies, 1 depository institution, 200 depository participants, 34 merchant bankers, underwriters, Debenture trustees, 16 portfolio managers, Bankers to issues, 2 credit rating agencies, and Venture capitalist firms. There are 1.90 million beneficiary owner account holders who can apply for IPOs in the primary market and also trade in the secondary market. Present government has an intention to increase the base of B/O account holders in the future. Number of investors in the stock market has also been increasing. This expansion of stock market in Bangladesh poses both risk and opportunities for the parties involved. SEC and stock exchanges have already taken both regulatory and administrative measures for establishing effective risk management system. 2.2 Analysis of Existing Measures-Legal and Administrative Stock market in Bangladesh has undergone a sea change in technology in order to make the market modern and thereby giving a pace to the risk management system. This change has also caused an unexpected degree of systematic risk which calls for effective regulatory and administrative measures in place. The existing risk management measures in stock market have been discussed as follows: 2.2.1 Automated Trading System The trading system has become on-line, fully automated, screen-based. Open outcry is now outmoded and virtually eliminated from the system. It has made the stock market more vibrant and transparent. It has reduced cost, time and risk involved. A large number of participants irrespective of their location, can trade with one another anonymously and simultaneously, providing equal access to every player with orders- big or small, thus improving the depth and liquidity of the market. The system provides perfect audit trail, facilitating dispute resolution. Given the size and complexity of the country, we could click the system and stabilize it successfully across the country. 2.2.2 Dematerialization Central depository system has already been in place for dematerialization of shares of listed corporate firms. Today, the investing public has been saved from the risk of loss in transit or in custody, misplacement or mutilation, theft or destruction, bad delivery or delayed delivery, forgery or duplicity, and also from irritating headaches of intimation of change of address, watching the receipt of bonus or rights shares, etc. At present, it is compulsory on the part of company issuing IPOs to the investors in the primary market to get the issued shares dematerialized through contract with Depository. Since, there is no clear cut provision to settle the transaction of traded/deposited shares with the depository, a good number of respondents have expressed a sense of doubt that this may pose a severe threat to the stock market. 2.2.3 Settlement Cycle Gone are the days when the seller had to wait for weeks and perhaps a month for settlement. Not long ago, the trading cycle used to be as long as 14 days for specified scrips and even 30 days for other scrips and settlement took another fortnight! Certain developments in the intervening period between the trade and settlement could tempt the parties to roll back their promises, leading to
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2.2.4 Prudential limits The comprehensive risk management system now in place, which is continually monitored and upgraded, covers capital adequacy, margining, exposure and turnover limits, on-line position monitoring and automatic disablement. Minimum capital requirements have been stipulated at broker levels. Exposure limits, in terms of intra day gross turnover and cumulative net outstanding position in securities at any point of time, are linked to certain number of times the base capital and free base capital respectively. There is a margin. The trading and margin positions are monitored on real time basis and any failure to make good the margin requirement will result in automatic disablement of the terminal of the member. 2.2.5 Circuit breaker Circuit breaker is applied aiming at controlling the movement of share prices and thereby curbing unhealthy volatility. Since unusual and abnormal price fluctuation of the securities may severely affect investors interest, CSE as an additional measure of safety, imposes price limit on all categories of securities (A , B, G, N & Z) as per the guideline. A Committee named Share Price Movement Regulating Committee comprised of CSE Secretariat is responsible to regulate the price limit in the market. Application of circuit breaker shall block the syndicates heinous activities of manipulating price, outplaying a company and thereby preventing them from making abnormal profits. This also restores the confidence of small investors by ensuring performance based share price movement and reducing risk of losing capital to the market. 2.2.6 Cash Product Market The stock market is now pursuing on line monitoring of margin and automatic terminal disablement in the case of failure to maintain the margin and to comply with required rules and regulations. This protects the stock exchange from the exposition of risk that arises from the failure of stock brokers/ dealers to maintain margin and to comply with rules and regulations. 2.2.7 Listing of Corporate Firms Both CSE and DSE have a good number of requirements for being enlisted with them. Though there are no significant differences in listing requirements between them. Both are ensuring the enlistment of corporate firms with sound financial and operation background. This ensures quality scrips and thereby reducing the risk of investors. Like other developed economy, we should have a central listing authority to enlist both domestic and foreign companies operating in Bangladesh and thereby ensuring quality scrips. 2.2.8 Structural Issues The structural issues have also been addressed. The corporate governance standards of the Stock Exchanges have been sought to be refined, though they themselves are Self Regulatory Organizations. Like charity, the propriety too, should begin at home. In order to eliminate conflict of interest situation and ensure alignment of investors interest with the Exchanges, the process of demutualization and corporatisation of stock exchange should have been initiated.
defaults, disputes and, in short, settlement risks. This risk has been considerably minimized by introduction of compulsory rolling settlement and contraction of the trading cycle. Rolling settlement on T+5 basis, was made compulsory for listed shares/unit certificates belong to A and B categories traded on CSE and DSE. Consequently, it reduced the trading cycle to one day and settlement period to 6 days.
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2.2.9 Corporate Governance The corporate governance standard is a crucial factor for ensuring investors confidence. The corporate governance framework is designed to manage risk through, inter alia, the accountability mechanism of financial reporting, audit and internal control (Spira and Page, 2003). While the Companies Act, 1994 fail to take care of the basic requirement of the form of corporate governance structure. SEC is concerned with the corporate governance practices on-going basis. It has come out with a regulation for implementation corporate governance in listed corporate firms. Corporate governance is essentially ethics-based. No amount of legislation or regulation will serve the purpose fully, unless there is an attitudinal change on the part of the management of the corporate. However, Companies Act 1994 is under the active consideration of government for amendment by including necessary provisions for implementation of corporate governance and coping with changes in accounting, auditing and reporting practices of corporate firms. 2.2.10 Regulations There has been paradigm shifts in regulatory environment of stock market. These shifts render the existing regulations outdated and therefore call for either new regulation or deregulation of existing regulations. Under the dynamic conditions of the market, SEC being a regulatory body of stock market have made a breakthrough by promulgating new rules and regulations and amending the existing one and thereby generated a sound regulatory environment in the stock market. Besides, both exchanges prepared necessary by-laws for bringing order in all of their activities. Such a review/amendment would be a continual process, to address the risks of under or over regulation. Codes of Conduct for various intermediaries have also been in place for all the parties involved. 2.2.11 Disclosures Over the years, several initiatives have been taken to improve the operational efficiency and transparency in equity market and to provide investors with the security issues of high quality and to enable entities to raise resources in cost effective manner. The disclosures prescribed for new issues in Bangladesh are comparable, in terms of contents and stringency, to those of most of the advanced markets. Entry norms and track record criteria have also been attuned to ensure the quality of new issues and to protect the investors. The continual disclosure requirements for listed companies are not that much for away from international standards. These relate to publication of annual audited results and semi-annual results in prescribed format and time frame, consolidated results, segmental reporting, cash flow, auditors qualifications and their impact quantification, and disclosures of certain transactions. A good number of listed companies have been found publishing annual reports through different media including internet. 2.2.12 IPO Subscription System Present IPO subscription system takes eight weeks to ten weeks. This is because, Banks put different serial number on IPO application which is different from BO account with CDBL. This gives birth to risk of error and omission for the investors on the one hand and takes a longer processing time on the other hand. Longer processing time also increases the opportunity cost of investors. 2.2.13 Emerging Concerns The market is dynamic and a change in prices of shares is the beauty of stock market. Certain risks would, therefore, keep on popping up, in the day to day operations e.g. the behavioral risks misconduct, manipulation, malpractices, fraud and unfair trade practices which would undermine the market integrity, erode into investor confidence and jeopardize the interest of hapless retail investors. These should be the areas of concern for the investors and the Regulator. Normally, one has to take appropriate lessons from the unexpected corporate events. The Bangladeshi investors
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2.3 Effectiveness of Risk Management System The SEC and Stock Exchanges have been found very concerned with the management of risk in stock market. In view of this, SEC keeps on promulgating new laws and regulations and deregulating the existing obsolete laws and regulation in order to keep the stock market on the right track. Stock exchanges have also been found very sensitive to the stock market risk. For management of risk, they come out with new guidelines and programs for the stock market participants particularly for investor class. Despite these efforts, stock market experiences risk that arises from ineffective legal and administrative measures. The effectiveness of legal and administrative measures has been tested by employing Chi-square test as non-parametric measure goodness of fit. In this case, the whole number of sample has been segmented into two- Regulators & Regulated Agencies including researcher and Investors. Statement Showing the Test on the Effectiveness of Risk Management Measures
Risk Management Measures 1. Automated Trading System 2. Dematerialization of Shares through CDS 3. Prudential Limits 4. Circuit Breaker 5. Initiation of Demutualization and Corporatisation of Stock Exchs 6. Present Corporate Governance Practice 7. Changes in Regulations. 8. Financial Reporting Practice 9. IPO Process 10. Role of Depository Participants x2 Value 4.966 1.837 3.987 4.533 4.226 2.926 4.837 2.228 1.576 2.326 P. Value 3.841 3.841 3.841 3.841 3.841 3.841 3.841 3.841 3.841 3.841 Level of Significance 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 Degrees of Freedom 1 1 1 1 1 1 1 1 1 1 Null Hypothesis (Ho) Rejected Accepted Rejected Rejected Rejected Accepted Rejected Accepted Accepted Accepted
It has been found from the perusal of above table that all the measures are not equally effective in managing stock market risk. Some of the measures such as automated trading system, prudential limit, circuit breaker, demutualization, and changes in regulation have been found very effective in managing stock market risk at 5% level of significance. The remaining measures have been found ineffective at 5% level of significance to some extent. This calls for standardization of present risk management system in stock market of Bangladesh. 3.0 SUMMARY OF THE FINDINGS AND POLICY IMPLICATIONS 3.1 Summary of the Findings It is evident that a number of measures - on line screen based trading, dematerialized trading, shortening of settlement cycle, risk mitigating prudential norms of capital adequacy and exposure limits, value at risk based margining, real time monitoring of positions and margins, automatic disablement of the terminals, trade/settlement guarantee fund, price based circuit breakers,
have been bitten once in the year 1996. To pre-empt any further biting, therefore, the intensity of carefulness must necessarily be high. As a regulator, SEC keeps a constant watch to spot any unusual movement or activities for possible prompt action. This keeps an alert to spot any unusual movements or activities for pre-emptive or punitive action to protect the integrity of the market.
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enhancement of Governance standards among corporates and stock exchanges, continual disclosure requirements, registration and regulation of intermediaries - are already in place to manage and mitigate the risks in Securities Market. It has been found from the analysis that some of the measures such as automated trading system, prudential limit, circuit breaker, demutualization, and changes in regulation have been found very effective in managing stock market risk. The remaining measures have been found ineffective to some extent. Therefore there is no relaxation on the part of both regulators & regulated agencies and investors that stock market risk is well managed. 3.2 Policy Implications The market is still small with respect to the ratio of paid-up capital to GDP- 8% and market capital to GDP- 19%. This indicates a huge growth potentiality of stock market. The growth should be nourished, the attendant risks need to be contained. By and large, following measures are suggested for managing risk associated with stock market and for protecting the integrity of stock market participants: I. SEC and stock exchanges should conduct investors awareness program at various places across the country in order to protect all investors generally, small investors particularly, from the exposition of risk generated by manipulators. II. Circuit breaker can also be applied on stock index basis. III. Stock market should introduce financial derivative products in order enable market participants for hedging their position both short and long. IV. Central listing authority should be established in order bring a harmonization in the listing requirements, or SEC can be empowered for enlistment of corporate firms. V. SEC should establish a central monitoring and surveillance system in order to protect the entire stock market from being risky. VI. SEC should make compulsory on the part of all listed corporate firms to disclose their financial information in accordance with IASs and IFRSs so as make them globally accepted and thereby developing the stock market in Bangladesh. VII.To reduce the risk in processing and the processing time, the lottery should be conducted on BO account identity basis instead of bank serial basis. This measure is expected to reduce the whole process of subscription, collection and distribution of refunds after lottery phase to four weeks from eight weeks. VIII.SEC should impose a definite time frame for settlement of traded/ deposited shares with the depository institution in order to salvage the stock market from likely risk that is expected to arise from mismanagement in settlement of traded or deposited shares. Reference
Spira, L.F. and Page, M.( 2003), Risk Management- The Reinvention of Internal Control and Changing Role of Internal Audit, Accounting, Auditing and Accountability Journal, Volume 16, No. 4, pp. 640-61. Hull, J. (2007), Risk Management and Financial Institutions, Delhi: Dorling Kindersley Pvt. Limited, pp.1740. Dhar, N. (2004), Laws on Securities and Exchange, Dhaka: Remisi Publishers, Bangladesh. Ministry of Commerce (1995), The Companies Act 1994, Government of Peoples Republic of Bangladesh, Dhaka. Securities and Exchange Commissions (1989), Securities and Exchange Commission Rules, 1987, Dhaka. Securities and Exchange Commission (2006), Securities and Exchange Commission Order, 2006, Dhaka, Bangladesh.
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Ministry of Commerce (1970), The Securities and Exchange Ordinance, 1969, Government of Peoples Republic of Bangladesh, Dhaka. Securities and Exchange Commission (2000), The Depositories Act, 1999, Dhaka, Bangladesh.
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Problems with Agency Coordination and Lack of Peoples Deliberation in Land Acquisition for Infrastructural Development
Bhaskar Chakrabarti Assistant Professor Public Policy and Management Group Indian Institute of Management Calcutta Joka, Diamond Harbour Road Kolkata 700 104 Phone: 91-33-24678300 Fax: 91-33-24678307 email: bhaksar@iimcal.ac.in alternate email: bhaskar203@hotmail.com
In all instances of land acquisition recently for infrastructural development in India, the disjunct between the government offices and between the officers and the community are evident. The disjunct is at the vertical tier of the local governments, and also at the horizontal tier, the land revenue department unaware of decisions at the Collectors office. In this paper, I analyse the problems inherent in current form of deliberation and search for possible forms of peoples participation in the decision-making process. Iargue that right form of coordination amongst the formal agencies and the people, change in practice, and involvement of new agencies in the process has the potential to correct the problems of distributive justice of benefits from infrastructural development. At one level, I focus on the form of coordination, and at another, I discuss the structure of network between the agencies and their potential roles. Keywords: Introduction It started with a small one-page note. The day was like any other summer day in the month of March in the year 2006. A one-page note was found hanging in public places. It notified the villagers about the governments decision to acquire land in the region for building a chemical hub. Initially there was talk about the acquisition, while people gathered in front of the notice in large numbers, fully puzzled and confused. Within a few hours, resistance gathered momentum and people were protesting in the streets and in front of the government offices. The officers were also at a loss. they did not have clear instructions about the possible step. there were hardly any coordination between the government offices. The government immediately called for police forces and 14 innocent villagers were killed. agency coordination, agency resources for land acquisition, deliberative and expansive democracy, centripetalism.
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Nandigram in West Bengal, India is not an isolated case. In all the instances of land acquisition
This paper discusses the problems inherent in the current practices and the way ahead. Here, I focus on formal agencies only, although there is now ample evidence that informal agencies play a major role in the decision-making process in land acquisition. Although there are problems of factional politics and skewed allocation of benefits from infrastructural development by informal institutions, I argue that right form of coordination amongst the formal agencies and the people, change in practice, and involvement of new agencies in the process have the potential to correct the problems of distributive justice of benefits from infrastructural development. At one level, I focus on the form of coordination, and at another, I discuss the structure of network between the agencies and their potential roles. Problems of coordination with the current structure: The Land Acquisition Act of India involved seven steps and three government agencies: the Collectors office, the land revenue department, and the Panchayat. It may involve non-governmental organisations to expedite the hearing process, where the Panchayat plays a role. The steps and the roles of the agencies are as follows: Step. I One requiring body (local authority: Government, registered societies, registered cooperatives) places request for land requisition before the government represented by the District Collector. The requisition must include a) map of the land required; b) aim of acquisition; c) number of holders; d) boundary area certificate; e) budget provision; f) agreement deed of any company or committee. The Collector after studying the proposal notifies the same. The notification is published in the Official Gazette and in two daily newspapers in the locality. After the notification is published, the government is authorised to start the survey to determine its suitability for an intended project. Any objections are registered with the Collectors office. The probable land losers are identified, their land measured and compensation calculated. If the government/collector is satisfied, compensation is awarded, notified land is acquired and transferred to the requiring body, even though some landlosers may not have accepted the compensation.
Step. II Step. III Step. IV
Step. V Step. VI
See M. Asif (1999). Land acquisition act: need for an alternative paradigm. Economic and Political Weekly June 19, 1999. http://dolr.nic.in/hyperlink/acq.htm Accessed on 22nd October 2008, http://www.gov.mu/portal/goc/housing/file/laa.pdf. Accessed on 22nd October 2008, http://land.delhigovt.nic.in/la.html Accessed on 23rd October 2008, http://jalgaon.nic.in/html/Branches/Land_Acquisition_branch.htm Accessed on October 23, 2008
recently for infrastructural development in India, the disjunct between the government offices and between the officers and the people were evident. The disjunct is at the vertical tier -- the Gram Panchayat not fully aware of the decisions taken by the Zilla Parishad -- and also at the horizontal tier, the land revenue department unaware of decisions at the Collectors office. An important aspect of land acquisition is about agency coordination and choosing the right process.
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Step. VII
Those landlosers who are not satisfied with either the measurement of land, the declared compensation and the apportionment of the said compensation between interested persons can approach the court for redressal.
Below is a schematic diagram which represents the process of land acquisition and the role of the agencies
Figure 1 Schematic diagram representing the process of land acquisition and the role of agencies As the diagram suggests, the current act is highly top-down in nature, with a heavy dependence on the role of the Collector. The Collector supposedly relies on three aspects to decide on the acquisition process. These include a) public purpose, b) lower limit of 70 percent for allowing companies to acquire land and c) social impact assessment study which needs to be conducted only if 400 families in plains and 200 in the hilly areas get affected and displaced. The public purpose is also defined in a top-down manner, often with special interest of the upper level decision-makers and their factional groups, where importance of informal policy networks gets increasing importance. Unlike several other countries like UK, USA or New Zealand, where there is clear definition of what may be passed under public purpose, in India, it still lacks proper definition and has become more of a political rhetoric. Since number of agencies involved are substantially low, subpolitics outside
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http://www.indiatogether.org/2008/may/law-land.htm Accessed on 22nd October 2008 Sebastian Morris and Ajay Pandey (2007). Towards Reform of Land Acquisition Framework in India. Economic and Political Weekly, June 2, 2007.
The current Act has given enormous power in the hands of the collector. In fact, in absence of proper transparency, the collectors decision can be manipulated once the requiring body has convinced the collector of the necessity of the acquisition the proceedings can move unhindered(and) the question of propriety is not sufficiently addressed and neither are the land losers called to participate in the decision-making process. We have seen such examples recently in West Bengal and Orissa. this was possible because the Collectors decision was influenced by informal institutions outside the formal agencies. There is no place for peoples deliberation in the whole process, which results in lack of clearness at every level. The informal institutions, therefore, try to control the decision at the Collectors office, which results from a nexus between powerful individuals and groups. The manifestations are different: in some places, dominant caste groups take the authority. In other places, the political parties (where there are more than one) or the faction between one party tries to manipulate the decision-making. The outcome is often a choice for land that is decided without any peoples participation. Sometimes the media certifies such processes by constructing consent for the public (read the political) purpose. The oustees are the consequences of the power bestowed on the Collectors office and the lack of peoples deliberations. Nonparticipatory and coercive nature of the current (absence of) platform for deliberations help the Collectors office to manipulate it. Asif argues, Wherever it is difficult to acquire land because of peoples refusal, mine owners both private and public, request mining leases on adjoining government land and start mining operations therein. Once they are able to scare residents of nearby villages through continued blasting operations in their mines, they approach the collector for land acquisition. Similar tactics are now being used by industries and irrigation departments too. A large steel unit located in the Chattisgarh region of MP, in its bid to acquire more land is deliberately polluting a pond located just outside its boundary. This pond is the only drinking water source for the residents of the two villages resisting acquisition. State irrigation departments on many occasions have started dam construction work even though people have not vacated the area to be submerged. The threat of submergence is thus used to force people to vacate their land and houses.
M. Asif (1999). Land acquisition act: need for an alternative paradigm. Economic and Political Weekly June 19, 1999. The logic of utility maximization is extrapolated from the neoclassical economics which states that people make choices among the alternatives in such a way that maximizes their economic pursuits. M. Asif (1999). Land acquisition act: need for an alternative paradigm. Economic and Political Weekly June 19, 1999. ibid Ibid.
and beyond the representative institutions play a major role in land acquisition. This, in turn, leads to lack of transparency and participation, and adds to conflict between the people interested in giving their land and would-be landowners. A dialectical relationship results in these two groups in stakeholders where the first groups primary interest is to prevent the acquisition if their land which is a profitable source of earning or is attached to their emotions. If the event of acquisition is inevitable, people try to maximise their utility. The second group of actors with their maximising impulse try to get the required land in as little a time as possible and at the least possible cost. The government, represented by the Collector is expected to provide a win-win solution to the dialectic nature of the relationship between the would be losers and would be owners. However, currently the government lacks the requisite agencies in order to bring a) transparency, b) participation of the people in the decision making process. This is due to short of enough agency involvement and deficiency of proper processes.
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Possible forms of Coordination While the current form of governance for land acquisition is mostly centralised, two solutions exist to the problem: a) deliberative democracy, b) expansive democracy and c)centripetalism. In this section, we will try to see which form of coordination between agencies can bring forth a more transparent and participative process, and under what conditions. We also argue the importance of involvement of non-traditional agencies like non-governmental organisations or civil society groups in the decision-making process, along with the grassroots level decision-making constitutional bodies like Gram Sabha/ Block Sabha or the Gram Unnayan Samiti, which are not currently involved. In each of the above processes, the goal however is the same. The literature on policy networks stress not only the coordination problems which result from initiatives that require inter-organisational boundaries but also the coordination problems which result from initiatives that require interorganisational coordination. From the above discussion on problems with agencies for land acquisition, it seems our agencies have avowed the image of a hollow state, where policy making and service delivery are not inclusive for all people. Network management is able to address this problem to a considerable extent by focusing on complex decision processes. Having said that, what form of governance can address the problem largely and provide a platform for network between agencies, as well as on the interface between people and agencies? Elster advocates that in order to have proper participation, there should be enhanced public deliberation of contested issues over limited resources. He hopes that deliberative processes will be democratic by default, and through solid participation, will legitimise the final policy choice.10 Advocates of deliberative democracy argue that participation in decision-making can be tokenistic in character, and therefore supplemental opportunities for local participation become necessary through a deliberate process initiated by the government.11 They seek to develop a substantive version of democracy based on political legitimation through deliberation. Deliberation also helps address impartiality by removing misunderstanding between the agencies, through processes of negotiations, educating people to act impartially and asking agencies or officials to clarify the position.12 Deliberative democracy is possible by creation of platforms for dialogues, for instance through a hearing of the land acquisition process at the Gram Sabha, an agency that has high constitutional powers, but is not properly used. The hearing process can enable coordination between the land revenue department and the Panchayat from an early stage. An amendment to the Act has taken place to this extent. however, most local governments are hesitant to have the hearing. A successful example of the use of deliberative democracy in the acquisition process is from Orissa, where Gram Sabhas at two villages went off peacefully and satisfactorily wherein people signed the resolution supporting the project with Arcelormittal after deliberations.13 Expansive democracy is characterised by increased participation, either by means of small-scale direct democracy or through strong linkages between citizens and broad-scale institutions, by pushing democracyand by relating decision-making to the persons who are affected.14 While deliberative democracy focuses more on a bottom-up approach by letting the people decide,
Erik-Hans Klijn (2005). Networks and Inter-Organisational Management. In Ferlie Ewan et al (eds.), The Oxford Handbook of Public Management. Oxford: Oxford University Press. 10 J. Elster (1998). Introduction. In J. Elster (Ed.), Deliberative Democracy. Cambridge: Cambridge University Press. 11 J. Forester (1999). The Deliberative Practitioner: Encouraging Participatory Planning Processes. Cambridge: The MIT Press. 12 Roberto Gargarella (1998). Full Representation, Deliberation and Impartiality. In J. Elster (Ed.), Deliberative Democracy. Cambridge: Cambridge University Press. 13 http://www.voiceofindia.in/index.php?option=com_content&task=view&id=1999&Itemid=80 accessed on 24th October 2008. 14 Maarten Hajer and Hendrik Wagenaar (2003). Introduction. In Maarten Hajer and Hendrik Wagenaar (eds.), Deliberative Policy Analysis. Cambridge: Cambridge University Press.
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While both deliberative and expansive democracy promote decentralisation, there can be problems with the decentralised form of land acquisition. The problematic relationship between local control and democracy has been argued in the literature because of less attention to conservation of land as a critical resource. Rural elites who try to maximise gain can dominate the Panchayat by allocating steering benefits from infrastructural projects after the land has been acquired.17 The major drawback in the theory that advocates participation in decision-making accompanies decentralization, and hence results in transparency in agency process considers the local people to be homogeneous, and often overlooks the power relationships at various levels. Even when it is local, it can exclude certain classes and members of the community. Local people can become consigned to a limited set of roles and relations with regard to the use of land, and little autonomy is created. Mehta, for instance, in his study of two villages in southern Rajasthan in India, stresses the political processes within the Panchayat that strengthen those who already have the power to control and co-opt the poor to serve their interests.18 With the example of Kerala, Platteau and Gaspart show that, When a party dominates a Panchayat, it tends to reward its sympathisers exclusively.19 Mishra and Padhy emphasise the politics within the local government and the forms of deliberations like Gram Sabha, and show that factions could even develop within the same party depending on the resources available. Kothari challenges the truth claims of deliberative or expansive democracy, and argues that it is necessary to understand the power that circulates between the people who have it.20 Agrawal and Gibson suggest a more political approach at the local level by focusing on the multiple interests within communities, and on the internal and external agencies that shape the decisionmaking process.21 Without proper information flow as a result of lack of coordination, bureaucratic procedures too can be distorted and subverted by groups which demand their...share of public resourcesand by individualswho know how to work things to their personal advantage [with an outcome than is]normally unfair [on the poor].22 This includes understanding the different actors,
15 R. Putnam (1993). Making Democracy Work. Princeton, N. J.: Princeton University Press. 16 John Harriss (2000). Depoliticising Development. New Delhi: Left Word. 17 Marcus Colchester (1994). Sustaining the Forests: The Community-Based Approach in South and South-East Asia. Development and Change, 25(1), 61-100, p.91. 18 Ajay Mehta (2000). The Micro Politics of Participatory Projects: An Anatomy of Change in Two Villages. In Pauline E. Peters (Ed.), Development Encounters: Sites of Participation and Knowledge Cambridge, MA: Harvard Institute for International Development, p.16. 19 Jean-Philippe Platteau and Frederic Gaspart (2003) The Risk of Resource Misappropriation in Community-Driven Development. World Development, 31(10), 1687-1703, p.1698. 20 Uma Kothari (2001). Power, Knowledge and Social Control in Participatory Development In Bill Cooke and Uma Kothari (Eds.), Participation: The New Tyranny. London: Zed Books, p.141. 21 Arun Agrawal and Clark C. Gibson (1999). Enchanment and Disenchanment: The Role of Community in Natural Resource Conservation. World Development, 27(4), 629-649. 22 John Harriss (2006). Power Matters: Essays on Institutions, Politics and Society in India. New Delhi: Oxford University Press.
expansive democracy results in a process where people participate beyond traditional political platforms. The new movements and protests and land acquisition, where agencies like civil society and non-governmental organisations are playing a role are examples. A network solution would be to provide platform to the non-traditional political entities a hearing in the process of land acquisition. There are many examples of good governance by strong and positive involvement of civil society groups as well as non-governmental organisations all over the world15. In West Bengal, for instance, the role of civil society and non-governmental organisations were almost paramount during the Singur and Nandigram cases. Interestingly, instead of providing any platform for discussion to civil society groups like little magazines forum or TASAM (Teachers and Scientists against Maldevelopment), who were against the process by which land acquisition was taking place, the ruling party manufactured their own civil society groups forums of intellectual who supported the left front governments way of operation for land acquisition. This resulted in a division of the civil society, one given a platform to talk on behalf of the government, and the other accused for their actions. Perhaps, as Harriss suggests, there is a need to recognise civil society as political society and provide a wider platform for their participation.16
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the different decisions, and the different interests associated with the various tasks of programme development (of the government), ..the program design,and implementation.23 If deliberative and expansive democracy cannot fully provide the possible framework for land acquisition, what form of democracy would be suitable and how can that be implemented? In contrast to the tenet of decentralisation, Gerring and Thacker argue that such agencies should be able to create power, enhancing the ability of a political communityto reach decisions and implement decisions.24 The authors argue that centripetalism is inclusive like the other forms, but it is also authoritative. It provides a platform for reaching agreement and implementing that agreement. Centripetalism includes both broad-based inclusion and centralised authority.25 However, to promote a centripetal form of governance, we need to have a shift in networks; new networks that can erode the power of previously powerful ones.26 This is a major task, and needs to throw light on the process analysis. On the one hand, the practice with all its actors and the resources -- need to be reformulated; there is also a need for process reengineering for the new network. Shift in the structure of network and use of resources Apart from change in forms suggested above, a structural need is also required for any land acquisition by involvement of new agencies with new roles. The new agencies could include the Gram Unnayan Samiti (Village Development Body), a fourth tier in the Panchayat system, which has recently started operating in West Bengal, and the standing committee on land issues at the Panchayat Samiti at Block level. These agencies are consciously left out as they will bring more transparency in land acquisition at the grassroots level. There needs to be empowerment of these bodies through proper education for deliberative dialogues, but the Zilla Parishad and the Collectors office have to facilitate the process. The agencies, including the Collectors office and the land revenue department need to build their capacity for land acquisition through accumulation of three kinds of resources: knowledge, relational and mobilisation. The first kind would involve all knowledge resources to which participants can have access, and the extent to which these are shared among stakeholders.27 There also needs to be space for use of local knowledge, which may show how people and their land are inextricably interwoven. Relational resources would involve the range of stakeholders involved, the thickness of the network, and the extent of integration of various networks in the process of land acquisition.28 Mobilisation capacity building may involve presence of change agents for shifts in networks, and institutional arenas developed by stakeholders, like interaction with civil society groups. Implementation of these may not be difficult in the near future, after the state wide area networks under the National e-Governance Plan starts fully operating.
23 Norman Uphoff (1985). Political Considerations in Human Development. In Implementing Programs of Human Development. World Bank Working Paper No. 403. Washington D.C.: The World Bank. 24 John Gerring and Strom C. Thacker (2008). A Centripetal Theory of Democratic Governance. Cambridge: Cambridge University Press. 25 Ibid. 26 Maarten Hajer and Hendrik Wagenaar (2003). Introduction. In Maarten Hajer and Hendrik Wagenaar (eds.), Deliberative Policy Analysis. Cambridge: Cambridge University Press. 27 Patsy Healey et al (2003). Place, Identity and Local Politics. In Maarten Hajer and Hendrik Wagenaar (eds.), Deliberative Policy Analysis. Cambridge: Cambridge University Press. 28 Ibid.
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Finally, would the shift in networks in the government agencies, along with procedural change be sufficient for proper land acquisition? Or should there be more role of the private institutions? In recent years, we have seen a rise of vocabulary in governance that indicates contribution of private agencies in good governance, where the established boundaries are becoming blurred. Could private agencies take part in any of the three forms of coordination suggested for land acquisition? There needs to be some research done in the area of private partners role, coupled with empirical evidence. References Agrawal, Arun and Clark C. Gibson (1999). Enchantment and Disenchantment: The Role of Community in Natural Resource Conservation. World Development, 27(4), 629-649. Asif, M. (1999). Land acquisition act: need for an alternative paradigm. Economic and Political Weekly, June 19, 1999. Colchester, Marcus (1994). Sustaining the Forests: The Community-Based Approach in South and South-East Asia. Development and Change, 25(1), 61-100. Elster, J. (1998). Introduction. In J. Elster (Ed.), Deliberative Democracy. Cambridge: Cambridge University Press. Forester, J. (1999). The Deliberative Practitioner: Encouraging Participatory Planning Processes. Cambridge: The MIT Press. Gargarella, Roberto (1998). Full Representation, Deliberation and Impartiality. In J. Elster (Ed.), Deliberative Democracy. Cambridge: Cambridge University Press. Gerring, John and Strom C. Thacker (2008). A Centripetal Theory of Democratic Governance. Cambridge: Cambridge University Press. Hajer, Maarten and Hendrik Wagenaar (2003). Introduction. In Maarten Hajer and Hendrik Wagenaar (eds.), Deliberative Policy Analysis. Cambridge: Cambridge University Press. Harriss, John (2006). Power Matters: Essays on Institutions, Politics and Society in India. New Delhi: Oxford University Press. Harriss, John (2000). Depoliticising Development. New Delhi: Left Word. Healey, Patsy et al (2003). Place, Identity and Local Politics. In Maarten Hajer and Hendrik Wagenaar (eds.), Deliberative Policy Analysis. Cambridge: Cambridge University Press. Klijn, Erik-Hans (2005). Networks and Inter-Organisational Management. In Ferlie Ewan et al (eds.), The Oxford Handbook of Public Management. Oxford: Oxford University Press.
This needs to be interwoven with process re-engineering. A shift in network cannot run with the same old process. Identifying processes for re-engineering will not only help in providing a fresh look in the process change, but also change the individuals role. For instance, it would be interesting to see if changing individuals and processes can bring in more transparency in the hearing process.
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Kothari, Uma (2001). Power, Knowledge and Social Control in Participatory Development In Bill Cooke and Uma Kothari (Eds.), Participation: The New Tyranny. London: Zed Books. Mehta, Ajay (2000). The Micro Politics of Participatory Projects: An Anatomy of Change in Two Villages. In Pauline E. Peters (Ed.), Development Encounters: Sites of Participation and Knowledge. Cambridge, MA: Harvard Institute for International Development. Morris, Sebastian and Ajay Pandey (2007). Towards Reform of Land Acquisition Framework in India. Economic and Political Weekly, June 2, 2007. Platteau, Jean-Philippe and Frederic Gaspart (2003) The Risk of Resource Misappropriation in Community-Driven Development. World Development, 31(10), 1687-1703. Putnam, R. (1993). Making Democracy Work. Princeton, N. J.: Princeton University Press. Uphoff, Norman (1985). Political Considerations in Human Development. In Implementing Programs of Human Development. World Bank Working Paper No. 403. Washington D.C.: The World Bank. Websites: http://dolr.nic.in/hyperlink/acq.htm Accessed on 22 October 2008 http://www.voiceofindia.in/index.php?option=com_content&task=view&id=1999&Itemid=80 Accessed on 24 October 2008. http://www.gov.mu/portal/goc/housing/file/laa.pdf. Accessed on 22 October 2008 http://land.delhigovt.nic.in/la.html Accessed on 23 October 2008 http://jalgaon.nic.in/html/Branches/Land_Acquisition_branch.htm Accessed on 23 October 2008 http://www.indiatogether.org/2008/may/law-land.htm Accessed on 22 October 2008
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Corruption: A Reexamination
Gour Gobinda Goswami & Badrudozza Shahid Rajib Department of Economics North South University, Banani, Dhaka, Bangladesh
The role of media freedom is critical in controlling corruption. Empirical evidence shows that there is a strong association between the level of press or media freedom and the level of corruption. Using panel data for 120 countries over a time span of 4 years from 1994 to 1997, this paper adds to the existing literature by reexamining the impact of press or media freedom on corruption. The result shows that freedom of press lowers corruption by 18% for all countries, 25% for Non-OECD countries and 30% for OECD countries, thus supporting the existing literature. Keywords: Press Freedom; Media Freedom; Corruption INTRODUCTION The curse of corruption has been polluting society since the beginning of human civilization. We have seen corruption in the Roman society, we have seen corruption in the Egyptian society and today we see corruption everywhere. It is a problem that all countries must confront. The lack of reliable and systematic data has kept corruption out of the research agenda of empirical economists. As a criticism of public administration during fourth century B.C. in India, Kautiliya wrote is his Arthasastra: Just as fish moving under water cannot possibly be found out either as drinking or not drinking water, so government servants employed in the government work cannot be found out (while) taking money (for themselves). (Bardhan 1997, p.1320) Corruption can be defined in different contexts. however, we confine ourselves within the economic and political denotations of corruption. Corruption refers to the use of public office for private gains, where an official entrusted with carrying out a task by the public engages in some sort of malfeasance for the private enrichment which is difficult to monitor for the principal (Bardhan, 1997, p.1321). For instance, government officials often collect bribes for providing permits and licenses, giving passage through customs, or for prohibiting the entry of competitors. In these cases they charge personally for goods that the state officially owns. Even in the private sector we find instances of widespread corruption. For example, a private seller sometimes rations the supply of a scarce good instead of using the price mechanism to clear the market. In other cases people use connections to get a job. Corruption, a systematic feature of many economies, distorts economic and social development, by engendering wrong choices and by encouraging competition in bribery rather than in the quality of the price of goods and services and, all too often, it means that the worlds poorest must pay for the corruption of their own officials and of multinational agents. The influence of corruption on the growth of GDP is examined by Keefer and Knack (1995), where corruption is measured by a variable of institutional quality by Political Risk Services (PRS).Using cross-section data,
5. The Effect of Media Freedom on
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they report that corruption exerts significant negative impact on the growth of GDP. Lambsdorff (1999) confirms that corruption lowers productivity of capital and hence GDP, which results in a large welfare loss. Mauro (1995) uses cross-country subjective measures of corruption to show that corruption is negatively associated with private investment and growth. Political scandals in countries across the globe have sparked outrage against corruption in recent years, and in dozens of countries discredited governments have been forced out of office. At the same time, corruption is viewed as one of the main obstacles that post-communist countries face in attempting to consolidate democratic institutions and open market economy (Shleifer, 1997). The awareness of the dramatic effects of corruption on a countrys development leads to investigate why corruption exists and what makes it so widespread among countries. The difficulty of measuring levels of relative corruption in different countries has presented a major challenge. Recently, however, economists and political scientists have begun to analyze indexes of perceived corruption prepared by business risk analysts and polling organizations, based on survey responses of businessmen and local residents. In most countries, citizens receive the information they need through the media - newspapers, television, and radio. The media serve as the intermediaries that collect information and make it available to citizens. It is believed that a free press or media can be a powerful weapon to curb corruption. Freedom of press or media (PFREE)1 ensures that all necessary information about society, politics, economics, and culture reaches a community. An independent press is probably one of the most effective institutions to uncover trespassing by government officials, as any independent journalists are highly enthusiastic to investigate and uncover wrongdoings. It also helps to shape public policy as it makes the government aware of its priorities. Freedom of press, however, has its negative impact on society in the form of Yellow Journalism (Goswami, 2004). Yellow Journalism is a term widely used in the US referring to newspapers involved in the internecine warfare of the popular metropolitan press empires of the late 19th century; a battle which has continued to the present day with mass circulation tabloids competing for leadership with all sorts of exploitative offers, lucid revelations and blockbuster bingo. Such type of journalism deceives the mass population by forming incorrect public opinion. Much too often, it also jeopardizes the public image of respected personalities by intruding their personal life. It is an established fact that when media is controlled by state, it is likely to be subject to political pressures (World Bank, 2002b, p. 109). A major source of revenue of many newspapers in developing countries is government advertisements (Staphenhurst, 2000). As a result, some newspapers are biased towards certain political parties for special reasons. So whenever a new political party comes into power, these newspapers also change their position accordingly. Such a scenario is not conducive to media freedom. Apart from these negative elements, freedom of press does reveal many untold stories of the government particularly about what is happening in judiciary, executives, and legislative authorities. Such bold reporting then initiates public bodies to launch formal investigations into allegations of corruption. Instances of such an event are most apparent in South Asian countries like Bangladesh and India now-a-days. When journalism exposes flaws within different bodies of state (the courts, police, and anticorruption task forces) corruption is put on check. Sen (2000) opines that countries with more press freedom can control famine, high population growth rate, and financial crisis more effectively. The media also provide information on political markets, exposing corrupt and unethical politicians (World Bank, 2002b, p. 181). Thus, we can conclude that countries with a free press should have less corruption than countries where the press is controlled and censored.
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LITERATURE REVIEW Mainly qualitative empirical research has been carried out on freedom of press and its impact on society. The cross country analysis of the impact of freedom of press on public corruption, which is considered to be a quantitative research, is restricted by two things - the unavailability of data on press or media freedom and the absence of long time series data on public corruption. Regardless of the shortage of such data, there are quite a few important researches in the area of what determines corruption. Goswami (2004) concludes that freedom of press can lower corruption by approximately 20% after controlling for the economic size of countries. He uses data for 111 countries over the period 1994-2000 or for a total of 777 observations in a panel framework. Brunetti and Weder (2003) also find a significant relationship between press freedom and corruption in a large crosssection of countries over the period 1996-1999 in a panel framework. The findings suggest that the direction of causation runs from higher press freedom to lower corruption. However, they did not find any impact of democracy on corruption in a cross-country set up. Similarly, Triesman (2000) find that while a long exposure to democracy reduces corruption, current degree of democracy is not significant in reducing corruption. However, Chowdhury (2004) concludes that democracy and press freedom both have a significant impact on corruption. He carries out a regression for a cross-section of countries, using OLS regressions, robustness analysis, instrumental variable regressions, static panel analysis and dynamic panel analysis. Stapenhurst (2000) also concludes that the role played by the media in curbing corruption has proved to be extremely valuable. He explains both the visible (i.e. the population can be reached easily through circulation of newspapers or radio and television) and the invisible (the role it plays in the society) effects of media. According to Ades and Tella (1999), countries that are more open to foreign trade tend to be less corrupt. In both cross-section analysis and controlling for country and time fixed-effects, they find other things equal; countries where firms enjoy higher rents tend to have higher corruption levels. Ades and Tella (1999) suggest that countries with large endowments of valuable raw materialsfuels, minerals, and metals- corruption may offer greater potential gain to officials who allocate rights to exploit such resources. Treisman (2000) analyzes several indexes of perceived corruption compiled from business risk surveys for the 1980s and 1990s. He argues that countries with Protestant traditions, history of British rule, more developed economies (i.e. process of economic development- presumably through the rationalization of public and private roles and the spread of education which renders abuses harder to conceal), and (probably) higher imports were less corrupt. Federal states are found to be more corrupt than unitary ones, controlling for the level of economic development. On the other hand, Fishman and Gatti (2002) argue that Treismans measure of decentralization is a simple dummy variable, reflecting whether a country has a federal structure or not, may not accurately reflect the true extent of decentralization of powers and resources in a
In this paper, the relationship of press freedom and corruption is examined using panel-regression approach. The aim of this paper is to test whether press freedom is negatively associated with corruption using data for 120 countries over the period 1994-1997. As corruption is detrimental to economic growth; therefore, we proceed by setting up an econometric model to discover the determinants of corruption to test the hypothesis that corruption is negatively related to press freedom. The remainder of the paper is organized as follows: Section 2 reviews possible determinants of corruption discussed in the literature. Section 3 proposes a model and then the theoretical arguments behind the impact of press freedom on corruption. Section 4 describes the variables and data sets used. Section 5 presents the estimation method while Section 6 focuses on the results and interpretations and Section 7 concludes.
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given country. He finds a very strong and consistent negative relationship between decentralization and corruption across a sample of countries. Serra (2006) investigates the determinants of corruption and their estimated impact applying the Global Sensitivity Analysis, which is based on the Leamers Extreme-Bounds Analysis. Her study finds that five variables are robustly related to corruption. Corruption is lower in richer countries, where democratic institutions have been preserved for a long continuous period, and the population is mainly Protestant. Corruption is instead higher where political instability is a major problem. Finally, colonial heritage appears to be strongly correlated with the current level of corruption, possibly due to the legal cultures inherited from the former colonizing countries. At the same time, long-lived aspects of countries cultural or institutional traditions affect the level of perceived corruption more significantly than current state policies. La Porta et al. (1997) argue that trust can be helpful in fighting corruption, as it assists bureaucrats to cooperate with each other and with the citizens. In a sample of 33 countries, they show that trust has a significant negative impact on the degree of corrupt behavior, while controlling for per capita GDP. Rijckeghem and Weder (2001) examine the relationship between civil-service pay and corruption using data set on wages for 31 developing countries. They find evidence of a statistically and economically significant negative relationship between relative civil-service pay and corruption in regressions based on cross-country averages while controlling for a wide array of variables. In a cross-country analysis for more than 100 countries, Dollar, Fisman, and Gatti (1999) analyze the relationship of corruption and gender on the basis of hypothesis formed under behavioral characteristics across gender. Based on the econometric results, their study establishes that increasing womens participation in the government, legislature, and labor force would significantly and negatively influence the degree of corruption index of International Country Risk Guide. Estimation of the regression required them to control for variables such as GDP, civil liberty index, population, average years of schooling, openness to trade, regional dummies etc. Finally, they conclude that encouraging women to participate in the political and economic sphere might benefit the whole society. One of the drawbacks of their study is that it does not reveal the underlying mechanism causing such correlation. Bliss and Tella (1997) investigate the relationship between market competition and corruption. They introduce three ways to capture the degree of deep competition in the economy: as a variable that increases the extent to which firms compete fiercely, perhaps a reduction in transport costs; as a tendency toward more similar cost structures; and as a tendency toward lower overhead costs relative to profits. They perform some comparative statistics and recognize that the extent of competition is not an exogenous parameter since corruption itself can affect the number of firms in free-entry equilibrium through the endogenously determined level of graft. In a model where the level of corruption and the extent of entry are co-determined by what they call deep corruption parameters, they show that there is no simple relationship between competition and corruption; rather everything depends on the structure of the uncertainty about costs that the corrupt officials face, thus questioning the validity of a commonly held belief that competitive pressures in the market can mitigate corruption. Shleifer and Vishny (1993) examine the relationship between corruption and the type of government and conclude that the structures of government institutions and of the political process are very important determinants of the level of corruption. In particular, weak governments that do not control their agencies experience very high corruption levels. They argue that economic and political competition can reduce the level of corruption and their diverse effects. If different agencies compete in the provision of the same services, corruption will be driven down provided that agents cannot
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Finally, the literature includes culture and the level of distortions in the economy. Lee (1986) for example suggests that a culture of bureaucratic elitism may lead to a disassociation of civil servants with the rest of society and breed corruption. Tanzi (1994) argues that the absence of a culture of arms-length relationships may lead to corruption becoming systematic. Shleifer and Vishny (1993) suggest that more ethnically diverse countries are prone to particularly harmful forms of corruption. In an empirical study Mauro (1995) indeed finds evidence of a positive relationship between ethnolinguistic fractionalization and corruption. Thus the above review suggests that in recent years the determinants of corruption is gaining importance at policy level. This paper adds to the existing literature by exploring the impact of press freedom on public corruption for 120 countries (which comprises both developed and developing countries signified by OECD and non-OECD nation) over the period 1994-1997 or for a total of 480 observations. The regression model presented here is the modification of Ades and Tella (1999) and utilizes the estimation method of pooled OLS, one-way fixed-effects, two-way fixed effects, and random effects in order to verify the hypothesis that freedom of press is negatively associated with the degree of corruption. THE MODEL Ades and Tella (1999) hypothesize that per capita GDP, political rights, and average years of schooling can reduce the extent of corruption in a country. In our model, slight adjustment have been made from this one in the sense that democracy has been controlled for and primary school enrollment is included instead of average years of schooling. Furthermore, trade GDP is included in the model to measure the openness. Thus, this paper employs four control variables which are per capita GDP (PPP), openness, democracy, and primary school enrollment rate in addition to press freedom. The random-effects or the error-component form of the model in a panel framework can be written as follows:
where i represent country and t represents year. Higher per capita income lowers the intensity of corrupt practices in the economy (i.e. higher per capita GDP lowers the expected benefit of corrupt practices), thus in that sense the expected sign of the coefficient ( 1) of per capita GDP (PPP) is negative. The advantage of including PCGDP in the model is that it controls for the economic size of countries and we can include any country in our dataset irrespective of its level of development. It is believed that more the economy is exposed to the outer world, higher will be the inflow of foreign investment. Corrupt government and their cumbersome legislative scheme are a major impediment for attracting foreign investment. Thus, the expected coefficient ( 2) of openness is negative. Reduction in the level of corruption is dependent on a liberal democratic political system (Sung 2003). Sung (2003) suggests that liberal democracy provides two institutional mechanisms to fight corruption of which are independent judiciary and free journalism. Liberal democracy signifies a political system marked not only by free and fair elections but also by a rule of law, a separation of powers, and the protection of basic liberties. Hence, the expected sign of the coefficient ( 3) of democracy is negative. However, if the index is measured in such a way that higher index means
simply steal. Similarly, political competition opens up the government, reduces secrecy, and so can reduce corruption provided that decentralization of power does not lead to anarchy.
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lower level of democracy then the expected sign is positive. Primary school enrollment rate is another important determinant of corruption. Enhancement of human potential and capability lead to lower level of corruption and so the expected sign of 4 is also negative. Finally, press freedom raises the expected cost of corrupt practices by public officials. Therefore, the expected sign of 5 is negative. Press freedom helps combating corruption through several channels. Chowdhury (2004) argues that the presence of press freedom brings public corruption cases to the voters while voters in a democracy in turn punish corrupt politicians ousting them from public offices. Hence, elected politicians react to the voters by reducing corruption. Stapenhurst (2000) identifies some tangible and intangible factors through which media freedom can affect corruption. The tangible factors are 1) investigating and exposing corrupt officials and office-holders; 2) prompt investigations by official bodies; 3) reinforcing the work and legitimacy of the states anti-corruption bodies; 4) strengthening anti-corruption bodies by exposing their flaws; 5) pressure for changes to laws and regulations that create a climate favorable to corruption, and 6) anticipation of adverse media publicity prompts a preemptive response. Hard-hitting, independent journalism can act as an indirect check on the sort of corruption that would otherwise flourish in the absence of such competition simply by presenting a variety of points of view and thus informing public debate in a way that enhances political and economic competition. Brunetti and Weder (2003) argue that free press is potentially a highly effective mechanism of external control on corruption because it works not only against extortive but also against collusive corruption. Free media reduces extortive corruption which is the type of corruption mostly taking place in the shape of bribe by raising the probability of being detected and punished by laws. Bureaucrats enjoy the discretion to refuse or delay in providing some services to the bribe payers in this situation. But in the collusive corruption which is mostly observed in the form of tax evasion, tax payers also collude with the bribe-takers. This arrangement is beneficial for both the bribe payers and the tax takers and thus, they will do everything to hide it. In contrast to extortive corruption the private agents cannot be trusted to help fight this illegal action. Free media is mostly effective in curbing collusive corruption of this kind. Hence, freedom of press plays a central role in curbing corruption. Free press leads to effective communication and ensures transparency. It reveals information that allows the mass population to assess what is right and what is wrong and then create resistance against any irregularities. DESCRIPTION OF DATA AND VARIABLES Measuring corruption is obviously tricky because of its illegal nature. It is further complicated by a wide range of definitions of a corrupt act. Also, there seems to be many different expressions of corruption. The model has ln(1+CORP) as the dependent variable. Data on corruption levels across countries are available from various sources, which are all based on surveys of experts or entrepreneurs. Our main measure of corruption is an indicator collected by the International Country Risk Guide (ICRG), an index that has been most commonly used in previous works. A low score means high government officials are likely to demand special payments and illegal payments are generally expected throughout lower levels in the form of bribes connected with import and export licenses, exchange controls, tax assessments, policy protection, or loans. The International Country Risk Guide (ICRG), a monthly publication of Political Risk Services, has constructed five measures of corruption. Out of these five measures of corruption, this study uses only the direct measure of corruption. The corruption index takes values which range from 0 (most corrupt) to 100 (least corrupt). For simplification purpose, corruption index is calculated by taking
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For the independent variables, the model includes per capita GDP (PPP), openness, democracy (measures the deficiency of democracy), and primary school enrollment as the four control variables. The main objective of this research is to find the relationship between corruption and press freedom, and so the main independent variable is the freedom of press or media. The data on per capita GDP (PCGDP) is taken from World Development Indicator CD-ROM (World Bank, 2004). PCGDP is defined as GDP at constant 1995 US$. Openness, denoted in the model as OPEN, is measured by adding up export and import divided by nominal GDP, is the total trade as a percentage of GDP. The data on openness has been obtained from World Banks World Development Indicators 2004 CD-ROM. The model defines democracy by taking the average of political right and civil liberty, where political rights refer to free and fair elections of offices with real power, freedom of political organization, freedom from domination by powerful groups and political inclusion of minority group. Civil liberties refer to freedom of expression, belief, association and organizational rights, rule of law, and human rights as well as personal autonomy and economic rights. The data for political rights and civil liberties are obtained from the website of Freedom House. Both the variables are ranked on a scale ranging from 1 to 7 where 1 indicates more political right and liberty, whereas 7 refers to lowest political rights and civil liberty. Therefore, both these two variables measure the lack of respect for political right and civil liberty that facilitate the functioning of independent political parties. Hence, democracy denoted in the model as DEM, generated by taking the simple average of these two indexes. Primary school enrollment (%gross) rate that is used in the model as PRIM refers to total enrollment in primary education as a proportion of the population of primary school-age according to national regulations, is also obtained from the World Banks World Development Indicators CD-ROM. Finally, our main measure of press freedom (PFREE) is assembled by Freedom House. Freedom House has compiled expanded indices of press freedom for 145 countries based on experts opinions, findings of international human rights group and press organizations, analysis of publications and news services and reports of governments on related subjects. The idea is to gain a comprehensive assessment of press freedom by not focusing exclusively on actual incidents of censorship like for instance arrests or assassinations of journalists but on the overall structure of the news delivery system. The index has four components 1. Laws and regulations that influence media content reflects judgment of the degree of actual impact on press freedom (), not simply the ceremonial commitment to press freedom. For instance, if private broadcast media are owned by government with no dissent allowed, the rating will be 15 (i.e., the worst score) but if a government that owns all broadcast media may permit widely pluralist ideas, even active dissent from government positions then the rating will be more favorable. 2. Political influence over media content captures political pressure on the content of both privately owned and government media and takes into account the day-to-day conditions in which journalist work. It also includes threats from organized crime which may lead to self-censorship. 3. Economic influence over media content reflects competitive pressures in the private sector that distort reportage as well as economic favoritism or reprisals by government for unwanted press coverage. 4. Repressive action measures actual acts which constitute violations of press freedom. For instance,
the deviation of most corrupt score (0) from least corrupt (100) to grasp the exposure of corruption. The calculated index denotes that higher the index, higher is the level of corruption. Therefore, 0 denotes the lowest level of corruption and 100 the highest.
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arrests, murders or suspensions of journalists, physical violence against journalists or facilities, selfcensorship, arrests, harassment, expulsion, etc. Freedom House ranks press freedom2, the degree to which each country permits the free flow of information, on a scale of 1 to 100. Countries with a score between 1 and 30 are considered to have a Free media, 31 to 60, Partly Free, and 61 to 100, Not Free. However, for our convenience, we transform the index in such a way that 0 means least freedom and 100 means most freedom. It is to mention that as the data collection has been conducted from different sources, the time span over which they are available varies, hence leading to the formation of a data set ranging from 1994 to 1997, which hindered the study from being up to date. Summary statistics of all the six variables are listed in Table 1 followed by the correlation matrix (Table 2). The correlation between corruption and press freedom is (0.56). The negative correlation signifies the relationship between these two variables. Among the other four control variables, lack of democracy (0.53) signifies strong correlation with corruption. Table 1. Summary Statistics Variable Observations Mean Standard Minimum Maximum Deviation ln(1+CORP) lnPCGDP OPEN DEM PRIM PFREE 480 480 480 480 480 480 3.45 4.57 73.88 3.57 96.16 55.41 1.07 0.08 43.40 1.90 20.08 23.46 0.00 4.00 2.15 1.00 28.96 1.00 4.61 4.99 296.01 7.00 140.72 95.00
Table 2. Correlation Matrix Variables ln(1+CORP) lnPCGDP OPEN DEM PRIM PFREE ln(1+CORP) 1.00 lnPCGDP -0.50 OPEN -0.11 DEM 0.53 PRIM -0.17 PFREE -0.56
1.00 -0.08 0.00 -0.11 0.04
1.00 -0.05 0.02 0.15
1.00 -0.29 -0.86
1.00 0.20
1.00
ESTIMATION METHOD Panel data analysis is an increasingly popular form of longitudinal data analysis among social and behavioral science researchers. In panel data the values of one or more variables are collected for several sample units or entities over time. As suggested by Baltagi, one of the main advantages of panel data is heterogeneity in the units due to its relation to individuals, firms, states countries etc. overtime. Hence, formulating the data available for several thousand units overtime, it can
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The model of this study represented by equation has been estimated by pooling the data from 120 countries from all over the world. It should be noted that the dataset has been pooled only for those countries that had data for all the control variables included in the model over the period 1994-1997. Countries are grouped as OECD, non-OECD and by all countries. The dataset, which is segregated by three broad categories, has been brought under situations that demonstrate five effects: pooled OLS, one-way fixed-effects, two-way fixed-effects, one-way random-effects and two-way randomeffects. The simplest of all panel models is the one that has constant coefficients, referring to both intercepts and slopes (Case 1). Under this approach, the space (country effects) and time dimensions (time effects) of the pooled data are disregarded. Hence, all the data in the sample can be pooled and an ordinary least squares regression model (OLS) can be run. There is another form of panel model that considers the individuality of each country or each crosssectional unit (in this case for 120 countries). Rather than assuming both the intercept and slope coefficient are constant this approach let the intercept vary for each country but still presume that the slope coefficients are constant across countries. The model allows the intercept term to differ due to special feature of the countries under consideration, such as ethnicity, customs, political affairs, bureaucracy, social norms and beliefs that diverge from country to country. Although the intercept may differ across countries, it may or may not differ over time; that is, it is time invariant. Time invariant fixed effects model is known as one-way fixed effects model (Case 2). However, the intercept can differ over time as well due to factors like changes in government regulations and/or tax policies and external effects such as wars or other conflicts. The model allows the intercept to vary across countries as well as time, but presume that the slope coefficients are constant across countries and over time. This type of model which allows intercept to vary over time (time variant) and across countries is known as two-way fixed-effects model (Case 3). To compare between pooled OLS, one-way fixed-effects and two-way fixed effects, pooled regression model is used as the baseline for comparison. A high value of F statistic with lower value of p rejects null hypothesis that there is fixed-effects in the specific model and thus fixed-effects model is better estimator than pooled OLS. If null hypothesis cannot be rejected, pooled OLS is better estimation than fixed-effects. Few characteristics of some countries may be considered unique to those countries and similarly few years may also be considered to be special, however, the reasons for this difference can be random. To address this kind of country-specific and time-specific heterogeneity we estimate random-effects model (Case 4 and Case 5). Case 4 and 5 are different in the sense that while case 4 considers randomness of intercepts across countries, case 5 allows randomness of intercepts across countries and over time.
minimize the bias that might result in pure time-series and pure cross-section studies. Also the study of repeated cross-section of observations, panel data are better suited to study the dynamics of change which will enable to study more complicated behavioral models. In regard to this paper, to capture and measure the effect of press freedom on corruption for all country, the employment of panel data is the most appropriate. Another usefulness of panel data is that it provides more informative data, more variability, less collinearity among variables, more degrees of freedom and more efficiency. In a nutshell, it can enrich empirical analysis in ways not possible in case of crosssection or time-series data.
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RESULTS AND INTERPRETATION Regression Results for All Countries: The results of the estimates of the main model represented by equation are presented below, which shows the regression results for all countries. Table 3: Panel Estimation for All Countries (Dependent Variable: ln (1+CORP)
Cases Case 1 Case 2 Case 3 Case 4 Case 5 Constant 0.972(0.406) -1.310(0.879) 1.865(1.14) -1.658(1.20) 1.238(0.83) ln PCGDP -0.174(2.46)* -0.181(2.66)* -0.164(0.49) -0.196(3.31)* -0.349(1.12) OPEN -0.008(2.93)* -0.004(2.74)* -0.005(1.98)* -0.001(0.63) -0.001(0.53) DEM 0.089(2.03)* 0.067(1.08) 0.174(4.11)* 0.188(4.54)* 0.106(1.96)* PRIM -0.001(0.73) 0.005(1.32) 0.003(0.74) 0.003(0.98) 0.001(0.52) PFREE -0.19(5.37)* -0.18(5.16)* -0.16(2.26)* -0.18(2.76)* -0.06(2.18)* Specification Test n.a. F= 24.29, p-value= 0.00 m= 18.03, p-value= 0.00 m= 15.77, p-value= 0.00
F= 23.56, p-value= 0.00
From Table 3, it is clear that no matter which panel estimation we use, freedom of press has significant negative impact on corruption. Except Case 5 (which is two-way random-effects estimation), on average media freedom reduces corruption by 18% given the economic size of countries. This shows the importance of media freedom in reducing corruption for a country. The table shows that per capita GDP (PPP) has negative relationship with corruption in all five cases which coincides with our hypothesis that higher the per capita GDP (PPP), higher will be the socio-economic development and lesser will be the degree of corruption in a country. Openness shows negative relationship with corruption in all the panel cases which is consistent with our hypothesis. However, they are found statistically insignificant in random-effects model. In the same way, lack of democracy (DEM) appears to be positively related to corruption and they are also highly statistically significant in all the panel cases except one-way fixed-effects model. Finally, primary school enrollment rate (PRIM) shows negative association with corruption in only pooled OLS. But since there are found statistically insignificant, we have to ignore its effect on corruption. Table 3 also provides results for specific tests conducted by F-test and Hausman test. High Fstatistics of 23.56 (in case of one way fixed-effects) and 24.29 (in case of two-way fixed-effects) at 5% significance level associated with zero p-value rejects the null hypothesis that fixed effects estimation is not efficient. In relation to Hausman specification test, m-statistics of 18.03 and 15.77 for one-way and two-way random-effects respectively at 5% significance level corresponds to pvalue of 0. Since p-value is lower than the 5% significance level, we can reject the null hypothesis of no correlation between the error term and the regressors. Thus, we can conclude that two way fixed-effects is better estimation method than both one way and two way random effects. It is to mention that Goswami (2004) did a similar research for 111 countries over the period 19942000 and concludes freedom of press or media lowers corruption by 20% after controlling for the economic size of countries. This paper controls more variables and checks the robustness across different groups of countries and reestablishes the thesis that more press freedom lower corruption.
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Regression results of the main model for Non-OECD countries are presented below: Table 4: Panel Estimation for Non-OECD Countries (Dependent Variable: ln (1+CORP))
Cases Case 1 Case 2 Case 3 Case 4 Case 5 Constant 4.720(5.14) 1.920(3.00) 2.671(3.89) 2.487(4.21) 3.022(4.89) ln PCGDP -0.089(0.45) -0.321(2.48)* -0.159(1.15) -0.306(2.48)* -0.191(1.47) OPEN -0.002(4.64)* -0.001(0.10) 0.001(0.37) -0.001(2.15)* -0.001(1.99)* DEM 0.023(1.36) 0.039(1.58) 0.055(2.16)* 0.043(2.52)* 0.047((2.75)* PRIM -0.003(3.87)* -0.001(0.70) 0.001(0.20) -0.001(0.84) -0.001(1.10) PFREE -0.283(2.06)* -0.307(1.99)* -0.21(2.14)* -0.281(2.05)* -0.25(4.51)* Specification Test n.a.
F= 19.09, p-value=0.00 F= 19.07, p-value=0.00 m=8.73, p-value=0.12 m= 6.32, p-value=0.27
The result shows the immense importance of media freedom in curbing corruption in Non-OECD countries. The extent of the impact of media freedom can be amounted to 25% on average given the economic size of countries. The slope coefficient of the control variable per capita GDP (PPP) and lack of democracy signify negative relationship with the level of corruption in all the panel models. Per capita GDP (PPP) was found statistically significant in case of one-way fixed and random effects and lack of democracy was found statistically significant in two-way fixed and random-effects. The coefficient of openness and primary school enrollment rate in Case 3 did not match with our hypothesis. Other than that, in all other cases the expected sign of both these coefficients match with our hypothesis. Openness is found as statistically significant in pooled OLS and random-effects while primary school enrollment rate was found as significant in only pooled OLS, thus again we have to ignore its effect on corruption. The specification result tells us that fixed-effects are preferred to pooled OLS as the obtained p-value is 0.00 for F test. However, Hausman specification test suggests that random-effects is preferable to fixed-effects for Non-OECD countries. The reason for this finding is probably the nature of sample in that all Non-OECD countries are not covered in the data set. Regression results for OECD countries: Taking only the OECD member countries, the regression results of the main model is demonstrated in Table 5. Table 5: Panel Estimation for OECD Countries (Dependent Variable: ln (1+CORP)
Cases Case 1 Case 2 Case 3 Case 4 Case 5 Constant -7.258(0.59) -17.23(1.85) 10.46(0.83) -22.86(2.97) -4.744(0.48) ln PCGDP 0.226(0.78) 0.369(1.80) -0.213(079) 0.155(3.13)* 0.108(0.52) OPEN -0.004(2.03)* 0.017(1.21) -0.004(0.24) -0.002(0.34) -0.005(0.82) DEM 0.090(2.29)* 0.508(3.87)* 0.243(5.42)* 0.547(2.62)* 0.466(2.39)* PRIM 0.038(2.26)* 0.019(1.06) 0.028(1.58) 0.023(1.42) 0.028(1.71) PFREE Specification Test n.a. F=13.72, p-value=0.00 F=13.81, p-value=0.00 m=6.773, p-value=0.238 m=6.870, p-value=0.2305
-0.45(2.20)* -0.25(2.29)* -0.20(3.06)* -0.35(2.18)* -0.15(5.78)*
Note: Figures in the parenthesis represents the absolute value of t-statistics. F represents F-statistics that is used to choose between the OLS and fixed-effects model, and m represents Hausman specification test that is used for choosing between fixed-effects and random-effects. * means the coefficient is significant at 5% significance level.
Regression Results for Non-OECD Countries:
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The importance of media freedom is supported for OECD countries. The result shows that on average, press freedom can lower corruption by about 30% after controlling for the economic size. The coefficients of the lack of democracy have strong linkage with corruption, which are also significant in all the panel cases. This goes with our hypothesis that higher the lack of democracy in an OECD member country, higher will be the degree of corruption. In case of per capita GDP (PPP), lnPCGDP have positive relationship with corruption in case 1, 3, 4 and 5 while it has negative relationship in case 2. However, its insignificant slope directs us to overlook its impact on corruption. A possible reason for this might be that since OECD countries have already achieved higher economic growth, per capita GDP is not essentially a component as a means to lower perceived level of corruption experienced in these countries. The variable openness shows negative relationship with corruption in four of the five cases, although it is only statistically significant in case of pooled OLS. Finally, the variable primary education enrollment rate shows positive association with corruption in all the five cases, although it is statistically significant in only pooled OLS. F-test statistics suggest that fixed effects is a better estimation method than pooled OLS while Hausman specification test shows that one-way random effect is a better estimation method than fixed effects at 5 % significance level. In general we may argue that even though different types of specification are found to be appropriate for different set of countries our main proposition is supported in most of the cases. CONCLUSION Corruption is a major obstacle for most of the countries around the world and information is a key ingredient in the policy making process. Since media plays a central role in transmitting information to the mass population, it can be said that media reporting influences economic and political processes and outcomes significantly. Being one of the main sources of information, media raises public awareness on corruption, its causes, consequences, and possible remedies in addition to investigating and reporting incidences of corruption. However, the effectiveness of media depends on access to information and freedom of expression as well as a professional and ethical cadre of investigative journalists. Press freedom is notable among all the determinants of corruption discussed in this paper. In fact, empirical evidence shows that there is a strong association between the level of press freedom and the level of corruption. Thus this paper adds to the existing literature of press freedom and its impact on corruption by drawing data on corruption and media freedom for 4 years and 120 countries in a panel framework. We find that freedom of press or media freedom plays considerable role in controlling corruption irrespective of the level of economic development of a country, openness, democratic situation etc... From the results we can conclude that freedom of press lowers corruption by 18% for all countries, 25% for Non-OECD countries, and 30% for OECD countries. Therefore, it is evident that governments must provide significant importance to press freedom in order to curb corruption. 1. 2. The words press and media has been used interchangeably in this paper. This means freedom of press also implies media freedom in this paper. Freedom House (2004) uses the same approach in rating countries based on press freedom This index covers both the print media and broadcast media.
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Ades Alberto, Tella Rafael D (1999). Rents, competition, and corruption. American Economic Review 89(4): 982-993. Baltagi Badi H. (1995). Econometric Analysis of Panel Data, New York: John Wiley & Sons Ltd. Bardhan P. (1997). Corruption and Development: A Review of Issues. Journal of Economic Literature 35 (3): 1320-1346. Bliss, Cristopher, Di Tella Rafael (1997). Does Competition Kill Corruption? Journal of Public Economy 105 (5): 1001-23. Brunetti A., Weder Beatrice (2003). A free press is bad news for corruption. Journal of Public Economics 87: 1801-1824. Chowdhury Shyamal K. (2004). The Effect of Democracy and Press Freedom on Corruption: An Empirical Test. forthcoming in Economic Letters. Dollar, D., Fisman R., Gatti, R. (1999). Are Women Really the Fairer Sex? Corruption and Women in Government. Policy Research report on Gender and Development, Working Paper Series, (4). Development Research Group. World Bank. Djankov S., McLeish C., Nenova T., Shleifer, A. (2001). Who Owns The Media? National Bureau of Economic Research. NBER Working Paper Series. Fishman R., Gatti R.(2002). Decentralization and Corruption: Evidence across countries. Journal of Public Economics 83(2): 325-345. Freedom House (2004), Index of Economic Freedom, www.freedomhouse.org Goswami Gour G. (2004). Does Media Freedom Curb Corruption? Paper Prepared for presentation at the XV Biennial Conference Bangladesh in the 21st Century: The Political Economy Perspectives of the Bangladesh Economic Association, Institution of Engineers. Keefer P., Knack St. (1996). Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Measures. Economics and Politics, VII, 207-27. La Porta R., Lopez-de-Silanes F., Shleifer A., Vishny R.W. (1997). Trust in large organizations. American Economic Association Papers and Proceedings 87 (2): 333-338. Lambsdorff, J. G. 1999. Corruption in Empirical Research- A Review. TI Working Papers. Transparency International Working Paper. Lee R. (1986). Bureaucratic corruption in Asia: the problem of incongruence between legal norms and folk norms. In Carino, A. (Ed.) Bureaucratic Corruption in Asia: Causes, Consequences, and Controls. NMC Press, Quezon City. Mauro Paolo. (1995).Corruption and Growth, Quarterly Journal of Economics 110 (3): 681-712. Political Risk Services, International Country Risk Guide. Rijckeghem Caroline V., Weder B. (2001). Bureaucratic corruption and the rate of temptation: do wakes in the civil service affect corruption, and by how much? Journal of Development of Economics Vol. 65: 307-331. Sen A. K. (2000). Development as Freedom, Oxford University Press, New Delhi. Serra D. (2006). Empirical determinants of corruption: A sensitivity analysis. Public Choice, 126: 225-256.
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Shleifer A. (1997). Government in Transition. European Economic Review. 41(3): 385-410. Shleifer Andrei, Vishny Robert. (1993). Corruption. Quarterly Journal of Economics 108(3): 599617. Stapenhurst R. (2000). The Medias Role in Curbing Corruption. World Bank Institute, Working Paper. Sung H.(2003). Fairer Sex or Fairer System? Gender and Corruption Revisited. Social Forces 82(2): 703-723. Tanzi V. (1994). Corruption, Governmental Activities and Markets. IMF Working Paper 94 / 99. International Monetary Fund, Washington, D.C. Treisman Daniel, (2000). The causes of corruption: a cross-national study. Journal of Public Economics 76(3): 399-457. World Bank. World Development Indicator CD-ROM 2004, D.C., Washington.
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OECD Australia Austria Belgium Canada Czech Republic Denmark Finland France Greece Hungary Iceland Ireland Italy Japan Korea Republic Luxembourg Mexico Netherlands New Zealand Norway Poland Portugal Spain Sweden Switzerland Turkey United Kingdom United States
Non-OECD Albania Algeria Angola Argentina Bahamas Bahrain Bangladesh Bolivia Botswana Brazil Brunei Darussalam Bulgaria Burkina Faso Cameroon Chile China Columbia Congo Dem Congo Rep. Costa Rica Cuba Cyprus Dominican Republic Ecuador Egypt El Salvador Ethiopia Gabon Gambia Ghana Guatemala Guinea-Bissau Guyana Haiti Honduras Hong Kong India Indonesia Iran Iraq
Non-OECD
Non-OECD
Israel Suriname Jamaica Syria Jordon Taiwan Kenya Tanzania Korea Dem Peoples Republic Thailand Kuwait Togo Lebanon Trinidad & Tobago Liberia Tunisia Libyan Arab Jamahiriya Uganda Malawi UAE Malaysia Uruguay Mali Venezuela Malta Viet Nam Mongolia Yemen Morocco Zambia Mozambique Zimbabwe Myanmar Namibia Nicaragua Niger Nigeria Oman Pakistan Panama Papua New Guinea Paraguay Peru Philippines Qatar Romania Russian Federation Saudi Arabia Senegal Sierra Leone Singapore Slovakia South Africa Sri Lanka Sudan
Appendix 1. List of Countries
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6 GLOCALIZATION: A THEORETICAL
ANALYSIS
Mohammad Shamsuddoha Assistant Professor Department of Marketing Studies and International marketing University of Chittagong This paper examines the evolution and transformation of the concept of glocalization which has come from the root of globalization. The paper will also trace the history and the development of the concept of glocalization, which originated in Japan as a popular business strategy. The paper examines in broad terms, concepts, theories and principles of glocalization in business perspectives. The paper wants to focus on the epistemological analysis of the glocalization themes. The article also provides a discussion on the importance of well-defined concepts and approaches used by scholars and by practitioners in various contexts. The discussion focuses on and demonstrates through the globalization of business activities and the term global strategy. The widespread use of popular jargon cannot cover the fact that a genuine or true global strategy approach appears to be a managerial viewpoint. The terms glocal strategy and the glocalization of business activities are introduced to enhance the accuracy of the present usage by scholars and by practitioners of the term global strategy and the phenomenon often described as the globalization of business activities. Keywords: Globalization, Glocalization, Localization INTRODUCTION Acombination of the words globalization and localization usedto describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market. This means that the product or service tailored to conform to local laws, customs or consumer preferences. Products or services that are effectively glocalized are, by definition, going to be of much greater interest to the end user. Yahoo! is an example of a company that practices glocalization. It markets a portal that is viewed worldwide and offers different versions ofits website (and related services) for different users. For example, it provides content and language variations in some 25 countries including China, Russia and Canada. It also customizes content to appeal to individuals in those locations. Anumber of both public and private companies currently practice glocalization in an effort to build their customer bases and grow revenues (http://feeds.investopedia. com). It would be extremely difficult to identify who used the term globalization for the first time. According to Malcolm Waters (1995) whose book titled Globalization is a fine primer, Roland Robertson was one of the early users of the term. More recently, Roland Robertson and Kathleen White edited Globalization: Critical Concepts in six volumes is a tour de force, which present some of the most important essays on this subject. No matter who coined it first, at the dawn of the 21st century globalization as a concept, as a slogan, as a term is used more frequently than any other terms. In Singapore, from the inflow of foreign capital, technology, workers or foreign talents, music, movies, popular culture, almost everything has resonance with globalization. Globalization
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OBJECTIVES OF THE STUDY The research pursued the following objectives: 1. To examine the glocalization concepts in various aspects; 2. To confer the prerequisites, core value and policy matter for glocalization; 3. To identify the principles of globalization in the light of business challenges ; METHODOLOGY OF THE STUDY The study has covered various literatures on globalization, localization, glocalization and internationalization of trade based on USA. UK and other developed countries like the European Union countries. A Library research method (Archive) has been used in this study. Different books, journals, periodicals and online papers have been observed by the researcher to find out different issues in global business dimensions in this connection. Mostly secondary data has been compiled in this study and this data has been collected from focused countries literatures, textbooks, e-journals, government publications etc. EVOLUTION OF THE CONCEPT GLOCALIZATION According to the dictionary meaning, the term glocal and the process noun glocalization are formed by telescoping global and local to make a blend (The Oxford Dictionary of New Words). According to Wordspy, glocalization means, the creation of products or services intended for the global market, but customized to suit the local cultures (http://www.wordspy.com/words). If one takes a long-term view of globalization, locality or local itself is a consequence of globalization. Hardly, any cultures can be seen as isolated or unconnected from the global processes. Robertson, one of the pioneers in the study of globalization, did not view globalization as a recent phenomenon nor did he see it because of modernization. The globalization of business activities and the term global strategy emerged in the early 1980s. Levitt (1983, p. 92) is often considered as the first to recognize the trend towards globalization and states that: Companies must learn to operate as if the world were one large market ignoring superficial regional and national differences. In addition, he argues that the companies that do not adapt to the new global realities will become victims of those that do. Jeannet and Hennessey (1992) argue that there are various factors limiting the global strategy approach and the globalization of business activities. For example, they refer to market characteristics, industrial conditions, marketing institutions, and legal restrictions. Robertson conceptualized globalization in the twentieth century as the interpenetration of the universalization of particularization and the particularization of universalism (Robertson, 1992:100 emphasis in the original). Khondker (1994) building on Robertsons framework argued that globalization or glocalization should be seen as an interdependent process. The problem of simultaneous globalization of the local and the localization of globality can be expressed as the twin processes of macro-localization and micro-globalization. The idea of a society managed by the mechanism of the free and voluntary trade, of an economic integration to a planetary level, is not born with our short experience of globalization, which has been wasted for his greatest part in the 90s. Instead, this idea, takes his origin from the classic economic thinking, as well as the
is a heroic process. globalization is a sinister process, depending on which side of the debate one stands. Some tend to see globalization as a brakeless train crushing everything in its path, others see benefit in getting on board the train towards economic growth and modernization.
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effective economic integration, based on market, was already advanced one hundred years ago, before undergoing a great regression (Harold, 2001); other episode of economic integration of big areas, build on different bases, broken by periods of de-globalization, have taken place in the human history, and it can demonstrate that this alternance is possible (Arrighi, 2000). In the last years, we have known a new economic, political and cultural process, called globalization, which is universally known like a new stage of capitalistic system, a new capitalism (Simmonds et al., 2000; Sklair, 2001). The globalization is an economic phenomenon, that conditions especially economic integrations, but it makes also problems for many cultures around the world, because there is incompatibility between human relationships and the extreme exploitation of resources and the maximization of the concept of competitiveness on liberalized markets (Boyer et al., 1996). It is possible to refer to a product as being internationalized if it has been developed to meet most of the needs of an international community, but not customized to a specific region. The customization to a specific region is called localization (Robertson J. C., 1999). Glocalization (a neologism of globalization and localization) has emerged as the new standard in reinforcing positive aspects of worldwide interaction, be it in textual translations, localized marketing communication, sociopolitical considerations, etc. Its decorum is to serve a negotiated process whereby local customer considerations are coalesced from the onset into market offerings via bottom-up collaborative efforts. Cultural, lingual, political, religious and ethnic affiliations are simultaneously researched and integrated into a unified holistic solution. In this manner, the intended market is given a stake in the overall process and not just the mere end result (Sassen, 2000). However, in the end what is needed is a set of globally valid concepts that will help us examine processes of social transformation that is inextricably connected with global transformation (Khondker, 1994; Castells, 1998; Wade, 1996). Defining globalization as transnational, transregional processes which affects a wide number of local communities, area studies scholars perhaps failed to recognize the importance of global forces because they misconstrued the geography of cultural areas. (http://www2.hawaii.edu). Macro-localization involves expanding the boundaries locality as well as making some local ideas, practices, institutions global. The rise of worldwide religious or ethnic revivalist movements can be seen as examples of macro-localization. Microglobalization involves incorporating certain global processes into the local setting. Consider social movements such as the feminist movements or ecological movements or consider new production techniques or marketing strategies, which emerge in a certain local context and over a period these practices spread far beyond that locality into a larger spatial and historical arena. Consider print industry or computer industry with a specific location of its emergence has now become a global phenomena. Overcoming space is globalization. In this view of globalization, globalization is glocalization. Glocalization, however, is radically changing that reality. Increasingly those who leave can return home and maintain the ties of family and nationality that used to characterize them (http://www2.hawaii.edu/fredr/diacon). PREREQUISITES FOR GLOCALIZATION Every concept has some fundamental prerequisites that assure its follower who follow this concept for his own interest. According to glocal forum (www.Glocalforum.org), the prerequisites for glocalization are as follows:1. Reform of traditional diplomacy 2. Peace and development 3. Centrality of cultural issues 4. Municipal governance
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CORE VALUES IN THE GLOCAL WORLD As per The Christian Book Summaries, a new world brings with it new values. These values both good and bad form new cultures. Here is a sample list. 1. Syncretism: pulling together the best ideas from a wide array of thoughts to formulate a new ideology 2. Hedonism: a belief that everything is relative; there are no absolutes 3. Pragmatism: placing value on what works, produces, and sells 4. Collaboration: many people working together in many networks to achieve common objectives For the moment, it may be worth considering a few actions carried out by the Glocal Forum as part of an awareness-raising policy of, such as: 1. Advocacy of a glocal perspective among international organizations, governments, private enterprises, trade unions and financial institutions; 2. Spreading the vision and the approach of glocalization among local authorities and civil societies; 3. Promoting a pro-urban culture, while bearing in mind the serious problems affecting cities, and indeed trying to help solve them, as part of a process of integration between urban and rural areas; 4. Implementing a communication strategy, integrated with forms of networking, in order to bring various publics or targets such as youth, women, businessmen, professionals, members of volunteer organizations in touch with the glocalization project, while keeping to a wider action directed at the world public opinion, clearly in collaboration with the media. THE PRINCIPLES The identification of glocalization principles is another outcome of CERFEs study on the glocal approach. In particular, they emerge from the analysis of the glocal vision in relation to other alternative visions. In this regard, some prominent differences among these positions can be identified, pertaining, for example, to the tendency shared by most international aid policies to keep development programs and peace-oriented initiatives separate. In the glocal approach, this separation is an anomaly to be rectified. Another difference concerns the widespread attitude to flatly oppose global to local because of holding international market rather local market. Most countries are concerned about balance of payment instead of stable growth of internal or local market. There are many diverging opinions on this issue since some experts continue to perceive the urban condition in a very negative way. For these actors, glocalization could be a real, new prospect, being characterized by some extrinsic features to be viewed as expressions and effects of the glocal vision and namely:
5. Resource management 6. Civil society and democratization 7. Public funds 8. Private resources 9. Financial mechanisms 10. Innovative sectors 11. Capacity building
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1. Universal nature of the glocal proposal, addressed to actors of both developed and developing countries, based on equal and not conflicting relationships. 2. Concreteness, emerging from its rejection of any ideology and from its tendency to assess the results of policies and actions in relation to their effects on the stakeholders lives; 3. Mobilize human energy, above all within the local civil societies, but also by spurring de-bureaucratized public administrations, socially-oriented enterprises, volunteers and individuals towards glocal action; 4. Sustainability, owing to its double orientation to use both public and private resources and to exploit both local and global opportunities, also referring to powerful political and economic actors; However, the real strength of the glocal proposal and perhaps its very appeal lies in its intrinsic and content related features. In order to account for this aspect, a glocalization ideal map has been developed through the research, from which a first set of principles listed below: 1. The importance of local actors: The first element making up the glocalization vision is the full recognition that the actors and social relations at local level have acquired crucial importance for development and peace. Often it is the agency of the local actors, their assessment of local problems and needs, their knowledge, their attitude to exercise governance over issues that affect them directly that makes the difference in terms of success or failure in development programs. The same is true for the effects that the quality of social relations at the local level have on peace-building and pacification strategies. Nevertheless, the relevance of this kind of actors is no longer limited to the locality. They are showing an unexpected capacity to interact with and influence actors of higher levels in the global arena, be they States, international agencies or even global corporations. It is this attitude of local actors that makes the glocalization approach realistic and able to provide unprecedented concreteness to peace and development strategies. Among the new actors, one should not underestimate the role of youth, whose contribution of imagination and orientation to the future is essential to the glocal vision and women, whose capacity to play a leading role in development strategies and peace building has been demonstrated repeatedly in these last decades. 2. The war/poverty nexus: At the core of the glocal approach, there is the assumption that the most destabilizing factor of the current world crisis is the vicious circle poverty/endemic war, proliferation of conflicts and spread of violence. Situations of war and conflict, and the culture which derives from and fosters them, tend in fact to go beyond their place of origin and to attain global dimensions while threatening the overall stability of the international community. In this perspective the entry point of glocalization to tackle this circle is not so much the issue of conflict resolution (which is under state responsibility), but peace building in connection with development. 3. Mainstreaming peace building: In the glocalization perspective, peace building is no longer regarded as a sectoral policy, but is seen as a central axis of any development strategy. This entails the drive to give concreteness and content to peace, by making peace dividends take root at local level, while mobilizing local actors to take the new opportunities offered and build a social, economic and cultural regime that is as consistent and self-sustaining as that of war.
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4. The link between stability, poverty-reduction, and development: It is now generally recognized that poverty reduction is not so much an outcome of, but a prerequisite for
5. The role of the city: Cities are the place where civil societies are emerging with more strength and where their relations with governing and administrative bodies are more direct. They are also engines of economic growth, centers of cultural and intellectual innovation and privileged arenas for social empathy and change as well as institutional reform. They can, thus, be considered as the most relevant social units for glocalization strategies including people-to-people cooperation, preventive diplomacy and cross-border relationships for the fight against poverty and in order to promote sustainable development and peace. 6. Governance: The glocalization effect could ultimately contribute to a more pluralistic and integrated governance of globalization, striving to correct the shortcomings of market dynamics vis--vis social and economic inequalities. This entails a double movement: on the one hand, bringing the benefits of globalization to local levels; on the other supporting and empowering local realities so that they can contribute with their perspectives, options and demands to the global decision-making process. 7. The use of global knowledge: The movement towards glocalization is strengthened by the characteristics of the knowledge society. These include increased circulation of knowledge, communication and peer-to-peer learning, and the possibility to insert local actors and organizations into global communication circuits. This can enhance the practice of a real multiculturalism, in which local players and their cultures, far for being depressed and nullified, can access the global arena and find ways of cross-fertilizing each other. CONCLUSION Different countries development experience, which underpinned by appropriate science and technology policies, provides a convincing example of the effectiveness of glocalization as a conscious development strategy. Although the strategy was not always perfect and there were lapses from time to time but generally, it has shown that cultural fusion can be an asset if properly harnessed for the objective of attaining socioeconomic growth without creating gross inequality and social dislocation. The sociological concepts of globalization in general and glocalization in particular can be of great value in understanding the dynamic social transformation in Southeast Asia, especially in Singapore and Malaysia. It is always possible to carry away with methodological nationalism, a position that says each country or society should be examined in light of its own context through the devices of its own homegrown methodology. Such a position would lead to intellectual closure foreclosing dialogue and understanding between societies. In the globalized world, such discourses have limited value. Yet, it is important to take the local context and variables and not to fall into the trap of blind imitation or aping of western ideas and concepts. However, in the end what is needed is a set of globally valid concepts that will help us examine processes of social transformation that is inextricably connected with global transformation.
development. The glocal assumptions, however, bring us one step further in pointing out that no serious effort in fighting poverty and achieving sustainable development can ultimately succeed if an adequate degree of stability is not attained at all levels, from local, to global. If the business will be global to local or only local, the poverty issue can be removed as local business will get highest priority than the FDI or Joint ventures. In this way, local focused business can alleviate poverty line of a country as it creates local employment, local expertise, local industry, local methodology and can hold local currency as well. It is the virtuous circle of stability, poverty reduction and development that in the long run can contrast the vicious one of poverty, war and conflict.
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REFERENCES 1. Arrighi G. (2000). Globalization and Historical Macrosociology, in J. Abu-Lughod (ed.) Sociology for the Twenty-First Century: Continuities and Cutting Edges, Chicago University Press, Chicago. 2. Boyer R. and D. Drache (1996). States against Markets: The Limits of Globalization, Routledge, London. 3. Brenner N. (1998). Global Cities, Glocal States: Global City Formation and State Territorial Restructuring in Contemporary Europe, Review of International Political Economy, V.5, No.1, [1-37]. 4. Castells M. (1998). End of Millennium, Blackwell, London. 5. CELE (Centre for Ethics Law & Economics) (2004), SURVEY Q-RES 2003, Responsabilit Etico-Sociale (RES): strumenti per attuarla in azienda, CELE (Centre for Ethics Law & Economics), Carlo Cattaneo University, Castellanza (VA). 6. Harold J. (2001). The End of Globalization: Lessons from the Great Depression, Harvard University Press, Cambridge, Mass. 7. http://feeds.investopedia.com/stockinvesting 8. http://www.Glocalforum.org 9. http://www.wordspy.com/words/ 10. http://www2.hawaii.edu/~fredr/diacon.htm#dimensions 11. Jeannet, J-P. and Hennessey, H.D. (1992). Global Marketing Strategies, Houghton Mifflin Company, Boston, MA. 12. Khondker H.H. (1994). Globalization Theory: A Critical Analysis, Department of Sociology Working Paper, National University of Singapore. 13. Khondker H.H. (2004). Glocalization as Globalization: Evolution of a Sociological Concept, Bangladesh e-Journal of Sociology, V.1, No.2, [12-20]. 14. Khondker, Habibul (1994). Globalization Theory: A Critical Analysis Department of Sociology Working Paper, National University of Singapore. 15. Levitt, T. (1983). The globalization of markets, Harvard Business Review, Vol. 61 No. 3, May/June, pp. 92-102. 16. Ritzer G. (2000). The McDonaldization of Society, Pine Forge, Thousand Oaks, California. 17. Ritzer, G (2000). The McDonaldization of Society, Thousand Oaks, California: Pine Forge, 18. Ritzer, G (2004). The Globalization of Nothing. Thousand Oaks, California: Pine Forge 19. Robertson J.C. and Tallman E.W. (1999). Vector Autoregression and Reality, Federal Reserve Bank of Atlanta, Economic review. 20. Robertson R. and White K. (2003). Globalization: Critical Concepts in Sociology, Routledge, London. 21. Robertson, Roland (1992). Globalization: Social Theory and Global Culture. London: Sage. 22. Robertson, Roland (1983a). Religion, Global Complexity and the Human Condition in Absolute Values and the Creation of the New 23. Robertson, Roland. (1995). Glocalization: Time-space and Homogeneity- heterogeneity, M. Featherstone et al (ed) Global Modernities, London: Sage. pp. 25-44 24. Sassen S. (1999). Servicing the Global Economy: Reconfigured States and Private Agents, in K. Olds et al. (eds.), Globalization and the Asia-Pacific: Contested Territories, Routledge,
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London. 25. Sassen S. (2000). Territory and Territoriality in the Global Economy, International Sociology, V.15, [372-393]. 26. Simmonds R. and G. Hack (2000). Global City-Regions: Their Emerging Forms, Carfax, London. 27. Sklair L. (2001). The Transnational Capitalist Class, Blackwell, London. 28. The Christian Book Summaries, Vol 3, Issues 47, Dec 2007 29. Wade R. (1996), Globalization and Its Limits: Reports on the Death of the National Economy are Greatly Exaggerated, in S. Berger and R. Dore (eds.), National Diversity and Global Capitalism, Cornell University Press, Ithaca and London. 30. Wade, R (1990). Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization, Princeton, N.J.: Princeton University Press 31. Waters, Malcolm (1995). Globalization. London: Routledge World, Volume 1. New York; International Cultural Foundation
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7 Implications of Washington
Consensus: A Case of Social Safety Net in the West Bengal State of India
R K Mishra, Senior Professor and Director, Institute of Public Enterprise, O U Campus, Hyderabad, Andhra Pradesh, India Email : ramkumarmishra@gmail.com
Washington Consensus (WC) made its headway during the initial years of 1980s to bring about globally acknowledged economic reforms in developing countries. WC covered the macro, micro and firm level economy. At the firm level, WC argued for labour adjustments through reduction of personnel necessitated by the introduction of new technologies and other restructuring measures. While advocating for labour adjustments, WC advocated the initiation of the Social Safety Net (SSN) through counseling, retraining, redeployment and retrenchment. India launched its economic reforms in 1991. Public Enterprises (PEs) at the central and the state levels had to also undergo these reforms. This resulted in the labour adjustments of a mass order in an economy characterized by frictional, partial and total unemployment. As in the other parts of the world, such labour adjustments have turned out to be a cause of great discontent and the restructuring and new technology initiatives have found a great deal of resistance by the workers and executives associations in the central and the State Level Public Enterprises (SLPEs). This paper aims at studying the impact of the introduction of new technologies and restructuring initiatives in the case of SLPEs of the State of West Bengal which has been in the forefront of Indias industrial development since its independence. The study dissects the impact of technologization of SLPEs in West Bengal and functioning of its SSN. The study is based on a sample survey of 2000 workers and executives in 27 SLPEs. The survey results point out the in-adequacy of SSN in terms of its conceptualization, process formulation, implementation and corrective mechanism. The affected workers and executives labeled the scheme as disastrous, inadequate. The results of SSN Programme in West Bengal State of India point out that WC with based reforms have very dim prospects to succeed and reforms therefore have to have a human face. Introduction As a part of SSNP, the Department of Public Enterprise, Government of West Bengal, has identified 36 training institutions for training for deployment of Early Retirement Scheme (ERS) employees and their dependence / nominees1. A visit to these institutions reveals that only 31 institutions are active in SSNP training as there was duplication in the case of two institutions and there were no candidates undergoing the training in the case of three institutions. Out of the 31 institutions involved in the training as the spot visits have conducted in the case of 25 institutions (See Annexure 1).
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The ongoing socio economic changes leading to inflationary tendencies render the current retirement benefits inadequate. The declining interest rates of bank deposits which are not in line with the inflation rates and unsafe stock investment opportunities call for higher risk taking capacity for the
The objective and scope of the scheme is to provide opportunities for counseling, retraining and redeployment to the rationalized employees of the State Level Public Enterprises (SLPEs) rendered redundant as a result of modernization, technology up-gradation and manpower restructuring. The aim of retraining of the employees is to reorient them through short duration training programmes to enable them to adjust to the new environment and adopt new avocations after their separation from SLPEs due to ERS or retrenchment owing to closure of the enterprise2. While it may not be possible to commit that the retrenched employees would be provided with alternative employment, yet it is desirable to reorient such employees so that they may engage themselves in income generating activities and take advantage of available opportunities of self-employment. The counseling and training programmes need to be planned in order to equip them with skills and orientation to engage themselves in self-employment activities and rejoin the productive process even after their separation from SLPEs. SSNP aims at giving a reasonable severance package to the workers and provide them counseling and retraining to start life all over again3. SLPEs contribute significantly to the Gross Domestic Product (GDP). Most of SLPEs at present are incurring in losses. It is high time that huge enterprises are restructured to enable them to cope with open market competition. SSNP is a part of this restructuring exercise. Restructuring, downsizing and right-sizing of labor force along with training and retraining is imperative for continued employability. There is a need for a holistic approach to SSNP for industrial workers. Suitable educational, health & unemployment insurance or pension schemes should be part of SSNP4. SSNP has become an integral component of enterprise reform. SSNP is aimed at mitigating the adverse impact of enterprise reform programme on the workers. The programme is addressed to the displaced employees in SLPEs. SSNP has two distinct components: 1. ERS which is essentially aimed at easing impact of job loss by providing severance package 2. Counseling and retraining for redeployment of displaced workers so that over a period they can be integrated into the emerging labour market or become self-employed Retraining is an important component of SSNP. The training institutions play the make or mar role in retraining. On the spot visits were conducted through a structured questionnaire to evaluate the functioning of the 25 training institutions under reference. Effectiveness of Training Institutions A study5 of the training institutions in terms of faculty, infrastructure, machinery and equipment, library facility, training material and approachability was conducted by the study team revealing the following strengths and weaknesses: 11 (44%) out of 25 institutions had excellent faculty support, infrastructure, and machinery and equipment. Eight institutions (28%) were good in terms of excellent faculty support, infrastructure, and machinery and equipment and the rest six institution were found fair on this count
retired employees. The Early Retirement Scheme (ERS) to meet up to family needs of education and marriage of children, a steady monthly income is required. One needs to be detached with career anxieties to preserve good health particularly in case of a retired employee. The lack of steady income creates an emotional trauma for majority of the people whose family needs continue to be demanding.
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There was lack of information about the conduct of the training programmes. Despite the visit of the heads of the training institutions to SLPEs, the number of ERS employees joining the course was not very high. The Ramakrishna Mission Center, Narendrapur, despite their visit to the enterprise could attract only 34 out of 60 ERS employees joined the various offerings Of all the institutions visited, Ramakrishna Mission Centers were found to have the excellent faculty support, infrastructure, and machinery and equipment and library facility. Further, these Centers are also financially very sound and therefore had enough cushion to meet working capital shortage The Traveling Allowance (stipend) of Rs.30/- per candidate per day to attend the training programmes was turned out to be very inadequate by the trainees Some training institutions mentioned about the delayed release of stipend resulting in liquidity crunch hampering training efforts A majority of the candidates undergoing training and also the center in-charges opined that the duration of training for different trades fixed at 96 days was not long enough to acquire proficiency to enhance the effectiveness of the programmes. ERS employees in the age group of 40-55 were found to be lacking capacity to learn the new trades as compared to ERS employees in the age group of 20-39. The nominees of ERS employees in the age group of 20-39 were found to be more receptive than ERS in age group of 40-55. It may be noted that among nominees, the wives sponsored for the courses were found less effective because of their domestic responsibilities The selection of the institutions was done without giving any regard to categorizing all the courses and offerings as skilled and unskilled programmes, faculty availability, presence of adequate infrastructure, etc A majority of the training institutions wanted the prescribed fee of Rs.5000/- per candidate for training to be enhanced as the training kit / process hardly left any margins for them reducing ultimately the appeal for taking up this important job. Further the service tax made a significant dent even in the inadequate package of Rs.5000/It was discerned that the training institutions are following different practices in regard to issuance of certificates after the completion of the course. The certificates issued by some institutions carried the signature and the stamp of the provider institution and the technical education department of the West Bengal whereas, in some cases these details were missing in the certificates The training institutions observed that the number of candidates assigned to them for different courses were inadequate and also the candidates assigned did not come in one or two lots which exposed these institutions to some operational problems ERS employees opting for tourism and travel related training needed grater support from government in terms of financial assistance, marketing and liaison with other departments The government may set up a revolving fund to provide margins to boost self employment option for ERS employees
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Rehabilitation is an important aspect of SSNP programme. Out of 856 candidates completing training, 299 candidates were rehabilitated. This works out to 35 per cent of the candidates having undergone the training (see Annexure 2) About five per cent of the candidates admitted for training dropped out of the courses (see Annexure 2). The placement of the candidates trained required greater attention. The training institutions should have contacted the local industries / merchant houses to intensify the placement activity. SSNP cell should have formulated suitable strategies to strengthen the placement activity. The percentage of attendance in training programmes was in the range of 70-80%. There was a need to enhance the effectiveness of training programme through appropriate changes in the contents by adding a module on personality development and soft skills. The range of training programmes need to be widened and within the help of information obtained from the employment department, employment exchanges and labour market specialists.
Suggestions To make SSNP training more effective: It is suggested that Institutions like Ramakrishna Mission Centers and Advanced Training Institute should be preferred for conducting SSNP programmes There is a need to increase the TA from Rs.30/-. The suggestions offered by the trainees indicated three levels of revised TA (stipend): Rs.60/-; Rs.75/-; Rs.100/-. In our view to reduce the hardships of ERS and inflation, the stipend could be increased to Rs.60/- which ceiling may be reviewed after one year. This hike will enable centers like Ramakrishna Mission Center, Narendrapur to offer the option for residential training programmes within the TA (stipend) range of Rs.60/- per candidate per day. The TA (stipend) should be released in time to prevent any liquidity crunch for the training institutions and also to prevent any dropout on this count The time duration of 96 days should be increased adequately after discussion with center in-charges and faculty for the training programmes. There is a need also to cut the flab in the various courses ERS employees in the age group of 40 55 should be encouraged to nominate their wards in the age groups of 18 29. The non inclusion of wives as nominee will further brighten the prospects for learning While providing counseling for choosing the courses it is suggested that only such ERS employees who hold the bachelors degree could be selected for the courses such as financial accounting, DTP, MS Office, Computer Hardware and Air-conditioning and Refrigerator courses
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The selection of institutions should be done after exercising adequate care and ensuring the presence of adequate infrastructure, competence to conduct specific courses, availability of faculty and the past track record. The institutions providing residential facilities should get an upper hand in selections. The performance of such institutions should be continuously monitored. The fees of Rs.5,000/- per candidate for the training programme needs to be revised to accommodate the component of service tax and the tool kit / service cost such as training material, faculty salaries, raw materials and location for training, etc. The practices with regard to the issuance of certificates need to be standardized and the certification need to be done besides the institution imparting training also by the relevant government agency / department An effort should be made to provide an adequate number of participants for different number of courses to the training institutions and that too in a maximum of 2-3 batches to ensure the viability of such programmes for training institutions ERS employees opting for tourism and travel related training need greater support from government in terms of financial assistance; marketing and liaison with other departments should be extended such support. Public- private-participation could be a better approach in this regard and as such the help of Bengal National Chamber of Commerce and Industry could be sought. The Government may provide escort facilities to those ERS employees who are interested in self employment. Such employees may also be provided accessing the project reports in the shelf of financial institutions. The financial institutions should be directed to liberalize the guaranty and collateral security norms and marginal requirements The government may set up a revolving fund to boost self employment option for ERS employees Adequate steps (e.g., selection of suitable trade, provision for distribution bi-cycles, provision of supplying medicines etc.) may be initiated to minimize the drop outs The rehabilitation efforts need to be strengthened by arranging placements and promoting self employment through a series of policy, financial and non-financial support The module on soft skills should be added to the curricula of all the training programmes. Besides increasing the training appeal, this will also enhance the acceptability of candidates for redeployment and self employment There is a need to diversify the present range of training programmes and for this purpose, it is worthwhile to approach department of employment, employment exchanges and industry. The services sector is booming in India and an assessment of jobs in this sector could be made to enhance the wage and self employment
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WC model of reforms is not suitable for India as revealed by the West Bengal experience of labour adjustments in its SLPEs. Reforms with human face alone could succeed in India. The retraining of workers declared surplus under ERS is a very crucial task to be executed by the training institutions selected for the purpose. A study of 25 training institutions engaged in the retraining of workers under ERS reveals that there were not equal to the task and needed to be reformed themselves6. References 1. Mishra, R K., Public Enterprise, Alternative Economic Survey : India (2005-06), Danish Books, New Delhi, p 134 2. Department of Public Enterprise, (Government of West Bengal, Calcutta), Restructuring the Public Sector in West Bengal : Polices, Practices and Lessons Learnt, 2005, pp27-33 3. Mishra, R K., Lakshmi Kumari Ch, Privatisation and Social Safety Net in Andhra Pradesh : Some Reflections Vol I: No 1, June 2004, Hyderabad p.7 4. Department of Public Enterprise, (Government of India, New Delhi), Public Enterprises Survey 2007-08, Vol I, p 57 5. Mishra, R K., Safety Net Programme Policy Framework in Central and State Public Enterprises : An Analytical Study, The ICFAI Journal of Public Administration, Vol II (2006), pp 7-18 6. Mishra, R K, and Venkataraman P, Evaluation of the Social Safety Net Programme and Tracer Study on Impact of Job Description : Suggestions and Recommendations A Study sponsored by the Department of Foreign and International Development (UK), 2007 Report 1-3
Conclusion
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Evaluation of Training Institutions Engaged in SSNP West Bengal
S No Excellent Good Fair Poor Adequate Inadequate Adequate Inadequate Existing
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Annexure 1
Name of the Training Institute
Faculty
Infrastructure Facilities Floor Space & Class Rooms Machinery & Equipment Facilities Not Existing Library Facilities
Training Material A I.A
Approachability Good Bad
Advance Training Institute
Astik Computers
Bengal National Chamber of Commerce
Bengal Institute of Technology
Centre for Electronic
Essar ITI
Geroge Telegraph Training Institute, Krishnanagar
GHG Softtech Ltd. (Tally Institute)
Indian Council of Small Industries, Baruipur
10
Tally Academy
11
Indian Council of Small Industries Sodepur
12
Ramakrishna Ashram Krishi Vijyan Kendra, Nimpith
S No Excellent Good Fair Poor Adequate Inadequate Adequate Inadequate Existing Not Existing A I.A Good
Faculty
Infrastructure Facilities Floor Space & Class Rooms Machinery & Equipment Facilities Bad Library Facilities Training Material Approachability
13
Ramakrishna Mission Ashram Lok Siksha Parishad, JSS, Narendrapur
14
Ramakrishna Mission Computer Centre, Belur
15
Ramakrishna Mission Computer Centre Saradamath
16
Ramakrishna Mission Shilpamandira Community Polytechnic
17
School of Medical Technology
18
Techno Lab
19
Tollygunge Science Society
20
Zee Interactive Learning System, Gariahat
21
Zee Interactive Learning System, Halisahar
22
Zee Interactive Learning System, Salt Lake
Closed
101
S No Excellent Closed Good Fair Poor Adequate Inadequate Adequate Inadequate Existing Not Existing A
102
Faculty
Infrastructure Facilities Floor Space & Class Rooms Machinery & Equipment Facilities I.A Library Facilities Training Material
Approachability Good Bad
23
Raja Ram Mohan Society for Social Change Closed
24
Indian Council of Small Industries, Kolkata
25 Closed
Ramakrishna Mission Computer Centre, Saradamath
(Source: On the Spot Visits of the Institutes)
Annexure 2
SSNP : Status of Training Activity of the Training Institutions in West Bengal

Admitted 30 19 30 26 21 9 41 76 9 233 15 34 122 9 233 14 31 111 35 8 41 36 11 21 26 1 5 1 3 28 -2 19 30 11 12 9 10 24 49 Completed Continuing Dropped Rehabilitated
S No
Advance Training Institute
Astik Computers
Bengal National Chamber of Commerce
Bengal Institute of Technology
Indian Council of Small Industries Kolkatta
Centre for Electronic
Essar ITI
Geroge Telegraph Trag Institute, Krishnanagar
GHG Softtech Ltd. (Tally Institute)
10
Indian Council of Small Industries, Baruipur
11
Indian Council of Small Industries Sodepur
12
Ramakrishna Ashram Krishi Vijyan Kendra, Nimpith
13
Ramakrishna Mission Ashram Lok Siksha Parishad, JSS, Narendrapur
14
Ramakrishna Mission Computer Centre, Belur
103
S No 47 9 88 101 16 149 105 55 30 Total 1208 55 18 856 86 62 16 85 352 33 56 73 15 9 12 2 19 12 57 47
15
16
17
18
19
20
21
22
23
24
25
(Source: On the Spot Visits of the Institutes)
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Admitted Completed Continuing Dropped Rehabilitated 30 53 20 62 5 9 14 299
Ramakrishna Mission Computer Centre, Durgapur *
Ramakrishna Mission Computer Centre Saradamath
Ramakrishna Mission Shilpamandira Community Polytechnic
School of Medical Technology
Techno Lab
Tollygunge Science Society
Zee Interactive Learning System, Gariahat
Zee Interactive Learning System, Halisahar
Zee Interactive Learning System, Salt Lake
Raja Ram Mohan Society for Social Change
Sarada Math
CHAPTER
BANKING
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BANKING
8 CUSTOMER TRUST VS RELATIONSHIP

MARKETING IN INDIAN BANKING SECTOR
Dr.Gurdip Singh Professor School of Management Studies Punjabi University Patiala 147002 Punjab, India gurdip_batra@yahoo.co.in and Dr. Narinder Kaur Senior Faculty, Govt. Bikram Post Graduate College of Commerce, (Punjabi University) Patiala147001 Punjab, India nk_patiala@yahoo.com TRUST is defined as an implicit or explicit pledge of relational continuity between exchange partners. One of the difficulties here is that Trust is closely related to the concept of loyalty and commitment and such, as might be considered to be the desired outcome of relationship building in consumer market. However, if the consumer is unaware that a relationship is being developed, and has not explicitly cooperated in the process then there is no evidence of trust and commitment on his/her part. Scholars have suggested that marketing relationships are based on the expectations of mutuality of interest with both parties expecting comparable benefits from relationships. The benefits to a firm of developing relationship are well documented. The present study is based on the concept of Trust and its impact on customer relationship marketing in banking sector in India in post liberalization era. The research methodology is based on the empirical data collected from Public Sector Banks, Private Sector Banks and Foreign Sector banks in India for the study. The study has shown that the trust is very strong in Foreign Sector Banks (FSB). This has been developed because of their consistent delivery of quality service. Where as in Private Sector Banks (PVTSB) the quality of service is also improving but the cost of delivering the services are far more as compared to the actual service. Public Sector Banks (PBSB) stand no where in trust because of poor delivery of quality service. Key Words: Trust; Commitment; Loyalty; Relationship Marketing; Banking Sector, Public Sector Banks; Private Sector Banks; Foreign Sector Banks.
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The need to find new sources of revenue is a fundamental requirement for business growth. Developing close, cooperative relationship with customers is more important in the current era of intense competition and demanding customers, than it has never been before. Over the last 30 years, we have moved from a mass-market culture of relatively few products with a limited number of options to a dynamic market where many products may be easily customized to fit the specific requirements of an individual customer. In the past, many organizations depended on personalized service to develop and maintain the loyalty of their customers. As the customers relationship with their supplier has become more electronic, the traditional source of customer loyalty personal service has been impacted. The one-to-one contact with an organization now occurs most often by telephone or on the Internet. Customer Relationship Management (CRM) is one of those business practices which sensible companies have been implementing to some extent for many years but which recently (and more than partly due to the advent of the Internet) has been given a trendy new name. In effect, it is a combination of good business practices, common sense and courtesy. Its a well-known fact that it costs a company dramatically less to retain and grow existing customers than it does to court new ones and this proposition underpins the argument that CRM is one of the most effective and valuable business tools available. Real customer relationships, those that result in the customer feeling a genuine sense of loyalty to the firm, are predicated on a series of satisfying experiences with the company. Relationships are not developed overnight. Until the customer senses some attachment to the company, then no relationship can be said to exist. At best it is a satisfying encounter, which, if it reoccurs often enough, could become a relationship. Thus, relationships are born of successive experiences of customer satisfaction (Barnes 2001). CRM is a strategy used in competitive environments that combines the information, systems, policies, processes, and employees of an enterprise in an effort to attract and retain profitable customers (Menconi 2001). The relative and marked emergence of CRM as a business strategy has radically transformed the way organizations operates. There has been a shift in business focus from transactional to relationship marketing where the customer is at the center of all business activity and organizations are now desperately trying to restructure their processes around the needs of their strategically significant customers. Different scholars defined the Relationship Marketing differently. Perhaps the first definition of Relationship Marketing: Relationship Marketing is a strategy to attract, maintain and enhance customer relationship (Berry 1983). Some recent definitions are: Relationship Marketing refers to all marketing activities directed towards establishing, developing and maintaining successful relational exchanges (Morgan and Hunt 1994). This definition is of special interest since it explicitly is linked to a governance form, i.e. relational exchange. Gronroos offers one long and one short definition: Relationship marketing is to identify and establish, maintain and enhance and when necessary also to terminate relationships with the customers and other stakeholders, at a profit, so that the objects of all parties involved are met, and that this is done by a mutual exchange and fulfillment of promises (Gronroos 1994). CUSTOMER TRUST VS RELATIONSHIP MARKETING The construct of the trust has regained prominence on the marketing agenda in the 1990s following the pioneering work of the 1960s (Rotter, 1967). Examined in the wide setting as discussed by Morgan and hunt (1994) trust has been seen as fundamental to development of loyalty towards retailers (Berry 1995). (Johnson , et al, 1997) said that Rotter 1967 defined trust as a general expectancy held by an individual that the word of another can be relied on. Trust is seen as being of
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INTRODUCTION
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considerable importance in the process of building and maintaining relationships, although it is also recognized as being difficult to manage. Indeed the perspective taken by Oakes (1990) suggests that the act of selling destroys the conditions under which trust can develop. While this perspective may be rather extreme it does highlight the intrinsic conflicts facing individuals who are endeavoring to build trust and at the same time sell products or services. Lindskold (1978), defined the dimensions of the trust as the first dimension of the trust focuses on the objective credibility of an exchange partner, an expectancy that the partners word of mouth can be relied upon. And the second dimension of trust is the extent to which one partner is genuinely interested in the other partners welfare and motivated to seek joint gain. Hill (1990), suggests that the supplier size encompasses the firms overall size and its market share position. Supplier size provides a signal to the buyer that the selling firm can be trusted through a buyer could draw on the experience of others to infer trustworthiness from the supplier size. This suggests that the supplier consistently delivers on its promises to others or it would not have been able to maintain its position in the industry. Bolton and Drew (1991), suggested that the trust primarily involves a calculative process as an individual or organization calculates the cost and/or rewards of another party cheating or staying in the relationship. To the extent that the benefits of cheating do not exceed the cost of being caught, one party confers that it would be contrary to the other partys best interest to cheat and therefore the party can be trusted. Morgan and Hunt (1994), have stressed the multidimensional nature of trust with conceptualization emphasizing both the behavioural aspects (confidence in probity and equity) and cognitive elements (confidence in reliability, and performance satisfaction) of exchange partnership leading to trust. The various elements included in the Probity dimensions are: Confidence, truthfulness, integrity, professional standing and reputation; Equity dimension consists of fair-mindedness, benevolence, caring, values, sincerity and helpful advertising; Reliability dimension consists of warranties, dependability, quality consistency, quality standing, predictability and corporate name guarantee; Satisfaction dimension consists of personal experience, opinion, purchasing duration, the experience of peers and standard of delivery. Further they demonstrate that the relationship between trust and commitment and suggested, (1) that there is positive relationship between relationship termination cost and relationship commitment, (2) There is positive relationship between relationship benefits and relationship commitment, (3) there is positive relationship between shared values and relationship commitment, (4) there is positive relationship between shared values and trust, (5) there is positive relationship between communication and trust, (6) there is a negative relationship between opportunistic behaviour and trust, (7) there is positive relationship between relationship commitment and acquiescence, (8) there is negative relationship between relationship commitment and propensity to leave, (9) there is positive relationship between relationship commitment and cooperation, (10) there is positive relationship between trust and relationship commitment, (11) there is positive relationship between trust and cooperation, (12) there is positive relationship between trust and functional conflict, (13) there is negative relationship between trust and uncertainty. There are number of different methods individuals can use to find out whether potential trustees are trustworthy. Wilson (1994), has empirically proved that the trust building exercise is not very easy. Trust is build up during the course of time. The selection of the supplier is also based on three aspects (1) Delivery performance; (2) relative price/cost; (3) Product /service performance. These aspects depend upon transaction-to-transaction basis between the buyer and the supplier. Lewiciki and Bunker (1995), suggest that predicibility as a source of trust requires not only repeated interaction but also courtship. Courtship behaviour is directed at relationship development-specifically learning more about other party. This suggests that trust grows when two parties share a variety of experiences, thereby improving their ability to predict the other behaviour. Doney and Cannon (1997), suggest the
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capability process of trust involves determining another partys ability to meet its obligations, thereby focusing primarily on the credibility component of trust. Trust also emerges through interpretation and assessment of the other partys motives using internationality process, the trustor interprets the target words and behavior and attempts to determine its intentions in exchange. These intentions can also result when two parties develop shared values and norms that enable one party to understand the other partys objectives and goals better (i.e. what drives their behavior). Further they concluded from the research that the supplier must make significant investment to set up and maintain customer trust. For supplier the value of such effort is most apparent when high levels of buyer trust head to more favorable purchasing outcome for the supplier. The results suggest that though the process of building customer trust is expensive, time-consuming and complex, the outcome in terms of forging strong buyer-seller bonds and enhanced loyalty could be critically important to the seller firm. Barnes (2001), has defined that trust comprises of several critical elements. These are: (1) trust evolves out of past experience and prior action, (2) Dispositional characteristics are attributed to the partner, such as reliability and dependability, (3) trust involves a willingness to put oneself at risk, (4) Trust involves feelings of confidence and security in the partner. SCOPE OF THE STUDY The study relates to the period of Post Liberalization (1991-2001) Era in Indian Economy. Few foreign and Indian studies are available, but these are in the field of Marketing of Services in the Banking Sector. The area of Customer Relationship Marketing in Indian Banking Sector has never been given priority, as this area has always been considered to be non-important. But with the Liberalization of Indian Economy, the competition has crept in. Foreign Sector Banks and Private Sector Banks are giving tough competition to Public Sector Banks in India. Bankers have started thinking that the survival of their business remains in maintaining customers and giving them the best of services, but, still there is no clarity, what type of Banking Services will lead to a satisfied customer that leads to customer retention thus contributing to long term relationship and profits to the organization. How trust and commitment can by realized by the banks from Retail Customers? As the area virtually remains unexplored, hence this project is undertaken. OBJECTIVES OF THE STUDY The objectives of the current study are: 1. To understand concept of Trust and Relationship Marketing in Service Sector. 2. To study the long term Trust level of retail customers in Public Sector Banks (PBSB) in India. 3. To study the long term Trust level of retail customers in Private Sector Banks (PVTSB) in India. 4. To study the long term Trust level of retail customers in Foreign Sector Banks (FSB) in India. 5. To compare the Trust level of retail customers in Public Sector Banks (PBSB), Private Sector Banks (PVTSB) and Foreign sector Banks (FSB). RESEARCH DESIGN OF THE STUDY The research design used in the study is Exploratory and Analytical. It is Exploratory as it probes into the various factors that influence the Trust It also probes the various factors which influence Employees of the banks in providing Quality Service to the Customers thus developing trust and commitment relationship with the Customers and by which the customers can reciprocate the same by loyalty. The study is analytical as it analyses, why the performance of various banks in Indian
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economy are different from the other. The Primary Data is collected from the respondents. The collection of the data is done through questionnaire method. Separate questionnaires are prepared for different respondents. The questionnaires are Non-Disguised and well structured. Close-Ended questions with multiple-choice answers are used. For Attitude measurement in the questionnaire, scaling method is used. The scaling method helps in the measurement of Emotional feelings, beliefs and behavioral responses. The questionnaire is framed and developed through Non-Participant Direct observation as well as Participant Observation method. Also a Few Personal interviews and focused interviews are conducted so that authentic questionnaire can be developed. The Primary Data is collected through Personal Interview method from the respondents. Samples are chosen through Non-probability Sampling method (Judgment sampling and convenience sampling). The Secondary Data used for the study comprised of the various issues of Business Magazines, Annual Reports of the Banks, News Papers, White Papers, Non Published documents etc. THE SAMPLE DESIGN OF THE STUDY The universe of the study consists of the Customers of Two Public Sector Banks, Two Private Sector Banks and One Foreign Sector Bank in Amritsar, Jalandhar, Ludhiana (in Punjab), Chandigarh (U.T) and Dehradun (Uttranchal). In each Bank 50 (Fifty) customers are selected 5 customers each having Saving Bank Account; Current Account; Fixed Deposits; Recurring Deposit; Loan Account; Credit Card; Debit Card; ATM Card; Locker and Foreign Currency Account. In total 750 respondents are selected. The Banks are: Public Sector Banks: Private Sector Banks: Foreign Sector Bank: 1. State Bank of India; 2. Bank of Baroda 1. ICICI Bank; 2. HDFC Bank 1. Standard Chartered Bank
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FRAMEWORK OF ANALYSIS OF DATA The analysis of the data is done after tabulating the collected data. The tabulation of the collected data is very carefully done so as to eliminate the chances of error. In addition to this, the various statistical tools have also been used to sharpen the inferences drawn on the basis of simple description of facts and to analyse the data. Theses are Percentages, Mean of Individual Series and Mean of continuous series, Standard Deviation, Coefficient of variation, weighted Average Score, Spearman Rank Correlation coefficient, Range, Kendall Coefficient of Concordance. A. CUSTOMER TRUST AND RELATIONSHIP DIMENSIONS IN BANKS: Respondents rate Trust as an important indication for developing positive and long term Relationship with the bank. In Table No. 1 (PBSB), 16 items are exhibited and categorized as Full Trust, Marginal Trust, Low Trust, No Trust and Cant Say. The respondents give Rank 1 to Applies Selling Pressure (Wt. Ave. 51.40), Rank 2 is given to Talks First and Listens Later (Wt. Ave. 50.93), Rank 3 is for Paints Rosy Picture of the Product (Wt. Ave. 50.86) etc. The important factors are given the least ranks as Recommends Suitable Products (14) (Wt. Ave. 48.26), Understands Needs (15) (Wt. Ave. 48.06) and Discuss Product Needs (16) (Wt. Ave. 47.73). It is clear from the table that respondents think that PBSB are applying pressure to sell their products. They force customer to buy the products and service.
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SNO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
ELEMENTS OF STUDY Accurate representation of product Discuss product needs Help achieving financial objective Understand needs Have customer interest in mind Adopt problem solving approach Recommend suitable products Applies selling pressure Emphasizes persuasion Forces me to buy product Stretches the truth Talks first and listens later Paint rosy picture of the product No false promises
PREFERENCES FT 35 27 29 26 33 30 29 46 32 33 37 39 41 39 MT 43 43 49 46 42 50 44 44 55 49 52 47 50 51 48 48 LT 63 66 66 67 65 61 65 61 60 62 62 62 61 62 61 59 NT 64 72 66 70 69 67 71 58 60 66 65 65 61 60 58 67 CS 70 67 65 66 66 67 66 66 68 64 63 64 64 65 67 62
WT AVE. 48.93 47.73 49.06 48.06 48.79 48.93 48.26 51.4 49.86 49.86 50.13 50.2 50.93 50.67 50.86 50.67
RANK 11.5 16 10 15 13 11.5 14 1 8.5 8.5 7 6 2 4.5 3 4.5
Agrees to my suggestion only to 34
Conveniences me too much to buy 37
* FT=FULL TRUST, MT=MARGINAL TRUST, LT=LESS TRUST, NT=NO TRUST, CS=CANT SAY; ** WEIGHTS EQUAL TO 5,4,3,2,1,HAVE BEEN ASSIGNED TO FT=FULL TRUST,MT=MARGINAL TRUST, LT=LESS TRUST, NT=NO TRUST AND CS=CANT SAY PREFERENCES RESPECTIVELY TO CALCULATE THE WEIGHTED AVERAGE SCORE; *** WEIGHTED AVERAGE SCORES HAVE BEEN ASSIGNED IN DESCENDING ORDER; S.D. = 1.129 ; C.V. = 2.27% Table No. 2 depicts that respondents are happy with the PVTSB and build Trust with the bank. This is helpful in attaining Relationship management between respondents and the bank. Respondents give Rank 1 to Understanding Needs (Wt. Ave. 76.40), Rank 2 to No false Promises (Wt. Ave. 76.13), Rank 3 to Have Customer Interest in Mind) etc. Respondents have least trust on Talks Firs and Listen Later (14) (Wt. Ave. 71.86), Forces me to Buy Products (15) (Wt. Ave. 70.80) and Applies Selling Pressure (16) (Wt. Ave. 70.40). Respondents feel building Relationships in PVTSB is far easy than building Relationships in PBSB.
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TABLE NO. 2: CUSTOMER VIEWPOINT REGARDING TRUST IN BANKING SERVICES IN PRIVATE SECTOR BANKS (PVTSB) SNO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 ELEMENTS OF STUDY Accurate representation of product Discuss product needs Help achieving financial objective Understand needs Have customer interest in mind Adopt problem solving approach Recommend suitable products Applies selling pressure Emphasises persuasion Agrees to my suggestion only to Forces me to buy product Stretches the truth Talks first and listens later PREFERENCES FT 99 112 111 120 114 112 106 93 114 88 106 113 98 MT 82 77 74 78 83 76 93 82 75 81 81 73 82 73 LT 47 42 49 45 42 47 37 44 37 55 42 41 43 40 NT 26 28 33 17 20 25 25 25 32 32 29 24 29 28 CS 71 66 58 65 66 65 64 81 67 69 67 74 73 77 WT AVE. 72.46 74.4 74.8 76.4 75.6 74.67 75.13 70.4 74.13 70.8 73.66 73.46 71.86 72.67 RANK 13 7 5 1 3 11 4 16 8 15 10 6 14 12
Conveniences me too much to buy 107
15 16
Paint rosy picture of the product No false promises
116 69 113 91
40 37
33 18
67 66
73.93 76.13
9 2
* FT=FULL TRUST, MT=MARGINAL TRUST, LT=LESS TRUST, NT=NO TRUST, CS=CANT SAY; ** WEIGHTS EQUAL TO 5,4,3,2,1,HAVE BEEN ASSIGNED TO FT=FULL TRUST,MT=MARGINAL TRUST, LT=LESS TRUST, NT=NO TRUST AND CS=CANT SAY PREFERENCES RESPECTIVELY TO CALCULATE THE WEIGHTED AVERAGE SCORE; *** WEIGHTED AVERAGE SCORES HAVE BEEN ASSIGNED IN DESCENDING ORDER; S.D. = 1.769 ; C.V. =2.34% Table No. 3, exhibits the response of respondents in FSB. Rank 1 is for Understand Needs (Wt. Ave. 42.20), Rank 2 is for Discuss Product Need (Wt. Ave. 41.67), Rank 3 is for No False Promises (Wt. Ave. 41.27) etc. Adopt Problem Solving Approach (14.5) (Wt. Ave. 38.73) and Talks First and listens Later (14.5) (Wt. Ave. 38.73) are same. Help Achieving Financial Objectives (16) (Wt. Ave. 38.53) is ate the lowest on Trust dimensions. As the respondents in FSB are satisfied they have more trust in FSB and enjoy relationships with the bank.
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TABLE NO. 3: CUSTOMER VIEWPOINT REGARDING TRUST IN BANKING SERVICES IN FOREIGN SECTOR BANKS (FSB) SNO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 ELEMENTS OF STUDY Accurate representation of product Discuss product needs Help achieving financial objective Understand needs Have customer interest in mind Adopt problem solving approach Recommend suitable products Applies selling pressure Emphasizes persuasion Agrees to my suggestion only to please Forces me to buy product Stretches the truth Talks first and listens later Conveniences me too much to buy the Paint rosy picture of the product No false promises PREFERENCES FT 80 95 77 96 86 82 85 81 93 83 87 93 77 81 84 94 MT 27 24 28 26 25 26 24 26 20 24 24 20 28 30 28 20 LT 12 10 13 9 13 10 12 14 12 15 13 11 16 13 12 10 NT 7 3 10 3 6 5 9 7 6 7 7 7 8 8 9 7 CS 24 18 22 16 20 27 20 22 19 21 19 19 21 18 17 19 WT AVE 38.79 41.67 38.53 42.2 40.06 38.73 39.66 39.13 40.73 39.4 40.2 40.73 38.73 39.79 40.06 41.27 RANK 13 2 16 1 7.5 14.5 10 12 4.5 11 6 4.5 14.5 9 7.5 3
* FT=FULL TRUST, MT=MARGINAL TRUST, LT=LESS TRUST, NT=NO TRUST, CS=CANT SAY; ** WEIGHTS EQUAL TO 5,4,3,2,1,HAVE BEEN ASSIGNED TO FT=FULL TRUST,MT=MARGINAL TRUST, LT=LESS TRUST, NT=NO TRUST AND CS=CANT SAY PREFERENCES RESPECTIVELY TO CALCULATE THE WEIGHTED AVERAGE SCORE; *** WEIGHTED AVERAGE SCORES HAVE BEEN ASSIGNED IN DESCENDING ORDER; S.D. = 1.109 ; C.V. = 2.77% B. RELATIVE USEFULNESS OF FACTORS IN TRUST-RELATIONSHIP DIMENSIONS: Table No. 4, 5 and 6 signifies the Relative Importance of the Factors as shown by the respondents yet it will be in the fitness of things to categorize these factors as Full Trust, Marginal Trust, Less Trust, No Trust and Cant say. For this purpose the range method of variation has been used on the weighted average scores. Table No. 4, relates to Relative Usefulness of factors in PBSB. It exhibits 5 factors in Full Trust category. These are Recommend Suitable Products, Talks First and Listens Later Conveniences me too much to buy the product etc. 2 Factors are depicted in Marginal Trust category; 2 factors are in Less Trust category (Emphasizes Persuasion, Agrees to my suggestions only to please me); 4 factors are in No Trust category. These are basic factors on which Service Quality of the bank is dependent. Other 3 items are in Cant Say category as the respondent are neither very satisfied nor very dissatisfied with the factor statements. Hence they play safe regarding these items.
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TABLE NO. 4: RELATIVE USEFULNESS OF STATEMENT DEPICTING TRUST DIMENSION TOWARDS BANKING SERVICES IN PUBLIC SECTOR BANKS (PBSB) Full Trust *Recommend suitable product (48.26) *Talks first and listens later (50.93) *Convinces me too much to buy the product *Paint rosy picture the product (50.86) *No false promises (50.67) Marginal Trust *Forces me to buy products (50.13) *Stretches the truth (50.20) Less Trust *Emphasises persuasion *Agrees to my suggestions please me No Trust *Accurate representation of products (48.93) *help achieving objectives (49.06) *have customer interest in mind (48.79) *adopt problem approach (48.93) Cant Say *Discuss product needs *Understand needs *Apply pressure
Table 5 exhibits Relative usefulness of statements in PVTSB. There are 3 items in Full Trust category and 5 items in Marginal Trust category. These are Understand Needs, Have Customer Interest in Mind etc and in Marginal Trust: Discuss Product Needs, Help achieving Financial Objectives etc. All these statements are very important in building Trust among the respondents of a bank. The respondents have given these statements in Full Trust, Marginal Trust Categories. There are 3 items each in Less Trust and No Trust categories. These are Forces me to buy the product, Stretches the truth etc and Accurate Representations of the Product. Talks First and Listens Later etc. respectively. In Cant Say category there are only two statements (Apply selling Pressure, Agrees to my suggestion only to please me). This applies that respondents in PVTSB are clearer about the vision than respondent of PBSB. Respondents of PVTSB lack trust on the bank as far as the stability and Long life of the bank is concerned but they have full trust in the quality of services delivered are concerned.. TABLE NO. 5: RELATIVE USEFULNESS OF STATEMENT DEPICTING TRUST DIMENSION TOWARDS BANKING SERVICES IN PRIVATE SECTOR BANKS (PVTSB) Full Trust *Understand needs needs (76.40) *Have customer Marginal Trust *Discuss product needs (74.40) *Help achieving financial Less Trust *Forces me to buy product (73.66) *Stretches the truth (73.46) No Trust *Accurate representation of product (72.46) *Talks first and listens Cant Say *Applies selling pressure (70.40) *Agrees to suggestion only to
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interest in mind (75.60)
*No false promises (76.13)
objectives (74.80) *Adopt problem approach (74.67) *Recommend products (75.13) *Emphasises persuasion (74.13)
*Paint rosy of the product
later (71.86) *Conveniences me much to buy the product (72.67)
please me
Table No. 6, exhibits 2 statements in Full Trust category. These are Discuss Product Needs, Understand Needs. There are 3 items each in Marginal Trust, Less Trust and No. Trust. People have trust as the FSB are old and respondents are also having longer experience with the bank. 6 items are there Cant Say category. Respondents are satisfied with the Service Quality of FSB. They have developed Trust between customers and the bank. This is helpful in building Long Term Relationship with the bank. TABLE NO. 6: RELATIVE USEFULNESS OF STATEMENT DEPICTING TRUST Full Trust *Discuss product needs (41.67) *Understand needs (42.20) Marginal Trust *Emphasises persuasion (40.73) *Stretches the truth (40.73) *No false promises (41.27) Less Trust *Have customer interest in mind (40.06) *Forces me to buy product (40.20) *Paint rosy picture of the product (40.06) No Trust *Recommend suitable products (39.66) *Agrees to my suggestion only to please me (39.40) *Conveniences me too much to buy the products (39.79) Cant Say *Accurate Representation of product (38.79) *Help achieving finan. Objectives (38.53) *Adopt problem solving approach (38.73) *Applies selling pressure (39.13) *talks first & listen later (38.73)
C. COMPARATIVE ANALYSIS OF BANKS Table No. 7, 8 and 9 shows the means and ranks of the various statements of Trust by the customers in PBSB v/s PVTSB; PBSB v/s FSB and PVTSB v/s FSB respectively. The tables also show the categorization of the statements in Full Trust, Marginal Trust, Less Trust, No Trust and Cant Say Category. The Spearmans Rank Correlations Coefficient for Table No. 7: PBSB v/s PVTSB is negative (R = - 0.50). It is clear from the fact that there is inverse relationship between the variables
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of Trust among customers in PBSB and PVTSB. The Kendalls Coefficient of Concordance W = 0.182. There is very low degree of similarity between the variables of the two banks. Customers give different ranks to the statements of Trust in PBSB and PVTSB. Customers have more Trust in PBSB. Trust in the PVTSB is almost nil. In PBSB, Apply selling pressure is given rank 1 and Talks first and listens later is given rank 2. Paint rosy picture of the product is given rank 3. In PVTSB, Understand Needs is ranked 1, No false promises is ranked 2 and Have customer interest in mind is ranked 3.Feelings of the customer expressed for PBSB are different from PVTSB. TABLE NO. 7: STATEMENTS DEPICTING TRUST IN PUBLIC SECTOR BANKS VIS--VIS PRIVATE SECTOR BANKS
S.NO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 ELEMENTS Accurate representation of Discuss product needs Help achieving financial Understand needs Have customer interest in mind Adopt problem solving approach Recommend suitable products Applies selling pressure Emphasises persuasion Agrees to my suggestion only Forces me to buy product Stretches the truth Talks first and listens later Conveniences me too much to buy Paint rosy picture of the product No false promises PBSB Category NT CS NT CS NT NT FT CS LT LT MT MT FT FT FT FT WT.AVE. 48.93 47.73 49.06 48.06 48.79 48.93 48.26 51.4 49.86 49.86 50.13 50.2 50.93 50.67 50.86 50.67 RANK 11.5 16 10 15 13 11.5 14 1 8.5 8.5 7 6 2 4.5 3 4.5 PVTSB Category NT MT MT FT FT MT MT CS MT CS LT LT NT NT LT FT WT.AVE. 72.46 74.4 74.8 76.4 75.6 74.67 75.13 70.4 74.13 70.8 73.66 73.46 71.86 72.67 73.93 76.13 RANK 13 7 5 1 3 11 4 16 8 15 10 6 14 12 9 2
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PBSB=Public Sector Bank; PVTSB=Private Sector Bank; Category: FT -Full Trust; MT Marginal Trust; LT - Less Trust; NT - No Trust; CS - Cant Say; The Spearman Rank Correlation Coefficient R = - 0.50, The Kendall Coefficient of Concordance W = 0.182
The Spearmans Rank Correlations Coefficient for Table No. 8: PBSB v/s FSB is negative (R = - 0.22). It is clear from the fact that there is inverse relationship between the variables of Trust among customers in PBSB and FSB. The Kendalls Coefficient of Concordance W = 0.386, which means that there is low degree of similarity between the variables of the two banks. Customers give different ranks to the statements of Trust in PBSB and FSB. Customers have more Trust in PBSB. Trust in the FSB is very low. In PBSB, Apply selling pressure is given rank 1 and Talks first and listens later is given rank 2. Paint rosy picture of the product is given rank 3. In FSB, Understanding needs gets rank1, Discuss product needs and is ranked 2, No. False promises is ranked 3 etc. The feelings of the customers for PBSB are different from FSB. TABLE NO. 8: STATEMENTS DEPICTING TRUST IN PUBLIC SECTOR BANKS VIS-VIS FOREIGN SECTOR BANKS
S.NO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 ELEMENTS Accurate representation of Discuss product needs Help achieving financial objective Understand needs Have customer interest in mind Adopt problem solving approach Recommend suitable products Applies selling pressure Emphasises persuasion Agrees to my suggestion only to Forces me to buy product Stretches the truth Talks first and listens later Conveniences me too much to buy the Paint rosy picture of the product No false promises PBSB Category NT CS NT CS NT NT FT CS LT LT MT MT FT FT FT FT WT.AVE. 48.93 47.73 49.06 48.06 48.79 48.93 48.26 51.4 49.86 49.86 50.13 50.2 50.93 50.67 50.86 50.67 RANK 11.5 16 10 15 13 11.5 14 1 8.5 8.5 7 6 2 4.5 3 4.5 FSB Category CS FT CS FT LT CS NT CS MT NT LT MT CS NT LT MT WT.AVE. 38.79 41.67 38.53 42.2 40.06 38.73 39.66 39.13 40.73 39.4 40.2 40.73 38.73 39.79 40.06 41.27 RANK 13 2 16 1 7.5 14.5 10 12 4.5 11 6 4.5 14.5 9 7.5 3
PBSB=Public Sector Bank; FSB=Foreign Sector Bank; Category: FT -Full Trust; MT - Marginal Trust; LT - Less Trust; NT - No Trust; CS - Cant Say ; The Spearman Rank Correlation Coefficient R = - 0.22; The Kendall Coiefficient of Concordance W = 0.386
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The Spearmans Rank Correlations Coefficient for Table No. 9: PVTSB v/s FSB is positive (R = 0.58). It is clear from the fact that there is direct relationship between the variables of Trust among customers in PVTSB and FSB. According to customers both PVTSB and FSB give top priority to Understand Needs. No False promises is ranked 2 and 3 in PVTSB and FSB respectively. The Kendall Coefficient of Concordance W = 0.786, which shows that there is very high degree of similarity between the variables of the two banks. TABLE NO. 9: STATEMENTS DEPICTING TRUST IN PRIVATE SECTOR BANKS VIS-VIS FOREIGN SECTOR BANKS
S.NO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 ELEMENTS Accurate representation of Discuss product needs Help achieving financial objective Understand needs Have customer interest in mind Adopt problem solving approach Recommend suitable products Applies selling pressure Emphasises persuasion Agrees to my suggestion only to Forces me to buy product Stretches the truth Talks first and listens later Conveniences me too much to buy the Paint rosy picture of the product No false promises PVTSB Category NT MT MT FT FT MT MT CS MT CS LT LT NT NT LT FT WT.AVE. 72.46 74.4 74.8 76.4 75.6 74.67 75.13 70.4 74.13 70.8 73.66 73.46 71.86 72.67 73.93 76.13 RANK 13 7 5 1 3 11 4 16 8 15 10 6 14 12 9 2 FSB Category CS FT CS FT LT CS NT CS MT NT LT MT CS NT LT MT WT.AVE. 38.79 41.67 38.53 42.2 40.06 38.73 39.66 39.13 40.73 39.4 40.2 40.73 38.73 39.79 40.06 41.27 RANK 13 2 16 1 7.5 14.5 10 12 4.5 11 6 4.5 14.5 9 7.5 3
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PVTSB=Private Sector BanK; FSB Foreign Sector Bank; Category: FT -Full Trust; MT - Marginal Trust; LT - Less Trust; NT - No Trust; CS - Cant Say; The Spearman Rank Correlation Coefficient R = 0.58; The Kendall Coefficient of Concordance W = 0.786
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It is being realized by the banking sector that Trust is very important for the long term development of the banking business. This also helps in the development of loyalty customers for respective banks. Studies have shown that the trust also reduces the cost of acquiring new customers as it develops committed and loyal customers which give long lasting business for the banks. The study has shown that the trust is very strong in Foreign Sector Banks (FSB). This has been developed because of their consistent delivery of quality service. Where as in Private Sector Banks (PVTSB) the quality of service is also improving but the cost of delivering the services are far more as compared to the actual service. Public Sector Banks (PBSB) stand no where in trust because of poor delivery of quality service. It has taken lead in the trust because the customers think it safer for money than Private Sector banks (PVSB) and Foreign Sector Banks (FSB). There is lot of scope for the improvement in the retail operations of PBSB and PVTSB than FSB. The PBSB should work very hard to provide quality service which would attract huge clientage and would pose challenge for PVSB and FSB. The PVSTB should rationalize the cost of servicing the clients. They should provide value (quality service) to the clients so that they can build trust and command loyalty and commitment from clients. REFERENCES Barnes, J.G. (2001), Secrets of Customer Relationship Management, McGraw Hill Co., New York. Berry, L. L. (1983), Relationship Marketing, in Berry, L.L., Shostack, L.G. and Upah, G.D. (Eds.) Emerging Perspective on Services Marketing, American Marketing Association, Chicago, IL, U.S.A., pp 25-28. Berry, L.L (1995), Relationship Marketing of Services Growing Interest, Emerging Perspectives, Journal of Academy of Marketing Science, Vol.23, No. 4, pp 236-245. Bolton, R.N. and Drew, J.H. (1991), A Multistage Model of Customer Assessment of Service Quality and Value, Journal of Consumer Research, Vol. 17, No. 4, pp 375-384. Doney, P.M. and Cannon, J.P. (1997), An Examination of the Nature of Trust in Buyer-Seller Relationships, Journal of Marketing, Vol. 61, April, pp 35-51. Gronroos, C. (1994), From Marketing Mix to Relationship Marketing: Towards Paradigm Shift in Marketing, Management Decisions, Vol. 32, No. 2, pp 4-32. Hill, J.J. (1990), Marketing Consumer Banking Services in Poland, Paper Presented to 3rd International Symposium on Management, Tinisoara, Romania. Johnson, L., Cullienl, J.B., Sakano, T. and Takenouchi, H. (1997), Setting the Stage for Trust and Strategic Integration, in Cooperative Strategies, P.W. Beamish and J.P. Killings, (Eds.), Lexington, SanFransisco, pp 227-251. Lewiciki, R.J. and Bunker, B.B. (1995), Trust in Relationships: A Model of Development and Decline, in Conflict, Cooperation and Justice, B.B. Bunker and J.Z. Ruben, (Eds.), Jossey-Bass, San Francisco.
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CONCLUSION
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Lindskold, Svenn. (1978), Trust Development, the GRIT Proposal and the Effect of Conciliatory Acts on Conflict and Cooperation, Psychological Bulletin, Vol. 84, No. 4, pp 772-793. Menconi, Peggy. (2001), Building a Great Customer Relationship Management Strategy, White Paper, AMR-Research. Morgan, R. and Hunt, S. (1994), The Commitment-Trust Theory of Relationship Marketing, Journal of Marketing, Vol. 58, pp 20-38. Oakes, G. (1990), The Sales process and the Paradoxes of Trust, Journal of Business Ethics, Vol. 9, No. 8, pp 671-679. Wilson, D.T. and Jantrania, S. (1994), Understanding the Value of a Relationship, Asia Australia Marketing Journal, 2, No. 1, pp 55-66.
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Mobile Business Services in India A Futuristic Approach

Dr. K. V. M. Varambally Director, Manipal Institute of Management, Manipal. And Dr. P. S. Aithal Director, Srinivas Institute of Management Studies, Mangalore.
Technological progress has enormous significance for the development process of a nation as well as an individual business organization. Mobile business technology is the proliferation of mobile telephones, wireless enabled personal digital assistance and other services that enable the user to make transactions anywhere any time. In India, mobile business service covers banking industry, share markets, customer shopping, office automation, packaging, hotel & tourism, pharmaceutical industry, construction industry etc. This paper aims to elicit the perspective of bankers to introduce mobile banking as a new distribution channel and examines the customers perspective on mobile banking adoption and their behavior on mobile banking services. It also provides suitable policy and regulatory guidelines to strengthen the mobile banking framework in the country. Key words : Mobile business Technology, Mobile Banking and Mobile Business Service 1. Introduction Technological advancement enables an economy to shape up its position and gain competitive edge in the changing market environment. Effective Management of Technology links engineering, Science, and Management discipline and address the issues involved in developmental planning and complex managerial situations. It helps a business unit to keep up its fitness and take a lead role in the competitive market. The convergence of wireless devices and the Internet is creating an important new channel to business and the next wave of change across industries. Mobile business (or M-business) will enable organizations in every industry to expand their markets, improve their services and reduce their costs. M-business can best be described as the transaction of data between mobile devices. The most significant factor driving M-business is undoubtedly the proliferation of mobile telephones, wireless-enabled personal digital assistants (PDAs) and other devices that enable users to conduct transactions anywhere at any time (Ozair et al., 2003). Much of the discussion surrounding M-business has been narrowly focused on m-commerce, a subset of M-business that involves the use of mobile devices for marketing, selling and buying products and services over the Internet, third generation (3G) networks, or other supporting technologies. But it is believed that M-business is a far greater one that will build on organizations e-business transformations and capabilities and provide the backdrop for a further qualitative shift in business operations. M-business will comprise a broad spectrum of applications, from communication and entertainment to consumer transactions and corporate services. These services will not be limited to one particular type of relationship, like business-to-consumer (B2C), but also will include businessto-business (B2B), business-to-employee (B2E), consumer-to-consumer and device-to-device relationships. For this reason, M-business has been dubbed A-A business : anytime, anywhere
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9 Technological Management and
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(Aithal et al., 2006). Indian organizations can benefit from world wide implementation experiences of M-business and apply them after local conditioning. The adaptations will have to be made in the areas of localized business practices, telecom infrastructure, security requirements and local language interfaces. M-business implementation in India has been affected by both external and internal factors. External factors include a low number of customers accessing the Internet/mobile devices for their purchasing needs, poor communications infrastructure, gaps in legal and regulatory frameworks and issues concerning payment gateways. The Indian IT Act is not clear on issues regarding taxation of electronic transactions, and is silent on protection of intellectual property rights in net space. Internal barriers include perceived uncertainties with regard to benefits, territory protection issues and a lukewarm response from business partners. In most business companies IT systems and processes are not geared to maximize the benefits of M-business. The mobile network penetration is very low and less than 10 per cent of internet users presently buy products / services online. Apart from B2B market, B2C market is expected to get more benefit due to the advantage of convenient, speedy and personalized services of M-business. A day will surely come for Indian former to sell his products in C2C market and carryout his financial transactions and payments using mobile business devices in near future. 2. Proliferation of Mobile Business Technology in India Since the mid-1990s, the penetration of mobile phones in developed and developing economies has been explosive. Whereas in 1997 only 215 million people were using mobile communicating devices worldwide, by 2001 this had grown to a massive 961 million, further growing to 1.16 billion by 2003. During 2005, Western Europe exhibited highest penetration of mobile phones (79 per cent), followed by North America (48 per cent), and Asia (12 per cent). In 2002, China was reported to have become the largest internet and the biggest mobile phone market in the world, with 59.1 millions internet users and 200 millions mobile phone users (Wong et al., 2004). Cellular phone subscribers rose in India by a record 6.6 million in October 2006, keeping the country's place as the world's fastest-growing mobile phone market, according to data released. Subscribers for the GSM network grew by 4.7 million in September, while the number of mobile phone subscribers using CDMA technology increased by 1.9 million. The Cellular Operators Association of India, which includes mobile phone companies offering services on the GSM network, said the country now has about 96 million GSM-based phone connections. CDMA phone service providers say they now have about 40 million subscribers. The total number of mobile phones in the country stands at about 136 million at the end of October 2006. The gross telephony subscribers in country reached 176.78 million at the end of October 2006 as compared to 170.26 million in Sept. 2006. The overall tele-density reached 16 in October 2006 as compared to 15.44 at the end of Sept. 2006. However, India still lags far behind China, which has more than 420 million mobile phones the most in the world. It is estimated that the mobile-phone subscriber base in India will rise to 500 million by 2010, resulting in a cellular penetration rate of 40 per cent of the nations population. Today the Indian consumers have a host of options available and thus can choose a mobile device that suits her/his budget and lifestyle. Further more, cell phone manufacturers, service providers, and software/network providers have started coming together to let the Indian consumer to get a feel of m-business phenomena. Indian cellular players are continuously striving to delight customers by increasing their coverage and introducing value added services. Cellular infrastructure rollout is faster than fixed line and in 2002, it is estimated that the cellular subscriber base will surpass that of the fixed line by 2008. But due unpredicted growth, cellular subscriber base surpassed that of the fixed line by 2006. In fact, the growth of cellular infrastructure in India is fast becoming an index of development of states. States like Maharashtra, Gujarat, Andra Pradesh and Karnataka are getting
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expensive coverage in every district and town. Although early winning m-business applications like mobile messaging, ticketing, stock trading, banking have become widespread in developed countries, it seems to be gaining grounds in Indian market as well. Banks are tying up with cellular service providers to provide a full range of m-banking facilities to its customers. HDFC bank is the first Indian bank to offer mobile banking services followed by others like ICICI and Global Trust. 3. Objective of the paper The objective of the paper is (a) to elicit the perspective of bankers to introduce mobile banking as a new distribution channel and (b) to examine the customers perspective on mobile banking adoption and their behavior on mobile banking services (c) to provide suitable policy and regulatory guidelines to strengthen the mobile banking framework in the country. 4. Mobile Banking A new distribution Channel Providing financial transactions through mobile devices is a new distribution channel for financial institutions. Using this new distribution channel, they can add further value to their financial services. One of the industries which seem to be more affected after inventing internet and mobile communication technology is retail banking. It holds all the opportunities and threats connected with the mobile devices and the mobile communication technology. Many retail banks have a dense branch network, close relationships with their customers, and are mostly local businesses operating in one country or part of a country or selected locations of the country only. However, their core services are perfectly digitizable and the new technology therefore has a potential for transferring all their banking business to mobile banking. This availability of new distribution channel is interesting for banks for many reasons due to possibility of improving operation effectiveness and service differentiation : 1. The new electronic distribution channel can offer the customers better service output in the form of a broader and deeper assortment, less waiting time, and higher market decentralization. This may attract new customers (Mols et al., 1999), increase the revenue of the innovative firms and consequently lead to higher profits over a long period of time. 2. The new electronic distribution channels are more cost effective than telephone and branch based networks, and lower cost may lead to lower prices for the consumers. In such cases, seemingly loyal customers may change to the new distribution channels, and the firms that have invested in the wrong channels may end up with channels that turn out to be useless, i.e., investments which may be difficult to recover. 3. The new electronic distribution channels may change the way in which financial institutions interact with their customers and may facilitate direct marketing, relationship marketing and mass customization and thus increase customer loyalty. 4. The number of customers demanding mobile banking channel is likely to increase in the future. With the increase in literacy and the availability of mobile phones at cheaper rate and fall in the cost of mobile communication charges, there has been a considerable growth in the segment of customers preferring mobile banking. This will change the optimal distribution channel structure for the most retail banks. Since the distribution channels changes very slowly, the need to act quickly has less obvious than in areas such as new product development, pricing and advertising. Before the widespread acceptance of internet banking and mobile banking, retail banks gained competitive advantage by adding new branches. These branches are expensive and no bank could afford to establish branches in every town. This resulted in differences in coverage and usually those banks which are the first to build
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a large network in an area gained a strong and lasting lead. Thus a right investment in distribution channels have traditionally been a long term protection against competition, and few researchers have been concerned with proposing strategic design principles focusing on feedback mechanisms to continuously monitor the design of distribution channels. 5. Methodology The present study is to explore and understand the bankers perspective to introduce mobile banking as new distribution channel and to study the customer perspectives on usage of mobile banking services and hence to know the reason for slow penetration. Since the study is exploratory in nature, exploratory research design is used. The research models are described using focus group interaction. The evaluation of Banks Strategy for online mobile banking is studied by developing a model through focus group interaction and analyzed through secondary data collected from the Indian banks website. The data are collected from 100 bank personnel of public sector, private sector and foreign sector banks located in Bangalore and Mangalore of Karnataka State. Bangalore, being the capital city of Karnataka State, is considered as Silicon valley of India and it houses the population who possess high technological quotient, computer and Internet knowledge, and mobile phone for personal communication. Mangalore is an upcoming city and considered as an educational hub of Karnataka State. Based on the investigators pilot study, observations, both Bangalore and Mangalore are identified on potential grounds for mobile banking service study both for bankers perspective on mobile banking as new distribution channel and customers perspective on mobile banking usage. The total number of respondents (customers) used for determining customers perspective on mobile banking and the factors affecting the actual usage are 400, of which, 250 respondents are belonging to Bangalore and 150 respondents are from Mangalore. Though this study comprises of both qualitative phase and quantitative phase and suggests a tentative framework which integrates a number of hypotheses built using qualitative phase and testing those hypotheses using quantitative phase, only the final observations and findings are mentioned in this paper. 6. Customer Equity Approach Deploying online banking as a component of a customer equity-building strategy of present Indian banks may be the best way to succeed. The customer equity approach model (Figure 1) proposed in this work is based on a long-term strategy of acquiring, retaining and selling additional services to the desired customer and online banking capabilities could help banks to improve their efforts in acquisition and retention of the customers. An integrated online and offline channels can be effectively used by the banks to acquire new customers. Websites that provide helpful information could attract prospective customers to investigate further products and services offered by the bank. These prospects can then use their preferred channels (online, telephone or a branch) to open a new account or apply for a loan. Online capabilities could be extremely helpful in retaining customers. By facilitating interaction and two-way communications, banks can learn about problems and opportunities before it becomes too late or costly to recover. Retention of individual customers can be enhanced as well as the ability to identify emerging service trends that may affect many customers. The last phase of a customer equity approach calls for increasing sales of additional products and services to existing customers. Additional sales contribute to increased profitability as well as to cementing the relationship with individual customers. The opportunities to use online
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capabilities to increase sales are enormous; most banks have not even scratched the surface of what is possible. Most sales efforts to date have been product-centric with little attention to the needs of individual customers. The online world allows banks to move proactively into customer-based marketing efforts. By developing meaningful databases, monitoring consumer needs and behavior, and experimenting with different tactics, new revenue streams are likely to materialize.
Figure 1 : Customer Equity Approach

In sum, a new goal of using online capabilities to acquire, retain and sell additional services to desirable customers is very feasible. To be able to get there, however, banks still face the challenge of convincing more customers to bank online. Thus, both for cost reduction and customer equity goals, banks need to find ways to accelerate the rate of consumer adoption of online banking. Only by pushing forward banks can hope to derive the benefit from the opportunities outlined above. Yet, for most banks, the efforts to date have not been very successful. 7. Strategy of Banks The specific areas investigated here are based on the strategy of Indian banks on a framework of consumers perceived benefits vs costs. The first issue to be examined is the banks strategy to communicate online the benefits of the service. The second aspect of the investigation focuses on cost issues, specifically price and incentives. The third area examines a non-monetary cost issue relating to the registration process and available customer service. The final area examines the Indian banks strategy to guide the customers through demonstration and training to use the online features. Taken together, these four strategies help to assess the banks responsiveness to prospective customer concerns (Figure 2).
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Figure 2 : Evaluation of Bank Strategy for online mobile banking. 7.1 New Channel Promotion Strategy Given the fact that most prospects are not really convinced about the value of online mobile banking, it is important for banks to communicate the benefits to prospects. Banks are expected to entice customers and provide them with reasons to consider this new channel. Table 1 reports on the nature of the information to which customers are exposed upon reaching the front page of the websites of 18 Indian banks which provides mobile banking facility. The table distinguishes between list of functions, benefits, and links only. Functions are lists of capabilities (eg. check balances, transfer money) whereas benefits are defined here as outcomes (time savings, control, saving money etc). Links only implies that no information about the online mobile banking service is provided on the front page; instead, only a link to a different page is available. Surprisingly, in 2004, all the banks provided links only with no additional information on the front page. No banks provided benefit descriptions or incentives to consider the service on the front page. In 2006 the information provided on the front page had not changed materially. Benefits are still used in one banks website. There has been a slight increase in the list of functions and an increase in links only. Clearly, the majority of banks still do not believe it is important to highlight the benefits. Almost all banks, at some point (in linked pages), provided a list of capabilities or benefits. During the year 2007, the number of banks providing mobile banking service with link only connection at first page of website improved substantially.
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Year 2004 2006 2007
List of functions 0 01 02
Benefits 0 01 02
Links only 03 09 14
Total 04 11 18
Table 2 examines the positioning of three key attributes on those lists provided in linked pages. A higher positioning logically reflects a banks belief about the importance of an attribute to the consumers. A lower positioning is likely to get less attention. Table 2 reports that in 2004, balance check is mentioned in the top three attributes in 75 per cent of the cases. Clearly, the bill payment is not recognized as a very important attribute that ought to be communicated early. In 2006 and 2007, the situation is quite similar with even a slightly lower emphasis on bill payment. In fact, 75 per cent of banks did not mention it at all. In consumer study it is found that the bill payment is the most useful benefit among active users. Table 2 : Ranking of key displayed benefits Year 2004 2006 2007 Balance Check 3, high 8, high 11, high Bill payment 1, low 03, low Low, 04 Security 02 03 07 Total banks 04 11 18
The final area to be examined in this table is security. In 2004, security is mentioned in the top three in two banks out of four and later in 2007 it is in 07 banks. Tables 1 & Table 2 tend to suggest that banks do not feel compelled to try to convince the customers. Most sites seem to be geared towards the favourably predisposed or even previously committed consumers, simply listing capabilities. Very little attempt to explain the benefits of mobile banking are observed. Interestingly, there has been very little change in the 3 years period reviewed here. The large majority of banks have not changed their online communication emphasis. 7.2 Fee and Incentives Strategy Access to basic mobile banking is offered free of charge in all banks. Significant differences, however, are observed in terms of pricing of bill payment services. Table 3 reports the fee structures in 2004, 2006 and 2007. The first part reports on the normal fee structure. The second part reports on the promotional fee-waiving tactics. The normal fee structure in 2004 indicates that 50 percent of all banks charge all of their customers for the bill payment service. A mixed pricing strategy of offering a no-fee bill payment to some of the customers is reported by 25 per cent of banks. This free service is provided to higher value customers. These are the customers who kept higher balances or had other loan and/or investment relationships with the bank. The pricing strategy reflects banks belief that it is a costly service to provide.
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Table 1 : Front page message (out of 18 banks)
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Table 3 : Bill payment fee and incentives Mobile banking fees Free for all Free for some Not Free Total Introductory Fee waived : Yes No Total 3 1 4 6 5 11 8 10 18 2004 2 out of 4 1 out of 4 1 out of 4 4 2006 6 out of 11 1 out of 11 4 out of 11 11 2007 10 out of 18 4 out of 18 4 out of 18 18
Thus, those customers who want it should be asked to pay for it. In three out of four cases in 2004, bill payment is marketed as an additional, almost separate feature that is available to customers, often at a fee. The free bill payment is normally an indication of the service being a fully integrated feature of online banking, not a separate function. In those cases, every customer who registered for online banking has access to bill payment capabilities. The results in 2006 and 2007 are quite interesting. A few more banks have finally realized the wisdom of offering free bill payment to all. However, the majority of the banks are still charging all customers for this service. 7.3 Online Registration Capabilities The another area investigated here focused on online registration capabilities and live customer support in the event that customers had questions. Table 4 reports the key findings in these areas. Table 4 : Online Registration and live customer service availability Online registration Available to existing customers only Available for new and existing customers Not available Total Live customer service Prominently displayed Displayed elsewhere Not displayed Total 50 25 25 100 30 30 40 100 2004 (per cent) 25 25 50 100 2007(per cent) 30 40 30 100
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The first part of the Table 4 examines the online registration capabilities. In 2004, 50 per cent of the cases, online registration is feasible. However, most sites are not geared for new customers. In fact 25 per cent of the banks allow only existing customers to register. Those who are not currently customers of the bank would have had to use other channels to open an online account. Only 25 per cent of the sites allowed both existing and new bank customers to register online. Clearly, such systems are not very helpful for a prospective new customer. In 2007, the situation improved somewhat. Online registration is not available in 30 per cent of the cases and available to all in 40 per cent of banks. Again, the increment has been mainly due to the competition from new banks that are pursuing the more innovative banking strategies. The second part of Table 4 reports on the availability and promotion of live customer service. The good news is that almost all banks do have live customer service, at least during some parts of the day. In 2004, however, 50 per cent prominently displayed the phone numbers on pages that relate to online registration or service description. The situation reported in 2007 is somewhat worst. 30 per cent of the banks prominently displayed the phone number, and 40 percent did not display it at all. It is very clear that banks are not making it easy for customers to find and call customer service as they would prefer customers to e-mail or SMS them rather than call. Such a strategy is not conducive to convincing uncertain consumers to register for online service. The findings of this study indicate that banks do not appreciate consumer requirements and are not providing the necessary information to convert these prospects on their websites. For the most part the results in 2007 indicated a worsening in the marketing efforts to be helpful to consumers. A few selected banks have realized the need to become more consumer friendly. The majority, however, still deploys a cost-plus approach to pricing with little regard or understanding of customer requirements. 7.4 Demonstration and Secured Technology Strategy Online demonstration and secured technology strategy of Indian banks offering mobile banking is shown in Table 5. Technological progress is giving a boost to existing online mobile banking services and devices. Their quality is improving. Ever faster and more powerful chips and the widespread use of broadband mobile communication technology make online banking more comfortable for more and more people without necessarily triggering the emergence of completely new devices and inventions. Table 5 : Online demonstration and secured technology strategy : 2004 (per cent) Online demonstration Additional security 100 50 2006 (per cent) 80 30 2007 (per cent) 70 30
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8. Determinants of Mobile Banking Adoption
Figure 3 : Our Model of determinant of online mobile banking. It is important to estimate the factors determining the adoption of online mobile banking by financial service providers. This also includes, determining why some banks offer a wide range of online mobile banking services. To study the factors explaining which banks chose to offer online mobile banking, we proposed a new model called Determinant of Mobile Banking as shown in the Figure 3. The purpose of this model is to know how banks view and evaluate the mobile banking as a channel of financial transaction and as a source of banking information. The qualitative data collection instrument chosen is the focus group. This technique provides data on group interaction, on realities defined in a group context, and on interpretation of events that reflect group input. Rogers (1995) proposes that the adaption process is heavily influenced by word-of-mouth; therefore it is appropriate to utilize group discussion to explore the extremes of views expressed, the interaction between these views and the consensus achieved. In this way focus group add more depth and provide more breadth of information than individual interview (Morgan, 1994). 9. Findings of Bankers Perspective Study 1. It is found that the factors like competitors focused issues, operational focused issues, technology focused issues, organizational issues, strategic focused issues, customer focused issues and society focused issues of financial institutions have substantial affect on deciding and providing the mobile banking as new distribution channel. 2. It is also found that the advantages and the value additions to the banking organizations due to adoption of mobile banking as new distribution channel overtake its limitations. 3. Banks can promote mobile banking channel by improving their marketing strategies like providing education and training on availability and usage of mobile banking. 4. By providing free online services, offering incentives, and bundled services, banks can further enhance the popularity of m-banking distribution channel.
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5. In bankers perspective, the possibility of increase in fraud in banking transactions is found to be major limitation while adopting m-banking channel. 6. It is also found in the study that for the financial institutions, the competitors focused issue is major factor while making decision on providing mobile banking as new distribution channel. 7. In the study, it is also found that the banks have to encash the technological innovation like mobile banking as competitive advantage to expand their business. 8. The study also identified the bankers perspective on various benefits and limitations of mobile banking as new distribution channel. 10. Customers Perspective on Mobile Banking Generally, studies of adoption of information technology takes one of three possible approaches, a diffusion approach, an adoption approach or a domestication approach. Diffusion researchers typically describe the aggregate acceptance process as a function of time that may be used to categorize adopters of different kinds (Mahajan et al., 1990). Others like, Rogers (1995) describe the diffusion process as consisting of four elements: an innovation or new technology, a social system, the communication channels of the social system and time. Adoption researchers, on the other hand, typically describe and explain the acceptance decision of individual users applying different social theories of decision-making. Three models, collectively called the Technology Acceptance Theories (TAT), stand out as the most widely applied explanation within the adoption approach. Research literature states that information about technological innovations can travel through a variety of communication sources and modes to members of a social system (Roger, 1995) have found that communication factors are also significant predictors of customer adoption of electronic banking innovations. New product innovators in technology based products are likely to be drawn from heavy users of other products within the product category. Adopters who adopt earlier than others are likely to gain more from the use of the product and hence have a greater usage propensity. Additionally, it is argued that adoption of complex products depends on the adopters ability to develop new knowledge and new patterns of experience. This ability can be enhanced by the knowledge gained from related products or the proper education on the new product and training on how to use it. In India, the educational and economical level of the people is not so advanced like other advanced countries where the above acceptance theory is used to study the customers behavior on new technology based products acceptance. Here, a new product usage can be enhanced by giving proper education on the product and training to use it. Accordingly, in this study, the Technological Acceptance Model is modified by considering local communication factors. 10.1. Modified Technology Acceptance Theory In addition to three models proposed under Technological acceptance theories (TAT), this study proposes a new model which is a modification of Technology Acceptance Model and named as Technology Acceptance Based on Theory of Customer Stimulation by Education and Training for Usage (TCSET). As in TRA, it includes behavioral attitudes, subjective norms, intention to use and actual use based on user training. However, this theory interprets behavioral control based on knowledge and training. Perceived behavioral control covers both the intention to use and the actual usage. Actual usage is in turn a weighted function of intention to use and perceived behavioral control based on knowledge of that technology and training on usage of such technology.
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According to this model shown in Figure 4,, any innovation in Technology and its application in service sector gets popularity if that innovation reaches the end user through education and training. Customer Education provides knowledge about that innovation and its relative advantages over conventional service model to the customers. The training provided by the service provider allows customer familiarize him/her to use that innovation. Customer education leads to knowledge about innovation, which in turn influence the perceived usefulness and perceived assurance of the innovation. In case of online mobile banking, Ubiquitous service, Enhanced Productivity due to adapting new innovation, Time saving, Opportunity for better service, Status in the Society, Challenging environment, may be perceived usefulness for the customers and Security of Information. Accuracy of transaction and Reliability of service are perceived assurance for the customers. Customer Training influences the perceived ease of use of that innovation compared to traditional model. This also influences the customer perception on cost of the new innovation. In case of online mobile banking services, the perceived ease of use include : easy operation of the device, easy and simple method of obtaining service, bundled services, availability of services and network, ease of switching between new and old models, ease of making corrections, and ease of registration to the bank. The perceived cost involves the knowledge on cost of device, service cost,
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The perceived usefulness of the innovation and perceived assurance stimulates the intention of customers to adapt new innovation and the perceived ease of use and the perceived cost of innovation stimulates the behavioral control of customer to use the new innovation. This model is more meaningful and applicable in developing and underdeveloped countries because of the low educational background and shy nature of rural people. To penetrate such innovative new service models effectively and efficiently, service providers should involve in customer education and training to stimulate the behavioral control and intention of the customer to adapt new service in their daily life. TCSET adopts the following causal chain : Innovation > Education and Training > Stimulation > Intention > Behavior > Actual usage Stimulation = f(education and training) Intention = f(usefulness and assurance) Behavior = f(ease and cheap) The three key stimulations that specially account for new innovation usage. The first of these beliefs is perceived usefulness, defined as the degree to which a person believes that using a particular system would enhance his/her job performance. The second is perceived ease of use, defined as the degree to which a person believes that using a particular system would be free of effort. The third is perceived cost, defined as the degree to which a person believes that using that system is cost effective and reduces his expenditure substantially. The most basic proposition of the TCSET is Customer Stimulation and is a function of Stimulative Behavior and Stimulative Intention. In previous models the behavior is postulated as a function of the individuals attitude toward the act and the social norms. Whether the attitude toward the act or the social norms exerts the greater influence on the behavioral depends on the individual and the decision object (Ajzen and Fishbein, 1980). 10.2. TCSET Model applied to Online Mobile Banking
Figure 5 : TCSET Model applied to Online Mobile Banking
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avoiding inter-mediatories, transaction cost, low cost registration for availing service, hidden cost etc.
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Online mobile banking services is a new distribution channel for financial services for the banks. Adapting such distribution channels for basic services like, account checking, finding last few transactions, Cheque book request etc. will enhance banks obligation to provide ubiquitous service. Educating the old customers and the new customers by providing Training on how to use and get benefit by using these services anywhere any time without fear. When the customer understands the easiness of operation and advantages of financial transaction using online mobile device in terms of cost benefit and other usefulness, he/she will tempted to use such distribution channel for future transactions by making use of his mobile set. Hence providing education and training to present customers, bank can teach the customers about perceived usefulness, perceived ease of operation of mobile device to make transactions and perceived cost-benefit by using such transactions frequently. This kind of training provided to the customers will certainly stimulate the intension to use such facility frequently and it also stimulates the behavior control to use such facility. Such stimulation of behaviour and intension due to perceived ease, perceived cost and perceived usefulness of mobile banking channel for ubiquitous financial transaction. Thus the customers who have mobile phone will be educated towards the advantages of this channel, get trained to reduce hesitation of usage of mobile banking channel and hence considerable improvement is possible due to changes in behaviour and intension of usage. The education and training camps conducted by the banks not only stimulate the existing customers of the banks but it will attract new customers to the bank due to percolating effect. 10.3 Findings of Customers Perspective Study 1. Based on Focus group interaction, a new conceptual model on penetration of new technological innovation to the society is developed and is named as Theory of Customers Stimulation through Education and Training (TCSET). 2. The TCSET model is applied to customers perspective on adoption of mobile banking service and the model is tested by means of empirical study. 3. A conceptual model is developed to determine the factors affecting the customers decision on adoption of mobile banking. The model is tested using empirical study. 4. It is found that the awareness and training on mobile banking usage based on usefulness, cost of transaction, and easy of use, changes the customers attitude and view on usage of mobile banking services. 5. It is also found that the security aspects of financial transaction have major roll in customers perceived decision on adopting mobile banking for actual use. 6. The various factors such as demographical profile of users, earlier banking experience, technology experience, psychology and culture, and the security challenges and trust have substantial role in customers view while adopting mobile banking channel. 7. The study identified that the enhanced security and banks actions to improve the customers trust on this channel encourages the adoptability. 11. Customer Oriented Model on Mobile Business The emergence of mobile banking would increasingly be intertwined with the emergence of mobile commerce and mobile payments. M-banking, rather than driving m-commerce, will in fact be driven by the increasing availability of mobile-focused, user-friendly content, and the rise of m-business would be based on the inclusion of a strong payments engine, which can provide better payment transaction processing services. Regardless of the bright future of mobile banking, its prosperity and popularity will be brought to a higher level only if information can be securely and safely exchanged among end systems (mobile users and banking service providers). Online banking through mobile
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service providers is more secure than online banking through internet because of the usage of private network of the service provider (PNSP) and the users personal mobile device. The existing electronic authorizations for mobile payment security are based on account - holder authentication by the payment system. The use of secure and convenient mobile personal devices through PNSP could revolutionize the payment, banking and investment industries worldwide. In consumer oriented model proposed in this paper (Figure 6), the mobile banking services are provided through mobile network service provider PNSP, either by collaboration or by strategic alliance. A consumer can use any private mobile network to access a particular real or virtual bank. The consumers and businesses in emerging markets are likely to find mobile financial services more attractive than do their counterparts in developed markets, because they have fewer alternatives. For many remote or low-income consumers, mobile handsets and the mobile Internet could for the first time provide access to financial services such as basic banking and electronic payments; otherwise financial-services providers find such segments impossible to serve cost-effectively. Mobile networks are cheaper to build than fixed-line networks, and mobile services are generally cheaper to roll out than their precursors. A mobile-payments network, for example, can cost less to create and operate than an electronic point-of-sale (POS) merchant network. This means that some countries will be able to leapfrog over intermediate technologies and move directly from a paperbased payments system to a mobile one, without ever having to build an extensive wired POS or automated-teller-machine network.
Consumer Identification
Confirmation
Figure 6 : Consumer oriented model - uses Private Network Service Provider for enhanced security
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In this model, based on user request, the device identifies the user through physical possession of mobile phones, passwords, or biometrics such as voice recognition (path 1). The mobile banking service provider authenticates the transaction request from the device via either subscriber identification (as with existing phones) or cryptographic mechanisms such as digital signatures or secure protocols, like the Wireless Transport Layer Security Specification through private network service provider PNSP (path 2). The users can perform secured operations on account balance or loan account statement, transfer money between two accounts in the same bank (internal transaction), loan payment, or payment of electricity, water, phone, credit card and cellular phone/pager bills, through the bank (path 3). The financial transaction can be also performed between the mobile banking service provider, and the merchant for m-commerce payment through PNSP (Path 3a) and/or other financial institution(s) for bill payments or interbank transfer through PNSP (path 3b) and may involve secure payment protocols such as Internet Keyed Payments/Secure Electronic Transactions, or iKP/SET (MacGregor, 1997). After completion of requested transaction, the mobile banking service provider delivers a confirmation of transaction to the user (path 4). In todays mobile phones, authorization is via subscriber identification mechanisms, which do not provide non-repudiation. However, in future, mobile consumers might also use a secure mobile signing device, to avoid disputes. This device may allow high-value transactions, as well as paying mobile operators who are not completely trusted (such as when roaming). Mobile communication mechanisms (such as GSM) allow the foreign (visited) network to authenticate the user with information from the home network. Charging requires prior agreements between the visited and the home networks. Designers of the Universal Mobile Telecommunications System (UMTS) recognized the difficulty of establishing agreements in advance among visited networks and all home networks (Horn, and Preneel, 1998); thus, UMTS includes mechanisms for dynamic negotiation and setup of roaming agreements between a visited network and a home network. Roaming agreements seek to establish fees and ensure operator trustworthiness. Operators are trusted to deliver payments in time; foreign (remote) operators are also trusted to not overcharge visiting customers. A secure signing mobile device can prevent fraud (overcharging) by foreign network providers, thereby allowing more automated and variable roaming agreements. Operators can also use the Final Payments protocol, (Herzberg, 2003) to extend pair-wise trust relationships into global trust relationships, allowing automated, secure, low-cost universal roaming. 12. Suggested Policy and Regulatory Guidelines 12.1 Recommendations to the Banks The study revealed that Proper Education & Training and Perceived Usefulness were the most significant factors in encouraging online mobile banking adoption, and External Environment was the most significant factor to impede mobile banking adoption in India. It is essential for banks to facilitate encouragement and restrict impediment factors. Therefore, in addition to the direct push from banks (in respect of the encouragement factors), indirect persuasion should be carried out as a pull mechanism (in respect of the impediment factors). Awareness of online mobile banking services is essential in the early adoption stages. As mobile banking services are still new in India, effective presentations using all forms of media advertising such as leaflets, brochures, web pages, etc., will be useful to introduce the services to a wider audience and educate potential customers about the benefits of online mobile banking. To access more potential adopters, information about mobile banking should be provided by bank tellers and bank assistants at branches. The information should include references to time saving, convenience at anywhere any time, low costs, and information availability. In addition, banks should design their web
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It is essential to provide a well-designed and user-friendly web site to attract potential adopters attention. The customer should not be required to expend a lot of effort or time, or undergo too great a change in behavior, to adopt mobile banking services. Information and instructions for SMS banking or WAP banking should be provided in both local languages and English in order to make the adopter comfortable. Wide publicity underscoring the benefits and ease of use by demonstrating mobile banking services should be provided. This could be implemented by providing personal training at bank branches accompanied by good documentation and bank assistance. Regular surveying of customers responses and opinions of the services should be conducted to ensure continuous improvement. Reliability of access when needed is one of the key encouragement factors. Although this reliability partly depends on customers mobile networks. Bank should also separate internal and external uses and give priority to external uses. While reliability is a key element from a customers perspective, so is the security system. It must be enhanced continuously to guarantee integrity of online transactions as this will build customer confidence. Security provisions should be posted on banks web sites clearly and understandably to create customer confidence and improve the trustworthiness reputation of banks. Security information should be provided in non-technical terms, and be accompanied by standard security statements. A perception of quality service will increase the banks image for good services, accuracy and effectiveness. Failure of execution not only causes dissatisfaction and uncertainty to the customer but also makes the whole mobile banking process more complex and less comprehensible. Offering incentives in the form of accumulated points or little increased interest rate for deposits or providing loan for purchasing mobile phones at subsidized rate or having collaboration with mobile phone service providers to give free accessibility for online banking operations are other effective strategy to encourage online mobile banking adoption by Indian customers. Banks should develop online mobile banking diffusion strategies by adopting pull strategies. Increased diffusion will increase the number of mobile banking adopters since they are likely to come from the mobile phone users population. Furthermore, support from the government and the industry regulator will positively affect online mobile banking services by increasing the confidence of the adopters. Effective co-operation among banks has to be developed. The value of online mobile banking is increased by linking one activity with both within banks and with outside suppliers, channels and customers (Porter, 2001). Furthermore, banks should collaborate with mobile network service providers because it will enable banks to better control quality of services as well as enhance adopters accessibility. In addition, a high quality mobile infrastructure should be provided since it is one of the primary requirements for mobile banking channel usage. In order to improve the authenticity and security of the financial transactions, banks should support to produce & purchase mobile phones with bio-metric identification technology. Support from the government and industry regulator should be effective to increase the growth of online mobile banking services. The Indian government should be encouraged to initiate suitable steps to remove legal and regulatory barriers to mobile-business in general and mobile banking in particular. In addition to lobbying the Indian government, TROI and the RBI, banks should also proactively participate in improving mobile banking services in order to increase online banking. For
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sites as effective delivery channels and offer information beyond banking services. Applying the notion of segmentation is also useful in this context; disseminating information through the right channel and the right mode of communication for different consumer segments is likely to increase each segments probability to adopt technological innovations.
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example, IT 2000 laws should be promoted by the banks in order to reduce customers perceptions of risks. Current co-operation has been for commercial purposes, rather than for mutual benefit of the industry. This may need the industry regulator, i.e. the RBI, to act as the central authority to improve the external environment. 12.2 Customer-targeting strategies Banks should focus on people with high purchasing power as the first priority and attempt to shift them online. This requires extensive analyses of customers needs and the provision of customized services that are of value to them. In summary, recommendations for moderating factors are as follows: (1) Target right customers : persuade people who use mobile phone, people have education, people in good positions and appropriate income to adopt the services. (2) Provide value to customers : monitor the historical bank usage of customers to know their needs; provide customized services to customers; and Provide incentives to the customers for usage of mobile banking distribution channel. 12.3 Recommendation to the Customers Customers should make use of the new ubiquitous mobile banking distribution channel by knowing the advantages of such services. Customers should ignore fear on security of their banking account and fraudulent transactions. Customers should educate themselves to maintain the secrecy of their passwords and pin numbers to maintain secured mobile banking usage. The following are some recommendations to the customers based on present study : 13. Conclusion This study investigated evaluated factors that are significant in determining the satisfaction of customers using mobile banking. Banks in India do not use their websites strategically to improve customer relationship or to add real value. For instance, if banks want more of their customers to use mobile banking, they will need to provide more value add services than the ones provided by ATMs or phone banking. The study identified the factors that are significant for internet banking customer satisfaction. Security of transactions and convenience contribute significantly to satisfaction of internet banking customers. Banks while advertising their mobile banking services should emphasize these points. In the case of new users of the mobile banking service, banks should also concentrate on the independence aspect of this service. Customers can be encouraged to take advantage of online banking by providing them with incentives. For example, successful online applications of frequent flyer programs in the airline industry may be a useful benchmarking exercise for mobile banking. The study identified the factors that are significance for mobile banking penetration and customer acceptance. It is observed that the prior banking experience, education & training on usage, and benefits of mobile banking have substantial effect on acceptance of mobile banking transactions by Indian customers. In addition, the security and incentives by the banks have also significant affect on acceptance & usage of banking services over mobile phone. The concern of customers on security of banking transaction is supported by the figures given in response to a question in Parliament of India on March 4, 2008, the total number of Banking frauds have gone up from 12,374 in 2005 (amounting Rs. 1,385.91 crores) to 21,687 in 2006 (amounting Rs. 1,200.87 crores) in 2006, and to 22,280 in 2007 (amounting Rs. 1,077.84 crores). These studies reveals that proper education and training on availability and usage of mobile banking services channel is required in India to attract more customers towards usage of this new channel for their financial transactions along with
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In the study, it is found that the proper education and training on usage of mobile banking services has substantial effect on attracting more customers to use this new distribution channel. The study comes to the conclusion that Mobile Banking, as an interesting application in Mobile business, is winning the acceptance of the customers and enjoys sufficient demand in future days. Banks are seeing themselves increasingly forced to include Mobile Banking in their product portfolios to avoid negative differentiation against their competitors. Apart from this strategic relevance, there are other financial incentives, too. Their actual scope however depends, amongst others, on the product portfolio and the customer structure of individual banks. The study also reveal that proper education and training should be provided on availability and usage of mobile banking services to the Customers by the banks in terms of its importance, convenience and negligible cost. References Aithal P.S. and Varambally K.V.M.(2006), Security Issues in Online Financial Transactions with Special Reference to Banking Industry. In Quality in Service Sector and Managerial Challenges Allied Publisher Pvt. Ltd. 2006, ISBN:81-7764-992-2, pp 103- 114. Ajzen, I. and Fishbein, M. (1980), Understanding attitudes and predicting social change, PrenticeHall, Englewood Cliffs, NJ. Herzberg, A. (2003), Payments and banking with mobile personal devices, Communications of the ACM, Vol. 46, No. 5, pp. 53-58. Horn, G. and Preneel, B. (1998), Authentication and payment in future mobile systems. In Proceedings of the European Symposium on Research in Computer Security (ESORICS98) Lecture Notes in Computer Science (Louvainla- Neuve, Belgium, Sept. 68). Springer Verlag, 1998, pp. 277293. MacGregor, R., Ezvan, C, and Liquori, L., (1997), Secure Electronic Transactions: Credit Card Payment on the Web in Theory and Practice. SG24- 4978-00 Redbook, IBM, International Technical Support Organization, Raleigh, NC, July 2, 1997; see www.redbooks.ibm.com/. Mahajan, V., Muller, E. and Bass F., (1990), New Product Diffusion Models in Marketing, a Review and Directions for Research, Journal of Marketing, 54, pp. 1-26. Mols, N.P., Bukh, P.N.D. and Nielsen, J.F. (1999), Distribution Channel strategies in Danish retail Banking, International Journal of Retail & Distribution Management, Vol. 27 No. 1, pp. 37-47. Morgan, R. M. and Hunt, S. D. (1994) The commitment-trust theory of relationship marketing, Journal of Marketing, Vol. 58, (July), pp. 2038. Ozair SM and Saboohi N,(2003) M-commerce to Rule, Dataquest, January, 15, 2003, pp. 84. Porter, M. (2001) Strategy and the Internet, Harvard Business Review, March 2001, pp. 62-78. Rogers, E.M., (1995), Diffusion of Innovation, The Free Press, NY. Wong, X., Yen, D.C. and Fang, X. (2004), E-commerce development in China and its implications for business, Asia Pacific Journal of Marketing and Logistics, Vol. 16 No. 3, pp. 68-83.
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other factors like technology experience, security & trust, psychology & culture, prior personal banking experience, and incentives from banks, studies in the model. The study also points out the requirement of new, comprehensive mobile business model for secured payment from the customers bank accounts.
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10 AN APPRAISAL OF NATIONALIZED
COMMERCIAL BANKS (NCBS) OF BANGLADESH
Professor Tanbir Ahmed Chowdhury Dean, Faculty of Business & Economics and Chairperson, Department of Business Administration East West University 43 Mohakhali C/A,Dhaka -1212, Bangladesh E-mail : tanbir @ ewubd.edu Telephone: 880-2-9882308 Extension 244,213 Cell : 88-01199131645 In a developing country like Bangladesh the banking system as a whole play a vital role in the progress of economic development of the country. In this paper we tried to analyze the development and growth of nationalized commercial banks of Bangladesh. For evaluating the performance of nationalized commercial banks data has been analyzed through the various statistical measures like growth percentage, average growth, trend equations and square of correlation coefficient of nationalized commercial banks of Bangladesh. The paper tried to identify the problems of nationalized commercial banks of Bangladesh. In order to overcome the problems a few suggestions for reform based on sound reasoning is given by the author. Key Words: Commercial Bank, Loan, Deposit, Net Income. INTRODUCTION Overview of Banks Banking is now an essential part of our economic system. Modern trade and commerce would almost be impossible without the availability of suitable banking services. First of all, banking promotes savings. All manner of people, from the ordinary laborers and workers to the rich land owners and businessmen, can keep their money safely in banks and saving centers. Secondly, banking promotes investments. Banks easily invest the money they get in industry, agriculture and trade. They either invest it directly or advance loans to other investors. Thirdly, it is most through banks that foreign trade is carried on. Whether we export or import, it is through banks that money is transferred from one country to another. For example, bills of exchange and letters of credit are the regular ways banks use to transfer money. Banking scenario in Bangladesh Bangladesh Bank: Bangladesh Bank (BB) has been working as the central bank since the countrys independence. Its prime jobs include issuing of currency, maintaining foreign exchange reserve and providing transaction facilities of all public monetary matters. Bangladesh Bank (BB) regulates and supervises
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The BB has a governing body comprising of nine members with the Governor as its chief. Apart from the head office in Dhaka, it has nine more branches, of which two in Dhaka and one each in Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and Barisal. Category of Banks in Bangladesh Category NCBs Private Banks Foreign Banks Development Banks Other Number of Banks 4 28 12 5 4 Number of Branches 3616 1214 31 1177 1280
In Bangladesh Sonali Bank is the largest among the Nationalized Commercial Banks (NCBs) while Pubali is leading in the private ones. Among the 12 foreign banks, Standard Chartered has become the largest in the country. Besides the scheduled banks, Samabai (Cooperative) Bank, Ansar-VDP Bank, Karmasansthan (Employment) Bank and Grameen bank are functioning in the financial sector. In Bangladesh the number of total branches of all scheduled banks is 6,038 as of June 2000. Of the branches, 39.95 per cent (2,412) are located in the urban areas and 60.05 per cent (3,626) in the rural areas. Of the branches NCBs hold 3,616, private commercial banks 1,214, foreign banks 31 and specialized banks 1,177.In Bangladesh four Nationalized Commercial Banks are operating now, these are Sonali Bank (SB), Janata Bank, Agrani Bank (AB) and Rupali Bank(RB). Sonali Bank: Sonali Bank was established in 1972 underway the Bangladesh Banks (Nationalization) Order, through the amalgamation and nationalization of the branches of National Bank of Pakistan, Bank of Bhowalpur and Premier Bank branches located in East Pakistan until the 1971 Bangladesh Liberation War. When it was established, Sonali Bank had a paid up capital of 30 million taka. In 2001, its authorized and paid up capital were Tk 10 billion and Tk 3.272 billion respectively. The banks reserve funds were Tk 60 million in 1979 and Tk 2.050 billion on 30 June 2000. Sonali Bank has a total of 1186 branches. Out of them, 488 are located in urban areas, 696 in rural areas, and 2 are located overseas. It also operates the Sonali Exchange Company Inc. in USA and Sonali Bank (UK) Ltd., United Kingdom, to facilitate foreign exchange remittances. Janata Bank: Janata Bank Limited, one of the state owned commercial banks in Bangladesh, has an authorized capital of Tk. 800 crore (approx. US$ 116.79 million), paid up capital of Tk. 259.39 crore (approx. US$ 37.87 million) and reserve of Tk.292.67 crore (approx. US$ 42.73 million). The Bank has a total asset of Tk. 24406.11 crore (approx. US$ 3562.94 million) as on 31st December 2007. Immediately after the emergence of Bangladesh in 1971, the erstwhile United Bank Limited and Union Bank Limited were nationalized and renamed as Janata Bank Limited.Janata Bank Limited operates through 848 branches including 4 overseas branches at United Arab Emirates. It is linked with 1198 foreign correspondents all over the world. The Bank employs more than 13(Thirteen) thousand persons. The mission of the bank is to actively participate in the socioeconomic development of the nation by operating a commercially sound banking organization,providing credit to viable borrowers, efficiently delivered and competitively priced, simultaneously protecting depositors funds and providing a satisfactory return on equity to the owners.
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the activities of all banks. BB is also responsible for planning the governments monetary policy and implementing it thereby.
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Agrani Bank Limited: Agrani Bank Limited, a leading commercial bank with 867 outlets strategically located in almost all the commercial areas throughout Bangladesh, overseas Exchange Houses and hundreds of overseas Correspondents, came into being in 1972 immediately after the emergence of Bangladesh as an independent state. It started functioning as nationalized commercial bank taking over assets and liabilities of the rest while Habib Bank ltd and commerce Bank ltd. functioning in the East Pakistan. Rupali Bank: Rupali Bank is a commercial bank in Bangladesh. It was established as a nationalized bank in 1972 under the Bangladesh Banks Nationalization Order, through the amalgamation of the branches of Muslim Commercial Bank, Australasia Bank and Standard Bank that were operating in East Pakistan, following the 1971 Bangladesh Liberation War. The bank was denationalized in 1986, and reorganized as a limited company, with the Government of Bangladesh holding 51% shares. However, after the year 2000, the Government divested of its shares, and the privatization of the bank was complete. Rupali Bank operates through 492 branches. REVIEW OF LITERATURE With respect to the Performances of Bangladeshi Commercial Banking sector, foreign and national experts undertook number of studies. Some of the notable ones are; Bhattacharya (2007), Chowdhury and Islam (2007), Jahangir, Shill and Haque (2007), Chowdhury (2002), Chowdhury and Adhikary (2002) Siddique and Islam (2001), Al-Shamrnari and Salirni (1998), Bhattacharya (2007) pointed out that six major recent policy measures include: reduction of bank rate and lending rate, linking classified loans to large loan sanctioning; rationalization and merger of bank branches, measures for loan recovery, and demarcation of responsibilities between the management and the board and decision on cash reserve ratio. Chowdhury and Islam (2007) stated that deposits and loan advances of Nationalized Commercial Banks (NCBs) are less sensitive to interest changes than those of Specialized Banks (SBs). So SBs should not make abrupt change in lending or deposit rates by following the NCBs. If NCBs change their lending or deposit rates, their deposits or loans and advances will be affected less than those of SBs. Moreover, deposits of NCBs have higher volume and higher volatility than those of SBs. On the other hand, loans advances of NCBs show a higher volume and higher volatility than those of SBs. Jahangir, Shill and Haque (2007) stated that the traditional measure of profitability through stockholders equity is quite different in banking industry from any other sector of business, where loan-to-deposit ratio works as a very good indicator of banks profitability as it depicts the status of asset-liability management of banks. Chowdhury (2002) observed that the banking industry of Bangladesh is a mixed one comprising nationalized, private and foreign commercial banks. Many efforts have been made to explain the performance of these banks. Understanding the performance of banks requires knowledge about the profitability and the relationships between variables like market size, banks risk and banks market size with profitability. According to Chowdhury and Adhikary (2002) in terms of loan provisioning, while in Bangladesh at present keeps 20% provision on sub-standard loans, India charges only 10% and in case of doubtful loans, Bangladesh charges 50% but India divides the doubtful advance between secured and unsecured and keeps 20% to 50% provision for the former (secured) and 100% provision for the latter (unsecured). However in case of bad/ loss assets, both the countries maintain 100% provision. Siddique and Islam (2001) has observed that during late eighties and early nineties, the banking system of our country was overburdened by excess liquidity. This was caused by economic stagnation, lack of investment demand and inefficiency of the banking system in mobilizing funds According to Al-Shamrnari and Salirni (1998) profitability ratio especially return on equity (ROE) signals the earning capability of the organization. They also suggest that higher return on equity (ROE) ratio is appreciable as it is the primary indicator of banks profitability and functional efficiency.
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BANKS OF BANGLADESH In this section we have tried to evaluate the performance of Selected Nationalized Commercial Banks of Bangladesh. Table: 1 Number of Branches of Selected Nationalized Commercial Banks SL 1 2 3 4 Name of Banks Sonali Bank Growth Janata Bank Growth Agrani Bank Growth Rupali Bank 493 870 847 Number of Branches 2004 1186 2005 1183 0. 25% 847 0.00% 864 0. 68% 493 2006 1183 0. 00% 847 0. 00% 864 0.00% 493
Growth 0. 00% 0. 00% Source: Compiled from different issues of Annual Report of Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank Table: 1 shows the growth pattern of number of branches of selected banks. The growth of branches is stagnant for all selected banks for the last three years. It indicates the NCBs are not trying to expand their branch network. Among the NCBs Sonali Bank has the highest number of branches i.e. 1183. The lowest number of branches is in Rupali Bank. Table: 2 Employees of Selected Nationalized Commercial Banks SL 1 2 3 Name of Banks Sonali Bank Janata Bank Agrani Bank Number of Employees 2004 24450 15705 12208 2005 23933 15321 11938 2006 23754 15071 12005
4 Rupali Bank 5225 5008 4901 Source: Compiled from different issues of Annual Report of Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank Number of employees of selected banks have been shown in table: 2. The highest no of employees are working in Sonai Bank i.e. 23754 and lowest is in Rupali Bank i.e., 4901.
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PERFORMANCE EVALUATION OF SELECTED NATIONALIZED COMMERCIAL
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Table: 3 Deposits of Selected Nationalized Commercial Banks SL 1 2 3 4 Name of Banks Sonali Bank Ltd. Growth Janata Bank Ltd. Growth Agrani Bank Ltd. Growth Rupali Bank Ltd. 63674 125390 151035 Total Deposits (BDT in million) 2004 252234 2005 277079 9. 85% 168897 11.83% 131020 4.49% 66871 2006 270335 2.43% 168500 0..24% 133909 2..21% 70871
Growth 5. 02% 5. 98% Source: Compiled from different issues of Annual Report of Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank Note: US $1 = BDT 69.35 Table 3 shows growth pattern of deposits of selected commercial banks. It is observed from the table that the deposit is highest in Sonali Bank that is TK .270335 in 2006. The growth percentage of Rupali Bank is highest that is 5.98% in 2006. In 2006Deposit Growth percentage of Sonali Bank and Agrani Bank is 2.43% and 2.21%in year 2006 respectively. The lowest growth percentage of deposit is in Janata Bank that is 0.24% in 2006. During 2004 to 2006 every year deposit of Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank has increased from the previous year. So it is reflected from the table that the deposit of all the selected banks have showed an increasing trend during the period of 2004-2006. Table: 4 Total Loans & Advances of Selected Nationalized Commercial Banks SL 1 2 3 4 Name of Banks SonaliBank Ltd. Growth Janata Bank Ltd. Growth Agrani Bank Ltd. Growth Rupali Bank Ltd. 45345 95920 107786 Total Loans & Advances (BDT in million) 2004 168283 2005 227010 34.89% 123546 14. 62% 99404 3. 63 % 44921 2006 240105 5.77% 175000 41.65% 103074 3. 69% 45747
Growth 0. 94% 1. 84% Source: Compiled from different issues of Annual Report of Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank Note: US $1 = BDT 69.35
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The growth pattern of total loans and advances of selected nationalized commercial banks of Bangladesh are reflected from Table-4. It is reflected from the table that almost every years loan and advances of selected nationalized commercial banks of Bangladesh has increased from the previous year. The growth of loan and advances is highest in Janata Bank i.e., 41.65% in 2006. The lowest growth observed is in Rupali Bank i.e., 1.84% in 2006. 2006. The lowest growth observed is in Sonali Bank i.e.,4.15% in 2006. Table: 5 Investment of Selected Nationalized Commercial Banks SL 1 2 3 4 Name of Banks Sonali Bank Ltd. Growth Janata Bank Ltd. Growth Agrani Bank Ltd. Growth Rupali Bank Ltd. 13203 26848 28375 Total Deposits (BDT) 2004 58896 2005 43636 25. 91% 29168 2. 79% 24330 9. 38% 12903 2006 45446 4. 15% 31905 9. 38% 31440 29. 22% 13543
Growth 2. 27% 4. 96% Source: Compiled from different issues of Annual Report of Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank The growth pattern of investment of selected banks of Bangladesh is reflected from table 5. It is observed that the growth percentage of Agrani Bank is highest i.e. 29.22% in 2006. The lowest growth percentage of investment is in Rupali Bank Ltd. i.e. 2.27% in 2005. During 2004 to 2006 every year investment of Janata Bank Ltd. has increased from the previous year. Table: 6 Net Incomes of Selected Nationalized Commercial Banks Net Income (BDT) 2004 Sonali Bank Ltd. Growth % Janata Bank Ltd. Growth % Agrani Bank Ltd. Growth % Rupali Bank Ltd. 513 -875 2313 157 2005 208 32. 48% 3301 42. 72% 2340 367.43% 811 2006 1651 693.75% 1400 57. 58% 1750 25. 21% 370
Growth % 58. 08% 54. 38% Source: Compiled from different issues of Annual Report of Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank
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It is observed from the table: 6 that the net income of Sonali Bank , Janata Bank, Agrani Bank and Rupali Bank has almost increased from the previous year during 2004 to 2006.It is reflected that Sonali Bank has earned exceptionally high net income in 2006 i.e., Tk. 1651 million. It is also reflected that all the selected banks has earned net income in all the year during 2002 to 2006 except Agrani Bank. Agrani Bank has earned net loss in 2004. The growth rate of net income is stable and very high. Table: 7 Trend equation and r2 of Branches Bank Sonali Bank Ltd. Janata Bank Ltd. Agrani Bank Ltd. Rupali Bank Ltd. Yc= a+bx 1184 - 1.5 (X) 847 + 0 (X) 866 - 3(X) 493 + 0(X) r2 0.75 .. 0.75 .
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Table: 7 shows the summary of trend equation and r2 of Branch expansion of selected nationalized commercial banks. It is reflected from the table that trend equation of all the Janata bank and Rupali Bank are positive trend equation of all the Sonali bank and Agrani Bank are negative and goodness of fit of Sonali and Agrani Bank are high i.e. more than 0.50. Table: 8 Trend equation and r2 of no. of Employees Bank Sonali Bank Ltd. Janata Bank Ltd. Agrani Bank Ltd. Rupali Bank Ltd. Yc= a+bx 24045.6667 - 348(X) 15365.6667 - 317(X) 12050.333 - 101.5(X) 5044.6667 - 162(X) r2 0.9271 0.985 0.5212 0.963
Table: 8 shows the summary of trend equation and r2 of employees of selected nationalized commercial banks. It is reflected from the table that the trend equation of all the selected banks are negative. Goodness of fit of all the selected banks are high i.e. more than 0.50. Basically most of the NCBs have decreased their employees in 2005 and 2006 as a result it shows a negative trend. Table: 9 Trend equation and r2 of Deposits Bank Sonali Bank Ltd. Janata Bank Ltd. Agrani Bank Ltd. Rupali Bank Ltd. Yc= a+bx 266549.33 +9050.5(X) 162810.67 + 8732.5(X) 130106.33 + 4259.5(X) 67138.667 + 3598.5(X) r2 0.499 0.7329 0.9667 0.9958
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Table: 10 Trend equation and r2 of Loans and Advances Bank Sonali Bank Ltd. Janata Bank Ltd. Agrani Bank Ltd. Rupali Bank Ltd. Yc= a+bx 211799.3 + 35911(X) 0 + 33607(X) 99466 + 3577(X) 45337.67 + 201(X) r2 0.8814 0.0393 0.999 0.237
Table 10 shows the summary of the trend equation and r2 of loans and advances of selected nationalized commercial banks. It is reflected from the table that the trend equation of all the banks are positive and goodness of fit of Sonali Bank and Agrani Bank i is very high i.e. more than 0.85. Table: 11 Trend equation and r2 of Investment Bank Sonali Bank Ltd. Janata Bank Ltd. Agrani Bank Ltd. Rupali Bank Ltd. Yc= a+bx 49326 - 6725(X) 29816 + 1765(X) 27539 +2296(X) 133216 + 170(X) r2 0.651 0.908 0.406 .282
Table 11 shows the summary of the trend equation and r2 of investment of selected nationalized commercial banks. It is reflected from the table that the trend equation of all the banks are positive except Sonali Bank and goodness of fit of Sonali Bank and Janata Bank is high. Table: 12 Trend equation and r2 of Net Income Bank Sonali Bank Ltd. Janata Bank Ltd. Agrani Bank Ltd. Rupali Bank Ltd. Yc= a+bx 672 +747(X) 2338 - 456.5(X) 1072 + 1313(X) 564.7 -71.5(X) r2 0.776 0.231 0.588 0.101
Table: 12 shows the summary trend equation and r2 of net income of selected nationalized commercial banks. It is reflected from the table that the trend equation of all the selected banks are positive except Janata Bank and goodness of fit of Sonali and Agrani Bank is high i.e., more than .588.
BANKING
Table 9 shows the summary of trend equation and r2 of deposits of selected nationalized commercial banks. It is reflected from the table that the trend equation of all the selected NCBs are positive and goodness of fit of all the equations are very high i.e. more than 0.73 except Sonali Bank Ltd.
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CONCLUDING REMARKS The journey of Nationalized Commercial Banks (NCBs) has started in Bangladesh in the year 1972. The selected nationalized commercial banks create employment opportunities for more than fifty thousand people. It has been observed that the net income of the selected nationalized commercial banks have increased from the previous year during 2004 to 2006. It indicates the profitability of all the selected banks is satisfactory. NCBs are not open any new branches during 2004-2006. It is observed that loan and advances of the selected bank has increased in every year. Twenty four trend equations have been tested for different activities of the nationalized commercial banks. Among them the trend value of fifteen equations are positive. Square of correlation coefficient (r2) has also been tested for all trend equations. The r2 fifteen trend equations are more than 0.5. During 2004 to 2006 the growth percentage of branches in case of nationalized commercial banks is zero. In order to increase the activities and income these banks need to expand its new branches. From the sequence of our analysis it is reflected that although the deposit of all the selected banks have showed an increasing trend during the period of 2004 to 2006. Deposit growth rate is less than 5 percent in 2006. The growth rate of deposits of NCBs is not satisfactory. So these banks need to increase their deposits. It has been identified that although almost every years loans and advances of selected NCBs have increased from the previous years but the growth rate of loans and advances is not satisfactory for Agrani bank and Rupali Bank. The growth rate of loans and advances of Agrani Bank and Rupali Bank was less than 4%. So Agrani bank and Rupali bank should try to increase the growth rate of loans and advances. It is reflected that the net income of all the selected banks have showed an increasing trend during the period of 2004 to 2006. Growth rate of profit of all the selected banks are more than 40% during 2004 to 2006. NCBs need to increase its branches, deposits, and loan and advances. We are quite optimistic that if the given suggestions of this paper are implemented then the Banking sector may be able to overcome its present problems and may contribute in the rapid development of the economy of Bangladesh. REFERENCES 1. Al Shammari, M., and Salimi, M. (1998). Modeling the operating efficiency of banks, A parametric methodology. Journal of Logistic Information Management, Vol. 11 2. Chowdhury, H. A., and Islam, M. S. (2007). Interest Rate Sensitivity of Loans and Advances: A Comparative Study between Nationalized Commercial Banks (NCBs) and specialized Banks (SBs). ASA University Review, Vol.1, No.1 3. Chowdhury, A., (2002). Politics, Society and Financial Sector Reform in Bangladesh. International Journal of Social Economies, 29(12), 963 988. 4. Jahangir, N., Shill, S., and Haque, M. A. J. (2007). Examination of Profitability in the Context of Bangladesh Banking Industry. ABAC Journal, Vol. 27, No. 2 5. Siddique, S. H., and Islam, A. F. M. M. (2001). Banking Sector in Bangladesh: Its Contribution and Performance. Journal of Business Research, Jahangirnagar University, Vol.3 6. Choudhury, T.A., and Adhikary, B. K. (2002). Loan Classification, Provisioning Requirement and Recovery Strategies: A Comparative Study on Bangladesh and India. Bank Parikrama, Bangladesh Institute of Bank Management, Vol. XXVII, No. 2 & 3.
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7. Siddique, S. R. and Islam, A. F. M. M. (2001). Banking Sector in Bangladesh: Its Contribution and Performane. Journal of Business Research, Jahangirnagar University, Vol. 3
CHAPTER
BUSINESS REFORMS
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11 DOING BUSINESS REFORMS IN SOUTH

ASIA: AN ASSESSMENT
Dr. Basant Kumar Reader & Placement Officer Department of Business Administration Utkal University Bhubaneswar-751004, India baghar@rediffmail.com and Professor Brajaraj Mohanty Xavier Institute of Management Bhubaneswar-751013, India brajaraj@ximb.ac.in The World Bank Group, through its Doing Business project which started in 2003, has emphasized positive business regulations as a part ofa new strategy for creating appropriate environment for development and growth. Various reforms in ten different areas and several developmental outcomes such as creating employment, reducing competitiveness and bribery, improving competitiveness and prosperity, facilitating international trade and commerce and inflow of foreign direct investment were considered. The latest project Report covering 181 countries and other reports show that in eight South Asian countries, the number of reforms is less and their performance is relatively low compared with global benchmarks. More reforms in business regulations are urgently required to improve business climate and make the economies more competitive and attractive. Keywords: Doing Business, Regulations, Reforms, South Asian Countries, World Bank 1. INTRODUCTION Economic activity requires good rules and regulations. This basic premise has guided the Doing Business project launched by World Bank in 2002-03. Doing Business project provides objective measures of business regulations and their enforcement across world economies and in selected cities at the sub-national and regional level. It suggests that good regulation is important for attracting foreign direct investment, boosting trade and enhancing economic growth. A simplified, transparent and efficient regulation makes it easy for aspiring entrepreneurs, regardless of their connections, to operate within the rule of law and to benefit from the opportunities and protections that the law provides. On the other hand, burdensome regulation prevents potential entrepreneurs with innovative ideas from entering business, thus limiting competition and keeping resources from being put to their best use. A burdensome regulation leads to delays in trading, and delays in trading undermine a countrys global competitiveness. Therefore, reforming business regulations are very crucial to improve business climate.
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Against this backdrop, this paper aims to present a birds eye view of Doing Business reforms across the globe and provides a cross country analysis of South Asian nations on Doing Business and other allied factors such as corruption, bribe, and competitiveness etc. The main data sources of
2. DOING BUSINESS REFORMS ACROSS THE GLOBE A vibrant private sector with firms making investments, creating jobs, and improving productivity promotes growth and creates opportunities for poor people. To support private sector, Governments around the world have implemented wide-ranging reforms including macro-stabilization programs, price liberalization, privatization, and trade-barrier reductions. In many countries, however, macro level reforms have been spurned and entrepreneurial activity remains limited, poverty high, and growth stagnant. About seven years ago when the Doing Business project was started, the World Bank Group outlined a new strategy for tapping private initiative to reduce poverty. The Doing Business project aimed at advancing the World Bank Groups private sector development agenda by motivating reforms through country benchmarking, design of reforms, enriching international initiatives on development effectiveness, and appropriate economic regulations. 2.1 Performance Subsequent to launching of the project, World Bank has brought out a number of progress reports. The first Doing Business report, published in 2003, used 5 indicator sets - starting a business, hiring and firing workers, enforcing contracts, getting credit, and closing a business and covered 133 economies. In 2004 report named understanding regulations, the same sets of indicators were used and more than 130 economies were covered. The report investigated the scope and manner of regulation that enhance business activity and those that constrain it. The 2005 report referred to as removing obstacles to growth covered 145 nations and added two more sets of indicators, namely, registering property and protecting investors. Doing Business in 2006 again updated all previous measures and added three more sets: dealing with licenses, paying taxes and trading across borders and covered 155 countries. The 2007 report designated as how to reform compared regulations in 175 economies with the 10 indicator sets of business regulations and the protection of property rights. Same sets of indicators across 178 countries were followed in 2008 report to investigate the effectiveness of business regulations. Doing Business report 2009 covers 10 indicator sets in 181 economies. There are special separate studies published in the current year for comparing regulations in 38 land locked countries and 33 small island developing economies. The project has benefited from feedback from governments, academics, practitioners and reviewers. As regards number of reforms, it is evident from Table 1 that the number of reforms is on the rise. The reformers simplified business regulations, strengthened property rights, eased tax burdens, increased access to credit and reduced the cost of exporting and importing. The rise in number of reforms since 2004 is attributed mainly due to four reasons viz the collapse of socialism leading to the entry of Eastern Europe and the former Soviet Union into the world economy, the increase in global and regional competition, focus on reducing corruption and finally, efforts by countries to identify bottlenecks and compare their performance with competitors.
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the study are World Bank, Transparency International, World Economic Forum, Legatum Institute, UNDP and UNCTAD. The indices designed by them namely Doing Business Index 2004-09, Corruption Perception Index 2008, Bribe Payers Index 2008, Global Competitiveness Index 200809, World Prosperity Index 2008, Human Development Index 2008 and Performance Inward FDI Index 2008 have been considered in this study. Simple tabular forms have been put side by side for comparison and drawing inferences.
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Table 1: Number of Positive Reforms Year of Reforms 2003-04 2004-05 2005-06 2006-07 2007-08 No. of Economies 58 99 112 98 113 Number 89 185 213 200 239
Source: Compiled data from Doing Business Reports 2003-09 (www.doingbusiness.org) DB 2008 survey reports that during 2004-07, 35 countries have made their labour laws more flexible to create more job opportunities especially for women, youth and the unskilled by making it easier for business to operate. The flexibility of labour laws were in the area of allowing flexible working hours, introducing apprentice wages, lowering dismissal costs and raising and equalizing mandatory retirement ages. Many countries have benefited from reforms. On employment, the 2007 report reveals that in Bolivia 0.4 million workers out of a population of 8.8 million have formal jobs in the private sector as a result of reforms. In Malawi, fifty thousand out of a population of 12 million and in Mozambique, 0.35 million in a country of 20 million have such jobs. Between 2002 and 2006 Slovakias reforms have helped cut the number of unemployed people by sixty seven thousand. In Colombia reforms of employment and business startup regulations have created 0.3 million jobs in the formal economy. As regards property rights and corporate regulation in Peru in the past decade, the government has issued property titles to 1.3 million urban households. Secure property rights have enabled parents to find jobs rather than staying home to protect their property. Similarly, children can now attend school. As a result, the incidence of child labor has fallen by nearly 30 per cent. Similarly, out of Egypts estimated 25 million urban properties, only 7 per cent were formally registered in 2005. But six months after reforms of its property registry, title registration increased and revenue rose by 39 per cent. After reforms of the property registry in Tegucigalpa, Honduras, the registry received 65 per cent more registration applications between July and December of 2007 than in the same period of 2006. Similarly, a reduction in the minimum capital requirement was followed by an increase in new company registrations of 55 per cent in Georgia and 81per cent in Saudi Arabia. Georgia now has 15 registered businesses per 100 peoplecomparable to those in Malaysia and Singapore. These results show that reforms are leading to change on the ground. Confirming the benefits that accrue to countries due to regulatory reforms are some important findings of independent studies. A recent study of 126 economies (Djankov, Freund and Pham, 2008) showed that the loss due to delay in export is around 1 per cent of trade for each extra day. For perishable agricultural products the cost is nearly 3 per cent of the volume of trade for each days delay. Another study (Freund and Bolaky, 2008) showed that countries that have a better business regulatory environment benefit more from opening up their economy than do countries with more burdensome regulation. Indeed, economies with burdensome regulation could increase their economic growth by up to 2.3 per cent if they improved their business regulation to the level in economies with the most business-friendly regulation (Djankov, McLiesh and Ramalho, 2006).
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Table 2: Top Reformers in DB 2009 and DB 2008 and Comparative Ranking No of Reforms in 200708 7 4 3 6 3 4 3 5 4 Rank* 2009 33 86 68 85 149 148 52 53 97 97 135 99 115 168 164 38 66 110 Economy Egypt Croatia Ghana Macedonia Georgia Colombia Saudi Arabia Kenya China No of Reforms in 2006-07 5 4 5 3 6 3 3 4 3 Rank* 2008 125 97 87 75 18 66 23 72 83 2007 165 124 94 92 37 79 38 83 93
Economy Azerbaijan Albania Kyrgyz Republic Belarus Senegal Burkina Faso Botswana Colombia Dominican Republic
Egypt 5 114 125 Bulgaria 3 46 54 N.B: * Rankings on the ease of doing business are the average of the economys rankings on the 10 topics covered in DB Survey; Break up data for 2003-07 not available Source: Compiled data from Doing Business Reports 2003-09 (www.doingbusiness.org) 2.2: Critical Assessment DB 2004 report found that poor countries regulate the business most to combat the problems of unemployment and poverty. Heavier regulation is generally associated with more inefficiency in public institutions longer delays, higher cost, more unemployed people, corruption, less productivity and investment, but not with better quality of private or public goods. They also have the least enforcement capacity and the fewest checks and balances in government to ensure that regulatory discretion is not used to abuse businesses and extract bribes The three main findings of DB 2005 are (i) Businesses in poor countries face much larger regulatory burdens than those in rich countries. They face 3 times the administrative costs, and nearly twice as many bureaucratic procedures and delays associated with them. And they have fewer than half the protections of property rights of rich countries. (ii) Heavy regulation and weak property rights exclude the poor from doing business. In poor countries 40 per cent of the economy is informal. Women, young and low-skilled workers are hurt the most. (iii) The payoffs from reform appear large.
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The reforms that have taken place during the last two years have changed the ranking position of economies. More the number of positive reforms a country have its ranking moves upward significantly. A comparative picture of top reformers and their change in ranking according to DB 2009 and DB 2008 is presented in Table 2. Azerbaijan, the top reformer with 7 reforms during 2007-08 moved its raking from 97 in 2008 to 33 in 2009. Similarly, during 2006-07 Georgia with 6 reforms occupied 18th position in 2008 going up from 37 in 2007 to 18 in 2008. Some countries like Botswana did not do enough and went down in ranking.
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Reforms allow firms to grow faster and create more jobs, DB 2006 report suggests. All the top ranking countries regulate businesses but they do so in less costly and burdensome ways. Better performance on the ease of doing business is associated with more jobs. Successful regulatory reforms abound, with payoffs for job creation. DB 2007 remarks that reform is like repairing a car with the engine running; there is no time to strategize. It suggests four steps to reform. First, start simple and consider administrative reforms that dont need legislative changes. Second, cut unnecessary procedures, reducing the number of bureaucrats entrepreneurs interact with. Third, introduce standard application forms and publish as much regulatory information as possible. Fourth, remember: many of the frustrations for businesses come from how regulations are administered. The internet alleviates these frustrations without changing the spirit of the regulation Easing business entry is the most popular form of reform during 2006-07 reported by DB 2008. Large emerging economies like China, Egypt, India, Indonesia, Turkey and Vietnam were the fast reformers in the ease of doing business. Payoffs from reform can be large. Higher rankings on the ease of doing business are associated with more growth, more jobs and a smaller share of the economy in the informal sector. The benefits are especially large for women. Countries with higher scores on the ease of doing business have larger shares of women in the ranks of both entrepreneurs and workers. Reforms go beyond the fixes that improve the Doing Business rankings. DB 2009 observes that where regulation is burdensome and competition limited, success tends to depend more on whom you know than on what you can do. But where regulation is transparent, efficient and implemented in a simple way, it becomes easier for any aspiring entrepreneurs, regardless of their connections, to operate within the rule of law and to benefit from the opportunities and protections that the law provides. The report also suggests that the latter focuses on development through income generation for women and poverty reduction, thus ensuring that poor people can participate in its benefits. Besides, with macroeconomic stability being present, domestic business regulation makes an important difference in economic competitiveness, lower barriers to start-up particularly with a smaller informal sector; lower costs of entry and reduced corruption; and greater employment opportunities. 3. DOING BUSINESS IN SOUTH ASIA 3.1 Ease of Doing Business The Doing Business 2009-South Asia Overview, published by IFC and the World Bank records reforms that eased the regulatory burden of doing business in four of the South Asian countries, viz. Bangladesh, Bhutan, India, and Sri Lanka, between June 2007 and June 2008. Table 3 exhibits the aggregate ranking of South Asian economies in Doing Business for the reporting period during 2005-09. It can be seen from the table that Maldives and Pakistan ranked within 80 where as other six nations have been occupying lower position. The ranking position for all the countries are going down with the increase in number of economies included in the survey.
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Year Singapore** New Zealand** United States** Maldives (1) Pakistan(2) Sri Lanka (3) Bangladesh (4) Nepal (5) India (6) Bhutan (7) Afghanistan (8)
2009 1 2 3 69 77 102 110 121 122 124 162
2008 1 2 3 60 76 101 107 111 120 119 159
2007 1 2 3 53 74 88 89 100 134 138 162
2006 2 1 3 31 60 75 65 55 116 104 122
2005 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
N.B: * Rankings on the ease of doing business are the average of the economys rankings on the 10 topics covered in DB Survey; ** Bench mark, Figure in [ ] indicates number of economies included in the DB survey; Figure ( ) indicates ranking within South Asia; Source: Compiled data from Doing Business Reports 2003-09 (www.doingbusiness.org). To understand the factors affecting aggregate ranking of ease of doing business in South Asia in 2009, a comparative picture of all 8 countries is shown in Table 4. Table 4: Factors affecting Ease of Doing Business Ranking* in South Asia 2009
Country Factors Starting a business: No of Dealings with construction permits: No Employing workers: Registering Registering property: No of procedures Getting credit: Legal Rights Index Protecting investors: Investors Maldives 1 5 (3) [38] 9(1) [8] 0(1) [4] -(8) [177] 4(6) [145] 5.3(4) [70] Pakistan 2 11(6) [77] 12(2) [93] 43(7) [136] 6(3) [97] 6(2) [59] 6.3(2) [24] Sri Lanka 3 4 (2) [29] 21(7) [161] 27(5) [110] 8(5) [141] 4(4) [68] 5.3(4) [70] Bangladesh 4 7 (7) [90] 14(4) [114] 35(6) [132] 8(7) [175] 8(2) [59] 6.7(1) [18] Nepal 5 7(5) [73] 15(5) [129] 42(8) [150] 3(1) [28] 5 (5) [109] (4) [70] India 6 13(8) [121] 20(6) [136] 30(4) [89] 6(4) [105] 8(1) [28] 6(3) [38] Bhutan 7 8(4) [63] 25(8) [116] 7(2) [13] 5(2) [38] 2(7) [172] 4(7) [126] Afghanistan 8 4(1) [22] 13(3) [140] 27(3) [30] 9(6) [174] 1(8) [178] 0.7(8) [181]
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Table 3: Ease of Doing Business in South Asia: Aggregate Ranking*
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Paying taxes: No. per year Trading across boarders: No Enforcing contracts: No of procedures Closing a business: Years of
1(1) [[1] 8/9(5) [121] 41(2) [90] 5.7(5) [123]
47(6) [124] 9/8(2) [71] 47(5) [154] 2.8(2) [53]
62 (7) [164] 8/6(1) [66] 40(4) [135] 1.7(1) [43]
21(4) [90] 6/8(4) [105] 41(7) [178] 4(4) [106]
34(5) [107] 9/10(7) [157] 39(3) [121] 5(3) [103]
60(8) [169] 8/9(3) [90] 45(1) [180] 10(6) [140]
19(3) [82] 8/11(6) [151] 47(1) [37] --(7) [181]
5(2) [49] 12/11(8) [179] 47(6) [160] --(7) [181]
N.B: Figure within ( ) indicates rank among the South Asian countries and figure within [ ] indicates global rank. * Rankings on the ease of doing business are the average of the economys rankings on the 10 topics covered in DB Survey Source: Source: Compiled data from Doing Business Reports 2003-09 (www.doingbusiness.org) Starting a business in Sri Lanka, Afghanistan and Maldives with less number of procedures is comparatively easier than any other counties in the region. Dealing with construction permits is very easier in Maldives that occupies 8th rank in global level. As regards employing workers Maldives top the rank and Bhutan stands at 13th position. Nepal and Bhutan figure at 28th and 38th position with 3 and 5 procedures respectively for registering property. India with legal rights index of 8, Pakistan and Bangladesh with 6 and Sri Lanka with 4 have faired very well for providing credit to entrepreneurs. Except for Bhutan and Afghanistan, investors protection regulations in other countries particularly in Bangladesh are very effective. Paying taxes is extremely convenient in Maldives and fairly better in Afghanistan. Trading across boarder is much better in Sri Lanka, Pakistan and India. Enforcing contract is very simpler in Bhutan. Finally closing a business is very convenient in Sri Lanka and Pakistan where as it is very difficult in other six countries. 3.2 Type of Reforms A comparative picture of various reforms in South Asian region as reported in Doing Business survey 2008 and 2009 is given in Table 5. The table reveals that there were five positive reforms reported in DB 2009 but ten positive reforms and three negative reforms were in 2008. A close insight into the type of reforms reflected in DB 2009 indicates that Bangladesh cut the time needed to register property by almost half, from 425 days to 245, through reforms at the Municipal Deed Registry Office. Starting a business has also become easier. Bangladesh made involvement of lawyers in company registration optional. That eliminated one procedure and reduced the cost by $100. Bhutan made it easier to enforce contracts by creating a Land Commission to handle cases involving the transfer of property. Because a large number of land disputes had been ending up in court, setting up the new commission took about 30 percent of all cases out of the district courts. As a result, the total time required to enforce a contract through the courts fell from 275 days to 225.
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Table 5: Types of Reforms reported in DB 2008 and 2009
Positive Reform
09 X 2 1 1 0 0 X 0 1 0 1 2 3 2 0 0 2 3
08
09
08
09
08
09
08
09
08
09
08
09
08
09
08
09
08
08
09
08
Afghanistan
Bangladesh
Bhutan
India
Maldives
Nepal
Pakistan
Sri Lanka
Source: Compiled from DB data base 2008-09
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India implemented electronic data interchange (EDI), allowing exporters to submit documents to customs online. The EDI system also enables customs to automatically assess export documents, making customs clearance more efficient. The new system reduced the time needed to export by 1 day. Sri Lanka, the top regional reformer, strengthened the legal rights of creditors by enforcing the new Companies Act. When a company goes into liquidation, the claims of its secured creditors are no longer frozen. Secured creditors now have the right during liquidation to seize or attach their collateral or appoint a receiver. Sri Lanka also implemented an online system for uploading credit information. Now the Credit Information Bureau (CRIB) can collect data on all loans extended by its members. The minimum threshold for the loans recorded was eliminated and data can be maintained over a longer period. In Afghanistan, Maldives, Nepal and Pakistan no major reforms were recorded. But the Pakistan government has a Doing Business study underway to track business regulations in 12 cities. The goal is to facilitate the sharing of best practices locally and foster cooperation among various levels of government. 3.3 Reasons for Low Ranking Regulatory intervention in the matter of Doing Business indicators determines the countrys performance and position. The countrys prospect of doing business is particularly damaging where enforcement of regulatory intervention leads to abuse and corruption (DB 2004). South Asian countries are more prone to corruption and bribe that affect the growth and prosperity. It is now a fairly established fact that corruption is severely undermining development objectives in South Asian countries by hindering economic growth, reducing efficiency, acting as a disincentive to potential investors and, above all, by diverting critical resources meant for poverty alleviationCorruption has become so much a part of the system that bribes are most often demanded directly by the office personnel involved, with no need for a negotiator or middleman (Transparency International 2002). AEI working paper by Mathur and Singh (2007) reveals quite convincingly that corruption perception does play a big role in investors decision of where to invest. The more corrupt a country is perceived to be, the less the flows of FDI to that country. Another interesting new result of this study establishes is that corruption perception in other developing countries also affects flows to a particular host country. Table 6 depicts various indices relating to corruption (CPI) and bribe (BPI), human development (HDI), global competitiveness (GCI), and world prosperity (WPI) in South Asian region. With regard to corruption, it is found that though corruption is rampant in all the South Asian countries, Bhutan is less corrupt followed by India and Sri Lanka. Afghanistan is most corrupt and is followed by Bangladesh. As regards, human development, except Maldives, other countries more or less have same fate. In global competitiveness, India and Sri Lanka are much better than other economies in the region.
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Table 6: Global Ranking of South Asian Countries on Indices of Corruption and Bribe, Human Development, Competitiveness, and Prosperity
Index Economy Afghanistan Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka CPI-2008 (N=180) 176 147 45 85 115 121 134 92 BPI 2008 (N=22) N/A N/A N/A 19 N/A N/A N/A N/A GCI-2008/09 (N=134) N/A 111 N/A 50 N/A 126 101 77 WPI 2008 (N=104) N/A 89 N/A 70 N/A 98 85 60 HDI-2008 (N=179) N/A 147 131 132 99 140 139 104 FDI-2008 (N=141) 2007 2006 N/A N/A 121 120 N/A N/A 106 110 136 83 113 138 88 111
Source: www.transparency.org,www.hdr.undp.org,www.gcr.weforum.org, www.prosperity.com, www.unctad.org Positive regulatory reforms for doing business encourage FDI. Corruption being the root cause of obstacles to all developmental and growth parameters, regulatory reforms in South Asia with high level of corruption and abuse squeezes inflow of FDI to the region. For instance, the low rate of regulatory reforms in South Asia has affected the flow of FDI to the region. UNCTAD study (2007) reveals that the growth rate of FDI flows (US$) to South Asia has drastically come down from 112 per cent in 2006 to 19 per cent in 2007 (Table 7). Table 7: FDI inflows to South Asian Countries (Million Dollars) Country 2005 2006 2007 Afghanistan 273 242 288 Bangladesh 845 793 666 Bhutan 9 6 78 India 7,606 19,662 22,950 Maldives 9 14 15 Nepal 2 -7 6 Pakistan 2,201 4,273 5,333 Sri Lanka 272 480 529 Total 12,136 25,780 (112%) 30,620 (19%) NB: Figure within ( ) indicates growth rate. Source: www.aei.org/publication26180#21706 4. CONCLUSION Good and positive regulations help in promoting business and heavy burdensome regulation restricts. The World Bank group started a Doing Business project in 2003 to promote positive reforms in various countries. The project suggested reforms in ten areas, viz; starting a business, dealing with construction permits, employment of workers, registration of property, credit facilities, investors protection, international trade, enforcing contracts, and closing a business. A series of reports, published during 2003-2009 by the World Bank groups showed progress of countries on such reforms. Other studies have reported countries ranking on various developmental indicators like corruption, bribe, human capital, global competitiveness, foreign direct investment and world prosperity. These studies together show that eight South Asian countries, namely, Afghanistan,
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Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka demonstrate less reforms and also lower performance on development front vis--vis global benchmarks. Therefore, reforms in business regulations in these countries are urgently required to improve business climate. Reforms are particularly needed to reduce the number of procedures (i) to start a business in India; (ii) to deal with construction permits in Sri Lanka, Afghanistan, India, Nepal, Bhutan and Bangladesh; (iii) to register a property in Maldives, Afghanistan, Bangladesh, Sri Lanka, and India; (iv) to enforce a contract in India, Bangladesh, Afghanistan, Pakistan, Sri Lanka and Nepal. Reforms in credit information sharing in Afghanistan, Bhutan and Maldives need to be undertaken. Number of documents required for international trade is to be substantially reduced in Afghanistan, Bhutan and Maldives. Governance system should be improved in most of the South Asian countries to protect investors confidence to make the economies more competitive and attractive. Since the present study is based on assimilation of findings of various studies conducted by established and well known international organisations like World Bank, UNCTAD etc., the main limiting factor of the study is non-availability of adequate data on the relative importance of the factors that affect inflow of FDI. However, country specific studies can be undertaken in future to understand the relative importance. References Djankov, Simeon, Caroline Freund and Cong Pham. Forthcoming. Trading on Time. Review of Economics and Statistics Djankov, Simeon, Caralee McLiesh and Rita Ramalho. 2006. Regulation and Growth. Economics Letters 92 (3): 395401 Freund, Caroline, and Bineswaree Bolaky. 2008. Trade, Regulation, and Income. Journal of Development Economics 87 (2): 30921 Mathur Aparna and Singh Kartikeya (2007), Foreign Direct Investment, Corruption, and Democracy, AEI Working Paper, see www.aei.org/publication26180#21706 www.doingbusiness.org, accessed on January 10, 11, 12, 2009 www.transparency.org, accessed on January 10, 11, 12, 2009 www.hdr.undp.org, accessed on January 10, 11, 12, 2009 www.gcr.weforum.org, accessed on January 10, 11, 12, 2009 www.prosperity.com, accessed on January 10, 11, 12, 2009 www.unctad.org, accessed on January 10, 11, 12, 2009 www.unctad.org/fdistatistics, accessed on January 17, 2009
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SUGAR INDUSTRY
Author: Dr Narendra Reddy Associate Professor and Head of School School of Management & Public Administration Faculty of Business & Economics The University of the South Pacific Suva, FIJI. Email: reddy_n@usp.ac.fj Telephone: (679) 323-2134 Fax: (679) 323- 1506 Many government-owned business enterprises have been inefficient and costing the taxpayers a lot of money to keep them in operation. The Fiji sugar industry is facing severe financial, operational and political problems on all fronts. At the international level special access and subsidies are being phased out by the globalisation process and WTO requirements. This study examines how the different stakeholder institutions are being restructured. In particular, it looks at what reforms are being undertaken, why it is difficult to implement them, why some aspects of the reform process are stalled, the role of politics in the sugar industry, and finally recommends some innovative recommendations to save the industry from the brink of collapse. (114 words) Keywords: Fiji, sugar, globalisation, politicisation, stakeholder institutions. INTRODUCTION The sugar industry of Fiji has dominated Fijis economy since its introduction in the early 1880s (Oxfam International, 2005:2). It is the backbone of Fijis agricultural sector and accounts for 5.6 percent of the GDP, employs 13 percent of the labour force and generates 20 percent of export earnings (FSC 2008 annual report). In addition to commerce and business, the industry is inextricably linked with the major political issues facing the country: ethnic relations, trade union movement and landownership. Hence, the industry is politicised. Approximately ninety percent of the annual production of the raw sugar is exported. Few sugar producing countries are depended on their survival to this extent on the global market. Another significant feature of the Fiji sugar industry is that all the sugar cane is grown by independent growers on farms averaging four hectares. The industry is besieged with problems on all fronts both internal and external and this is compounded by the uncertainties of the world sugar markets. These problems can be only dealt with effectively if the internal structure is less political and more businesslike. The sugar industrys institutional structure was reviewed in 1984 and since then its operating environment has substantially changed. The restructuring proposals put forward since 1997 via the Industry Strategic Plan has not worked for a number of reasons. AIM AND OBJECTIVES This paper will consider the following issues: 1. Whether the current structural arrangement is adequately serving the needs of the sugar
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industry in Fiji? 2. What changes are necessary to ensure the industry is more commercial oriented and globally competitive? 3. What are the likely problems and future implications of the reform process in the industry? METHODOLOGY This paper examines the Fiji sugar industry from ground zero and assumes there is nothing sacrosanct about the industrys current institutions and structures and put forward a simple structure with a commercial focus of getting the industry back to profitability and globally competitive. The following research methods were used to collect data for this paper: 1. Literature review of documents, reports and publications on the sugar industry in Fiji. Additionally a wider literature on reform processes both within Fiji and internationally was also reviewed. 2. Face to face interviews with the key stakeholders within the sugar industry and relevant government ministry officials. 3. Archival research was conducted on the background of the sugar industry including confidential internal and external reports. LITERATURE REVIEW AND THEORY ON REFORM PROCESS Spicer, et al. (1996) and Guislain (1997) argue that the significance of public sector reform has been widely established and accepted internationally, regionally and locally. Globally, the recent trend is that governments have progressively downsized their involvement in public service delivery by facilitating increasing private sector involvement. Originally starting in Chile, United Kingdom and New Zealand in the late 1970s and early 1980s public sector reforms have now taken worldwide dimensions. One estimate of global infrastructure public sector reform projects averaged approximately $F120 billion (US$60 billion) annually from 1984-1995 (So and Shin, 1995). There is global drive for the introduction of market driven commercial culture into the public sector organisations with the aim of increasing its efficiency and effectiveness. Public sector organisations could be modernised and made more useful by management practices developed by the private sector. Metcalfe and Richards (1990:155) suggest that the way to make government more businesslike is to make it more like business. The most fundamental commercial concept from the private sector which could stimulate the public sector is competition. Under competitive pressure, organisations develop new innovation and techniques, methods and concepts of undertaking commercial activities. Osborne and Gaebler (1992) suggest that a new type of institution is slowly replacing the traditional dinosaur of government owned organisations: Yet there is hope. Slowly, quietly, far from public spotlight, new kinds of public institutions are emerging. They are decentralised, lean and innovative. They are flexible, adaptable, and quick to learn when conditions changeAnd they are our future (Osborne and Gaebler, 1992:2). BACKGROUND OF THE FIJI SUGAR INDUSTRY The sugar industry initially started on a plantation and estate system with foreign capital, imported labour and indigenous land. The millers also owned the plantations and grew the cane but changed to small farm system because of labour shortage starting from the early 1920s. The small farm system remains intact today and distinguishes it from other cane sugar producing countries where
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most of the sugar cane is grown on large plantations owned by the millers. 75 percent of the growers are the descendents of the original Indian indentured labourers brought in to work on the sugar cane plantations. The adversarial relations developed between the millers and the plantation workers over one hundred years ago have continued to this day between the current miller and the growers. In Fiji, currently 19,000 independent farmers grow cane on four hectare farms and supply to the sole miller, The Fiji Sugar Corporation Limited. Most of the land on which cane is grown is not owned by the growers themselves but leased from the Native Land Trust Board which manages these lands on behalf of their indigenous owners. One significant current problem is that a number of these leases are not being renewed to the existing growers who are therefore leaving the industry. In the last few years cane production has declined to about 2.6 million tonnes from an average of four million tonnes a decade earlier. There is a rapid exodus of farmers and other sugar industry related workers from the cane belts to urban and semi urban areas of Suva, Nadi and Lautoka. These developments on the agriculture side of the industry are further acerbated by development in the global sugar market (Reddy and Kumari, 2007: Pan Pacific Conference). The industry is also facing a shortage of skilled workers especially in the sugar mills where mill operations has been adversely affected. The millers performance both in term key business indicators of operations, efficiency and profitability has been nothing short of abysmal. For financial year ending March 2008, Fiji Sugar Corporation (FSC) announced a loss of $19.2 million the largest loss it its corporate history. Its accumulated losses for last ten years amount to approximately $77 million (total 1998 to 2008 financial years). FSC is only able to operate financially under these circumstances because of government ownership (68 percent of the shares) which has brought grants and other financial and non financial assistance. Another important point to note is the role of politics in the sugar industry. Two of the major political parties took their roots in the cane belts and they continue to dominate various facets of the industrys operation. Trade unions are also strong and active in the industry and they together with national political parties continue to have a strong impact on the philosophy, sway and operations of the industry. As a result, the sugar industry is highly politicised at all level of the industry from cane harvesting gang level appointment of the sirdars (heads of cane harvesting gangs) to chief executive officer and board level appointments in the sugar industry institutions. It is an irony that industry leaders at all levels keep telling the public that they wish to keep politics out of the sugar industry and yet in practise do the exact opposite. An editorial in the local daily newspaper precisely highlighted the plight and future of the industry and the role sectional and partition politics has played and further accentuated the situation: Fijis sugar industry has no God-given right to survive. Like any other commercial enterprise, it stands or falls by its ability to supply its market with a product of the quality and price those markets demand. Fijis sugar industry cannot do those things and is doomed to fall unless it learns to do them. Many, including this newspaper, have reminded the industry stakeholders of this simple rule of business. Politics has not only stifled the growth of this vital export earner but now threatens to kill it completely. Without radical and rapid reforms, this industry will die (Saran, Fiji Times 26 November 2001, editorial, page 5). There are two widespread beliefs among the various stakeholders of the industry which to some extent has led to its current precarious position. These are that the industry cannot be allowed to fail. closing the industry is not an option (Saran, Fiji Times, 9 October 2008).
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Whether these beliefs are facts and or accepted as a form of official policy is another matter. What perhaps is more crucial to recognise is the impact such widely held beliefs have on the wider psyche of those involved in various facets of the industrys operations?
DEVELOPMENT IN THE GLOBAL SUGAR INDUSTRY The most significant global development is the reduction in preferential price Fiji receives from the European Union (EU). This is shown in Table 1 which indicates that the EU will reduce it preferential price by 36 percent. This will have a severe impact on all the stakeholders in the industry. Table 1: Reduction in EU subsidy to Fiji Sugar Industry 2007 5.1% 2008 9.2% 2009 21.7 Total reduction 36.0%
Percent reduction in EU price
Source: The Fiji Sugar Corporation Limited, Annual Report, Page 11 2008 INSTITUTIONAL STRUCTURE OF THE INDUSTRY The structure of the Fiji sugar industry is complex. It is made up of many stakeholders and institutions. In addition to the existence of several institutions the sugar industry is also highly regulated and has specific legislations covering the activities of its stakeholders. The Sugar Industry Act of 1984 specifically disqualifies anyone who has been involved in politics from Board membership of any sugar industry institutions. This was a sensible decision to insulate the sugar industry, as far as possible, from political manoeuvring. The national politics cascades to all facets of the industrys operations. The farmers and workers unions are directly affiliated with political parties and it has been difficult to demarcate politics from the commercial operations of sugar industry. In a way politics is part and parcel of the sugar industry. Fijis major political parties were born in the sugar belts and it would be difficult to wean mainstream politics from its sugar connection for the foreseeable future. The two main farmers unions support two different political parties. Independent observers have great difficulty in accepting that the nominated members of the growers council or the members appointed to the various board of the sugar industry institutions, including FSC, by the ministry responsible for sugar matters are non-political. To an outside observer, who has some knowledge and understanding of the industry, it would be clear that it is politics and not commerce which is central to the problems facing the sugar industry. The two main partners are the sugarcane growers and the FSC. For much of the history of the industry, the relationship between these two parties has been adversarial rather than that of a partnership. A contract between the growers and the miller, called the Master Award, after an award made by an independent judge appointed by the Government, governs the commercial and legal relationship between the growers and the miller. The following section will consider the specific institutions together with their structure and roles in the industry: 1 FSC is the sole miller in the industry and the legislation governing the formation of FSC was reviewed and changed in 2006. From 1973 to 2006 it operated under the Fiji Sugar Corporation Limited Act of 1972. It now operates under the Companies Act. Operating FSC
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2 The Sugar Cane Growers Council was established in 1984 within the legal guidelines of the Sugar Industry Act of 1984. It is the official body representing all the growers and is required to bring harmony and co-operations among the cane growers and look after their interests in dealing with all other stakeholders, especially the miller, in the industry. In addition to the above two immediate stakeholders, there are other partners in the industry. These are: the Sugar Commission of Fiji, Sugar Industry Tribunal, Fiji Sugar Marketing Company, Cane Growers Fund Authority, Mill Area Committees, Native Land Trust Board, Mill workers unions, and the Government of Fiji in its role as an arbiter rather than the owner of the mills. The government has a dual and potentially conflicting role in the industry; it is the majority shareholder in the milling company while it is also entrusted with role of enacting and implementing the laws of the country which, inter alia, governs the industry. The Sugar Industry Act 1984 provides the legislative framework which defines the role and relationships among the various parties in the industry whereas the Master Award only governs the relationship between the growers and the miller. 3 Sugar Commission of Fiji. The Sugar Commission of Fiji is the apex coordinating institution in the sugar industry. It consists of a Chairman and representatives of other stakeholders in the industry. It is required to coordinate all the activities within the sugar industry. Its core role is to bring about peaceful resolutions and understanding to the various industry issues. The expenses of the operations of the Sugar Commission are deducted as an industry cost from the gross proceeds of the sale of sugar. In a way, the Commissions role is fiduciary in nature implying trusteeship of the industry. The total expenses of the Commission for 2007 amounted to approximately $500,000. It is time to ask whether the industry, which is paying for the operations of the Commission, is getting value for money. 4 Sugar Industry Tribunal. The Sugar Industry Act of 1984 also created the Sugar Industry Tribunal with a permanent arbitrator to address all disputes in the sugar industry. In the past disputes were settled by arbitrators appointed on an ad hoc basis. The government realised the importance of the industry and saw the need for a more permanent structure to facilitate a smooth functioning of the industry. The Tribunal is appointed by the Judicial and Legal Services Commission in consultation with the Sugar Commission of Fiji. The day to day operations of the Tribunal is carried out by the Industrial Commissioner and other support staff. The Tribunal has wide jurisdiction over matters pertaining to the sugar industry and relations among the various stakeholders. 5 Fiji Sugar Marketing Company Limited. Under the sugar cane contract and the successor Master Award the miller is required to market the sugar on behalf of the industry. The FSM is a fully Government-owned limited liability company established in 1976 and took over the marketing functions from the CSR Company. It acts on behalf of the FSC in marketing all sugar and molasses. The reason for establishing a separate company rather than allowing FSC to directly handle the marketing function is simple. This is to avoid any conflict of interest as FSC together with the growers are the owners of the proceeds of the sale of the sugar and molasses and any other by products. 6 Mill Area Committee. The Mill Area Committee for each of the four mills was another
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under the Companies Act facilitates an environment of greater participation of the industry stakeholders and relieves FSC from many of its non commercial obligations which it was required to undertake as statutory organisation.
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institution created by the Sugar Industry Act of 1984 to facilitate the smooth operations of the industry. This Committee is presided over by the Chairman of the Sugar Commission and its members are representatives of all the other stakeholders. 7 Cane Growers Fund Authority. The Cane Growers Fund Authority was another institution set up in 1984 as part of the general restructuring and strengthening of the sugar industry institutions under the Sugar Industry Act of 1984. It took over the assets and liabilities of the predecessor Sugar Cane Support and the Stabilisation Fund. The Fund had $F19.2 million in assets in 1984 and grown to $F58 million in 2008. 8 Sugar Research Institute of Fiji. This was established under the Sugar Research Institute of Fiji Act 2005 as part of the restructure of the sugar industry. The Sugar Research Institute took over the activities of FSCs Sugarcane Research Centre at Lautoka in July 2007. Prior to the establishment of the Sugar Research Institute, its predecessor the FSCs Sugarcane Research Centre was largely operated and managed by FSC. The growers contributed to its operating budget but had little if any input in the management of the Sugarcane Research Centre. 9 Employee Trade Unions. The mill workers are represented on the Sugar Commission of Fiji. In addition to the mill workers there are approximately 18,000 cane cutters and farm workers whose work is seasonal in nature. These workers are the most vulnerable to cyclical nature and the ups and downs of the sugar industry. They are currently not unionised and not directly represented on the Sugar Commission of Fiji. 10 Native Land Trust Board. The issue of land and especially its ownership and usage is not only a sensitive national issue but it is also of paramount importance in Fiji generally and the sugar industry in particular. The Native Land Trust Board manages all native land on behalf of the indigenous land owners. Approximately 92 percent of all the land in Fiji is indigenous-owned and administratively comes under the auspicious of the NLTB. 11 Fiji Government. Government of Fiji has a dual role as the majority shareholder of FSC (owns 68 percent of the shares in the company) and also its role as the national government where it has the responsibility of providing the legislative framework for enacting and implementing the laws of the country and those governing the industry. In its role as the majority shareholder it is required to appoint the majority of the board directors including the chairman of the board and provides broad policy directions. In the earlier years of FSCs operations the government had made board appointment of individuals with proven track records in industrial, commercial, legal and business field. Furthermore there was continuity in the board as members served for long periods and there were no drastic and sudden changes to its membership. This is not so in the recent past. The political developments in Fiji since 2000 have also filtered down to the board levels of statutory organisations where board members are replaced as often as the government and/or the minister responsible for the particular organisation changes. The sugar industry institutions including the FSC are no exception. The membership of the board of directors of FSC has changed much more frequently during the last decade and this to some extent has contributed the lack of direction it has been facing. This is adequately reflected in the appointment of the Chief Executive Officer (CEO) of FSC following the departure of the last sustentative CEO. The board was not been able to appoint a substantive CEO for FSC since 2004 largely because of the frequent changes to the board itself and the political manoeuvring which goes with such appointments. The fact that Fijis largest corporate organisation is not able to appoint a
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The second important role of the government is its responsibilities as the government of the day. The FSC and the sugar industry are not just another business organisation and industry respectively in the economy but one which is still regarded as the backbone of the economy. Therefore the government is required to promulgate appropriate legislations and give direction to both the miller and the industry to implement policies to meet national objectives. KEY PROBLEMS The industry is inundated with problems in all fronts from the cane fields (expiring land leases and declining production) to the factory (poor state of the mills and declining efficiencies) to the global markets (loss of preferential markets and volatile prices). WTO reforms are driving global markets to move towards free trade but on the producer side here in Fiji there are too many regulations and internal institutions which diffuse the effectiveness of the industry. The current internal structure in the industry is nothing short of an anachronism from the past. The external environment is rapidly changing and the window of opportunity to bring about necessary changes and remain globally competitive is on the verge of closing. Another major problem is that by 2010 FSC would have upgraded and rehabilitated its milling capacity to process 4 million tonnes of cane annually and manufacture 450,000 to 480,000 tonnes of sugar within a 20 week season but there may not be available this volume of crop. In addition to underutilised capacity and financial losses, there would be many other operational problems for FSC if this indeed occurred. There may not be a continuous supply of cane, a potential long slack season, not able to meet market obligations and skilled employees may move away from mill centres because of non continuous employment opportunity. REFORMS IN THE SUGAR INDUSTRY The presence of too many institutions creates a degree of parochialism by those institutions within the sugar industry. Furthermore, these institutions are expensive. For any business or industry to function efficiently it needs to asses and understand the environment and a stable environment is generally preferred to a changing and an unpredictable environment. Furthermore, no industry can operate in isolation from the changes taking place in the national and global economic environment. This broad rule of business, that is environmental impact on business, is also applicable to the sugar industry. The sugar industry is no exception. The sugar industry both in Fiji and other protectionist economies, especially those in the ACP sugar producing countries, felt that they were immune from their respective national economies and also from the vagaries of the global economic environment. The sugar industry needs to realise that the global economic system is rapidly changing and will further change as required by WTO rules. The most powerful global commodity cartels and even the most influential nations are within the ambit of these global reforms in trade including agriculture. Therefore, the days of especial access for Fiji sugar industry are nearly over and they have to not only restructure the industry but take a step further. Restructuring the industry is only trying to get a short term solution to what is really a long term problem.
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sustentative CEO for four years leaves much to be desired and sends signals of uncertainty to not only the other stakeholders in the industry; and financial and business community, suppliers and markets; but also to FSC internally especially to the employees. At a time when FSC is encountering crisis after crisis the task of turning it around is made much more difficult without a substantive CEO with full board authority.
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For long term viability, the industry needs to restructure as part of the eventual deregulation of the industry. At present the industry is highly protective and regulatory. A necessary first step in the proposed deregulation is reviewing the relevance of the existing industry- legislations and institutions. The current structure has served it purpose (is an anachronism of the past). The two main stakeholders in the industry are the miller and growers and they have to rapidly learn to work in a league. To successfully compete in the global market the miller and growers need to form an alliance from the cane field of Fiji to the battlefield of the global markets where sugar is sold. In simple and commercial terms it requires growers to produce and continuously supply fresh, clean, green and high sugar content cane to the miller who in turn is expected to crush the cane with the minimum of delay and process the sugar efficiently. Efficiency is to be defined in terms of sugar recovery, quality and TC/TS ratio. The growers and millers mission does not end just there. They both need to deliver their side of the bargain efficiently in terms of cost of production and meet the challenges of the competitive global markets. Once these two stakeholders appreciate, understand and accept that they are in a commercial business and their survival and prosperity is dependent as much on the sincerity and commitment of the other as on themselves individually. When this position is reached the majority of the other stakeholders are to a large extent irrelevant. The remaining sugar industry institutions are either to be absorbed with the miller and/or the growers organisation or made redundant. The key to the success of the industry is that growers and millers need to end their historical adversarial relationship which is a journey from the past of you and me and you versus me to the journey us in the future. A good starting point is to start implementing the 1997 Sugar Industry Restructure Plan. This requires visionary leadership in the industry and unfortunately there seems to be a lack of this vital resource. So far, the restructuring in the sugar industry has been done on a piecemeal basis. This did not have much impact. Furthermore the operating environments both domestically and globally have substantially changed since the restructure proposal were agreed to in 1997. Therefore, a major and comprehensive reform of the entire industry is recommended as follows: Change from adversarial relationship between growers and miller to work in league. Strengthen these two partners. Depoliticise the industry. Appoint appropriately qualified board members who have commercial background and with proven track record. It is to be emphasised that if these two key stakeholders cannot or do not want to work for the wider mutual interest of the industry (which is them) then the eventual demise of the industry has arrived. Continued government support will be conditional on this. Sugar Commission of Fiji to wind up. It has chewed in $F0.5 million annually and not delivered much. It does not have any executive authority and is largely a coordinating body. Fiji Sugar Marketing to be a subsidiary of FSC with an independent chairman (CEOs of FSC and SCGC as board members) based at the shipping centre. FSM is largely shipping and logistics organising company, little of what is called marketing is done by them. This is to continue to be an industry cost. Sugar Industry Tribunal to be wound up and the registry of growers function to be undertaken by the Growers Council. Sugar Research Institute to be managed by FSC as it has the infrastructure and the technical know how of the industry. (equal representatives from FSC and SCGC, with an independent chairman). The current funding arrangement to continue. Sugar Cane Growers Council to continue to operate but not duplicate functions which could be better undertaken by the FSC to provide those via its field division, extension and gang management. Their commitment can only come through by their having a direct ownership
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stake in the FSC. It is suggested they purchase up to 30percent of the shares in FSC via funds from cane growers fund. Option be given to minority shareholders to exit from the industry and sell their shares to Growers Council, the rest from government-owned shares. Cane Growers Fund. Continue to operate on the current basis. South Pacific Fertilizes Limited. To be taken over by the FSC by purchasing growers shares but to include a representative of growers on its board. Current government in unique position to see through most of these recommendations. Government to use the purse string to bring about the necessary changes for the overall good of the industry. There has been adequate consultation among all the relevant parties and stakeholders over a long period. The environment is deteriorating and also unpredictable. The delay in implementing reforms further aggravates the situation. As mentioned earlier the window of opportunity may be fast closing away. The rationale/ethos behind recommending the appointment of representatives of FSC and Growers Council on these institutions is bring about an increase commitment and ownership in these institutions in particular and thereby to the sugar industry in general.
SUMMARY AND CONCLUSION The window of opportunity for the sugar industry is fast closing down. The recent hurricane and flooding in the cane belt has further aggravated the plight of the industry. Governments in the past were not able to implement drastic policies because of politics and voter backlash. The current interim government may be in unique position to undertake and implement painful policies without the same level of resistance and backlash from the industry stakeholders. The plethora of industry institutions needs to be reduced and those which do not add value to the industry need to exit the industry. Their time has run out. The other need to rationalise with the two key institutions: growers and miller. This is the only logical and financially sustainable way forward under the current circumstances. References FSC (Fiji Sugar Corporation Limited). 2008. Annual Report. Fiji Sugar Corporation Limited. Guislain, P. The Privatisation Challenge: A Strategic, Legal and Institutional Analysis of International Experience. The World Bank, Washington DC, USA 1997. Lal, P. N. 2008. GANNA: Portrait of the Fiji Sugar Industry. Sugar Commission of Fiji, Lautoka, Fiji. Metcalfe, L and Richards S.1990. Improving Public Management. SAGE Publications, London, UK. Osborne, D. and Gaebler, T.1992. Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector. Addison-Wesley, Reading, MA, USA Oxfam Briefing Paper No 77. 2005. The Fijian sugar industry: Investing in sustainable technology. Reddy, N. 2005. Managing Change of Ownership in Fiji Sugar Industry: From CSR to FSC. New Zealand: Macmillan Brown Centre for Pacific Studies, University of Canterbury, Reddy, N. 2005. Prospects of the Fiji Sugar Industry without European Union Subsidies. Paper presented at the Pan Pacific Conference. Shanghai, China.
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Reddy, N. 2003. Survival Strategies for the Fiji Sugar Industry. Fijian Studies, Fiji Institute of Applied Science 1(2): 265-285. Reddy, N. 2002. Marketing Potential for Fiji Sugar. Paper presented at the Pan Pacific Conference XIX. Bangkok: Thailand. pp. 306-308. Reddy, N. 2002. Restructuring Prospects for the Fiji Sugar Industry. Paper presented at International Management Development Associations Eleventh Annual World Business Congress. Antalya, Turkey. Reddy, N. 1999. The Fiji Sugar Industry: Managements Dilemma in the Age of Globalisation. Paper presented at the Pan Pacific Conference XVI. Nadi, Fiji. Reddy, N and Kumari D. 2007. Reform in Fijis Sugar Industry. Paper presented at the Pan Pacific Conference. Dunedin and Queenstown, New Zealand. Saran, D. 2008. FSC closure not an option, Thursday, October 09, 2008 So, J., and Shin, B.1995. The private infrastructure industry- a global market of US$60 billion a year. Public Policy for the Private Sector, World Bank. Spicer, B., Emanuel, D and Power, M. 1996. Transforming Government Enterprises, Wellington, The Centre for Development Studies, NZ, 1996. Sugar Commission of Fiji. 1997. Sugar Industry Strategic Plan, 1997- 2020. Lautoka, Fiji
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DESIGN AND ITS OPPORTUNITIES IN INDIAN MARKET

NISHA PRAJAPATI Graduate School of Information Science and Control Engineering, Nagaoka University of Technology and TATSUO ASAI Professor, Management and Information Systems Science, Nagaoka University of Technology
Universal design (UD) products and environments are designed to benefit a wide range of users. UD allows people with and without disabilities to use products and services without specialized design. India has not implemented UD concept in durable products yet. In this context, this study tries to explore the opportunities of UD products in Indian market and to promote UD concept in product design. This paper discusses how Panasonic incorporates UD in durable products as a model company. Analysis of Indian market shows new market opportunities for UD products. This study proposes to raise awareness among young people in order to induce the benefit of mass production. KEYWORDS: India, innovation, Japan, product design, universal design
1. INTRODUCTION Universal design (UD) has been defined as the design of products and environments to be usable by all people, to the greatest extent possible, without the need for adaptation or specialized design (Mace 1988). UD is an initiative that can be incorporated in any product or service such as those from the design of a web page to the grip of a pen. Against a backdrop of the trends towards rapid aging, production of multi-functional products, and the increase of sophistication in technology, there is an increasing demand for UD. The purposes of this research are (i) to explore the opportunities of UD product in Indian market and (ii) to promote UD concept in product design. This paper focuses on durable products of home appliances like washing machines because firstly, people (specially female) spend most of time in their house in keeping household. Secondly, home appliances are widely available. Thirdly, India is on the threshold of development therefore this is the right time to take up the issues related to UD. A well-known Japanese global company, Panasonic, was selected to motivate Indian producers to incorporate UD in their design product. This company was selected because it is one of the biggest corporations from the viewpoint of sales records in the electronic sector. This paper will examine how Panasonic has infused UD concept into their products. This paper studies further the need of UD concept in Indian market and it also proposes raising UD awareness among young people.
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13 IMPLEMENTATION OF UNIVERSAL
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2. REVIEW OF LITERATURES A brief review of literatures related to UD in India is outlined below. A Non Government Organization (NGO) named Samarthyam is promoting UD. Its main goal is to promote UD in a project of Built Environment and Transportation. In the planning stage, Samarthyam implemented UD and made its office fully accessible to people with disabilities. In 2002, the first metro line of India was inaugurated, which was built with the cooperation and coordination between Samarthyam and Delhi Metro Rail Corporation (DMRC). They built stations, which provide features such as ramps with handrails, guiding paths, warning strips for visually impaired persons and others (Samarthyam 2008). The level of awareness regarding the needs of the disabled is very low in India. Sometimes small changes make a difference, for example, at typing, the use of a bigger font and well contrast color makes books easier to read for low vision people. Moreover, it is important to take a holistic view in the earlier stages of product development rather than incurring additional costs at a later stage (Ramalingam 2005). Ray (2006) states that UD is unexplored in India despite the tremendous growth in the building industry and the demand for international standards of construction. He also introduced UD concept to architecture schools. Singanapalli (2008) points out that a developing country like India has some traditions which are inherent in UD principles. These traditions should be redefined to bring changes. He also says that although new development and technology are looked as a matter of doubt in India, It is better to implement UD in all over India as its benefits have been seen in developed countries. Furthermore, he says a number of innovative technologies and design solutions are applicable to India. Raheja (2008) states that UD is a philosophy of thought and action for designers and non-designers to achieve the goal of UD. UD may be defined as the best approximation of an environmental facet to satisfy the needs of all the people. He concludes that India is in progress towards meeting the four goals. These goals are equality of opportunity, full participation, independent living economic, and self-sufficiency. These goals are dependent on successful policy made by the government which is promoting a highly interactive process between environment and the people with disabilities. After reviewing these literatures, it is clear that Indians have started to be aware of UD. UD has already implemented in infrastructure and education. However, this is not a symptom of the incorporation of UD in durable products. 3. AN EXAMPLE OF A MODEL COMPANY OF JAPAN Panasonic was ranked as the 59th largest company in the world in 2007. It offers a wide range of UD products for consumers. Panasonic has incorporated UD concept since 1990. UD concept has gradually developed in Panasonic since then, based on its own principles concerning UD. In 2003, Panasonic focused on rising number of aged people, increasing product functions and sophistication of technology. In 2004, Panasonic focused on users manuals, packaging, and catalogs and implemented UD in all of them. As a result, Panasonic had 891 UD products in 2005. Moreover, Panasonic started to introduce UD concept to the rest of its products in order to make operation understandable easily (Panasonic 2006).
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UD concept has no prescribed design. It is flexible to adopt UD principles anytime and to any product. Therefore, Panasonic incorporates UD in its products, users manuals, packaging, and catalogs. At the beginning of UD incorporation, Panasonic created its own five basic principles and added one later. The six principles are as follows: simple operations, displays and phrases that are easy to understand, comfortable posture and motion, easy movement and space characteristics, safety and security, environment in which the product will be used.
Panasonic holds UD seminars for all the employees to reinforce programs of user-friendly products for manufacturing. Panasonics ideas behind the pursuit of usability shown in Figure 1, consider three aspects. They are (i) user-friendly, (ii) barrier-free, and (iii) accessibility. Starting at the development stage, Panasonic works to improve the usability of products from the customers perspective, addressing considerations such as ease of operation, efficiency, and comfort.
Level of usability Can use freely User - Friendly
Easy to use
Realizing universal design Concept of pursing usability of product and expanding use Barrier - Free
Usable (but difficult to use) Usability of a product Cannot use The elderly Persons (Impaired without disabilities sight or characters) Persons with mild disabilities (low vision)
Accessibility
Persons with severe disabilities (blind)
User (e.g. visually impaired)
Figure 1. Universal Design and Usability (Panasonic 2006)

3.2 Economic Analysis of Panasonic Panasonic faced an operating loss in 2002 (see Figure 2) for the first time in its history. However, in the next year, Panasonic achieved and actually exceeded the years target for net sales growth up to 5%. To recover from the economic crisis in 2002, Panasonic adopts three management strategies which are (i) reconstruct the business, (ii) implement black-box technologies that are difficult to copy by other companies, and (iii) focus upon V products, which are a mixture of black-box technologies, environmentally friendly products, and the incorporation of UD in product design (Panasonic 2003).
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3.1 Panasonics Approach to UD
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Figure 2. Operating Profit/Loss of Panasonic (Panasonic 2003 and 2007)

3.3 Improvement of Panasonics Financial Condition In 2003, Panasonic introduced three models of tilted drum washing machines, which were (i) NaV81, (ii) Na-V61, and (iii) Na-S81. The first one incorporated advanced UD concept in its design, providing products that can be used easily by the aged and the disabled. The rest of the models have incorporated simple UD concept in the design. The tilted drum washer has sustained a continuous growth rate of more than 100% for three consecutive years. About 45% of Japanese households have either already purchased or are planning to purchase tilted drum washers (Hktdc.com 2008). Table 1 shows that the monthly production of advanced UD concept tilted drum washers was higher than that of the other models. Table 1. Monthly Production and the Assumed Profit per Model (Hktdc.com 2008) Model Monthly production in 2003.11-2005.3 Assumed profit a month (in million yen) Na-V81 20,000 100 Na-V61 5,000 25 Na-S81 5,000 25
Based on sales records of the tilted drum washer, the 100% of its production was sold out. Therefore, if we assume that Panasonic made 5,000 yen profit/unit, then the profit from the advanced tilted drum washer would be 100 million yen and for the other two would be 25 million yen every month. This shows that Panasonics gain from the advanced tilted drum washer represented approximately 67% out of the total profit, while the gain from other models represented 16% for each. In summary, this shows that Panasonic recovered in 2003 by changing its strategies into producing UD washing machines. 4. MARKET FOR UD PRODUCTS 4.1 Reasons to Choose India as a Sample Country
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India is selected because firstly, many foreign companies are interested in doing business in this country. This responds to the facts that economic reforms have transformed India into the second
4.2 Assumptions for the Research The assumptions of this study are as follows: UD products and services are not always expensive. Innovation means to create new products or modify the existing ones. UD concept extends the market of durable products to aged and disabled people. Advertisements and demonstrations may help to raise UD awareness. Higher demand of products and services may reduce production costs. 4.3 Study of Indian Macro Environment The environment of developed countries is different from that of developing countries. Therefore, before UD is incorporated in Indian products and services, the overall macro environment should be analyzed in order to recognize the threats and opportunities. Macro environment consists of the variables which cannot be controlled by any company. These variables are (i) economic, (ii) societal and cultural, (iii) behavioral, (iv) technological, and (v) demographic. The present conditions of these variables are explained below. Economic - The per capita income has increased. In 2001, it reached US $460 and in 2007, it reached US $950 (Rediff news 2008). Societal and cultural - Indians are classified into three social classes, which are upper, middle, and lower class. This classification is based upon both caste (family name) and income. The population of the middle class is the highest among all the classes. Seventy percent of households live in rural areas and these people are slowly moving to urban ones. The number of nuclear families as well as the number of working women are increasing. Technological - Technology is improving and there are many innovative products, which offer a greater variety of choices. The demand for durable products has increased by 12% during recent years (FICCI 2005). In 2007 and 2008, the demand for fully and semi automatic washing machines grew at the rate of 40% and 17%, respectively (NaukriHub.com 2008). Behavioral - Indians are not ready to accept new products easily (Singanapalli 2001). For example, they prefer to have their clothes washed by a washerwoman and pay an average of 75 rupees/day (less than US $2/day). Indians still believe that the cost of using a washing machine is higher than the amount paid to the washerwoman. They also believe that the washing machine will tear their clothes off. However, young people are not restricting themselves to try a new product. They like to enjoy their life and work. They feel doing the household activities without the modern equipment is tiresome. Demographic - The people aged 65 years or over are named as aged people in South Asia. The number of aged people is 50 million and that represents 5% of the Indian total population. According to Indias census for 2001, disabled people represented 2.13% of Indian population. In 2005, many organizations believed that 6% approximately 60 million of Indian population are disabled. In Figure 3, it is assume that the rate of disabled is 6% of total population. There is no statistical data of disabled in census of different year. Moreover, the figure also shows the rate of aging is approximately in the same rate of the increasing population.
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fastest growing large economy. In addition, India is the second most favored nation for investment because of economic liberalization (India 2008). Secondly, India is regarded as a potential market because it is the worlds twelfth largest economy at market exchange rates and the fourth largest in purchasing power. In addition, it is the seventh largest and the second most populous country of the world (Bestwaytoinvest.com 2008).
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Figure 3. Trends of Total Population, the Aged and the Disabled in India (1950-2050) (UN Census 2006)
4.4 Need of UD in Product Design Although there are many international articles saying that UD products are designed for everybody including the aged and the disabled, India has not incorporated UD concept in the product design. The aged and the disabled are ignored by Indian society. In order to avoid discrimination against the aged and the disabled, UD products should be produced. Although Indian producers are looking forward to finding ways to create innovative products, they havent considered UD implementation as one of these ways. Nowadays the organizations are adopting UD approaches not only to increase revenue or profit, but also to consider human centered responsibility. A study of Asai and Konta (2006) show a strong positive correlation between a companys level of commitment to UD and its corporate value. Moreover, Hasegawa and Asai (2007) state that the promotion of UD in business activities seems to improve stakeholders satisfaction and give good influence to corporate value. Based on the previous ideas, it can be said that any company, which incorporates UD products into its product design, would be able to extend its market to the aged and the disabled. Therefore, there would be more chances to implement mass production, which would benefit the company. 4.5 New Approach to UD Market Kotler and Armstrong (1997) state that it is difficult to target the whole population at the same time. This paper tries to segment the Indian market to meet needs and wants of people. Based on the macro environment previously explained, Figure 4 shows the present composition of Indian population based on the age and considering the disabled in the center of the circle (UN Census 2006). Figure 5 shows the first targeted UD market which we propose. The target marked with black. It represents the aged and the disabled and covers 11% of the total population. Figure 6 shows the extension of UD market from the aged and the disabled to the young. The people aged between 20-39 are named the young in this study. It covers 42% of the total population. In order to have young people involved, aggressive marketing strategies should be applied to raise UD awareness. This responds to the fact that many people believe that UD is only for the aged and the disabled. However, UD is necessary for everybody because people may be temporarily disabled for many reasons such as cramps in ankles, pregnancy, and being tired while walking.
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Figure 4. Composition of Indian Population
Figure 5. First Target of UD
Figure 6. Second Target of UD
There are many reasons why young people should be targeted. First, they buy durable products during migration for study and/or their career. Second, they are less restrict to try new products. Third, most people get married in this age and Indians have a ritual of dowry. Finally, many young women are jobholders and increasing in number. It is natural to include young people a target because they create high demands on durable products. 5. CONCLUSIONS AND FUTURE WORK Based on the findings mentioned previously, it can be concluded that there are opportunities of UDs implementation in Indian market. Therefore, it is better to raise UD awareness among young people, because it would help businesses to adopt mass production and get the economic benefits from Indian market. Thus, in the future work, this study will be further extended in order to know how far UD may help mass production in a short and long period of time. REFERENCES [1] [2] [3] [4] [5] [6] [7] [8] [9] Asai Tatsuo, Konta Yoichi (2006). Development of Simple Measures of UD and their Application to Evaluation of Corporate Management. Journal of Japan Association for Management Systems 23(1): 53-60. Bestwaytoinvest.com (2008). Invest in India, http://www.bestwaytoinvest.com/india. FICCI, Consumer Durable Goods Survey (2005). Consumer Durable Goods Survey, http:// www.ficci.com/surveys/consumer-durable.pd. Hasegawa Mitsunari, Asai Tatsuo (2007). The Effect of Universal Design Level in Management of Enterprise Value. Journal of Japan Association for Management Systems 24(1): 67-72. Hktdc.com (2008). The warring washing machines, http://info.hktdc.com/imn/08050902 / houseware062.htm. India 2008: A Reference Annual (2008). Research, Reference and Training Division, Publications Division, Ministry of Information and Broadcasting Government of India. Kotler Philip, Armstrong Gary (1997). Principles of Marketing (7th Edition). Prentice Hall. Mace Ron (1988). The Center for Universal Design, North Carolina State University About UD, http://www.design.ncsu.edu/cud/about_ud/about_ud.htm. NaukriHub.com (2008) Washing Machines,
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http://www.naukrihub.com/ india/fmcg /overview/washing-machines/. Panasonic, Annual Report of Panasonic 2003 (2007). Matsushita Electric, http://panasonic. net/ir/annual/2003/pdf/all.pdf. [11] Panasonic, The Panasonic Report for Sustainability (2006). Matsushita Group, pp. 62-64, http://panasonic.net/csr/reports/pdf/csr2006.pdf. [12] Ramalingam Arpana (2005). Design for the disabled: Small changes can make a difference. The Financial Express, http://www.financialexpress.com/old/print. php ?content_id=84491. [13] Raheja Gaurav (2007). Accessability, http://accessability.co.in/Article-Universal-Design. [14] Rediff news (2008). Nations with highest per capita income, http://www.rediff.com/money 2008/jul/24sld1.htm. [15] Samarthyam (2008). Universal Design in Built Environment, http://www. samarthyam. org/node/16. [16] Singanapalli Balaram (2001). Universal Design and the Majority World, In W.F.E. Preiser E. Ostroff (Eds). Universal Design Handbook. New York: McGraw-Hill, pp.5.1-5.20. [17] Singanapalli Balaram (2008). Universal Design Education and Development, http://www. ncpedp.org/access/ac-resrch.htm. [18] UN Census (2006). World Population Prospects: The 2006 Revision Population Database, http://esa.un.org/unpp/index.asp?panel=2. [10]
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CHAPTER
MANAGEMENT EDUCATION
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14
INTEGRATING SOCIOLOGY IN MANAGEMENT EDUCATION: TRENDS, TRAJECTORIES AND POSSIBILITIES

Manish K. Thakur Assistant Professor Public Policy and Management Group Indian Institute of Management, Calcutta.
Based on a critical assessment of the disciplinary practices of sociology, this paper outlines possible trajectories of its integration in management education in the specific context of the Indian Institutes of Management (IIMs). It evaluates the practices of the discipline in its varied manifestations teaching, research, training and consultancy - on the basis of professional experiences of fellow sociologists irrespective of their location in a separate sociology area or in other interdisciplinary groups. And finally, it explores the relationships existing between sociologists based at the IIMs and elsewhere and the way these relations impinge on the task of integrating sociology in management education. [Key Words: Management, Sociology, Education, Research] INTRODUCTION IIMs have been at the very centre of the academic firmament in India, and are reckoned to be the elite business schools having global recognition. At a time when the new generation of professionals are no longer trained in liberal arts colleges and conventional universities, the prestige of IIMs is on the upswing. In a way, they appear to have occupied the central place in professional higher education as with every passing year the number of engineering graduates coming to IIMs is on the rise. Even those trained at IITs feel compelled to supplement their professional training with management degrees to enter the high-end corporate job market. Sociology, as such, has not been stranger to the curriculum of the American schools of business and management a state of affairs which reflects the high standing of sociology in that country and the strategic importance of Elton Mayos appointment at the Harvard Business School.29 Way back in 1960, Smith (1960: 103) could claim that Indeed, the position of sociology in business and management education in the US now seems to be such that it has passed beyond the point at which separate reference needs to be made to it in the curriculum. True, even in the School of Industrial Management at the MIT, sociology was present more by way of immersing its separate identity in the interdisciplinary themes areas. Be that as it may, available evidence suggests that relevance of things sociological to management process has been taken for granted at least in the US, and also to some extent in the UK. In fact, very often the case for inclusion of sociology in management curriculum has largely been
29 Elton Mayo (1880-1949) was one of the key figures involved in Hawthorne Studies and his work laid the foundation for the many later management and organisational thinking. He worked in areas of motivation and commitment, and worker-management relations and came to occupy a legendary status as a pioneer of applied social science, especially in the workplace. He emphasised that work is a group activity, that it is social, and that the peer group (informal groups) is highly significant in work relationships. According to him, workers are influenced by social demands inside and outside work, alongside formal structures and groups. His plea was to harness informal groups for greater productivity. He is generally credited with the use of sociological theories to the field of industrial relations (see Smith 1998: 221-49).
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large. On the flip side, it has also meant equating industrial sociology with Hawthorne experiments. As a consequence, sociology is looked at as a palliative for industrial conflict and a source of social skills it has been seen as contributing to solving human (read labour) problems in the industrial societies. In this fashion, sociology justified its limited uses in business schools and/or in management teaching. In the UK, sociology has been projected as being essentially a study of institutions including a description of representative industrial institutions the enterprise, the trade union, and the labour market. Besides, it included in its provenance the concept of formal and informal behaviour at work place and focused on the interaction of industrial with other institutions of society-those of class, politics and education. In a manner of speaking, by providing illustrative material on industrial situations, the industrial problems and their social implications, sociology has managed to sneak in through the backdoor of business schools. Sociology, as such, has not been stranger to the curriculum of the American schools of business and management a state of affairs which reflects the high standing of sociology in that country and the strategic important of Elton Mayos appointment at the Harvard Business School. Way back in 1960, Smith (1960: 103) could claim that Indeed, the position of sociology in business and management education in the US now seems to be such that it has passed beyond the point at which separate reference needs to be made to it in the curriculum. True, even in the School of Industrial Management at the MIT, sociology was present more by way of immersing its separate identity in the interdisciplinary themes areas. Be that as it may, available evidence suggests that relevance of things sociological to management process has been taken for granted at least in the US, and also to some extent in the UK. In fact, very often the case for inclusion of sociology in management curriculum has largely been made on the basis of its achievement in the US where the contributions of Elton Mayo loom large. Sociology has also resorted to the general and oft-repeated justification of its being a liberalising influence on aspiring managers and contributing to the understanding of the world manager lives and works. Sociology helps students become more conscious of the subtleties of social environment and the processes of social change shaping it. It is useful in the sense that sociology offers clues into the behaviour of employees as the latter is linked to social structure as a whole. The general argument has been that sociological knowledge makes management students alive to the long-term changes affecting their world. It is equally useful as the managers get insights into the varieties of human values and conduct which sharpen their understanding of the social context. The overall claim runs like this: sociology can teach managers something about the social structure of industrial institutions, the social values which sustain them, and the social context in which they function; and that the teaching of this kind is both a liberal element in that it broadens the perspective of the student, and at the same time, an useful one, in that it gives him knowledge which may be relevant to practical decisions (Smith 1960: 108). In this paper, I focus on the place of sociology in IIMs. I try to evaluate the practices of the discipline in its varied manifestations teaching, research, training and consultancy - on the basis of professional experiences of fellow sociologists irrespective of their location in a separate sociology area or other interdisciplinary groups. I have also interviewed some of the academics in the management field who have spent considerable time in IIMs, and are familiar with its structure and functioning. And, finally, I base some of our observations on the basis of published institutional data such as annual reports, convocations addresses, directors speech at the convocation, booklets, brochures of various types, and other sundry material that IIMs have produced over the years as part of their routine administrative demands and professional packaging. Tangentially, I also dwell on as to how the
made on the basis of its achievement in the US where the contributions of Elton Mayo loom
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practices of sociology in IIMs relate to those in the universities and other research centres. And finally, I explore as to how our peers, mainly from the universities relate to us as sociologists. The Context A sense of self-perceived marginalisation is all pervasive among a small number of sociologists who teach and research at Indian Institutes of Management (IIMs hereafter). The practitioners of the discipline know only too well that their colleagues in functional areas carry more weight and glamour within the Institute as well as outside. To put it bluntly, social sciences in general occupy a marginal location within these institutions. It would be unfair to confine this narrative of marginalisation to the design and philosophy of IIMs alone. Interestingly, the mainstream of the discipline (if there is one) bypasses these institutions as potential sites of academic research collaboration. There is another angle to this. A sociologist in an IIM cannot bask in the institutional glory in the same way as her counterpart, say, in Jawaharlal Nehru University (JNU) or the Delhi School of Economics (DSE) can and indeed does. In the latter case, the accumulated prestige and the acquired glamour of the institution rub on in the individual professional trajectory of the sociologist. For the one in an IIM, she has to acquire that professional prestige by her own unaided efforts. In my reading, despite the downgrading of social sciences and liberal disciplines in general in the context of withdrawal of the state, and the increasing competition from the emerging market-friendly disciplines such as management, commerce, software technology etc., sociological research and teaching seem to be firmly anchored in the universities and social science research institutions than in IIMs. This can be seen in terms of publications issuing from prestigious publishing houses, the composition of membership of curriculum development committees of the UGC and the Subject Advisory Committee of the ICSSR, the sources of change in research interests and disciplinary foci, and the overall professional leadership which generally come from universities. Of course, this proposition does not apply across the board but only to the few elite universities. Deshpande (2001: 9) puts it aptly, most of the time, most of those who refer to Indian Sociology are usually only referring to whatever is happening in/from a small number of elite institutions. Greatly (some may say overwhelmingly) dominated by the city of Delhi and its two major universities, this elite set of institutions also includes such well-known regional centres as Chandigarh, Hyderabad, Mumbai or Pune. Otherwise a careful observer of the institutional landscape of Indian sociology and its regional divisions and hierarchies, it is instructive to note that Deshpandes meticulous mapping of the practices of discipline has no reference to IIMs or IITs. After all, universities nourish and sustain disciplinary traditions through their teaching programmes and research degrees. A university, despite all its limitations, creates future torchbearers of the disciplinary culture by virtue of its focus on postgraduate teaching and subsequent research thus imparting continuity to the traditions of disciplinary learning. An IIM is not meant for offering a postgraduate degree in sociology. Naturally, it does not have in-house prospective researchers who can be trained for Ph.D. research. For its Ph. D. programme (called Fellow Programme in Management or FP in IIM parlance), it has to draw on the same universities which it hardly has any linkages worth its name. No wonder, IIMs fail to attract Ph.D. fellows in sociology despite its brand name and a host of fellowship incentives faring much better than many universities. In no IIM, Ph.D. research in sociology seems to be picking up and hence we can hardly depend on it to boost our sagging morale as the practitioners of the discipline in IIMs. That leaves with two areas to struggle for our contributions in terms of courses in the flagship teaching programmes of IIMs and our own individual research in terms of publications and projects. It is no secret that in an IIM, sociology is seen more as an add-on than some sort of value addition. For a management student,
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Somehow Ph.D. research, and expectedly faculty research, in IIMs are caught in the quagmire of relevance. Their existential dilemmas emanating from their locations in institutions of management propel sociologists to go for relevant research (Thakur 2006). Relevance comes to acquire a distinctive applied orientation, and sociology faculty seem to naturally gravitate towards those issues/themes that have relevance in management-related fields. I am not saying that research on these issues is not important, but one fails to understand why someone who is in IIM alone should conduct study in the area of sociology of consumption, or entrepreneurship, or management of rural social change, or general issues related to business, society and management? And why someone who is placed in an IIM should not research on religion or kinship? In the Company of Superiors The most fundamental point relates to the inferiority complex being suffered by most of sociologists in IIMs who are anyway few and far between. They have to carry the extra burden of proving all the time to themselves and their peers from other disciplines about the scientificity of sociology. They travel the extra mile to convince themselves as well as those around them that sociology is an empirical and scientific discipline, just few rungs below the natural sciences. Not only does this concede low hierarchy to sociology in relation to natural sciences but also fails to realise that inferiority does not always carry evaluative implications (see Machlup 1994). Something is inferior to something else in relation to a particular quality provided that quality is highly valued and whose absence is seriously missed regardless of other qualities present. Moving further, one can think of different possibilities: (a) inferiority might make things desirable (e.g. sandpaper because of its inferior smoothness, anthropology because of its ability to meaningful insights in a micro-setting), (b) inferiority may be a simply a matter of indifference (c) inferiority may be simply regrettable, nonetheless wanted, (e.g. psychiatry is required without its ability to effect quick cures, biology is essential without the lack of internal consistency in its theoretical systems). Wherever something is inferior-superior with respect to the same attribute, there is a choice to be made between alternatives. That would mean in the context of natural and social sciences (a) banishment (b) no allocation of resources (c) discouraging the gifted from social sciences and pushing them for superior pursuits, and (d) withholding respect from social scientists. However these possibilities are out of question as natural sciences and social sciences cannot be, by any means, regarded as alternatives. Both are needed and neither can be dispensed with. That would mean that something can/should be done to improve them and remedy their defects. But these defects are differences and not defects per se. That there are more variety and changes in social phenomena because of the large number of relevant variables and the impossibility of controlled experiment, that hypothesis in social sciences cannot be verified, that no numerical constants can be detected in the social world are not defects but fundamental principles to be grasped, accepted and taken into account. Indisputably, all differences need not lead to hierarchy and inferiority is context bound. Very often, we fail to appreciate this plain proposition that because of these properties, research and analyses in social sciences, hold greater complexity and difficulties, and possibly greater challenge (Ibid.: 5-19). They should not be seen as deterrent. Problems presented by the social world are certainly not unimportant, and if they
sociology courses are unnecessary deviations from their primary tasks of self-fashioning as future managers.
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are also difficult to tackle, they ought to attract ample resources and the best minds. Unfortunately, neither is forthcoming. Seen thus, inferiority boils down to the place social sciences are accorded by society and the political priorities of resource allocation, both human and financial. Many issues bearing on the place of sociology in IIMs go well beyond the internal politics of the Institute and are conditioned by extraneous factors. In its essence, it is tied up with larger political questions linked to the academy, and not merely those of availability and allocation of resources. The point is that the marginalisation of sociology (or social sciences in general) is not only institutionally ordained but also politically conditioned. To that extent, claiming a space for autonomous academic research is as much an internal struggle as an external one. The endeavour to carve out a distinctive identity for the practitioners of sociology in IIMs becomes arduous as the latter confront an ingrained tendency among mainstream practitioners to look down upon them for whatever reasons professional envy, lack of respect for the type of research and teaching they do or simply because of the competing understanding of the calling of sociology. There is a perception that sociologists in IIMs (and IITs) are not given due professional recognition by their peers in the universities and by those who matter in the disciplinary mainstream. Sociology in Management Curriculum For the IIMs, the two-year residential Post Graduate Programme in Management (PGP) is the flagship programme. Over the years, IIMs have been forced to launch various other tailor-made management programmes to cater to different types of constituencies such as young executives, army personnel, and senior executives with considerable length of work experience. Also, in some IIMs, there is an amalgamation of core management programme and areas like information technology, public systems management, agri-business etc. Yet, the PGP continues to be the most prestigious brand for the IIMs. Even otherwise, within the IIMs, participation in the PGP is taken to be the ultimate source of legitimacy and relevance for the faculty members as well as for the groups/areas they come from. Generally, during the two year of the PGP, two sets of courses are offered: the compulsory package and the elective package. Largely, the compulsory courses are offered in the first year and the elective ones in the second year. The stated aim of the compulsory courses is to provide the students with the fundamental knowledge, skills and the techniques, contextual understanding, and overall perspective necessary for general management. Compulsory courses are intended to offer broad training to students that will be useful to them in terms of career flexibility and mobility. On the other hand, elective courses have the ostensible purpose of helping students develop an in-depth understanding of areas of their interest. Through such courses, students may choose to concentrate on particular topics or areas of their interest, if they wish. Since most of them are likely to start their careers in one of the functional areas, the specialization through elective courses is geared towards them. Apart from IIM Ahmedabad, IIM Calcutta and IIM Kozhikode are the only two IIMs are where sociology courses are offered as part of compulsory package. IIM Calcutta has a compulsory course for the PGP: Indian Social Structure (Basic Sociological Concepts). Besides, the Sociology Group of the IIMC offers a set of elective courses for the PGP. IIM Kozhikode has a compulsory course called Social Transformation in India which is offered in the very first academic term of the PGP itself even when IIMK has no trained sociologist among its faculty members. In IIM, Indore, there is an interesting course by the name Society, Business, and Management (started in the year 2000). Of all the IIMs, IIM Lucknow appears to have been least receptive to sociology: in terms of modes of teaching research including both the intellectual orientations of research and teaching as well as the institutions within which they are done. I can do not better than quote the personal communication received from a faculty member of IIM, Lucknow: As far as I know there are no courses being taught
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Interestingly, the mission statement of the PGP programme of most IIMs stresses values and social concerns the typical justifications for sociology courses in the management curriculum. I fail to understand as to why social sensitivity (and its English language equivalents) is such a key term finding a place in the mission and vision statements of almost all the IIMs (with minor variations of wordings and emphases). Sociological Research at IIMs IIMs are generally not organised in terms of distinctive disciplinary identities. In IIMs, trained sociologists are generally scattered over areas such as behavioural sciences, entrepreneurship studies, business environment, and marketing with a definite slant towards rural marketing. Agribusiness and public policy groups are other theoretically possible institutional homes for sociologists. But then, the total number of trained sociologists in all the IIMs would hardly touch the double digit. Clearly, there is a problem of scale given the abysmally low strength. Moreover, sociologists in IIMs are constrained by the lack of a healthy and robust tradition of sociological investigation in the industrial and corporate sectors notwithstanding the sub-discipline of industrial sociology. Surprisingly, even today there is no accessible text or research literature on the increasingly influential Indian managerial class. What you have are indeed coffee table books. Except for the studies of trade unions or labour relations and a few descriptive ethnographies of particular industrial settings, sociologists appear to have missed the opportunity to contribute to some of the frontier areas of research. One notices similar dearth of literature on the theme of sociology of consumption in India. One needs to sociologically probe as to why the tradition of economic sociology has had such a weak foundation in our country. No wonder, most of the cases (which are pedagogically privileged in IIMs) are US-based. Another factor that has a great bearing on the professional profile of sociologists in IIMs is the existing (and dominant) understanding of the scope and purpose of management education (DMello 1999). Some of the practitioners of management science themselves have started realising the need for some sort of traditional liberal education. They have started expressing a sense of unease with the tendency on the part of IIMs to become polytechnic training centres with excessive zeal towards vocational and technical instruction aiming mainly at imparting of techniques and skills on a comparatively narrow front. The disproportionate focus on competency-building courses rather than perspective-building ones expectedly keep sociology on the margins of the curricula at IIMs (personal interview with A Sreekumar, 28 March 2007). Sociology as a humanist discipline has to struggle hard to find a slot in the crowded timetables and the overburdened workload of the management graduates. A discipline which as accumulated such sobriquets as the science of the leftovers, the academic custodian of trivialities, soft in the centre and fuzzy around the edges has to swim against the tide. Administrators deciding resource allocations in a multidisciplinary setting often look at the disciplines real and potential contribution to resource generation. Given the corpus of accumulated knowledge, sociology can hardly assert its suitability for MDPs. Its failure on this count the failure to organise training programmes and to offer enough consultancy to the corporate sector further pushes it down in the institutional hierarchy. Even when sociologists are increasingly getting
which have sociological components, and in ongoing research I do not think much of sociological components are there (personal communication, 14 July 2007). Potentially though, IIM Lucknow has a stated focus on Agribusiness which lends itself to the tools and the accumulated academic legacy of the discipline. But then, the area is monopolised by economists alone.
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involved in NGOs, consultancies, corporate research and new assignments like social auditing, the public image of sociology as an esoteric discipline dealing with worn out themes like caste and village continues. More importantly, sociologists in IIMs are ill-disposed (to some extent ill-equipped) to perform tasks expected of them. Most of us come from the universities and the bigger biases of professional socialisation generate a trained incapacity to practice sociology in settings like IIMs. We have been brought up on a heavy dose of Nisbets sociology as an art form (1976) and Bottomores sociology as social criticism (1974). We have learnt to be apologetic about our meagre accomplishments in terms of offering feasible solutions to real life problems. We have been taught the subtle intricacies of conceptual distinctions between a social problem and a sociological problem the latter being our provenance. Our campus culture has communicated to us (of course in not so direct ways) that more removed your ideas and theories are from the real world greater a sociologist you are. Who does not recall the evocative distinction between theoretical Brahmins and empirical Shudras in relation to internal division of labour within Indian sociology? In IIMs, where many may not know what sociology is, and where fellow sociologists are few and far between, such a professional socialisation does not encourage productive adaptation and fruitful collaboration. Even otherwise, the bottom line, to use business school language, is that life at the border of sociology and management is not for everyone. It is a comfortable location only if you are willing to move beyond the boundaries of sociology, and at the same time, are inclined to bring sociological ideas into management (Meyer 1999: 509-10). Very often, the pursuit of sponsored or state-promoted research has been seen as a threat to the status of established centres and the integrity of the discipline. There have been fears that too much of encouragement of applied research might slow down the cumulative development of sociological theory and further constrict the already narrowing social and political outlook. Conventional sociologists ensconced in prestigious (and not so prestigious) university departments may find it difficult to move out of the comfort levels that the habitual world of repetitive courses and disciplined classrooms, familiar bodies of literature, research methods and work settings have created for them. To go for a change in institutional sense is unattractive as well as fraught with risk. In IIMs, sociologists are per force engaged in self-conscious marketing of their discipline and profession as they confront their academic colleagues, administrators, and professional competitors from other disciplines, students, the general public and potential and actual clients. I am not saying that these factors are totally absent from the university scene. Definitely, the degrees vary. Sociologists in IIMs see no harm in attempting to expand the domain of the discipline by enlarging the application of sociological perspectives and methods to the understanding and solving of concrete problems. It is not that sociology can solve problems, or offer any readymade answers to the challenges of our times. One needs to stress that engagement in applied research (with all its limitations) does not mean that any compromise with the disciplines self-reflexivity. In a pragmatic sense, extending the scope of the discipline through applied research may be a better professional strategy than rueing the decline in state support for social sciences, or the general decline in the prestige of liberal education, or the public image of sociology. For example, Freeman and Rossi (1984) convincingly demonstrate as to how applied work could mitigate the consequences of the shrinking opportunities for sociologists in the academic labour market. But then, applied sociology continues to have negative associations. In the Indian context, it lacks an image altogether, or at best, has an ambivalent positioning within the mainstream professional establishment. The fear of getting bogged down by applied interests led the professional leaders of the yore to claim a space for knowledge producing activity of the academic kind (see Thakur 2006). As a corollary, it
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It is not that applied sociology means less rigorous engagement with the discipline. Heuristically speaking, as DeMartini (1979: 333) argues, there are two types of applied sociology. One tradition of work emphasises the utilisation of the basic empirical methods of the discipline in collecting and gathering information needed to make informed decision or opinion on matters of practical concern. Evaluation research, programme evaluation, cost benefit analysis and social impact assessment, public opinion polling, market analysis, community ethnography belong to this genre of work which finds its organisational expressions in entities such as ORG-MARG-, A.C. Nielson, Microsoft, and numerous research and advocacy NGOs. The other kind of work utilises the disciplines concepts in interpreting relevant data, and hopefully in providing a more accurate understanding of social determinants and the possible outcome of proposed social action. Analysis of social problems, policy research and analysis would fit in this variety of applied research. It is possible to maintain a judicious balance between expectations of IIMs in terms of applied research and training and the conceptual and theoretical rigour of sociology. While continuing to be a perspective-building critical discipline oriented towards understanding of social processes and phenomena shaping the context we live in, sociology can also lend itself to theory-driven, case-based and managerially relevant research. As Petrus and Adamek (1988) suggest, sociologists in IIMs can fruitfully employ their relatively easy, if not unfettered, access to business and their databases, for a wide range of research pertaining to issues such as sociological study of language and culture of business. Likewise, sociologists in IIMs can draw on new economic sociology integrating management research with the core concerns of society and apply some of these ideas from economic sociology to concrete business settings. Why should not it be a worthwhile academic endeavour if one extends Appadurais illustrious work on consumption as a category, or one attempts the study of Indian business environment from a sociological perspective? Yet, as Marshall W. Meyer, from the well-known Wharton School, University of Pennsylvania, notes, the sociological perspective which emphasises the role of values, institutions and social structures in human behaviour is not fully appreciated and may never be (1999: 508). Some Concluding Remarks I find no better way than conclude these tentative reflections on the location of sociological practices in IIMs than by presenting a somewhat lengthy quote from Meyer who captures the predicament and the dilemmas sociologists face in institutions like IIMs. Evidently, the status anxiety of sociologists in IIMs emanate from two sources: their perceived role and legitimacy within the institution, and outside, that is, in relation to the professional mainstream in the country. They, in turn, are intimately intertwined with the conceptualisations of the disciplinary practices as an established body of knowledge and as a profession. One starts understanding ones professional alienation within an IIM as one reads Meyer: At the core of sociology are an assumption and a suspicion. The assumption is that values, institutions and social structures are central to human behaviourin other words, that it departs substantially from rational choice or simple utility maximisation. The suspicion is that things are not quite what they seem o as simple as they seem to bethis is what Berger and Luckman called the debunking motif of sociology. Our inclination to question rationality and to look for the unexpected leads us to believe that causation is complex, and, often, contingent, and that good empirical work, whether quantitative or qualitative, is preferable to modelling exercises relying on highly stylised assumptions about human
also meant keeping away promising sociologists from such applied interests despite expanding job opportunities in non-university and non-academic settings.
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behaviour. Management schools and management curricula are dominated by economics. There is a preference for models over hypothesis testing, with the corollary belief that models derived rigorously from the premise of utility maximisation describe how people ought to behave, even if they do not always behave that way. The preference for models is especially strong among MBA students, who seek answers rather than questions and want to learn about opportunities rather than constraints (Meyer, 1999: 509). On a different plane, sociologists in IIMs find the absence of the simple realisation on the part of fellow (mainstream) sociologists that practices of the discipline differ in varied institutional settings (cf. Gupta 1995). Rather than making invidious comparisons between types of sociology done in the university and the IIMs, we need to create spaces for empathetic and thoughtful dialogue among practitioners of the discipline irrespective of the sites of their practices. This should augur well for the discipline as it brings under self-reflexive gaze both our strengths and weaknesses, our accomplishments and inadequacies, professional solidity and internal fault lines, and finally, instances of theoretical rigour and imitative empiricism. References Bottomore, T. B. [1974]. Sociology as Social Criticism. New York: Pantheon Books. DeMartini, Joseph R. [1983]. Sociologists Working in Applied Settings, Sociological Perspectives 26 [3]: 341-51 Deshpande, Satish. [2001]. Disciplinary Predicaments: Sociology and Anthropology in Postcolonial India. Inter-Asia Cultural Studies, 2 [2]: 1-14. DMello, Bernard. [1999]. Management Education: A Critical Appraisal. Economic and Political Weekly, November 27, 1999: M-169-M-176. Freeman, Howard E. and Peter H. Rossi. 1984. Furthering the Applied Side of Sociology. American Sociological Review, 49 [4]: 571-80. Gupta, Dipankar. [1995]. Practising Sociology. Seminar, December, pp. 43-47. Indian Institute of Management Calcutta. [1987]. Management Education and India: Collection of Convocation Addresses 1966-1987 [A Silver Jubilee Publication]. Kolkata: IIMC. Indian Institute of Management Calcutta. [2004]. IIMC: Some Concerns about its Future (A Position Paper P Indian Institute of Management Calcutta. 2004. IIMC: Some Concerns about its Future [A position paper prepared by Faculty Council, mimeographed]. Kolkata: IIMC. Machlup, Fritz. [1994]. Are the Social Sciences Really Inferior? In Martin Michael and Lee C. McIntyre (eds.), Readings in the Philosophy of Social Science. Massachusetts: The MIT Press, pp 5-19. Meyer, Marshall W. [1999]. Notes from a Border Discipline: Has the Border Become the Center. Current Sociology, 28 [5]: 507-10. Nisbet, Robert, S. [1976]. Sociology as an Art Form. London: Heinemann. Petrus, Gene and Raymond J. Adamek. [1988]. Taking the Role of the Other: An Aid to Marketing Applied Sociology, Teaching Sociology, 16 [1]: 25-33. Planning Commission. [1957]. Second Five Year Plan: Education and Social Services. Delhi: Planning Commission, Government of India. Robbins, George W. [1959]. Recommendations for an All-Indian Institute of Management. New Delhi: The Ford Foundation [mimeographed]. Smith, J. H. [1960]. Sociology and Management Studies. British Journal of Sociology, 11 [2]: 10311. Smith. J. H. [1998]. The Enduring Legacy of Elton Mayo. Human Relations, 51: 221-249. Thakur, Manish K. [2006]. Social Scientists or Development Professionals? Research-Policy Interface in a Rural Development Institute. Review of Development and Change, 11 [2]: 179-200.
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Prof. Dr. Anil Rao Paila Dean Welingkar Institute of Management Development & Research Banglore 560100. India Email: anil.rao@welingkar.org And Prof. Dr. P. S. Rao Dean Welingkar Institute of Management Development and Research Mumbai 400 019, India Email: ps.rao@welingkar.org
In a world where national boundaries are fast disappearing and becoming more accessible, the world is becoming smaller and has now become Global Village. The technological advances in transportation, electronics and telecommunications are supporting these changes. Globalization poses a number of challenges before management education and also demands to upgrade its course curriculum, adopt new and effective teaching methods, motivate faculty to take up the challenges ahead, with extensive research to understand international markets. An attempt was made in this paper to highlight globalization and its impact on management education in general and India in particular and tried to identify the gaps and refocus the areas of management education qualitatively with its prospects and challenges in the changing scenario. Keywords: Globalization, Management Education, Change, Challenges
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GLOBALISATION AND QUALITY OF MANAGEMENT EDUCATION - THE CHALLENGES OF CHANGING SCENARIO
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GLOBALIZATION AND MANAGEMENT EDUCATION Globalization is impacting the institutional framework in both developing and industrial countries. It is changing the way in which governments perceive their role in the society. It has also far reaching implications for socio economic development and educational systems of countries all over the World. Knowledge is the driving force in the rapidly changing globalised economy and society. Quantity and quality of specialized human resources in management education determine their competence in the global market. Emergence of knowledge as driving factor results in both challenges and opportunities. It is well known that the growth of the global economy has increased opportunities for those countries with good levels of education. Globalization has a multi-dimensional impact on the system of management education. It promotes new tools & techniques in the areas like E-learning, Flexible learning, Distance Education Programs and Overseas training. Globalization will mean many different things for management education. In the near future, it will mean a more competitive and deregulated educational system modeled after free market but with more pressure on it to assure that the next generation of workers are prepared for some amorphous job market of 21st century. Globalization is expected to have a positive influence on the volume, quality and spread of knowledge through increased interaction among the various countries. Today Indian educational system is strong enough but Central and state governments should change their roles within the education system, reinventing themselves as facilitating and supervisory organizations. Teacher training, infrastructure and syllabuses need to be urgently upgraded. Industry should come forward to share experience with students and to offer more opportunities for live Projects. With abundance of natural resources India has huge young and skilled man power to excel in every walk of life. OVERVIEW OF MANAGEMENT EDUCATION IN INDIA India is also following the global phenomenon. As part of globalisation, the economic reform packages were introduced in India in the beginning of 1991. These reform packages imposed a heavy compression on the public budgets on education sector, more specifically so on higher education and management education. In the modern economic scenario all over the world- Management as a stream of education and training has acquired new dimensions. Management is an exciting field where you can have an immediate impact on the operations of any business. The field of Management is dynamic in nature. New tools and techniques are continually being introduced to improve the efficiency, productivity, and profitability of any organization. All organizations and their departments, functions, or groups use Management methodologies, which include problem solving techniques and guidelines for various related activities.
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The research paper is an effort to examine the present status of management education and to find out ways for quality improvements in the current system so that business responds to current paradigm shifts and global dynamics. METHODOLOGY The methodology used was secondary data sources and survey of literature available on the internet, journals, newspapers and the proceedings of the Annual Conventions conducted by AMDISA, South Asian Management Forum, AIMS, IAMD and ICUBER. This gave a broad overview of what has been happening in the areas of management education in different business schools. Management education is in great demand especially after the change towards liberalization, privatization and globalization. There are several challenges of management education which require change in the character and structure of management education, integration of management education with corporate sector, upgradation of curriculum and course content, designing of different programs for executives, maintenance of an efficient and effective regulatory system to check mushrooming, and emphasis on research. India being the part of global linkage in the aftermath of WTO agreement is becoming a technology driven society. Nearly one lakh management graduates pass out every year in India, providing a tremendous potential to contribute to the creation of a knowledge society. Management education in India dates back to the late fifties (1959), when a course in business administration was started for the first time at the University level by the Andhra University. Consequently the government started national institutes at Kolkata and Ahmedabad in 1960, Bangalore in 1970 and Lucknow in 1980, Indore in 1996 and Kozikode in 1997. Today, across the country there are more than 1500 business schools producing about 1, 00,000 management graduates every year, making India the second on the list of Nations with the largest number of management graduates per year. Quantity-wise this is good but the quality of the average student leaves a lot to be desired. In the last decade, there has been a phenomenal increase in the number of institutes offering management education. This of course has been backed by an unabated demand for the MBA degree. Unfortunately, most of the institutes set up in the recent past do not have the basic infrastructure, faculty, library or support services to run professional imparted. From the academic point of view there is a widening gap between what is being taught and what is practiced in the corporate. The institutes are unable to attract quality teachers due to varied reasons due to which the course is being downgraded to the level of any other PG course. PRESENT STATUS OF MANAGEMENT EDUCATION Amongst the management schools in India only the top dozen schools including the IIMs can be called World Class. The 1000 odd products from these schools are generally absorbed by the 100 odd top Indian companies and MNCs. In addition to these top ranking Management Institutes, still there are around 20 to 30 Management
OBJECTIVE
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Institutes in the country which have also established a long standing reputation amongst industrial houses and their students too are well placed either in the country or abroad, even though the compensation package offered here differs from the first category of management schools. However, things are changing very fast and the above phenomenon is not the general state of affairs with the remaining business schools. In a most optimistic estimate it can be said that the state of affairs of nearly 500 business schools in India do not appear to be bright in terms of their functional freedom and autonomy, quality of students intake, existence of core faculty, quality of visiting faculty, inputs given by students, peace on campus etc. As a result, it seems as if, the prospective students are losing interest in management education, which is clearly visible from the decline number of applications for admission into MBA Programme in these schools. In one of his addresses at XIME, Bangalore Prof. J. Philip said that, MBA is a universal product, and management education is now a worldwide revolution just as privatization is. It knows no tariffs or boundaries. Any time any barrier or limitation appears in its universal march, it will resort to various unconventional strategies from distance mode to virtual universities. It has been recognized that India is emerging as the worlds biggest market for Management Education. Let us look at a simple statistics such as a production of engineers in the country. Their number is about 2.5 lakhs per year, of which at least one-fourth stay unemployed for sometime and about one-fourth are determined to pursue an MBA programme. To most of them, MBA is the terminal Programme. Add to this, the MBA aspirants from other disciplines such as economics, commerce, mathematics and statistics, their number must easily be about a quarter million. That gives us a potential market of about 0.3 million graduates seeking admission to MBA programme. The Indian MBA capacity at the moment is just about 1,00,000 (including part time students) That leaves a huge unfilled demand. Therefore any of our youngsters will leave our shores for study abroad or will join a foreign institution which has already pitched its tent in India or join the socalled twinning programme. Yet another report of this kind from Hindu, a daily Newspaper states that Australia has become one of the favourite study destinations for Indian students. More than 90000 Indian students are expected to go to Australia for studies by the year 2025, though the number in the year 2008 was expected to be about 25,000. This is a wake-up call for Indian academicians and policy makers. There is another key aspect to be considered, that is the burgeoning international job market for MBAs. As traditional corporates entry into international market becomes more intense (and this is an economic reality) these entities will need more and more international managers. There is now a growing recognition that Indians are not only good in BT, IT or QT but also Management. This is a commodity which we can export, provided we make it truly international. And this is where enhancement of our competitiveness and international benchmarking figures in. It is in the background of Indian management education system and globalization that a few suggestions have been made at the end for the betterment of management education in the country, which will perhaps help devising a suitable mechanism to meet the requirements of this professional
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QUALITY OF MANAGEMENT EDUCATION CHALLENGES OF CHANGING SCENARIO The world around us is changing and changing very fast. The speed of change is so fast that we cannot turn back. The changes are visible in multiple forms and in multiple directions. The qualitative aspects of management education are as important as its technical aspects. It should equip students with management skills and expertise and develop in them the right attitude. In India, All India Council of Technical Education (AICTE) is entrusted with the responsibility of monitoring, controlling and ensuring the quality of management education. The National Board of Accreditation (NBA) claims that their approvals would result in quality education of global standards in the country. In a true sense, Internationalization of management education needs number of changes and the thrust areas of management education requiring quality improvement are the following: 1. Course Curriculum 2. Teaching Methods 3.Teaching Faculty 4.Research and Innovation, 5.Industry Institute Linkages and 6. Foreign collaborations. 1. Course Curriculum In the context of a rapidly changing global economy, universities / Institutes have to learn to cope up with the emerging challenge. It calls for changes rather than updating curriculum to take up the challenges. The updating / restructuring course curriculum includes the following i) International Orientation The course curriculum should be of international character. The curriculum bounded by national boundaries will not serve the purpose in present scenario. The stiff competition from global players made it mandatory for every organization, to study the issues from international perspective. The studies should include global issues like gender, nuclear, economical, social, political, cultural diversity and foreign policy etc. ii) International Marketing As market is wide open for every nation and every organization, knowledge of international marketing is of utmost importance. The curriculum should include understanding of overseas markets, their needs, their purchasing patterns, opportunities, political scenario, foreign trade policy, etc. Study of principles of trade, bi-lateral and multilateral agreements, regional groupings, foreign direct investment is highly needed. iii) Understanding Foreign Language / culture There is the need for understanding of foreign consumers, their culture and language. It is said that culture changes at every 50 km, but to understanding foreign consumer, its study is of immense value. Cultural pattern gives basic information like behavioral pattern, consumption pattern, likes and dislikes, etc.
and lucrative course in the years to come.
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So there is a need for organized programmes like Cultural Immersion Programme, Language studies Programme etc., in collaboration with foreign universities / organizations. It is a novel way to know about diversity in culture and developing partnership /collaboration with other higher educational institutions around the globe, The universities/ Institutions have to take entrepreneurial role and be more proactive in negotiating and arriving at mutually satisfactory exchange agreements. iv) Understanding Technicalities of Foreign Trade Practices With the emergence of WTO, the International trade is governed by unique trade practices. There is need to understand these unique rules of governance. So one must know the features of national and international trade. This includes study of various agreements of tariff and trade like, agreement on preshipment inspection, agreement on technical barriers to trade, agreement on valuation of goods, principles of WTO etc., and last but not the least documentation i.e. procedural part of international trade. v) Knowledge of E-commerce / Internet Internet is just not one more point in the long continuum of inventions, but a moment of real transformation that is now beginning to be appreciated. Development of Internet is a real boon for internationalization of management education. The internet education facilitates not only e-learning process but utmost needed to understand a new trading practice i.e. electronic commerce (e-commerce). The objectives served by Internet in learning process are. a) b) c) d) surfing through the information highways. promise on-line library international orientation of curriculum facilities in learning
The motto of learning internet is that now a days e-commerce becomes the watchword for business world. Internet has an exclusive potential to elicit business from 100 million-plus Internet users world wide. There is no second opinion that Internet in general and e-commerce in particular is overturning the old rules about competition and strategy. Many companies choose to engage in this type of business practice in addition to traditional business methods, while others use the internet exclusively to reach existing and potential customer. It also facilitates to complete the transaction over web only. Hence keeping in mind this very fact, the knowledge, especially of Internet and e-commerce is of great importance. vi) Benchmarking course Curriculum against Institutes - Overseas Apart from the above, the business schools in the country must also continuously upgrade themselves by comparing themselves with their counterparts in other parts of the world. Infact they should benchmark their course curriculum against such Institutes overseas. Here the following aspects must be stressed upon a) course on technology should stress not specific computer techniques, but the very dynamism of information revolution. b) course curriculum to stress on strategic planning, systems analysis and design and operations. c) inclusion of International policy study and
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2. Teaching Methods Already we are witnessing several paradigm shifts in management education. Globalization demands change in existing structure, mode of delivery of education system etc. thanks to the major developments in information technology, learning is made easier, highly customized and learning centred. Electronically delivered educational services make use of the real time television and computer links and make interactive learning possible. It makes it possible to bring real life experience to class room. The prominent changes needed in teaching methods are: i) Interactive Teaching The two way flow of information will always be more fruitful than a traditional way of teaching. Interactive teaching is the best techniques of understanding the subject. ii) Learning through real life cases They will lead to better understanding of subject than merely teaching the text. The applied nature of text always leads to the thorough understanding of the subject. iii) Continuous education The tasks of Institute just not end at educating the students once for a life time. Institute should educate their students on continuous basis. Life long education shall be made available to all, at all places and all times. The student access centres should be built up all over the world. These centres will facilitate in providing a copy of related material as well as copies of information databases in CD-ROM format also. iv) Learning support through the Web This has lead to a significant interest in the implementation of the internet based teaching through the virtual classrooms. The interaction between spatially separated learners can be organized in the following ways: a) Interaction between teachers and students b) Work on assignment alone or collaboratively with other students. c) Internet Relay Chat (ITC) is a method by which students and teacher can communicate synchronically on different channel and from different locations. v) Global Study tours Global study tours should be made part and parcel of the course, the leading business school in India and abroad send the groups of students to take a review of business environment in various parts of the world. In the recent news the California University sent a group of students to India to study the Indian Business environment. Welingkar Institute from Mumbai University sends every year
d) offer electives like global money, market games, Asian management models, Lab in group dynamics and the like over the traditional electives offered.
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groups of students (20 to 25) to Japan, Germany, UK and Sweden to study the International business environment under student exchange programme. Very recently the University of Mumbai sent groups of Principals and Directors form various colleges and institutes to UK, USA, Australia and Newseland on study tours to interact with their counter parts abroad. These study tours will lead to better understanding of business environment around the globe. 3. Teaching Faculty Globalization also demands, preparing teaching faculty to take up challenges of tomorrow. The faculty must be international in composition to a very significant degree. Employment of teaching faculty on the basis of nationality is just not enough .If we want to internationalize the management education, faculty of international composition must be recruited. This will not only result in knowing diversity in culture but also about various issues across the national boundaries The prominent changes to be made are: i) Core Faculty A lot of development and value addition of management students take place only in classrooms. Therefore, a critical component of core faculty is a must for running a successful MBA/ MMS Programme. A team of dedicated and committed core faculty enables the Head of the management institution to effectively run, evaluate, improve and monitor the Programme. Paradoxically, both in universities and privately managed institutions, the situation is far from encouraging. ii) Visiting Faculty The purpose of inviting professional and practicing managers from industry and senior academics from management institutions is to bring the real life situation to classroom exposing students to practical day to day problems which the managers were facing in running the affairs of corporate world and to develop a deep theoretical insight among them. Moreover, the intention is also to build the image of the institute in industry and enhance the industry academics interaction which will ultimately facilitate arranging summer training, final placement of students and sometimes even to know the requirements of industry in terms of syllabus and courses being taught in business school etc. 4. Research and Innovation Management education system should be highly vibrant , dynamic system which is constantly experimenting, innovating and evolving. It should have the confidence to experiment and the ability to nurture innovations to success. Innovation requires autonomy and strong internal institutional mechanisms to protect quality. Any live system evolves in constant search for a better fit with the changing environment.
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Research in Management is crucial for improving the practice and teaching of management. It is a mater of fact that quantity and quality of research undertaken by management institutions has
Research carried out should not be restricted to national boundary. The research on various issues of international aspects is need of the time. Joint research programmes with leading foreign institutes or agencies can be a good option for this.Also organizing the seminars, conferences, workshops on various issues of international aspects will facilitate in a) research on various issues of national and international interest b) platform for exchanging information of international issues around the globe and c) an opportunity to know about foreign cultures, consumption pattern etc., 5. Industry- Institute Linkages In the changing times the need for better Industry-Institute linkages is compelling. If education has to keep pace with the technological and job market changes, it has to take proper steps to develop industry institute interface. And if industries strive to become cost effective and efficient they will also have to ask help from the universities / Institutes. In partnership with industry can be found common goals, shared initiatives, and the mutual eagerness to create, integrate and spread new knowledge. In this mission the human resources have to be involved. Process of educational reconstruction and transformation is a peoples movement and when people are involved nothing can fail. Together a strengthened society can emerge, a better future and relevant education can flourish and happy productive individuals can thrive. The instituteindustry tie up is beneficial not only for the education centers i.e. the institutes and the work centres i.e. the industries but also the student and the worker i.e. the individual. It is a symbiotic relation where the three viz. institute, student and industry depend on each other and are benefited mutually by this interdependence. 6. Foreign Collaborations Foreign collaborations with leading University / Institute help in improving course material, technology transfer, and joint research programmes in addition to generating additional resources. This also gives boost to faculty exchange programme which in turn leads to international composition of teaching faculty. Globalization also offers new challenges as well as opportunities to the universities around the world in general and management education in India in particular. To successfully operate in a borderless world, management institutes have to maintain high quality standards, gain a multi-cultural and multi-disciplinary perspective, ability to work in different cultures, strategic planning, developing up-to-date infrastructure facilities, and acquire the ability to internationalize their curriculum and courses and ensure greater mobility to staff across the borders that would enrich academic life and experience. We are now living in the age of science and technology. This new era demands highly by skilled business graduates and hence our business schools should refocus on developing these skills through re-orientation and rigorous training and development
been largely inadequate. Research is a crucial activity for promoting all round development of the institution and exchanging the quality of academic processes. It conveys an important message to the students, future industry leaders that research is thus a key educational strategy to be adopted across the entire management education system.
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CONCLUSIONS AND SUGGESTIONS The present state of affairs of our management education demands immediate attention if the drift and decay is to be avoided. The educational culture of the 21st century warrants new reform packages and an altogether fresh approach in tune with global futuristic trends in management education. The fast expanding domains of knowledge, owing to increasing pace of information explosion, necessitates radical changes involving newer options of academic renewal. The need of the hour is for greater introspects on innovative methodologies of teaching and research in our institutes, the emphasis should be on improving the quality in all aspects-right from the intake of students till they are placed. The mushrooming growth of management institutes should be curbed with immediate effect and the existing ones must be closely monitored for their standards and performance in all aspects. WTO and the ensuing business environment will not leave any room for complacency and lethargy, only the fittest will survive. There is also a need that our dependence on foreign literature and techniques should be minimized and management teaching and thinking should be based upon practical experiences deriving strength from Indian ethos. Management education needs to be made value based, rather than money based. India is facing a crisis of quality management education. As compared to international standards the Indian management institutions (with a few exceptions) are far behind. There is a need to fill this gap to survive, grow and develop in the changing scenario. Alvin Toffler in is famous book Future Shock says To help avert future shock, we must create a super industrial education system and to do this, we must search for our objective methods in the future, rather than the past Education must shift into future tense. Keeping in mind the changing scenario and the future, re-engineering of management education must be done soon and the management Institutes endeavour must be to develop global managers of proper knowledge, attitude, skill insight and foresight to meet the challenges of 21st century.
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16 EFFECT OF LEADERSHIP AND
ACADEMIC CULTURE ON IMPLEMENTATION OF SELF ASSESSMENT MANUAL IN PUBLIC UNIVERSITIES OF PAKISTAN

N. A. Akhtar, M.U. Awan & F. Jalil Institute of Quality and Technology Management University of the Punjab, Pakistan.
Higher Education Commission, Govt of Pakistan has selected 30 Public Sector Universities in which Self-Assessment technique is being employed for assessing and raising the standard of education. This paper presents the effect of Leadership and Academic Culture on the implementation of Self Assessment Manual (SAM) in these Public Sector Universities. The research questionnaire was developed for this purpose and was sent to the Director Quality Enhancement Cells (QECs) whose major responsibility is to implement SAM in the Institutions; this was also followed by semistructured in-depth interviews with these Directors. It was observed that, in most of the Public Sector Universities, academic culture and leadership were found as critical factors for the implementation of SAM. Certain strategies, that could enhance possibility of effective implementation of SAM in Public Universities of Pakistan been suggested so that quality of education is brought at par with the international standard. Key words: Self Assessment Manual, Culture, Leadership, Public Universities of Pakistan. INTRODUCTION Over the span of last ten years, the higher education landscape in Pakistan has gone through significant changes. With improvements in the quality of education and better academic performance in public sector Universities, the demand to evaluate and assess their quality of education has increased. The concept of accountability is closely allied with quality- As Quality has become one of the most popular words of the early twenty first century, It is absolutely critical to monitor and regulate growth of institutions of higher education. Continuous and regular assessment is necessary to achieve this objective. Simultaneously, it is to be ensured that great care is exercised when making quality assessments, as it involves matters of judgment, academic values and cultural understanding. Furthermore, most accrediting bodies are insisting that institutions assess students learning outcomes as a means of improving academic programs. This has led The Higher Education Commission (HEC) to develop methods for assessing the quality of academic programs. For this purpose SAM is conducted to measure the quality in higher education institutions. Self assessment manual conducted by the institution to verify that either the existing programs meet their objectives and institutional goals or not. Self-assessment is required for continuous
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improvement in organizational performance (Crosby, 1979; Deming, 1986; Neves and Nakhai, 1993 and Mele and Colucio, 2006).
LITERATURE REVIEW The key factors that influence the quality of higher education is the quality of faculty, curriculum standards, technological infrastructure available, research environment, academic culture, accreditation regime, leadership and the administrative polices and procedures implemented in institutions of higher education. Leadership and quality culture are the two main core values of Total Quality Management framework (Venkatraman, 2007). In recent years many researchers worked on that how these two factors effects the performance, productivity, employee morale and motivation but the area focused in this paper is explored less. To improve the quality of education, it is important to identify effect of leadership and academic culture on Implementation of Self Assessment Manual in Public Sector Universities of Pakistan, as it enhances employees organizational commitment, encourage them to work more and make efforts to maximize the productivity. Quality There are various well-known definitions of quality. Crosby (1979) defines quality as conformance to requirement while Juran and Gryna (1980) define quality as fitness for use. Demings (1986) definition of quality a predictable degree of uniformity and dependability at low cost and suited to the market is more towards quality in operation. Many organizations found that the old definition of quality, the degree of conformance to a standard, was narrow and consequently have started to use a new definition of quality in terms of customer focus. Many companies had initially concentrated all their efforts on improving internal processes with little or no regard for the relationships between those processes and the organizations ultimate customers (Brigham, 1993). This failure to include the customer focus had resulted in companies struggling hard to survive and resorting to fire-fighting situations. In the context of higher education, there is considerable discussion on the notions of educational quality (Green, 1994 and Harvey, 1995a). Fincher (1994) describes how quality perspectives have evolved in higher education over the years by going through a shift from experience to technique to style and finally to process. Harvey and Green (1993) point out that quality is a relative concept and provide five discrete but interrelated notions of quality. Quality has a variety of meanings and its range of meanings does cause confusion as each individuals perception of quality differs (Shields, 1999). A possible reason for the dynamic nature of quality is that it is a dynamic idea and the emotional and moral force which quality possesses makes it difficult to be tied down to one particular meaning (Sallis, 1993). Sallis (1993) gives a customer definition of quality as that which best satisfies and exceeds customer needs and wants. Quality in Higher Education Quality in higher education has proved to be a challenging task. Jiayi (2006) Quality has become one of the most popular words of the early twenty first century. Quality of life, quality of circles, total quality management, quality products, quality service, it becomes important part of our daily life. Especially in education, governments, production, and students parents pay more
Higher Education Commission, Govt of Pakistan has asked 30 public sector universities to implement self assessment technique for assessing and then raising the standard of education in their respective institutions. For this purpose Quality Enhancement Cells have been established in these universities. The purpose of this paper is to investigate the effect of top management (Vice Chancellors, Dean of the faculties and Directors) and academic culture in implementing SAM in each department of these selected universities.
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attention to quality. Researchers have different concepts on what quality in higher education is. Definitions given by business organizations and the academic world on the term quality of higher education are quite different. Quality, one of the definitions used in business, is the extent to which the product meets the demands; another is customer satisfaction (Bornman, 2004). Quality in higher education is wide and indefinable concept, Alma Craft (ed.) (1992). However Vroeijenstijn (1995), comments that in higher education there is no clear indication of who is the customer. Moreover, due to the different perceptions on the meanings of quality, the academic world tries to define quality by using many variables. The World Declaration on Higher Education (1998) declared that quality in higher education is a multi-dimensional concept, which should encompass all its functions, and activities: teaching and academic programs, curriculum, research and scholarship, qualification of faculty, , management and administration, government, facilities student characteristics, buildings, facilities, equipment, infrastructure and the academic environment. Internal self-evaluation and external review, conducted openly by independent specialists, if possible with international expertise, are vital for enhancing quality. David Lim, (2001) defines Quality in Higher Education as performance is, exceptional, attainable only in limited circumstances and only when very able students are admitted. This definition applies more to higher education provided by best institutions where there is huge excess demand for limited places and only the brightest are admitted. Moreover it is producing perfection through continuous improving by adopting Total Quality Management to create a philosophy about work, people, and human relationships built around shared values. David Lim, (2001), In his another definition stated that it is the ability to transform students on an on-going basis and add value to their knowledge and personal development. This is a definition which accords more with todays concern for higher education for the mass, where the emphasis is more on value adding per se rather than value adding from an already high level David Lim, (2001) also sees quality as something, which fits the purpose of the product or service, once the purpose has been decided. Thus, if the education provided fulfils its purpose, whatever that may be, then it is to said to be one of quality, provided that it accords with publicly accepted standards of accountability and integrity. David argued this is an instrumental approach, which avoids defining the essence of quality, which many believe to be impossible, and, instead, concentrates on what is needed to achieve the purpose or mission of the institution. Influence of Leadership in Higher Education Leadership or management style is one of the category of information flow and also important in the context of higher education (Thornhill, Lewis, and Saunders, 1996) Implementation of quality in a organization or institution is a complex task as it requires the application of the leadership abilities of senior managers and the commitment of all staff (Gordon, 2002). Therefore High-level management and leadership abilities are crucial in achieving quality for the successful organization. The commitment for improvement can only be obtained and sustained with strong and dedicated leadership i.e. top management Investigations into the impact of specific types of leadership behaviors reveal varying degrees of effectiveness. Leadership behaviors directly affect organizational commitment. Reichers (1986); Bolman and Deal (1991); Lee (2002); Mosser and Wallas (2002), Bruner (2003), Lok and Crawford (2004), Chen (2005) and Mitcher (2005), have reported close influence of leadership behavior on organizational commitment.
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Quality management System for continuous improvement is incomplete without effective leadership (Brigham 1993). Brigman states that the common mistakes made in implementing Total Quality Management in industry are lack of proper leadership, middle management muddle, unfamiliar with process and failure to include the customer. Leaders should set viable corporate vision and be willing to initiate change and provide the resources needed for team efforts directed towards achieving the vision. The past few decades have seen much work on educational leadership (Bensimon and Neumann, 1993, Westerman, 1994, Kezar, 1998 and Friedman, 2004). The leadership element should examine senior managements personal leadership and involvement in creating and sustaining a customer focus, clear goals, high expectations and a leadership system that would promote performance excellence. It should also examine leadership system and policies internally that would impact staff and students and public responsibilities, establishing partnerships with industry, parents, and general community externally. Improvements in leadership effectiveness could be achieved through a participative management style that includes inputs from a comprehensive 360-degree feedback system from these internal and external stakeholders. The strategic planning of this element would examine how the institution sets strategic directions and how it determines key plan requirements with a primary focus on customer satisfaction. Effective top-level leadership and commitment to quality improvement strategy are also required if there is to be total customer satisfaction (Ho and Wearn, 1996). Leadership style and motivation recognizes the importance of employee communication (Storey 1992). According to Moosa (1997), leadership in a university is very complex. It includes abilities of faculty and academicians to conceive the vision of quality. This aspect is not limited to the principals and/or vice chancellors or deans, but also required in instructors to provide the leadership in their classrooms. To improve the quality of ones institute, all teachers and administrators, need to be committed with their quality goals and measure their processes and activities, to improve the quality of their institutes. Every faculty member of institution must assess the quality of his/her work. This sort of leadership can not be developed or continued by faculty and administrators without teamwork, long term quality goals, intensive efforts, proper training, right policies, and strong commitment, because they are responsible for developing an environment that encouraging and motivating faculty members. Therefore top management need to embrace Self Assessment as a strategy to achieve the quality results. Influence of Culture on Higher Education Organizational culture may be defined as a set of values widely shared by organizational members. The organizational culture, using Hofstedes phrase, is software of the organizational mind (Hofstede, 1991) which serve as an interpretive frame and gives meaning to organizational actions and behavior at individual, group and organizational level. Without an awareness of the existing organizational culture the introduction of any model, process or approach will not in itself create or sustain a quality enhancement culture (Myra Hodgkinson, Mike Kelly, 2007). The culture has a great link with organizational structure, and they should be match to each other. In case of a mismatch between them organization may deviate from its stated objectives. While organizational structure can be changed easily through enactment of new rules and procedures, changing culture of an organization is a slow process and requires a holistic approach to organizational change of which organizational structure is just a one component. Traditional and bureaucratic management produces the bureaucratic culture while quality management nurtures the quality culture. Quality oriented organizational culture springs out from values of quality management that include but are not limited to egalitarianism, collectivism, partnership, trust, customer satisfaction, continuous improvement, cost minimization, innovation, and creativity (Kochan, et al. 1995; Bowen and Lawler, 1992). Therefore, quality management should not be seen merely as a change in organizational
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structure or use of few quality tools and processes in organization. It only succeeds if it is adopted as a change in organizational culture whereby bureaucratic culture is to be replaced by a quality culture based on a unique set of values. Therefore, it is obvious, that quality management can only be effectively implemented in a quality oriented organizational culture. Human resource management has a critical role in developing a quality culture in the organization. To develop a quality culture in an organization, strategic and operational aspects of human resource management are bound to be altered to support values of quality management mentioned above. However, in any such effort, certain basic norms of bureaucratic behavior such as legality, rationality, professionalism, and an overall scientific mindset (Kiggundu, 2002) are taken for granted. Many authorities such as W. Edwards Deming, Joseph M. Juran, and Philip Crosby documented that Leadership is creating and supporting a quality culture. The quality components are essentially compatible with the values of higher education, but often the culture must change to support the principles. Members need to shift their thinking about how work is done. The positive value in the culture brings continuous improvement, that is based on continuous change. People are trained to feel comfortable with change and not fear becoming involved in improvement efforts. Planning for change is an attitude to be cultivated by the leaders in the institution. Leaders are essential in creating a quality culture and they play a significant role in assuring that the necessary resources are available to support quality initiatives. When the quality principles are implemented holistically, a culture for academic excellence is created. Davies, Douglas, A., Douglas J. (2007) works on The effect of academic culture on the implementation of the European Foundation for Quality Managements (EFQM) Excellence Model in UK universities. The paper identifies aspects of academic culture. He found that certain aspects had a good cultural fit with the EFQM Excellence Model and some of them acted as cultural barriers to the implementation of the model. Culture is created by its employee behaviour, curriculum design, available funds and resources. Employees resistance to change is a barrier in implementation of self Assessment. In the case of higher education, most of the employees are predominantly professionals who by tradition expect autonomy and academic freedom. Academic staff may not like being asked to rethink their teaching styles (Blankstein, 1996). Educational professionals may be more devoted to teaching they feel in doing Self Assessment Activities. The staff members avoid getting their work to be evaluated by Management. In higher education, culture highly depends upon the curriculum. Poor curriculum design could lead to quality failure. There could be unsuitable academic systems and procedures that serve as a bottleneck while imposing changes in curriculum or course delivery (Kohn, 1993). Lack of sufficient funds and resources also affect the Self Assessment Activities. Quality can be achieved through systematic and strategic training of all the employees. The educational organization may not have the required expertise to train the staff and may look for external consultants for training, especially to suit the requirements of education. Hence, it involves high cost, effort and time (Koch and Fisher, 1998). METHODOLOGY Survey method was used to evaluate that how the leadership and academic culture effect the implementation of Self assessment activities. For this purpose the questionnaire was designed and sent to 30 Public Sector Universities. The questionnaire was filled by Director QEC, five Head of the Departments and three Deans of respective Universities.
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The section on background issue sought general informations about the institution and the programs. Second part of the questionnaire was about the practicing level of TQM in their universities. Last two sections intended to measure the effects of Leadership and Academic Culture on the implementation of Self Assessment. From the prospective to measure role of leadership, it was divided into four dimensions, the role of Vice Chancellor, Director QEC, Head of department and Dean of Faculty. This section also further, attempted to find out the capacity of universities in terms of financial, human and technical resources for their efficient and effective operations in the university to maintain its competitive edge. The questionnaire contains 45 items that included all the elements from the literature. The order of items was deliberately arranged according to the order of the proposition. The Questionnaire followed five-point Likert Scale: Strongly Disagree =1, Disagree=2, Neutral=3, Agree=4 and Strongly Agree=5. Descriptive statistical methods were used to analyze the data collected and to examine the evidence about the Implementation of Self Assessment. This questionnaire was also followed by interviews and discussions with Director QECs of the relevant universities. DATA ANALYSIS & DISCUSSION Data analysis Figures 1-3 show majority of the top management in these public universities is interested to bring quality in higher education institutions and provide resources to organize training sessions for the concerned faculty members and employees of the university, so that capacity of Human Resources is enhanced. These results also confirmed that top management has established QECs and have included expenditures of these cells in the recurring budget of the universities. The management also provides time to design effective planning for its operations.
Questionnaire had of four major components: (1) Background issues. (2) Implementation of Total Quality Management (3) Role of Leadership in Implementation of Self Assessment (4) Role of Culture in Implementation of Self Assessment.
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Figures 4-7 show that on average 70% of the universities are documenting quality system. However, it is noticed from the data that quality policy is not documented and defined to its members in an efficient way. If the universities want to bring improvement in higher education they should formulate quality policy which should be documented, displayed on the notice boards, informed to all stakeholders and regularly reviewed by the top management. The Jarratt (1985) strongly recommended that Higher Education institutions should have clear quality objectives. Perhaps these public universities have included their objectives in vision and mission statements rather than to have separate institutional quality policy. Results shown in figure 7 indicated that these universities are primarily focusing on quality practices in the academic areas only. These universities must implement quality assurance in non- teaching areas as well, so that proper outcomes of quality efforts can be achieved by these institutions.
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Figures 8-10 show that the Institutions have enough resources or facilities as library, class rooms and offices but their activities are not reviewed on regular basis. These facilities are necessary to support the objective of the program. The institutions must have the infrastructure to support new trends in learning such as e-learning. Class-rooms must be adequately equipped and offices must be adequate to enable faculty to carry out their responsibilities. The library must possess up-to-date collections relevant to the program and must be adequately staffed with professional personnel.
Figures 11-12 show that on average there are almost 60% of the public universities who take society as their customers, and encourage the students to provide feedback about the quality of education. Most of the faculty members and university administration are not convinced to recognize students as a customer.
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the Cell
Figures 21-25 show that on average 70% of the Deans and Head of Departments in public sector universities are well aware of Self Assessment manual but they dont review and monitor the activities, to implement it properly in their departments. Hence, they are failing to bring positive improvement in work quality at their universities. More over most of the head of departments have constituted program teams who look after self assessment processes at the departmental level.
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Figures 26-32 show the commitment of the VC in implementing self assessment techniques in their relevant university. Undoubtedly most of the VCs have provided sufficient resources to QECs, they have shown their commitment by nominating Director QECs in statutory bodies of the university.
Fig 33: Department/ Colleges are created in the university after fulfilling the procedures and Criteria of the establishment of new department
Fig 34: The staff wants freedom to perform their duties rather than interference of others.
Figures 33-39 indicate that faculty members are aware of self assessment techniques but the faculty does not like their evaluation done by the students. The faculty have a strong reservation about the students evaluation and increased documentary working.
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Figures 40-42 show that students unions and academic staff do not interfere in implementation of Self Assessment Manual.
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Figures 43-45 show that HEC has developed methods for assessing the quality of academic program of Pakistan but there is a need for continuous monitoring and evaluation of QECs by HEC as an external agency.
Fig 45: HEC provides necessary support to QECs for effective implementation of Self Assessment Manual (SAM).
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For any academic institution or organization leadership and academic culture has a great influence to achieve quality goals. In the literature review it was concluded that appropriate management or leadership style is necessary for the successful implementation of Quality Management System. Culture is another factor impacting on the implementation of the self assessment process in the context of Pakistan universities. In the literature review, the need for an understanding of the culture of an organization was seen as crucial to implementing quality programmes. Successful adoption and practice of Quality Management System requires close attention, and probably modification, to organizational culture as organizational culture is a key determinant in the success of quality management. In this study it is obvious that there is a consensus among respondents that leadership and culture both have great effect on implementation of self assessment manual but these both aspects are missing in Pakistani universities. Leadership (i.e. Dean, Director, Head of Departments is not committed for implementation of self assessment manual and culture is not conducive. The reasons may be the same as in other sectors in developing countries. Top management in developing countries is mostly not committed to quality initiatives and is reluctant to delegate authority (Djerdjour and Patel, 2000). Kaplinsky (1995) identifies reasons for lack of top management support for TQM in developing countries and conclude that in developing countries, many state or enterprises are family-owned and corporate growth and effective management are constrained by the reluctance of the bureaucracy and family to devolve responsibility to professionally trained individuals. A second critical barrier identified is culture. Bruun and Mefford (1996) recommend that TQM programs in developing countries should be accompanied by changes in organizational culture as programs that are highly successful in the industrialized developed countries often fail in the developing countries because these programs are uncritically adopted without any regard to their congruence with the internal work culture of developing countries (Mendonca and Kanungo, 1996). Yong and Wilkinson (1999) examine cultural issue within the quality management context from a human resource perspective and argue that Even in culturally homogenous societies, the issue of cultural change plays a key role in determining the success of quality management implementation, but because of the competitive push for the adoption of TQM and the pervasiveness of perspective market driven consultancy packages, managers have already neglected to tailor quality initiatives to suit their own organizational cultures. Madu (1997) argues that as multinational corporations have adopted strategies that work well within the confines of developing economies cultures, developing countries have to tailor quality management practices according to their own culture, as issue is not whether quality management practices should be adopted but how to implement these practices. CONCLUSIONS AND RECOMMENDATIONS From the feedback provided by the respondents it may be concluded that leadership and culture has great effect on implementation of self assessment in Public sector universities but these aspects are missing in Pakistani Universities. Most institutions in Pakistan are practicing Self assessment procedures in their institute but they neither have clear missions nor are the activities documented. Leaders are usually not trained in the tools and techniques used to improve systems and processes. Leadership in a university is very complex, as it includes abilities of faculty and academicians to
Discussion
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conceive the vision of quality. This aspect is not limited to the principals and/or vice chancellors or deans, but also required in instructors to provide the leadership in their classrooms. To improve the quality of ones institute, all teachers and administrators, need to be committed with their quality goals and measure their processes and activities, to improve the quality of their institutes. Every faculty member of institution must assess the quality of his/her work. This sort of leadership can not be developed or continued by faculty and administrators without teamwork, long term quality goals, intensive efforts, proper training, right policies, and strong commitment, because they are responsible for developing an environment that encouraging and motivating faculty members. Therefore top management need to embrace Self Assessment as a strategy to achieve the quality results. Following steps are also recommended to achieve the desired goal of achieving quality: As leaders commitment is the driving force to the implementation of self assessment manual to the success of an institution therefore Chancellor should appoint VCs, dean of faculties on merit basis and only Ph.D. professors should be appointed. Similarly VCs should appoint the Directors, Principals, Head of Departments on merit basis. These should also be Ph.D. professors who take the responsibility of improving quality of education in true meanings. These appointments should be on competency based. The Director of QEC need to organize training sessions of faculty on regular basis in which they have to address the importance of self assessment to faculty of the institute.
Moreover students, faculty members and employees should be taken on board and all these stakeholders should have clarity about the self assessment techniques. LIMITATIONS & FUTURE RESEARCH DIRECTIONS The paper focuses on only public universities of Pakistan, which are practicing Quality Management system in their Universities. Private sector universities are excluded in the sample. The Data was very small, so complex analysis was not possible. The questionnaire was also limited to only two factors that influence the quality of higher education i.e. Leadership and Academic culture. Relative studies and biggest sample size studies are recommended for more effective results.
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17 FUTURE CHALLENGES IN HIGHER

EDUCATION IN INDIA FACTORS INFLUENCING QUALITY
Vishnuprasad Nagadevara and Rishikesha T. Krishnan Indian Institute of Management Bangalore, India The growth in higher education in India has been very impressive, especially post independence. The number of higher educational institutions as well as enrolments have increased manifold. Yet, the government support for higher education has been coming down in the recent years, leading to increased number of private unaided institutions. With the reduced financial support from the government and high cost of education in the private institutions, the survival of the higher educational institutions will largely depend on the quality of education. This paper analyses the data collected from the decision makers of educational institutions to identify various factors that lead to improved quality. It uses Principal Component Analysis and suggests strategies for improving the quality based on the analysis. Keywords: Higher Education, Principal Component Analysis, Quality Introduction The higher education system India is highly developed and offers education and training in all fields ranging from arts and humanities to mathematical and social sciences to engineering and medicine. India has the third largest higher education system in the world, next only to China and the United States. As on 31.3.2008, there were 416 University level institutions including 24 Central Universities, 251 State Universities, 103 Deemed Universities and 5 institutions established under State Legislation, 33 Institutes of National Importance established under Central legislation and 6 Private Universities. In 2007-08, an estimated 11.16 million students were enrolled in the institutions of Higher Education (Ministry of Human Resource Development 2008). Similarly, the faculty strength was 488 thousand in 2006-07 as compared to 472 thousand in the previous year. Prior to Independence, access to higher education was very limited with enrolment of less than a million students in 500 colleges and 20 universities. Since then, the growth has been very impressive; the number of universities has increased by 18-times, the number of colleges by 35 times and enrolment more than 10 times. According to Tilak (2004), the system has become more mass-based and democratized with about 40% of enrolments from lower socio-economic strata, and women comprising of some 35% of the total enrolments.
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India has a long tradition of education in pure and applied sciences. It consists of more than 338 universities like institutions and 17,625 colleges capable of producing the largest share of educated manpower in the world (Varghese 2006). Studies made at various levels (Garg and Gupta 2000)
Immediately after independence, the growth in the higher education institutions was primarily confined to government colleges. The private sector entered into the higher education through private aided and private unaided institutions. Between 2000-01 and 2005-06, the growth of different types of institutions has shifted in favor of private unaided institutions as presented in Table 1. While the growth rate during this period was only 3 to 4 percent in the case of government and aided institutions, the growth of private unaided institutions was a whopping 139 percent. The average enrolment figures have shown a different picture. The average enrolment in government institutions has increased from 840 to 888 during this period. Similarly, the average enrolment in the private aided institutions also increased from 569 to 610. On the other hand, the enrolment in private unaided institutions has decreased from 569 to 421. In other words, while the growth of the institutions more or less remained stagnant in the government and private aided institutions, their average enrollments increased significantly. The situation in the private unaided institutions was very different. While the number of institutions has shown phenomenal growth, the average enrolments have actually declined. Table 1. Growth of Higher Education Institutions Government 2000-01 Colleges Growth rate Higher Growth rate Enrolment (000) 4097 3.12% Educational 4342 3.48% 3443 3752 4493 2005-06 4225 Private Aided 2000-01 5507 4.41% 5507 4.59% 3134 3510 5760 2005-06 5750 Private Unaided 2000-01 3202 138.91% 3223 139.53% 1822.00 76.67% 3219 7720 2005-06 7650
Growth rate 8.97% 12.00% Source: India - Country Summary of Higher Education
One of the reasons for the stagnation in the government and private aided institutions is the shift in the government policy. There had been a marked change in the government spending on different sectors of education. Table 2 presents the data on plan and non-plan expenditure by the central and state governments in different years. While the expenditure has increased significantly between 1994-95 and 2004-05 in elementary, secondary, technical and higher education sectors, the percentage increases had been very different. The percentage increase in the total expenditure during the first five years has been similar across elementary, secondary and higher education where as the increase with respect to technical education was significantly less. During the subsequent
have illustrated a paradigm shift away from science both at secondary and tertiary levels. In the comprehensive report published by the National Council of Applied Economic Research (NCAER) reveals that less than three percent of school children want to pursue a carrier in science (Shukla 2005). Students drift to other job-oriented courses after graduation in science is prevalent in India. The widespread impression among students is that unlike professional courses, a career in basic science is not lucrative. The Prime Minister of India has given assurance to the scientific community that the government is committed to building a strong science base in universities. Two new Institutes for Science Education and Research were started as part of this initiative. These institutes will be devoted to teaching a five year integrated masters and post masters and PhD program in science in an intellectually vibrant atmosphere. A chain of similar organizations are planned in the coming decade to promote advance teaching in science and research under a National Foundation similar to the NSF in USA (Varghese 2006).
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five years, there has been a significant shift in the expenditure away from higher education. While the growth in the expenditure in elementary education was more than 45 percent the corresponding growth in higher education was only 16 percent. The share of higher education among the 4 sectors of education has come down from 13.35 percent to 12.18 percent. Similar decrease was also seen in the case of secondary education where as that of elementary education has increased significantly 47.87 percent to 51.69 percent. Table 2. Plan and Non-plan Expenditure (000 Crore) Year Elementary Secondary Higher Technical 1994-95 12639 9050 3525 1189 1999-00 27905 20845 8248 2459 2004-05 40586 24990 9562 3387 Percentage 1994-95 47.87% 34.28% 13.35% 4.50% 1999-00 46.93% 35.06% 13.87% 4.14% 2004-05 51.69% 31.82% 12.18% 4.31% Source: Ministry of Human Resources Development, GOI H+T 4714 10707 12949 17.85% 18.01% 16.49%
There has been an interesting pattern in the plan allocation with respect to higher education. As shown in the Country Summary by World Bank, the allocation for higher education sector was only 6 percent in the First Five Year Plan and steadily increased to 28 percent by the Fifth Five Year Plan. Then the allocation started decreasing and reached 6 percent by the Tenth Five Year Plan. This shows the importance given for higher education during the early plan periods and the subsequent shift towards other sectors. The shift in the priorities over the years across different sectors of education is much more evident with respect to the expenditure per student. Table 3 presents the data with respect to average expenditure per student in nominal as well as real terms for the three sectors of education. There has been a significant increase in the expenditure per student in all the sectors between 1994-95 and 1999-00. But, in real terms the expenditure per student stagnated with respect to higher education while the growth in expenditure per student remained healthy in elementary and secondary education sectors. Between 1999-00 and 2003-04, the nominal expenditure per student had shown positive growth only in the case of elementary education. Even this sector had shown a marginally negative growth in real terms. The average expenditure per student has actually decreased in both secondary and higher education sectors during this period. This shift in priorities had lead to the increase in the role of unaided institutions in higher education. In summary, the financial support from government to higher education has been coming down significantly. The government colleges as well as aided higher education institutions are finding it more and more difficult to procure resources and as a result, the infrastructural and other facilities have been stagnating. On the other hand, the number of students getting into these institutions has been increasing. Consequently, the quality of education in these institutions is being affected. The number of unaided institutions providing higher education has seen phenomenal growth in the recent years but, the average number of students in these institutions has been coming down. The low average of the students in these institutions could be because of the affordability as well as the quality issues.
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Year 1994-95 1999-00 2003-04 1999-00 2003-04
Elementary Secondary Actual Real Actual Real 893 793 4040 3588 1792 1233 7392 5087 2162 1229 6852 3896 Percentage Change (Over the previous period) 100.67% 55.49% 82.97% 41.78% 20.65% -0.32% -7.31% -23.41%
Higher Actual 9821 13219 12518 34.60% -5.30%
Real 8722 9097 7117 4.30% -21.77%
Quality in Higher Education Quality plays crucial role today than ever before due to the impact of globalization on the higher education field. The central tenet of strategic implementation and planning of educational reforms in India has recognized the significance of quality teaching and learning. As an outcome of the national policy, the University Grants Commission has established the countrys first autonomous agency for quality assessment (Antony, 2004), the National Assessment and Accreditation Council (NAAC) in 1994. The activities and future plans of the NAAC are guided by its vision and mission that focus on making quality assurance an integral part of the functioning of higher education institutions. Only about 20 percent of the higher educational institutions in the country have been assessed. Based on the assessment, the colleges are awarded one of the nine ratings, and only 9 percent of those which have been assessed managed to obtain A category, consisting of A++, A+ and A ratings. Table 4 presents the data with respect to the rating of the colleges as on 2006. The accreditation and assessment process has been modified in 2007. Under this method, the first assessment is with Institutional Eligibility for Quality Assessment (IEQA). When colleges apply for assessment, the IEQA analyzes the data with respect to 25 parameters and makes a recommendation for further processing. As shown in Table 5, of the 834 institutions which have applied for assessment, only 757 were recommended for the next stage and the remaining 259, accounting for about 30 percent are found to be unfit for assessment (Balakrishna 2009). The low quality of the higher educational institutions is also reflected in the quality of graduating students. NASSCOM-McKinsey Report (2005) claims that not more than 10-15% of graduates of general education and 25% of technical education are fit for employment. Given this scenario, the higher educational institutions have no other option but to improve the quality Table 4: NACC Rankings of Colleges as on 2006 NAAC Ranking of Colleges - 2006 Number Percentage Percentage of Total A++, A+, A245 9 1.75 B++, B+, B1785 66 12.75 C++, C+, C668 25 4.77 2698 100 19.27 Total Colleges Not Assessed 11302 80.73 Source: Country Summary of Higher Education Rating
Table 3. Average expenditure per student in different sectors of education
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Table 5: Region-wise Applications and Recommendations for Accreditation Region North South East & North East West Total Number of Institutions Applied Recommended 171 104 148 126 156 112 359 233 834 575 Not Recommended 67 22 44 126 259
Objectives and Methodology It is important to identify the factors that lead to improved quality in higher education. Thus, the objectives of the study are as follows: 1. 2. 3. to identify various factors that influence the quality in Higher Education Institutions in India Identify the current status of quality in the higher education Institutions with respect to the above factors Identify possible strategies for improving the quality based on the above
The methodology adopted for the study involved collection of perceptual data from the management of higher educational institutions. The management of higher education institutions includes, vice chancellors, principals, directors, registrars etc who are in the decision making capacity. Data was collected through a structured questionnaire. The questionnaire listed 34 different statements dealing with the quality issues with respect to faculty, students and the management. The respondents are asked to rate each statement on a 4-point Likert scale based on their perception of the current status of their own institution with respect to each of the statements. It was intentional to reduce the usual 5-point scale to 4-point scale so that the respondents will not have an opportunity to give a neutral response. The scale consisted of four levels namely Strongly Agree, Agree, Disagree and Strongly Disagree. The respondents are asked to rate their respective institutions based on their perception of the level of their institution with respect to each of 34 items. Some of the statements have been reverse coded to facilitate cross checking. Nevertheless, the coding has been reversed again for these statements while analyzing the data as well as presenting the results. The sample profile along with the data analysis and results is presented in the next section. Sample Profile The sample consisted of 62 decision makers from higher educational institutions, covering government, aided and un-aided institutions. The distribution of these decision makers based on their designations is presented in Table 6. A large majority of the sample consisted of college principals and directors and few of them are registrars and vice-chancellors/deans. As shown in Table 7, majority of the respondents are from the northern region accounting for 58 percent. There is very little representation from the eastern region of the country.
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Designation Number Percent
Principal 33 53.23
Director 11 17.74
Registrar 4 6.45
Chairman 2 3.23
V. C. /Dean 3 4.84
Others 9 14.52
Total 62 100
Table 7: Distribution of Sample Respondents by Region Region Number Percent North 36 58.06 South 11 17.74 West 10 16.13 East 2 3.23 Not given 3 4.84 Total 62 100
Analysis of Data and Discussion Three major actors namely, Faculty, Students and Administration affect the quality of higher education. The faculty contributes to quality with knowledge, excellence in research and teaching and building a reputation. The students contribution emanates from quality input into the system, motivation for learning, ability to provide constructive feedback and a challenging environment for teaching. The administrations role arises from its ability to provide high quality infrastructure, ethical governance structure and financial support for excellence. Data on perceptions of the respondents was collected on 34 different items. The reliability and internal consistency of this scale data is verified using Cronbachs Alpha. The alpha value for all the 34 statements is 0.845 indicating fairly good extent of reliability (Santos 1999). Principal Component Analysis is applied to these variables to extract eight different factors. About 75% of the total variance is explained by these 8 factors. These factors are presented in Table 8. Table 8: Factors Extracted and The respective Items Faculty and students pursue knowledge in any direction without interference We focus on developing leaders for the country There is a strong sense of academic freedom In making decisions, excellence is the over-riding consideration Existing Faculty have a decisive say in the decision of hiring new faculty Excellent library facilities are available A student who gets admission to my university/institution chooses it over most other universities/institutions offering the same course of study Given the chance faculty from other universities/institutions would like to join my university/institution Campus facilities are regularly renovated and updated to provide a modern Faculty are provided excellent working conditions There is a clear vision and philosophy of striving for excellence The vision of excellence is shared by all important stakeholders We have a strong technology backbone (Internet, E-mail, e-learning system, etc.) that supports the teaching of our faculty
Quest for Excellence Score: 2.87
Reputation and Infrastructure Score: 3.00
Table 6: Distribution of Sample Respondents by Designation
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Financial Management Score: 2.81
Excellence in Teaching Score: 2.54
Collaboration Efforts Score: 2.53
Independent Faculty Score: 2.58 Q u a l i t y Admissions Score: 2.59 Academic Freedom Score: 2.65
Any faculty member having an externally-funded project gets an updated statement of accounts of the project immediately upon request Researchers having sanctioned or funded projects face no difficulty in purchase of equipment for their projects The finances are managed in a professional manner The faculty decides the curriculum Students feedback on teaching is obtained regularly Non-academic administrative positions are held by professionals who take independent decisions International students are attracted by the quality of education that is offered by Students get transcripts immediately across the counter on payment of a fee There is collaboration between Faculty in different departments for interdisciplinary projects Faculty compensation policies are aimed at rewarding excellence in Faculty members weave their research and teaching together for mutual benefit Students are admitted based on merit and no other consideration A faculty members status in the university comes from his position in the hierarchy and not from the quality of his teaching and research Majority of faculty have doctoral qualifications from the best universities in the Faculty are thought leaders at the national level in their respective disciplines The faculty has control over admission criteria Students feedback on different faculty and courses is open and shared Students believe that studying in my university/institution provides them a lifelong learning experience that is more than just what they learn from the academic Students and junior faculty contradict or question senior faculty in academic matters without fear of rebuke It is necessary for the Faculty to have a strong research record (publications in high quality refereed journals) to get promoted Faculty and students state their opinions in external media freely
The factor analysis in this particular case serves two purposes. The first is to identify the items that are grouped together based on correlations. The factors emerging out of the grouping of the items provide insights into the characteristics that are important for improving quality. The other is to identify the present status of the institutions with respect to these factors. The average scores of factor are calculated. These scores indicate the present level of institutions based on the respondents perceptions. These scores for each characteristic are presented in Table 8. The eight characteristics that emerged out of the analysis indicate that the students role is interlinked to that of the faculty. It is important for the students to be part of the quest for excellence in collaboration with the faculty. The administration needs to place importance in financial management and infrastructure. The reputation of the institution is a function of the faculty and students, as well as infrastructure provided. It is very interesting to note that library facilities form part of the quest for excellence and not that of the infrastructure. In a learning institution, library is not just an infrastructure facility, but a seat of learning, leading to excellence. The quest for excellence has to emerge mainly from the facultys efforts. There needs to be openness and lack of interference and fear among faculty and students. Excellence should be the overriding criterion for all activities. The collaborative efforts of the faculty are necessary for achieving excellence. Also, excellence
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The average scores of each of the characteristics are significantly below 3.0. The highest score is obtained for Reputation and Infrastructure at 3.0. All other characteristics have scored less than 3.0. On the Likert scale used in the survey, scores 1 and 2 represent Strongly Disagree and Disagree and an average score of less than 3 indicates the low level of quality parameters as perceived by the respondents with respect to their own institutions. Table 9 presents perceptions of the respondents as a percentage about their own institution. Table 9. Perceptions of the respondents as a percentage about their own institution Strongly Disagree Quest for Excellence Financial Management Excellence in Teaching Collaboration Efforts Independent Faculty Quality Admissions Academic Freedom 3.23 8.77 17.74 8.62 9.84 1.69 7.81 Reputation and Infrastructure 3.33 Disagree 50.00 40.00 36.84 45.16 65.52 62.30 64.41 50.00 Agree 41.94 55.00 49.12 35.48 25.86 27.87 32.20 40.63 1.69 1.56 Strongly Agree 4.84 1.67 5.26 1.61 Total 100 100 100 100 100 100 100 100
It can be seen from the above table that the perception of the respondents with respect to all the 8 characteristics is skewed towards Strongly Disagree or Disagree, with one exception with respect to Reputation and Infrastructure. This shows that these institutions have a long way to go in achieving the desired levels of quality. The two major factors that require immediate attention are Collaboration Efforts and Teaching Excellence. In order to achieve this, the institutions will have to encourage collaborative research across different departments leading to inter-disciplinary research and compensation packages which will reward excellence. On their part, the faculty needs to weave their research and teaching together. Similarly, the faculty needs to have a major say in the development of the curriculum and be open to student feedback. The faculty time need not be wasted on academic administration, which can be carried out more effectively by professionals hired specifically for this purpose. The quality of teaching should be high enough to attract international students. Summary and Conclusions The growth in higher education in India has been very impressive, especially post independence. The number of higher educational institutions as well as enrolments have increased manifold. Yet, the government support for higher education has been coming down in the recent years, leading to increased number of private unaided institutions. With the reduced financial support from the government and high cost of education in the private institutions, the survival of the higher educational institutions will largely depend on the quality of education. Data was collected on the perceptions of the decision makers of higher educational institutions on 34 different items that reflect quality. Principal Component Analysis was used to extract 8 different factors or characteristics that define
in teaching requires appropriate and frank feedback from the students. The faculty should have a major role in deciding the curriculum. The academic freedom is in terms of freedom of expression to the outside media and ability to have constructive criticism and also the need to publish their research in high quality journals.
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quality. These characteristics are further analyzed to identify the present status of these institutions as to arrive at possible strategies for improving eh quality in higher educational institutions. References Balakrishna, Shruthi (2009). 30% colleges, Varsities not fit or Assessment, Times of India, 27 Jan 2009, p 5 Department of Higher Education, MHRD, Government of India. Statistical Publications. available at http://www.education.nic.in/stats/statpub.asp Last accessed 5th Feb 2009 Garg, K. C. and Gupta, B. M. (2003). Decline in Science Education in India-a Csae study at +2 and undergraduate level, Current Science, vol 84, no. 9, pp 1198-1201 Ministry of Human Resources Development, Government of India (2009). Annual Report, 20072008 Ministry of Human Resources Development, Government of India (2008). Annual Report, 20072008 NASSCOM-McKinsey Report (2005). Extending Indias Leadership of the Global IT and BPO Industries, available at http://www.mckinsey.com/locations/india/mckinseyonindia/pdf/ NASSCOM_McKinsey_Report_2005.pdf last accessed Feb 5, 2009 Santos, J. Reynaldo A. (1999). Cronbachs Alpha: A Tool for Assessing the Reliability of Scales, Journal of Extension, Vol 37, no. 2 April 1999 Stella, Antony (2004). External Quality Assurance in Indian Higher Education: Development of a Decade, Quality in Higher Education, Vol. 10, No. 2, pp 115-126 Sukla, Rajesh (2005) India Science Report, National Council of Applied Economic Research, New Delhi Tilak, J.B.G. (2004) Public Subsides in the Education Sector in India. Economic and Political Weekly 39 (4) (24-30 January): 343-59 Varghese, George (2006). Declining Trend in Science Education and Research in Indian Universities, available at http://portal.unesco.org/education/en/files/51677/ 11634979955Varghese-EN.pdf/ Varghese-EN.pdf last accessed 5th Feb 2009 World Bank India Country Summary of Higher Education available at http://siteresources. worldbank.org/EDUCATION/Resources/278200-1121703274255/1439264-1193249163062/ India_CountrySummary.pdf Last accessed 5th Feb 2009
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ORGANIZATION MANAGEMENT AND CULTURE
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ORGANIZATION MANAGEMENT & CULTURE
18 Learning New Management Viewpoints: Recontextualizing Strategic Leadership in Global and Regional Context
Dr. Hasan Sohaib Murad Professor and Rector & Ahmad Raza Research Fellow University Of Management and Technology, Lahore Pakistan This paper makes a theoretical critique of the current paradigm on strategic leadership and proposes an epistemology of managerial practice as unfolded in the business contexts. It is argued that there exist diachotomic views of managerial practice based on profit-logic versus responsibility-logic throughout the corporate world. The strategic leaders, instead of practicing one of these logics, should try to synthesize best of the both at the cognitive level and then apply them into the business and management environment. The rapid technological changes coupled with the profound cultural heterogeneity at the workplace have also created the determinants of humanly responsive and socially aware strategic leadership, which must respond sensibly to the hyper-transformative forces both at the regional as well as global level.Therefore, this paper suggest that strategic leaders in business, society and industry must cultivate a culture of courage, vision and will to transcend the established strategic straitjackets and usher into the new brave world of strategic opportunities and alliances. Key words: strategic leadership, epistemology, managerial practice, profit logic, responsibility logic. Context of Strategic Leadership The hyper transformative business markets of the world have created conditions, which impress upon the local as well as international business leaders, to think and lead their firms strategically. As described by Hitt etal (2003), strategic leadership is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary The emerging competitive scenarios of international finance, trade, communications technologies, and business have set the stage for a new kind of strategic leadership in the arena. Because of the unfolding complexity and fluidity of the business firms global environments, strategic leaders must demonstrate an ability to interact across divergent behavioral and cultural recipes, and of course, in an unpredictable environment. They must demonstrate skills, personal and visionary in nature, which can influence the behaviors, thoughts and feelings of those with whom they work (Peters 2001).
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The locus of strategic leadership happens to be multidimensional in its nature. The strategic leaders are primarily concerned with managing large enterprises through others. They are not interested in managing the small business units (Hitt etal, 2003). They focus on rapid business and economic changes which may affect their business enterprise and its competitiveness as well as performance in the dynamic global environments. The failure of the strategic leaders, to respond quickly to the changing global business realities can weigh heavily upon the firms strategic competitiveness and earn above average returns (Hitt etal, 2003).The global business competition is not just a competition between company versus company, or product versus product. It is also as Hamel and Prahald (1993) have commented, a case of competing, mindset versus mindset, managerial frame versus managerial frame. The strategic leaders must know how mindset of the firm be aligned with the mindset of the diverse global competitors, in order to retain the competitiveness and business advantage of the firm. The ability of strategic leader to interact across the cognitively complex competitive situations, demand from him the application of five interrelated competencies of, foresight, systems thinking,visioning, motivating, and partnering(Hammer and Stanton,1997). Several strategic actions can be identified which characterize the structure of strategic leadership. As they have to execute the strategic intent of the firm in order to realize its strategic vision, understandings borne out of the analysis of internal and external environment of the firm constitute a prerequisite for the success of strategic leaders. Apart from this they should be capable enough of taking what Hitt etal (2003) have identified as key strategic actions, which include interalia, determining strategic direction, establishing balanced organizational controls, exploiting and maintaining core competencies, developing human capital, sustaining an effective organizational culture and emphasizing ethical practices. These strategic actions necessitate a higher order managerial skill from the strategic leaders. The effectiveness of the strategic leadership largely depend upon the fact of how far they can see into the futuristic market developments, how far they can make courageous yet calculable decisions in the midst of volatile global markets, and how far they can steer and maintain the sustainability of their firm in the unfolding strategic business realities (Lasserre, 2003; Hitt etal, 2003).Moreover, strategic leaders dealing with hyper transformative contexts in business, economy and technology, must demonstrate managerial skills to interact across different cultures and be able to respond to the diverse emotional and cultural needs of the stakeholders(Dreskey,20 03;Schein,1985).Strategic leaders in many ways can change the organizational culture of the firm and transform it into social capital through which the competitive advantage of the firm in the marketplace can be retained. In the process strategic leaders have to formulate effective business strategies through a consultative partnership of the employees, peers, and superiors and desire to seek, what Hitt etal(2003) describe as a corrective feedback about their difficult decisions and vision. This helps the strategic leaders to foster alliances and partnerships, both internally and externally for their firms, in order to materialize the broader features of their strategic vision (Hammer and Stanton, 1997).
Managing the human capital may be the most critical skill of strategic leadership (Collins, 2001; Finkelstien etal, 1996). In the new millennium, intellectual capital, including a dynamic knowledge resourcefulness and an ability to create and commercialize innovation, can affect a strategic leaders success very significantly (Teece, 2000). Business contexts are also important in the effectiveness of strategic leaders performance. The competent strategic leaders also establish the context through which stakeholders can perform at peak efficiency (Kets de Vries, 1995). The firm without leadership may be a rudderless ship, wavering amongst the changing market winds and stormy business environment. The effects are experienced both within the firm and outside. The employees within the firm may suffer crisis of confidence, resulting in lower productivity, coupled with the stake holders fears about the security of their investments. The primary focus of the strategic leadership happens to be its ability to manage the firms operations effectively and sustain high performance over time (Maccoby, 2001).
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The top management of the firm holds the basic responsibility of strategic leadership, particularly the CEO (Hitt etal, 2003).Other significant position holders of strategic leadership within the firm may include members of board of directors, top management team and divisional general managers (Wright etal, 1996;Hitt etal.2003 ).Apart from their routine organizational responsibilities, strategic leaders have considerable decision-making powers which can not be delegated (Finkelstein and Hambrick, 1996).As Hitt etal (2003) have commented very aptly that, strategic leadership is an extremely complex, but critical, form of leadership. Strategies cannot be formulated and implemented to achieve above-average returns without effective strategic leaders. In the hyper transformative global economic scenario, effective strategic leadership needs to cultivate a mastery of technological innovation coupled with cultural imagination, to decide strategically and reach across the cultures to secure the financial and business advantage of their firms in a responsible manner (Deresky, 2003). Recontextualizing Global and Regional Managerial Practice The managerial practice of strategic leadership appears to be divided in two types of logic. There is one school and perhaps a dominant one in the management sciences, which takes managerial practice as rational, based on the analysis of forces effecting strategic decisions, consequently leading to the competitive advantage of the firm. The strategic leader can lead his organization to sustained profitability and growth by rationally calculable and tangible business results (Friedman, 1962; Porter, 1979; Filbeck, 1996; Larson, 2004). The managerial practice remains justified unless it can lead to tangible growth and above average profits for the firm what ever the social, environmental or human consequences may be. The hallmark of strategic leadership is shown by its ability to apply strategy as a competitive advantage and value creating instrument which should lead the firm to tangible profits and financial gains in the marketplace (Hitt etal, 2003; Wright.1996).The logic of business enterprise is driven by a rational instrument, objectively, regardless of emotional, cultural and moral consequences of the profit making. The logic of profit maximization as a sole motive of business and economic enterprises is in itself a sufficient moral justification of competitive operations in the market place. The notion of profit as a competitive advantage, culminating in a strategic decision, internalized by rational human actors is raised to the level of universal economic ethic. All strategic actions which terminate in measurable business profits have full moral justification. One can see the simple law of profit logic operating underneath the myriad labyrinth of free (we may add blind and objective) rational market forces. Either your enterprise make sustainable competitive profits or you perish and languish in the marketplace. This crave for profit and competition as strategically plausible end has created an ugly mess of corporate exploitation of human as well as material resources having no regard for the human and moral costs of such actions. Several cases of corporate crime have been reported in the management literature, such as Enron Scandal, Union Carbide gas leakage at Bhopal in which thousands died and still thousands suffering, sexual and human abuses of particularly woman workforce by Nike contractors in Vietnam, sacrilegious shoes marketed in Bangladesh by Footwear International and Child labor malpractices in hand stitched footballs in Pakistan, stare at the face of ardent advocates of business as profit logic (Dreskey.2003;Hitt etal,2003;Lassere,2003). The alternative to this view of business as profit logic is offered by responsibility logic. The proponents of responsibility logic argue that economic and business enterprise holds profound social responsibility towards the society and its moral concerns. The business enterprise must satisfy the emotional, moral and social needs of the society. The strategic leadership must formulate business strategies keeping in view the social contexts in which they operate. Several researchers have shown that a business firm can still yield profit, when it takes into consideration the environmental, social and moral contexts of the business into account (Mintzberg, 1994; Curcio etal 1996; Hall etal1998; Baldridge etal, 2004; Liljenquist etal, 2004). The relevance of responsibility logic as interpreted in
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The activities of firm can not be seen in isolation from the larger social, ecological, moral and cultural implications (Allenby and Graedel, 1995). From manufacturing of a product to its marketing and eventual disposable have serious and tangible human social consequences. The MNCs must develop a systemic view of their business and economic pursuit in the regional and local host countries. They must take note of the moral and cultural diversities across the globe and how these are going to be affected by them. The economic profitability must be balanced against the ecological and social consequences of such actions. As commented by Dreskey (2003) that, MNCs must take the lead in dealing with ecological interdependence by integrating environmental factors into strategic planning. Along with an investment appraisal, a project feasibility study, and operational plans, such planning should include an environmental impact assessment. The strategic leaders must fully know that the secret of sustainable business growth lies in realizing the strategic interdependence of business, economy, society and ecology. The real challenge for managerial strategic leadership in executing their strategic business goals across a culturally and morally diverse and unpredictable global business environment, reside in cultivating a uniform and worldwide posture on social and ethical responsibilities and see as to how it is implemented.(Dreskey, 2003) Apart from the ecological dimensions of strategic business venture; the issues of corporate corruption, kickbacks, and business malpractices have raised serious concerns about the role of strategic leadership in handling the corrupt practices in their corporations. According to Mr. Peter Eigen, Chairman of German based non governmental organization, Transparency International which keeps an eye on the corruption culture in the world, The scale of bribe-paying by international corporations in the developing countries of the world is massive (cit in Dreskey, 2003). Although US and other countries have enacted laws (e.g. Foriegn Corrupt Practices Act of 1977) to check the corrupt practices in business and economy, notheless, it remains a menace which continuously engages the attention of global leaders. International corporations indulge in unethical practices in order to retain their competitive advantage over the rival companies in the local and regional markets. Even a company like IBM have not escaped the trap of corrupt practices in securing business with the largest commercial bank in Argentine, Banco de la Nacion (Dreskey, 2003). The international managers in order to make correct decisions in strategic business deals, with sound ethical considerations, must ponder whether a business decision or transaction is of questionable nature and therefore illegal and secondly, how the transaction could be made without indulging into scandalous business profits. They must integrate local moral strictures on bribery and corruption with the international ethical code on business practices. The moral implication of the firms business deals must be considered at the strategy formulation stage (Dreskey, 2003)The unabated desire to accumulate wealth as a social symbol of power and success have plagued a charade of
moral and ethical terms has now assumed an indispensable significance in the managerial strategic leadership. The rapid global interdependence of business and technology has caused the managers to interact with diverse ethical and cultural values. As underscored by Dreskey (2003), managers today are usually quite sensitive to issues of social responsibility and ethical behavior because of pressures from the public, from interest groups, from legal and governmental concerns, and from media coverage .We find several instances, in corporate world, where, profitability of the enterprise have been strategically realigned with ethical and human consequences of global strategic business engagements. For example, Reebok, a global athletics sports and fitness company have made clear commitment to human rights in carrying out its business across the globe with its contractors, subcontractors, suppliers and other business partners. They have what they call a, Reebok Human Rights Production Standards. Some of its important elements include, a healthy and safe work environment, refusal to do business with firms who indulge in child labor(under 14), refusal to work with firms that use forced labor motivated by political coercion or holding different political views, and a preference to do business with those firms who observe a 48 work week(Dreskey, 2003).
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politicians,bureaucrats, brokers, investors, soldiers and corporate leaders to connive and plunder the monetary, natural and human capital of societies across the world. In the complex global business scenario, strategic leadership assumes a very significant, yet critical role. It is significant, because they formulate strategic business vision and critical, because they have to make courageous and difficult decisions to materialize it in the real world. Change and volatility is inherent in the strategic conditions. But, we must hasten to add that competitive business advantage at the cost of ethical, environmental and social abuses of human being is not justifiable under any kind of contingency or emergency. Business heuristics must corroborate into strategic paradigm the human consequences of strategic managerial decisions, synthesizing profit with ethical responsibility and accountability. We find a host of MNCsemanating from North America and Europe, which include, Reebok, Liz Claiborne, Wal-mart, Avon, Sainsbury Plc, Otto Versand, who have implemented Antisweatshop Code of Conduct and Social Accountability 8000 to oversee that their business partners across the world strictly observe the ethical and moral aspect while fulfilling their business commitments. They take a strong note of child labor, human rights abuses, and forced labor at the work place and monitor closely the enforcement of ethical standards in the conduct of business by their global partners (Dreskey, 2003). Other developing economies of the South Asian region and Far Eastern region need to follow the suit and improve human conditions of business environment in a more elaborate way, because these regions are facing massive human rights and labor standards violations along with a high standing on the corruption index of Transparency International (cit. in, Dreskey, 2003). The end of cold war and ensuing technoglobalism have unleashed complex cultural forces, which have created new strategic economic realities which demand from the local and global strategic leaders to shape their business and economic priorities in a flexible and creative fashion taking into full consideration the human consequences of their business agendas (Dreskey,2003,Lassere,2003). The one notable trend which has emerged very strongly is that of forming regional and bilateral strategic alliances in business and economy. NAFTA and ASEAN are two significant examples of strategic economic alliances. EU has also rapidly emerged as a strong strategic economic and business alliance. In the South Asian context, SAFTA is fast growing strategic economic reality, with only one setback, that is of India-Pakistan strategic straitjacket fixed in a long standing political issue of Kashmir. Strategic leadership from both countries need to demonstrate sufficient courage, vision and will to transcend this strategic straitjacket, in order to facilitate and help unearth the economic and trade genius of one of the largest segments of human populations on the face of earth. Apart from SAFTA shaping into a powerful regional economic alliance; another economic strategic alliance can be visualized between the trio of China, India and Pakistan. These three coming together can make a strategic difference in the global business chunk. The realization of a free trade partnership between China, India and Pakistan can radically alter the traditional economic and trade realities of not only these close neighbors but also change the future course of the strategic global business and economic developments. The strategic economic alliance of these three countries can save its populations from the negative impact of globalization as currently experienced by them through MNCs and formulate a common strategic response to meet the economic and trade challenges of this century. This could be a trilateral strategic economic and trade parternership, making a historic difference in the lives of its peoples and transforming the whole region into unparallel economic prosperity. For the realization of this goal, leadership, political and economic have to grow out of the inherited strategic straitjackets borne out of pseudo-historical and cultural misconceptions conditioned by a West European colonial experience. If the strategic leadership of these three neighboring states fails to respond creatively to the new global economic realities, this great region of tremendous economic potential may precipitate into economic failure, consequently being exploited by economic forces, which may not be under their control.
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Strategic leadership is more than a managerial practice; its a kind of visionary dejavu emanating from a deep sense of working towards the collective betterment of business, society and people at large. Those who show a will to transcend the narrowness of strategic straitjackets; have dreams and visions can transform risk into advantage. The secret of sustainable growth lies within firms, organizations and economies and not outside the system. Only visionaries can feel and unlock that region of within and make it into collective betterment of the humanity at large, what to speak of a business firm. The strategic leaders in contemporary corporate world must tamper their strategic vision of business, seeking to acquire competitive advantage over their rivals, with a clear commitment towards moral and social responsibility, reinforced through a realization to protect the essential spiritual basis of managerial practice. If business loses touch with the spirit of vast majority of human beings, it can only lead to bitter conflicts, wars and intercultural rivalries. Rationality, moral responsibility and spirituality should go hand in hand in shaping this kind of strategic leadership, necessary to respond to the culturally and spiritually diverse workplace of the 21st century. One unthoughtful strategic action in business, economics or politics can cause havoc for the safe and secure environment in which prosperity and growth make strides. References Baldrige, David, C.Floyd, Steven, W.Markoczy, Livin (2004). Are Managers From Mars and Academicians from Venus? Toward an Understanding of the relationship between Academic Quality and Practical Relevance. Strategic Management Journal.Vol 25, issue, 11 pp: 1063-1074. Curcio, Richard, J.Wolf, Fran, M. (1996). Corporate Environmental Strategy: Impact upon Firm Value. Journal of Financial and Strategic Decisions.Vol:9, No: 2 Summer 1996. Filbeck, G.Gorman, Raymond, F.Preece, Diana, C. 1996 Behavioral Aspects of the Intra-industry Capital Structure Decisions. Journal of Financial and Strategic Decisions.Vol:9,No:2,Summer,199 6http//www.studyfinance.com/jfsd/.Retrieved on 11/02/04. Collins, J. (2001). Level 5 Leadership: The Triumph of Humility and Fierce Resolve, Harvard Business Review, 79(1):67-76. Dreskey, Helen (2003). International Management; Managing Across Borders and Cultures. Prentice-Hall Inc. New Jersey. Friedman. (1962). Capitalism and Freedom. Chicgo. Chicago University Press. Finkelstein, S and Hambrick, D.C. (1996). Strategic Leadership: Top Executives and Their Effects on Organizations. St, Paul, MN, West Publishing Co. Graedel, T.E. and Allenby B.R. (1995). Industrial Ecology. New Jersey: Prentice-Hall. Hammer, M and Stanton, S.A. (1997) .The Power of Reflection. Fortune, Nov.24, 291-296. Hammel, G and Prahald, C.K. (1993). Strategy as Stretch and Leverage. Harvard Business Review,
Some Concluding Remarks
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71(2):75-84. Hall, Pamela, L.Rieck, R. (1998). The Effect of Positive Corporate Social Actions of Shareholder Wealth. Journal of Financial and Strategic Decisions. Vol:11,No:2,1998. http//www.studyfinance. com/jfsd/. Retrieved on 11/02/04. Hitt, Michael, H.Duane, Ireland, R. and Hoskisson, Robert, E. (2003). Strategic Management; Competitiveness and Globalization. Thomson South Western, Ohio. Kets de Vries, M.F.R. (1995).Life and Death in Executive Fast Lane.San Francisco: Jossey Bass. Larson, James, R.Sargis, Edward, G.Bareman, Christopher, W. (2004). Shared Knowledge and Subgroup influence during decision-making discussions. Journal of Behavioral Decision Making. Vol:17, 1ssue:4, pp: 245-262. Liljenquist, Katie, A.Galinsky, Adam, D.Kary, LaraJ. (2004). Exploring the Rabbit Hole of Possibilities by Myself or with My Group: The Benefits and Liabilities of Activating Counterfactual Mindsets for Information Sharing and Group Coordination. Journal of Behavioral Decision-Making. Vol:17, Issue: 4, pp: 263-279. Lassere, Phillppe (2003). Global Strategic Management.Palgrave Macmillan. New York. Mintzberg, H. 1994 The Fall and Rise of Strategic Planning. Harvard Business Review, Jan-Feb: 107-114. Maccoby, M. (2001). Successful Leaders Employ Strategic Intelligence, Research Technology Management, 44(3):58-60. -------------44(5):58-60. Porter. (1979). How Competitive Forces Shape Strategy. Harvard Business Review, 57(2):37-145. Peters, T.J. (2001), Leadership: Sad facts and Silver lining, Harvard Business Review, 79(11):121128. Schein, E.H.(1985). Organizational Culture and Leadership. San Francisco: Jossey Bass. Teece, D.J. (2000). Managing Intellectual Capital: Organizational, Strategic and Policy Dimensions. Oxford: Oxford University Press. Wright, P.Kroll, Mark, J and Parnell. (1996). Strategic Management; concepts and cases. New Jersey: Prentice-hall. (2001).Making Sense of Leadership Literature, Research Technology Management,
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PSYCHOLOGICAL CONTRACT OF TELECOM EXECUTIVES AND THE WORKING ENVIRONMENT: A CASE OF CITYCELL AND TELETALK IN BANGLADESH
Dr Nazrul Islam Professor, Department of Business Administration East West University, Dhaka, Bangladesh Email: nazrulislam@ewubd.edu And Md. Wahidul Habib Adjunct Faculty, Department of Business Administration, East West University, Dhaka, Bangladesh Email: wh@ewubd.edu
This paper aims at identifying the relationships between the psychological contract of the employees and the working environment of Citycell and Teletalk companies in Bangladesh. Thirteen items were used to identify working environment and 16 items were used to explain psychological contract. Eighty executives from City Cell a private company and Teletalk a government company were interviewed with a structured questionnaire. Factor analysis was conducted to identify the factors relating to psychological contract and the working environment. Results show that there are 5 factors that form psychological contracts of the employees such as, recommend company as career, company policy and procedures, respect of individual differences, satisfaction with the recognition as individual, and value and encouragement. Five factors are important to working environment in telecom companies in Bangladesh such as, training, goals and strategies, flexible program, opportunity to interact with others, and supervision style of the management. The relationship between working environment and psychological contract were identified by the Spearmans Rank Correlation analysis of the factors. Results show that there are 4 pairs of factors where there are significant correlations. The factor pairs are (i) respect of individual differences and goals and strategies of the company (ii) respect of individual differences and the supervision style (iii) satisfaction with the recognition as individual and training programs of the company and (iv) satisfaction with the recognition as individual and goals and strategies of the company. This indicates that the telecom employees in Bangladesh will have strong psychological contract with the company if the goals and strategies of the company are clear, supervision style is acceptable, and training programs are adequate for the employees.
19 THE RELATIONSHIP BETWEEN
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1. BACKGROUND Telecom sector of Bangladesh is a very important sector in the economy of Bangladesh since 2001. It is a high growing industrial sector of Bangladesh. In this sector, five private mobile companies such as Grameenphone, AkTel, Citycell, Banglalink, Waried Telecom, and one government owned company, TeleTalk, are operating right now. These companies are formed with the joint venture arrangement. Grameenphone is a joint venture (62%) with a Norwegian company - Telenor while Banglalink is a joint venture with Orascom originated from Egypt. Aktel is a joint venture between Telecom Malaysia Berhad TM and A. K Khan & Company Limited. Waried Telecom is an investment of Dubai and Abu Dhabi Group UAE while Citycell is a joint venture with SingTel Asia Pacific Investment Pvt. Limited. TeleTalk is a public limited company with 100% shares owned by the government of Bangladesh. As a very high growth sector, telecom companies in Bangladesh started growing since 2001. Till 2004, 4 companies along with a fixed phone company were established in Bangladesh. The companies are Grameenphone, AKTel, Bangla Link and City Cell. After 2004, government owned company Teletalk started its mobile business. In 2007, Warid Telecom started functioning commercially. A continuous growth in telecom sector in Bangladesh is observed from the inception of mobile phone companies in Bangladesh. The total number of telephone subscribers in Bangladesh were 22,819,385 in 2007 which is about 22% more than the previous year. The rate of increase of total subscribers, rate of increase of mobile users, rate of increase of PSTN users and tele-density shows upward trend in Bangladesh (Table 1). Table 1 Users of Mobile/PSTN from January 2003 to January 2007 in Bangladesh 2003 2004 2005 2006 Mobile Subscriber 1140394 4150787 9269095 Public switched telephone network 682000 716000 831000 871000 Total Subscriber 1822394 4981787 10140095 Rate of increase of total subscribers 43.97 89.87 103.54 Rate of increase of mobile users (%) 67.29 117.57 123.31 Rate of increase of PSTN users (%) 4.99 16.06 4.81 Tele density (%) 1.45 2.5 3.81 7.77 Source: Bangladesh Telecommunication Regulatory Commission (BTRC) *PSTN refers to Public Switched Telephone Network
2007 21771668 1047717 22819385 125.04 134.88 20.29 16.85
Observation shows that there is a very high employee turnover in telecom sector of Bangladesh. This is attributed by the working environment of the companies which is defined by the goals and strategies of the company, availability of training programs, opportunity to interact with others, supervision style of the management, and the flexibility in programs. The stability of the employees to some extent depends on the psychological contracts which are influenced by the working environment of the company. Hence, this paper aims at identifying the relationship between the psychological contracts of the employees and the working environment of the company. This study only includes City Cell and Teletalk companies with an exploratory research conducted to identify the relationships.
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1. To identify the factors relating to psychological contracts of the employees and the working environment of the company; 2. To identify the relationship between the factors concerned with psychological contract and the working conditions; and 3. Provide suggestions to the telecom companies of Bangladesh to improve the psychological contract of the employees. To identify the relationships between the psychological contract and the working environment, data were collected from the junior and mid-level executives of City Cell and Teletalk companies. They were deliberately selected from the marketing and customer service departments of the companies. Structured questionnaire was used to collect the data. A total of 80 executives of Teletalk and City Cell were interviewed of which 46 were from City Cell and 34 from Teletalk. The questionnaire was developed based on the measurement instrument developed and used by Patwardhan (2008). The respondents were selected randomly who were comparatively young officers of the company. Respondents have 1 to 5 years of working experience in Telecom Company. Likert 5-point scale was used in the questionnaire. Direct interview method was used to collect data. This study only included working environment as independent variable of psychological contract. However, other factors related to external environmental, personal and individual etc. were not included in this study. 2. PSYCHOLOGICAL CONTRACT AND WORKING ENVIRONMENT Psychological contract with the organization is an important factor for the good performance of the employees. Psychological contract is concerned with the obligations of the employees. The better the psychological contract the higher the obligations of the employees will likely lead to higher performance. In this regard, Robinson and his Associates (1994) found that an employers failure to fulfill its commitments is significantly associated with the decline in some types of employee obligations. Psychological contract depends on a number of factors mostly associated to the inner feeling of the employees. These factors are constituted by the personal and social aspects of the lives of the employees. The factors are persons perception, conception, personality, working environment, supervision style, management practice and work culture, supervision style of the managers of other companies, employees personal and family affairs etc. (Guest 1998). Among these factors working environment has substantial impact on the psychological contract of the employees. Arnold (1996) explored the relationship between employment environment and the psychological contract of the employees. He identified that the psychological contract is influenced by the working environment of the organization. 2.1 Psychological Contract A number of scholars have defined psychological contract at different times. Psychological contract is a contract and attachment between the person and the organization. Schein (1978) described psychological contract as a set of unwritten reciprocal expectations between an individual employee and the organization. Kotter (1973) explained it as an implicit contract between an individual and his organization which specifies what each expects to give and receive from each other in their relationships. He added that as individuals belief regarding the terms and conditions of a reciprocal exchange agreement between focal person and another party is psychological contract. The perceptions of both the parties to the employment relationship, organization and individual, of the obligations implied in the relationship. Psychological contract is the process whereby these
The specific objectives of this study are as follows.
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perceptions are arrived at (Herriot and Pemberton 1995). Rousseau (1989) and Rousseau (1994) viewed that a psychological contract emerges when one party believes that a promise of future returns has been made, a contribution has been given and thus, an obligation has been created to provide future benefits. Rousseau and et. al., (1998) has given a comprehensive definition of psychological contract. They viewed that the concept of psychological contract is an individuals belief in reciprocal obligations arising out of the interpretation of promises. The interpretations include (i) subjective or self-reported measures which are the most direct source of information on the nature and content of the psychological contract (ii) assessments focusing on promises, resulting obligations, and reciprocal exchanges are preferred forms of measures when operationalizing the psychological contract and its terms and (iii) measures of expectations are not direct operationalizations because they are contaminated by content unrelated to promissory interpretation. Based upon the discussions made above, we can specify some boundaries of psychological contract of the employees in a company. As psychological contract is an individual perception regarding the organization as a whole in which beliefs may diverge from what is in writing and from interpretations by other principles or third parties. Reviews noticed that the focus of psychological contracts upon individual cognitions is a major defining factor of an individual (Roehling 1996; Pearce 1997). In this regard, Guest (1998) suggested a comprehensive model of psychological contract including causes, content, and consequences which will give us a complete picture of psychological contract of the employees in an organization (Figure 1). Causes: Organizational culture HRM policy and practice Experience Expectations Alternatives Content: Fairness Trust The delivery of the deal Consequences: Job satisfaction Organizational commitment Sense of security Employment relations Motivation Organizational citizenship Absence Intention to quit
Figure 1: A model of the psychological contract [Source: David E. Guest (1998), Is the psychological contract worth taking seriously? Journal of Organizational Behavior, Vol.19, p.661]. Figure 1 reveals several issues that would seem to be essential to the development of a coherent and actionable body of knowledge around the psychological contract. It seeks to go beyond the limited amount of work on how psychological contracts emerge to specify influences on the psychological contract. Broadly, these reside in the organization or in the individual, although both will be influenced by wider norms that include expectations of the individual. This is an important point to emphasize since much of the research has concentrated on expectations and obligations. This can also be construed as inputs to the psychological contract. The second key component of the model is the focus on the state of psychological contract. This has three components which are constantly emphasized in the literature, such as trust, fairness and delivery of the deal. In particular, it takes us away from the descriptive focus on dimensions of the psychological contract. Without discounting the potential importance of contract violation, it is the content of these rather than any
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(i)
(ii)
(iii)
Content-Oriented Approach examines the content of the contract including terms and interrelations among the terms (e.g., contingencies and/or reciprocities among specific employee and employer obligations). Contract content has been described in three ways: specific terms, focusing on individual contract elements such as job security; composites (where groups of items are combined to create scales or indices characterizing broad content of the psychological contract); and nominal classifications, assessing such contract types as relational or transactional. Feature-Oriented Approach compares the contract to some attributes or dimensions such as, the degree to which the contract is implicit or explicit and stable or unstable over time (Parks and Van Dyne1995). While the contract content can be thought of as comprising nouns (e.g. job security or career development), its features are adjectives that characterizes summary features of the contract and the ways in which it was conveyed or interpreted (e.g., explicit, unwritten). Evaluation-Oriented Approach assesses the degree of fulfillment, change, or violation experienced within the context of the contract. This contract oriented assessment addresses individual judgments, evaluating actual organizational experiences against the contract itself. Robinsons (1996) assessment of the degree to which specific obligations were fulfilled is an evaluation (Robinson and Rousseau 1994; Rousseau and Tijoriwala 1998).
Based on the literature review of psychological contract, this study uses the psychological factors such as, company policies and procedures, respect of individual differences, employee feel secure about job, good job attracting team member, job choice in another company, remember company as career, expected work is reasonable on job, value and encouraged perspective, job satisfaction, satisfaction with the recognition as individual, motivation by company success, clear job requirement, security feeling, self esteem feeling, feeling of self fulfillment from the job and feeling of expertise. 2.2 Working Environment Working environment is perceived as an important independent factor related to psychological contract. The values, beliefs, and historical and social experiences that generation-defined employees bring to the workplace are likely affect their interaction with work, thus influencing organizational and individual performance (Bell, 2008). The work environment includes all factors and variables external to an employee that can have an impact on an employees performance (Robinson and Robinson, 1996). It is all that surrounds workers as they do their jobs: the information, tools, and incentives that support performance (Gilbert, 1996). This variable can be attributed by the factors such as, physical working environment, working in company in future, job satisfaction, information about work, cost efficiency, goals and strategies of the company, flexible program, opportunity to interact with others, supervision, encouragement, training, involvement in decision making and climate of work group. Job performance is multidimensional and a product of (i) individual attributes, abilities, and skills, which are measurable at the time an individual enters an organization (ii) environmental and organizational variables that have an impact on the person after job entry (iii) the individuals attitudes, perceptions and motivation to perform (Olson and Borman, 1989).
violation of promises made at the outset that is the major source of dissatisfaction with the contract process. It also allows for the possibility that many workers may have poor contracts in both formal employment contracts and psychological contracts. The final part of the theoretical model focuses on the consequences of the contract. Although some research mainly concerned with contract violation, has explored consequences (Guest 1998). It can be helpful to analyze the following three approaches to understand psychological contract clearly.
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3. RESULTS Factor analysis was separately conducted on the variables of working environment and psychological contract of the employees in telecom companies of Bangladesh. After the identification of the factors, this study conducted correlation analysis between the two sets of the factors. The following sections deal with the factor analysis and the correlation analysis of the factors. 3.1 Psychological Contract Sixteen variables concerned with psychological contract of the employees were identified through literature review. Psychological contract of an employee is formed by these factors. The factors are company policies and procedure, respect of individual differences, employees feel secure about job, good job attracting team member, job choice in another company, recommend company as future career, expected work is reasonable on job, value and encouraged perspective, job satisfaction, satisfaction with the recognition as individual, motivation by company success, clear job requirement, security feeling, self-esteem feeling, feeling of self-fulfillment from the job, and feeling of expertise of the employees. Factor analysis of the variables related to psychological contract factors show that the communalities of the variables are very high indicating higher level of interrelationships among the variables except the variable security feeling. The communalities of the variables are company policies and procedure (.628), respect of individual differences (.841), employees feel secure about job (.563), good job attracting team member (.691), job choice in another company (.903), recommend company as future career (.910), expected work is reasonable on job (.805), value and encouraged perspective (.904), job satisfaction (.904), satisfaction with the recognition as individual (.825), motivation by company success (.632), clear job requirement (.576), security feeling (.358), selfesteem feeling (.737), feeling of self-fulfillment from the job (.602), and feeling of expertise of the employees (.694). This means that the security feeling of the employees has fewer interactions with other 15 variables of the psychological contract. Factor analysis of the variables relating to psychological contract identified 5 factors such as recommend company as career, company policy and procedures, respect of individual differences, satisfaction with the recognitions as individual, and value and encouraged perspective. The most important factor of psychological contract of the telecom employees in Bangladesh is recommend company as career (23.59%), followed by company policy and procedures (18.24%), respect of individual differences (12.55%), satisfaction with the recognitions as individual (9.40%), and value and encouraged perspective (8.54%). These factors together explained 72.34% of the variance (Table 2). For details of factor loadings of each variable of psychological contract please see Appendix 1.
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Initial Eigenvalues Factor Total Recommend 3.775 Company as Career Company Policies and Procedures Respect of Individual Differences 2.919 % of 23.593
Extraction Sums of Squared Loadings Cumulative % of Cumulative Total % Variance % 23.593 3.775 23.593 23.593
Rotation Sums of Squared Loadings % of Cumulative Total Variance % 3.181 19.884 19.884
18.245
41.838
2.919 18.245
41.838
2.293 14.330
34.214
2.008
12.552
54.390
2.008 12.552
54.390
2.239 13.992
48.206
Satisfaction 1.505 with the Recognition as Individual Value and encouraged Perspective 1.366
9.409
63.799
1.505 9.409
63.799
1.972 12.322
60.528
8.541
72.340
1.366 8.541
72.340
1.890 11.812
72.340
Extraction Method: Principal Component Analysis.
3.2 Working Environment Working environment was used as an independent variable that has direct influence on psychological contract of the telecom employees in Bangladesh. Thirteen variables on working environment were identified from the literature which has influence on psychological contract. The variables are physical working environment, working in company in future, job satisfaction, information about work, cost efficiency, goals and strategies of the company, flexible program, opportunity to interact with others, supervision, encouragement, training, involvement in decision making and climate of work group. Factor analysis results show that the communalities of the variables concerned with the working environment are very high. The communalities of the variables are physical working environment (.687), working in company in future (.835), job satisfaction (.642), information about work (.645), cost efficiency (.753), goals and strategies of the company (.736), flexible program (.688), opportunity to interact with others (.771), supervision (.804), encouragement (.604), training (.718), involvement in decision making (.670), and climate of work group (.530). This indicates that the variables concerning with working environment have very strong interrelationships. Factor analysis identified 5 factors on working environment of the telecom companies of Bangladesh. The factors are training, goals of the company, flexible program, opportunity to interact with others, and supervision. These factors together explained 69.85% of the variance of the data set (Table 3). Training (22.79%) is the most important factor of working environment in telecom companies of Bangladesh. This can be attributed by the knowledge of the employees regarding the company and its culture. If the employees are well trained and educated they feel more comfortable and consequently it will have positive impact on the working environment of the company. The second important working environment factor is the strategies and goals of the company (18.23%) followed by flexible program (11.00%), opportunity to interact with others (9.49%), and supervision (8.36%).
Table 2 Factors Concerned with Psychological Contract of Telecom Employees in Bangladesh
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Factor loadings of the variables of working environment are shown Appendix 2. Table 3 Factors Concerned with Working Environment of the Telecom Companies in Bangladesh
Factor Initial Eigenvalues Total Training 2.959 Goals of the 2.371 company Flexible program 1.430 % of Variance 22.759 18.236 Extraction Sums of Squared Loadings Cumulative Total % of Cumulative % % 22.759 2.959 22.759 22.759 40.995 2.371 18.236 40.995 Rotation Sums of Squared Loadings Total % of Cumulative % 2.419 18.608 18.608 2.187 16.821 35.430
11.002
51.997
1.430
11.002
51.997
1.735
13.349
48.779
Opportunity 1.234 to interact with others Supervision 1.088
9.495
61.492
1.234
9.495
61.492
1.609
12.375
61.153
8.365
69.857
1.088
8.365
69.857
1.131
8.704
69.857
Extraction Method: Principal Component Analysis
3.3 Relationships between Working Environment and Psychological Contract After identifying the factors related to working environment and the psychological contract a Spearmans Rank Correlation analysis was run. The result shows that there are 4 significant correlations between the factors of working environment and the psychological contract (Table 4). For details of correlation matrix please see Appendix 3. Table 4 Significant Correlations between the Factors of Working Environment and Psychological Contract Psychological Contract Correlation 1 Correlation 2 Correlation 3 Correlation 4 Respect of individual differences Respect of individual differences Satisfaction with the recognitions as individual Satisfaction with the recognitions as individual Working Environment Goals and Strategies of the Company Supervision Training Goals and Strategies of the Company Correlation Coefficient -.500(**) .293 (*) -.456 (**) .259 (*)
* Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed).
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Table 4 shows that there is a significant correlation between respect of individual differences and the goals and strategies of the company. This relationship can be attributed by the company policy to do the business in the long run. If the executives find that the company is stable and consistent in its
Correlation 1
Respect of individual differences
Goals and Strategies of the Company
There is also a significant relationship between the respect of individual differences and the supervision style of the management. This indicates that the supervision style of the management has positive impact on the respect of individual differences in the telecom employees in Bangladesh. If the supervision style is autocratic, employees will have negative impact and will create chaos and confusion among the employees. Hence, the respect of the telecom employees is influenced by the supervision style of the management of the company. Correlation 2 Respect of individual differences Supervision
Satisfaction with the recognition as individual is significantly correlated with training and development situation of the organization. If the telecom executives are well trained they will be more satisfied with colleagues and that will consequently lead to increase respect of individual differences among the telecom employees in Bangladesh. The lower the training arrangement in the organization the lower the satisfaction of the employees will likely be. Correlation 3 Satisfaction with the recognitions as individual Training
There is also significant relationship between the satisfaction with the recognitions as individual and the goals and strategies of the company. This means that the companys proper goal and stability in its policy has strong correlations with the satisfaction of the executives of telecom employees in Bangladesh. Positive change in company goal and strategies will lead to positive change in the satisfaction level of the employees. Correlation 4 Satisfaction with the recognitions as Goals and Strategies of the individual Company
4. CONCLUSIONS AND RECOMMENDATIONS Factor analysis of the variables concerned with psychological contract identified 5 factors such as recommend company as career, company policy and procedures, respect of individual differences, satisfaction with the recognitions as individual, and value and encouraged perspective. Factor analysis on working environment also identified 5 factors such as training, goals of the company, flexible program, opportunity to interact with others, and supervision style of the company. The correlation analysis between the factors of psychological contract and the working environment shows 4 significant correlations. Factors relating to working environment including goals and strategies of the company, supervision style, and training are significantly correlated to psychological contract of the telecom employees. Goals and strategies of the company are correlated with the respect of individual differences and the satisfaction with the recognitions as individual. The reasons could be attributed by the consistency of the goals and strategies of the company. In Bangladesh, telecom companies are relatively new so that the individual respect and the satisfaction aspects are not addressed properly by the company. Hence, it is suggested that the company should be consistent with the policy and strategy regarding the growth and development of the company and the employment policy as well.
policy they will think of developing their career at that company and as a result their behavior will also be shaped. This will help to improve the respect of individual differences among the telecom employees. The unexpected change in goals and strategies of the company will lead to decrease the respect of individual differences among the telecom employees of Bangladesh.
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Supervision is another factor concerned with working environment that has significant correlation with the psychological contract of the telecom employees. Respect of individual differences is affected by the supervision style of the management of telecom employees in Bangladesh. As a very high growing sector, telecom companies, perhaps, are unable to give proper attention to the management and supervision aspect which is very important to improve the psychological contract of the employees. Satisfaction with the recognitions as individual is also significantly correlated to training and development programs of the organization. This means that the training and development programs of the companies have significant impact on the satisfaction levels of the telecom employees in Bangladesh. If the company has adequate training and development programs they will be more satisfied and thus will have positive impact on the relationship with their colleagues. The higher the training arrangement will have higher level of positive impact on the employee satisfaction of telecom employees in Bangladesh. REFERENCES 1. Arnold J. (1996). The Psychological Contract: A Concept in Need of Closer Scrutiny?. European Journal of Work and Organizational Psychology 5(4): 511-520. 2. Bell E.E. (2008). Exploring Employee Perception of the Work Environment Along Generational Lines. Performance Improvement 47(9) :35-45. 3. Gilbert T.F.(1996). Human Competence: Engineering Worthy Performance. Silver Spring, MD: ISPI/HRD Press. 4. Guest David E. (1998) .Is the psychological contract worth taking seriously? Journal of Organizational Behavior19: 649-664. 5. Herriot P., Pemberton C. (1995) .New Deals: The Revolution in Managerial Careers .Wiley: Chichester. 6. Kotter J.P. (1973). The psychological contract. California Management Review15: 91-99. 7. Olson D.M., Borman, W.C.(1989). More Evidence on Relationships between the Work Environment and Job Performance. Human Performance 2(2): 113-130. 8. Parks J. and Van Dyne L. (1995). An idiosyncratic measure of contracts. Paper presented at Academy of Management Meetings. Vancouver. August. 9. Patwardhan M., Bajpai N., Bhale S.M. (2008) Work Environment and Psychological Contract: A Comparative Study of Employees in the Public and Private Telecom Industry. International Association of Management and Business (IAMB), Conference Proceedings, San Diago, USA. 10. Pearce J. L. (1998).Review of Psychological Contracts in Organizations: Understanding Written and Unwritten Agreements. Administrative Science Quarterly 43: 184-188. 11. Robinson S.L., Kraatz M.S., Rousseau D.M. (1994). Changing Obligations and the Psychological Contract: A Longitudinal Study. Academy of Management Journal 37(1): 137-152. 12. Robinson D.G., Robinson J.C. (1996). Performance Consulting: Moving beyond Training. San Francisco: Berrett-Koehler. 13. Robinson S.L., Rousseau D. M. (1994).Violating the psychological contract: not the exception but the norm. Journal of Organizational Behavior 15: 245-259. 14. Robinson S.L. (1996). Trust and breach of the psychological contract, Administrative Science Quarterly 41:574-599. 15. Roehling M. (1996).The origins and early development of the psychological contract construct, Paper presented at Academy of management meetings. Cincinnati. 16. Rousseau, D. M. , Greller, M. M.(1994). Human resource practices: administrative contract makers. Human Resource Management 33(3): 385-401. 17. Rousseau D. M (1989).Psychological and implied contracts in organizations. Employee Responsibilities and Rights Journal 2: 121-139. 18. Rousseau Denise M., Tijoriwala Snehal A. (1998).Assessing psychological contracts: Issues,
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Appendices Appendix 1 Rotated Component Matrix (a) Relating to Psychological Contract Component 1 2 .084 .733 -.048 -.050 .008 -.642 -.211 .713 .881 .006 .933 -.001 .769 -.064 -.232 .070 -.134 -.164 .084 .161 -.575 .045 .447 -.537 .082 .500 -.286 .052 .413 .198 .143 .434
Company Policies and Procedure Respect of Individual Differences Employee Feel Secure About Job Good Job Attracting Team Member Job Choice in Another Company Recommend Company as Career Expected Work is Reasonable on Job Value and Encouraged Perspective Job Satisfaction Satisfaction with the Recognition as Individual Motivation by Company Success Clear Job Requirement Security Feeling Self Esteem Feeling Feeling of Self Fulfillment from the Job Feeling of Expertise a Rotation converged in 6 iterations.
3 .217 -.890 .235 .188 -.032 -.095 -.088 .120 -.350 -.097 -.229 .273 .188 .802 .581 .029
4 -.184 .049 -.294 -.302 .292 .079 -.362 -.013 .189 .884 .444 -.060 .182 -.013 -.233 -.656
5 .051 .204 .095 .107 -.199 -.156 -.267 .912 .837 .046 -.221 -.102 -.183 .094 -.010 -.233
Extraction Method: Principal Component Analysis.
Appendix 2 Rotated Component Matrix (a) Relating to Working Environment Factors 1 .127 -.482 .788 .333 .540 -.388 -.082 .007 .271 -.287 .835 .312 .201 2 -.049 .593 .092 -.128 -.159 .758 .270 -.120 .130 -.596 .046 .586 .635 3 .073 .451 -.042 -.569 .645 -.003 .758 -.061 -.125 -.354 -.022 -.189 .174 4 .814 -.151 .094 .245 .142 .034 .078 .864 .118 .178 .021 .045 -.180 5 -.006 -.157 .044 -.366 -.021 .100 -.169 .078 .827 -.092 .134 -.437 .153
Physical Working Environment Working in Company in Future Job Satisfaction Information About Work Cost Efficiency Goals and Strategies of the Company Flexible Program Opportunity to Interact with Others Supervision Encouragement Training Involvement in Decision Making Climate of Work Group
alternatives and measures. Journal of Organizational Behavior19: 679-695. 19. Schein, E.H. (1978). Career Dynamics: Matching Individuals and Organizational Needs. Addison-Wesley. Reading. MA.
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Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a Rotation converged in 11 iterations. Appendix 3 Correlations Matrix
Psychological Contract Working Environment Training Goals of the company Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N .182 .148 65 .128 .311 65 .021 .868 65 -.456(**) .000 65 -.182 .147 65 .070 .580 65 -.009 .946 65 -.500(**) .000 65 .259(*) .037 65 .187 .135 65 Flexible program -.123 .330 65 -.224 .073 65 -.055 .665 65 .232 .063 65 .159 .205 65 Opportunity to Supervision interact with others .052 .682 65 .167 .184 65 -.120 .341 65 .093 .463 65 .105 .404 65 -.179 .154 65 -.096 .445 65 .293(*) .018 65 .209 .095 65 .070 .581 65
Recommend company as career Company policy and procedures Respect of individual differences Satisfaction with the recognitions as individual Value and encouraged perspective
* Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed).
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Ahmed Shahriar Ferdous Senior Lecturer, School of Business, North South University, Bangladesh And Abdul Hannan Chowdhury Professor, School of Business, North South University, Bangladesh The papers aim is to develop and empirically test a conceptual model that investigates and synthesize the antecedents of firm (service provider)-customer relationship quality in the Bangladeshi mobile telecom sector. To test the theoretical model 630 customers subscribed to different mobile operators in Bangladesh were surveyed using multiple sampling methods. Structural equation modeling was applied to investigate the associations between the constructs in the model. The findings of the study reveal that of the different underpinnings of relationship marketing (RM) communication was the only underpinning having direct, nonetheless, negative impact on firm-customer relationship quality. Results further reflected that factors explaining dimensions namely in-deed, in-speech and personal trait are significant predictors of overall satisfaction, which in turn impacts the relationship quality. Keywords: Relationship quality, Relationship Marketing, Mobile Telecom Sector
20
ANTECEDENTS OF FIRM-CUSTOMER RELATIONSHIP QUALITY: THE BANGLADESHI EVIDENCE
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INTRODUCTION Relationship marketing has emerged over the years as an exciting area of marketing that focuses on building long-term relationships with customers and other parties. According to Berry (1995) relationship marketing (RM) is a strategy to attract, maintain and enhance customer relationships. Kavali et al. (1999) pointed out that relationship marketing is about healthy relationships characterized by trust, equity, and commitment. Other pioneering and scholarly studies (see, for example, Crosby et al., 1990; Morgan and Hunt, 1994; Wong and Sohal, 2002, Ndubisi, 2006) have documented the following constructs namely, trust, commitment, conflict handling and communication as key underpinnings of relationship marketing. Nonetheless, Chen et al., (2008) states that todays rapidly changing marketing environment is compelling service firms to seek more creative and flexible means for dealing with competition. Ndubisi (2007) further illustrated that only high quality firm customer relationship would deliver the needed competitive edge to gain privileged information about customers and thereby better understand their needs and serve them more satisfactorily than competition. According to Crosby et al. (1990) relationship quality (RQ) has been found to be the core of maintaining a healthy relationship between buyers and sellers. Relationship quality by different authors is explained as an overall assessment of the strength of a relationship, conceptualized as a composite or multidimensional construct capturing the different but related facets of a relationship (Crosby et al., 1990). Interestingly, majority of the studies that were carried out in the context of sales management and business to business relationship quality have attempted in operationalization of relationship quality in terms of satisfaction and trust. However, this is worrisome as Ndubisi (2007) and Wong and Sohal (2006) argued that in the context of firm (service provider)-customer quality in relationship the constructs satisfaction and trust are clearly antecedents to relationship quality. Even though few other related streams of researches have attempted to investigate the key determinants and underpinnings of firm-customer relationship quality, nonetheless, these studies have limitations of its own. For example, Wong and Sohal (2002) and Ndubisi (2004) came with limited number of relationship marketing underpinnings impacting the quality of relationship between firm and customers. Ndubisi (2006) study reflected on overall satisfaction as a mediating variable between underpinnings of relationship marketing (RM) (namely, trust, commitment, communication, conflict handling, service satisfaction and quality) and firm-customer relationship quality (RQ), however the study failed to show direct associations that may exist between the key determinants of relationship marketing and relationship quality. While Ndubisi (2007) study attempted to prove direct association between four primary underpinnings of relationship marketing namely trust, commitment, communication and conflict handling and firm-customer relationship quality in the Malaysian banking sector but the study had its limitation in terms of not exploring overall satisfaction as a mediating variable and not considering all the underpinnings of relationship marketing that may impact firm-customer relationship quality. Given the preceding discussion relating to the gaps and limitations that are existent in previous studies it immediately open the door for researchers to further investigate and empirically generalizing the key antecedents of relationship quality in the context of firm-customer relationships.
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Previous studies mostly have chosen the service sector to investigate the antecedents of relationship quality (Wong and Sohal, 2002; Ndubisi 2007; Chan et. al, 2008). Per se, the service industry is expanding rapidly throughout the whole world and the contribution of service sector towards economic activities is also increasing. This phenomenon is also true for Bangladesh. In recent times the mobile telecommunication industry (currently consisting of six mobile operators namely GrameenPhone, Aktel, Banglalink, CityCell, Teletalk and Warid) is one of the major contributors in terms of revenues, employments and infrastructure development. Bangladeshs phone sector witnessed a 120 percent growth from January 2006 till now, with the numbers of users rising to 22 million from 10.8 million in 13 months (Ratan et al., 2007) and expansion of mobile services in Bangladesh has contributed an additional US $650 Million to GDP and created nearly 240,000 high wage jobs (Bogle, 2006). According to Ratan et al. (2007) mobile operators in Bangladesh in recent time are gradually trying to gain competitive edge by offering innovative services and leveraging firm customer relationship quality. Consequently, based on existing relationship marketing and social psychology literatures (Crosby et al., 1990; Wong and Sohal, 2002; Grace 2005; Wong and Sohal, 2006; Ndubisi 2007) an integrated conceptual model (as shown in Figure 1) depicting the key antecedents of relationship quality is formulated and tested in the context of the Bangladeshi mobile telecom sector.
C omm itm ent H5a 1 Trust H5a 2 Service Satisfaction (H5a 1) Service Qu ality H5a 3 H1
H2
H5a 4 H5a 5
Overall Satisfaction
H6
Relations hip Qua lity
C ust omer D isposi tion H5a 6 C ommun ication
H3
H4 H5a 7
C onflict
Figure 1. Conceptual path model of the antecedents to firm-customer relationship quality
THE STUDY
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THEORETICAL BACKGROUND AND RESEARCH HYPOTHESES According to previous studies (Crosby et al., 1990; Dwyer et al., 1987; Ndubisi, 2006, Wong and Sohal, 2006) relationship quality is a higher order construct composed of the four primary relationship-marketing underpinnings namely commitment, trust, communication and conflict handling. Commitment is a factor that affects the level of relationship between a customer and an organization. Trust is also considered as a dimension that precedes relationship quality. It has been defined as a willingness to rely on an exchange partner in whom one has confidence (Ndubisi, 2006). Conflict handling is another important aspect of relationship marketing which according to Dwyer et al. (1987) refers to the suppliers ability to minimize the negative consequences of manifest and potential conflicts. Previous studies have articulated that the exchange of information is an important element of relationship marketing (Dwyer et al., 1987; Morgan and Hunt, 1994). Such exchange of information or better defined as Communication in relationship marketing refers to the ability to provide timely and trustworthy information. Subsequently it is logical to expect association between the four primary relationship-marketing underpinnings and overall relationship quality. This is further supported by the empirical evidences found in the studies carried out by Wong and Sohal (2006) and Ndubisi (2007). Wong and Sohal (2006) found significant association between trust, commitment, relationship strength and quality in the Australian retail environment. Ndubisi (2007) found direct and significant association between trust, conflict handling and relationship quality in the Malaysian banking sector. Empirical validity of the mentioned supposition discussed so far is sought in this paper within the proposed conceptual framework. Thus we propose that: H1. Commitment has significant positive impact on relationship quality H2. Trust has significant positive impact on relationship quality H3. Conflict handling has significant positive impact on relationship quality H4. Communication has significant positive impact on relationship quality Customer satisfaction is generally described as the full meeting of ones expectations. Nowadays the expectations from a product or service, incorporates both and this is very much suitable for Telecom companies where interaction with the customers is essential. In addition to expectations towards the core services, customers are probable to have expectations towards the service providers regarding their communication, commitment, conflict handling and trust. Further, prior studies (Ndubisi and Chan, 2005 and Ndubisi, 2006) have also revealed that service providers can impact relationship quality by satisfying them in deed comprising of elements such as commitment, trust and conflict handling and in speech comprising of the relationship marketing underpinning communication. Therefore, in view of the literature, the following hypotheses are proposed: H5a1: Commitment is a significant indicator of overall satisfaction H5a2: Trust is a significant indicator of overall satisfaction H5a6: Communication is a significant indicator of overall satisfaction H5a7: Conflict Handling is a significant predictor of overall satisfaction In addition, Ndubisi (2006) relationship quality antecedent model revealed that service quality and service satisfaction are also elements of the behavioral (in-deed) dimension that guides to overall satisfaction with the services provided by Malaysian Banks. Grace (2005) defined consumer
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H5a3: Service Satisfaction is a significant indicator of overall satisfaction H5a2: Service Quality is a significant indicator of overall satisfaction H5a6: Consumer Disposition toward Satisfaction (personal trait) is a significant indicator of overall satisfaction H6: Overall customer satisfaction has significant positive impact on relationship quality
METHOD Sample and data collection procedure Although the sample frame was the entire Bangladeshi mobile phone users, the sample of customer responses was drawn from Dhaka, the capital city of Bangladesh. The city was divided into major residential areas such as Banani, Gulshan, Uttara, Mohammadpur, Mirpur and Farmgate. From each of the major residential areas a neighborhood shopping centre having, at least one mobile service shop was chosen as the interview site. Then, a mall intercept survey method was utilized by four research assistants recruited from a private university. The interview was conducted at different times of the day for duration of 15 days to every 2nd person (above 18years and active subscriber of any one of the mobile operating company) until the 250th interview was completed in each of the selected shopping centers. Among all collected data set of 700 respondents, 630 were found satisfactory for data analysis. The sample consisted of 59.4 percent male and 40.6 percent female respondents. The sample comprised of different professional people including 15.1 percent students, 11.7 percent housewives, 55.9 percent employed in different jobs from the private service sector, 6.8 percent government employees and 10.5 percent businessmen. In terms of contractual agreement/relationship with the operators 66.3 percent of the respondents were pre-paid users and the rest 33.7 percent post paid subscribers. Measurement Instrument A quantitative survey comprising of 41 items was administrated in order to empirically investigate the hypotheses that were developed within the conceptual meta-model representing the antecedents of relationship quality. The questionnaire items for the sub constructs communication, conflict handling, trust, commitment, communication, service satisfaction and quality were adapted basically from the study conducted by Ndubisi (2006), Wong and Sohal (2006) and Ndubisi (2007) in the Malaysian banking sector. As far as the relationship quality construct was concerned it was derived from Wong and Sohal (2006) study. Items relating to consumer disposition towards satisfaction (CDS) was
disposition toward satisfaction (CDS) as the consumers general tendency to be sufficiently satisfied with the purchase and consumption of the goods and services they utilize. Further Grace (2005) reflected that CDS is not another expression of customer satisfaction, but rather it represents an individual consumer characteristic, thus exerting influence on the consumers cognitive and emotive reactions (customer satisfaction). CDS further gives insights into why some customers are easily satisfied while others are not (Grace, 2005). Therefore, beyond the total offerings dimension of service providers in terms of in-deed and in-speech perspective there is a necessity to explore if another dimension in the form of consumers personal trait/disposition impacts overall satisfaction.
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adapted from Grace (2005) study. Some of the wordings were changed in the adapted items so that the constructs were relevant to the mobile telecommunication sector. All items were measured on a five point likert type scale with 5= strongly agree and 1= strongly disagree. The questionnaire also included various socio-demographic questions. ANALYSIS AND RESULTS Modeling and hypothesis testin A confirmatory factor (CFA) analysis using AMOS 7 software was carried out on the overall model (i.e. the structural equation modeling) to test the hypothesis developed based on the conceptual analytical framework of the antecedents of relationship quality (Nguyen, 2007). The structural equation model was treated as shown in Figure 2 using the maximum likelihood method (ML) as the results of MLE correspond to events that are likely to happen based on the observed variancecovariance matrix. Further, in order to retain complexity and enhance the robustness of the overall model fit, a partial disaggregation technique was adopted to explain the various underpinnings of relationship marketing impacting the higher order constructs namely overall satisfaction, which in turn effect relationship quality (Wong and Merrilees, 2007; Ferdous and Towfique, 2008). Consequently, in order to accomplish the partial disaggregation items related to the different first order latent factors of the second order construct overall satisfaction and relationship marketing was randomly aggregated so that two combined indicators instead of several items/indictors explained the first order latent variables considered in the study. Relationship quality was taken as the observed variable in the structural model and three items explaining the construct firm customer relationship quality was aggregated by averaging of scores into a composite relationship quality score. The structural equation modeling results indicate that the meta-model has good fit to the data, with GFI=0.944, AGFI= 0.916, TLI= 0.934, CFI=0.950, RMR=0.037 and RMSEA=0.061. The chisquare value was 263.07 with 79 degrees of freedom and p less than 0.01. However, as the sample size becomes more than 200, the chi-square test becomes sensitive and its significance test is less reliable (Hair et al., 1998; Wong and Merrilees, 2007) Considering, the complexity of the model and the sample size of 630 (N>200) in our study and all other fit index showing acceptability values, the structural model shows good fit of the data (Hair et al. 1998, Wong and Merrilees, 2007; Ferdous and Towfique, 2008). Table 1 shows the unstandarized path estimates, critical ratio (standard error) and p values of the relationship quality model. Overall satisfaction accounted for 53.7 percent variance in explaining firm customer relationship quality. All the path (unstandardized) estimates as shown in Table 1 have critical ratios (equivalent to t values) over acceptable value of 1.96 (Hair et al., 1998, Nguyen, 2007). As predicted by hypotheses H5a1, H5a2, H5a3, H5a4, H5a5, H5a6, H5a7 and H6 the first order latent variables namely communication, trust, commitment, conflict handling, consumer disposition, service satisfaction and quality are all significant predictors of the second order construct overall satisfaction, which in turn significantly and effects relationship quality (H6). Communication (H4) was the only construct which showed direct but negative significant association with firm-customer relationship quality in the Bangladeshi mobile telecom sector.
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Hypotheses H1 H2 H3 H4 H5a1 H5a2 H5a3 H5a4 H5a5 H5a6 H5a7 H6 Commitment Relationship Quality Trust Relationship Quality Communication Relationship Quality Conflict Handling Relationship Quality Commitment Overall Satisfaction Trust Overall Satisfaction Service Satisfaction Overall Satisfaction Service Quality Overall Satisfaction Consumer Disposition Overall Satisfaction Communication Overall Satisfaction Conflict Handling Overall Satisfaction Satisfaction Relationship Quality
Estimate 0.336 0.336 -0.436 -1.011 1.076 1.344 0.781 1.319 0.448 0.772 1.028 1.791
C.R. 1.864 0.934 -4.269 -1.232 9.916 13.641 13.452 13.452 4.833 8.784 11.113 3.017
p-value 0.062 0.348 0.000 0.218 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.003
Table1. Unstandardized structural paths for the proposed meta-model
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e22
e3
CMT1 .76
.90
.38
Commitment
e23
e4
CMT2 .86
e5
TRS1 .81
.70
Trust
.62 e13
.69
e6
TRS2 .69 .93
.09 .18
e2
SS1 .86
Service Satisfaction
e16
e1 e7
SS2 .66 .82 .78
.83 e26 .54 .88
QL1
Service Quality
e18
Overall Satisfaction
.65
e8
e11
Ql2 .93 .86
Relationship Quality
CDS1 .23
.81
CDS
.60
-.21
e12
CDS2
e24
.64 .36
-.06
e9
COM1 .68
.87
Communication
e10
COM2
e25
e19
CNF1 .86
.53
.41
conflict
e20
CNF2
Figure 2. The structural equations model DISCUSSION AND MANAGERIAL IMPLICATIONS A study investigating and synthesizing the antecedents of relationship quality between firms (service providers) and customer has not been carried out in-depth so far especially in the context mobile telecom sector and in emerging and/or developing economies. Consequently, this paper adds to the dearth of studies on firm-customer relationship quality. The path results from the partially disaggregated structural equation modeling revealed that all the underpinnings of relationship marketing and consumer trait considered in this study are significant predictors of overall satisfaction, which in turn positively affect relationship quality in the mobile telecom sector of Bangladesh. The only direct and significant association was found between communication and relationship quality. Even though communication has significant impact on relationship quality but from a practical point of view organizations should emphasize on first satisfying customers and then turn customer satisfaction into positive relationship quality.
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Results from the Univariate analysis revealed that there were no significant differences in relationship quality with respect to all demographics under investigation namely gender, age, education, occupation, location and user status.
LIMITATIONS AND FUTURE RESEARCH DIRECTION The results of this study need to be viewed in light of its limitations. First, the proposed conceptual model was tested only in the mobile telecommunication sector of Bangladesh, an LDC. Thus findings cannot be generalized to all other service sectors and under various economies. Therefore, it is necessary for testing the model in other services sectors and in other countries belonging to different economies. Second, the study only tested for the antecedents of relationship quality. Future studies should also focus on the consequences of relationship quality such as purchase intention, loyalty etc so that it gives researchers and practitioners a meta-analytic view of the antecedents and consequences of relationship quality.
This study has provided some important managerial implications for marketing practitioners to better understand and manage customer relationships especially in the mobile telecommunication sector. A key implication for mobile industry is operators should emphasis on building trust, keeping promise, resolving conflicts, maintain quality performance (in-deed) and communicate with an outside in approach (in-speech) so that consumers are satisfied with the operators services. Such strategic approach according to the findings of this study should in turn help the mobile operators/ service providers to strengthen the quality of relationship with the subscribers/consumers. Further, it is also necessary for service organizations to realize that consumer satisfaction will vary depending on their individual trait or disposition toward satisfaction (personal trait). Hence mobile operators need to tailor made their service offer as much as possible so that ultimately it affects the expressed satisfaction level of consumers, which in turn positively impacts relationship quality.
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References Berry, L. L. (1995). Relationship Marketing of Services-Growing Interest, Emerging Perspectives. Journal of the Academy of Marketing Science 23(4): 236-245. Chen, X. H., Shi, X., and Dong, D.H. (2008). An Empirical Study of Relationship Quality in a Service Setting: A Chinese Case Study. Marketing Intelligence and Planning, 26(1):11-25. Crosby, L., Evans, K., and Cowles, D. (1990). Relationship Quality in Services Selling: An Interpersonal Influence Perspective. Journal of Marketing 54(3): 68-81. Dwyer, F.R., Schurr, P.H. and Oh, S. (1987). Developing Buyer-Seller Relationships. Journal of Marketing 51(2): 11-27. Ferdous, A.S. and Towfique, B. (2008). Consumer Sentiment towards Marketing in Bangladesh: the Relationship between Attitudes to Marketing, Satisfaction and Regulation. Marketing Intelligence and Planning 26(5): 481-495. Grace, D. (2005). Consumer Disposition towards Satisfaction (CDS): Scale Development and Validation. Journal of Marketing Theory and Practice 13(2): 20-31. Hair, J.F.J., Anderson, R.E., Tatham, R.L. and Black, W.C. (1998). Multivariate Data Analysis, (5th Eds). Prentice-Hall, Upper Saddle River, NJ. Morgan, R. M. and Hunt, S. D. (1994). The CommitmentTrust Theory of Relationship Marketing. Journal of Marketing 58(3): 20-38. Ndubisi, N.O. (2004). Understanding the Salience of Cultural Dimensions on Relationship Marketing, its Underpinnings and Aftermaths. Cross Cultural Management 11(3): 70-89. Ndubisi, N. O. and Chan, W.K. (2005). Factorial and Discriminant Analyses of the Underpinnings of Relationship Marketing and Customer satisfaction. International Journal of Bank Marketing 23 (7): 542-557. Ndubisi, N.O. (2006). A Structural Equation Modeling of the Antecedents of Relationship Quality in the Malaysia banking sector. Journal of Financial Services Marketing 11: 131141. Ndubisi, N.O. (2007). Relationship quality antecedents: the Malaysian retail banking perspective. International Journal of Quality & Reliability Management 24(8): 829-845. Nguyen, T.D. (2007). Factors affecting the utilization of the internet by internationalizing firms in transition markets: Evidence from Vietnam. Marketing Intelligence & Planning 25 (4): 360-376. Palmatier, R.W., Dant, R.P., Grewal, D., and Evans, K.R. (2006). Factors Influencing the Effectiveness of Relationship Marketing: A Meta-Analysis. Journal of Marketing 70 (4): 136153. Ratan, S.A, Alam, S.M. and Sohel, Z. A. (2007). Innovation Strategy: A Realistic Example in Bangladesh Mobile Telecommunication Service Marketing. Cost and Management 35(1): 49-58. Wong, A., and Sohal, A. (2002). An Examination of the Relationship between Trust, Commitment and Relationship Quality. International Journal of Retail & Distribution Management 30(1): pp 34-50. Wong, A. and Sohal, A. (2006). Understanding the Quality of Relationship in Customer Services: A Study in a Retail Environment. International Journal of Quality and Reliability 23 (2): 244-264 Wong, H.Y. and Merrilees, B. (2007). Multiple Roles for Branding in International Marketing. International Marketing Review 24(4): 384-408.
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Sonam Chuki, Lecturer Royal Institute of Management Simtokha : Thimphu Bhutan This article is about gender stereotypes in organizations in Bhutan. It argues that gender bias against women is constructed on gender stereotype which is associated with mainstream psycho social process greatly determined by the age old Buddhist-Hindu socio-cultural norms. These norms are deeply ingrained in the societys sub conscience. As a result, the process of change concerning existing stereotype is very slow. The past research on gender and this study confirm that socio-cultural barrier is the critical factor to overcome stereotypes constructed on gender lines. Despite the positive impact of modern western education on the general populations thinking, the predominant patriarchal society has left women behind in decision-making and leadership roles in public, corporate, private, judiciary, legislative and local government bodies in the country. Bhutan does not have any gender discrimination policy, but the women constituting more than half of our population is left behind in the development process. The article concludes that the gender stereotype determines the organizations culture in the form of practices and procedures which derails womens upper mobility in the organizations. Secondary data sources and literature review are methods used for writing. Key Words: Gender, Stereotypes, Organization and Socio-Cultural Introduction In Bhutan, there is no overt gender discrimination in terms of state supported gender discrimination like the former Taliban regime in Afghanistan. In principle, men and women enjoy equal opportunities in every sphere of life. Ever since Bhutan embarked on modern development in 1961, the boys and girls were equally included in the state policies of education, health care, job prospects, social security schemes, wages30 and other benefits. However, prior to modern development Bhutanese societys livelihood largely depended on subsistence agriculture. This demanded a high degree of physical labour. Therefore, the individual families and the society preferred son to daughter. In addition, the monastic education system mainly catered for the boys than the girls. There was a belief that girls will not be able to learn the dharma (Bum gi choe me yong). The few existing nunneries were inadequate. Traditional education left the girls behind.31 Moreover, when the modern education started girls could not avail education like the boys. Women were perceived as biologically less strong and sexually more vulnerable. These have highly
30 The male and female receive equal wages in most of the public, corporate, private and Non-Governmental Organizations. These sectors demand intellectual labour. In the agriculture and in the area where the manual labour is sold, female receive less wages than male. 31 The latest education statistics published by the Ministry of Education states that there are 6930 boys and 75 girls enrolled in monastic schools administered by the Central Monk Body. There are only 3 nunneries out of 388 monastic schools (Ministry of Education 2008: 49-50).
21 Gender in Bhutanese Organizations: Is the Stereotype Changing?
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influenced their position in terms of access to education and employment opportunities. Womens own perception of themselves in Bhutan seems to be based on these two factors, which are viewed as their limitations (Convention on Elimination of all forms of Discrimination Against Women (CEDAW Report on Bhutan: 10). Therefore, the families saw the girls to be weak and vulnerable and therefore risky for travel. In the early days of modernization, the situation demanded the girls to travel to India as there were no education facilities in the country. This involved several days of long travel on foot to the nearest road head located near the border towns. Even when a few schools were established within the country, this entailed long walks over harsh mountainous terrain and hindered the girls from going to schools. The parents meant to protect them by not sending them to the schools. In addition, the girls were expected to care for the children and the elderly and carry out the household chores. As a result, girls and women joined the mainstream development late in time. Womens under representation in public domains therefore, can be attributed to the significant gender gap that existed in education about 40 years ago. The traditional agrarian society found women less capable compared to men. There was a presence of subtle socio-cultural gender bias against women in the society which constructed the gender stereotypes. These gender stereotypes were greatly determined by the age old Buddhist-Hindu socio-cultural norms. The introduction of modern western education has positively influenced the general populations thinking and behavior to a certain degree. This is particularly true for the emerging educated middle class living in urban Bhutan. But, the process of positive change is very slow as it involves human psychology. The socio-cultural norms still overrule modern notion of being independent and non superstitious. The gender studies on Bhutan indicated socio-cultural barrier as the critical factor to overcome stereotypes. The CEDAW Report on Bhutan, for example, states that the biggest challenge in Bhutan is the eradication of the more subdued and indirect forms of gender bias encountered at home and in the workplaces ( ibid.: 10). Despite the alternative development philosophy of Gross National Happiness (GNH) attempting to address gender equality, the deeply rooted socio-cultural beliefs perceive women as less capable and confident than men (Royal Government of Bhutan 2001: 5). Therefore, these stereotypes are ingrained in our societys sub conscience. These age old stereotypes, constructed on gender lines have negatively affected women and gave birth to a patriarchal society. This has left women behind in leadership and decision-making roles in public, corporate, private and political organizations in the country. As mentioned earlier, Bhutan does not have any gender discrimination policy but women appear to be left behind in the development process. With 57 percent, women constitute more than half of our population (Kuensel 2009: 5). This means they are potential human resource for our economy. In addition, we are a GNH state striving to meet individual happiness, which will ultimately build national happiness. This can be applied to South Asia and beyond. What is the Cultural Stereotype? Cultural stereotype refers to standard conventional norms based on social and cultural perceptions of a society. Such norms are often fixed in a wrong way concerning views and perceptions of things and people. Krueger defines it as an expression of personal beliefs about the characteristic of group or as beliefs about the predominant cultural view of a group.32 For the present purpose, it is defined as age old socio-cultural values, principles and beliefs predominantly prevalent in Bhutanese society.
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Amongst the Buddhist community, there is a common belief that men are greater than women by
32 Personal beliefs and cultural stereotypes about racial characteristics , retrieved the Abstract from http://cat.inist. fr/?aModele=afficheN&cpsidt=3222052
Buddhism is in itself is a mind taming and healing path based on logic and rational thinking. It does not discriminate women. In fact, most of Buddhist teachers state that both men and women possess the inherent Buddha nature and therefore have the potential to achieve enlightenment. The Mahayana tradition of Buddhism state that women are more intelligent than the men (Bu mae sherab kyi rang shen) ..female has more tendency, stronger tendency to be a good person, enlightened being because women have sharper wisdom, we men are mostly stupid, quite dumb actually, even though we do not like to be told that, we like to dominate but this is egoistic language. The actual fact, at least to me, is that the women are greater than men in this world in terms of developing the wisdom, doing good things to the society and helping the family. I dont believe that male and female have any difference in terms of approaching spiritual practice. Female and male both can achieve enlightenment equally (Teachings of His Eminence Gyalwang Drukpa Rimpoche).33 But in practice, the Buddhist culture bars women from entering the inner sanctum-the goenkhang of the monastery. There is an inherent belief that women are impure. Also in Hinduism, although there are three main goddesses, the society is largely patriarchal in nature. Both Hindus and Buddhist regard menstruating women and girls impure and prevent them from entering the shrine room and the kitchen. In some extreme cases, menstruating women and girls are made to live outside homes in some make shift places till they finish their period. This is particularly true amongst the Hindus. Some renowned Buddhist teachers and scholars express that the most important thing is taming ones mind and such views originate from the mind. There is no such thing as impure (His Eminence Dzongsar Khyentse Rimpoche and Dr. Karma Phuntsho).34 The society has defined roles for men and women and how they must behave. Often these roles are gendered in nature and some of them have derogative connotation. In Buddhist communities, women are not allowed to plough fields for the fear that the ox will not be reborn as a human being (Lang melu methop). Women ploughing field also has a bad connotation in terms of sending negative message that the particular family has lost all the men (Pho rap chey dha nu). The rural people believe that even the oxen will cry to see women ploughing the fields. The Hindus and Buddhist perceive that women are weak and sexually vulnerable (Da rang gi lue lu yoe) meaning the enemy is within your body. Even capable women are compared to be like man implying that men are capable and women are not. Hence, men are looked up to as bread earners and women as receivers. This means that men participate in public life and womens participation is limited only within the
33 CD recorded teachings of His Eminence Gyalwang Drukpa Rimpoche entitled Voices of Palden Drukpa. 34 Teaching of His Eminence Dzongsar Khyentse Rimpoche at the Deer Park Centre of Art and Contemplation, Thimphu and Talk by Dr. Karma Phuntsho at Royal Institute of Management in 2008.
nine noble births (Pho dha mo gi bana kerab ghu yoe). Also, a common proverb- Zama bue me mena phung me literally states that if there is no women there will be no problems. Unmarried women are derogatively referred to as morem literally meaning alone. But it often has a negative connotation. The chairperson of the Public Accounts Committee (PAC) of the National Assembly in 2006, for instance, used the phrase Amsu morem no ni mep literally meaning, unmarried stupid woman to describe the governments unsatisfactory work (CF Dorji and Yanzom 2006: 18). The conservative Hindu communities think that single women are witch (boxie). A baby girls used clothes are not given to the baby boy born after the girl for the fear that it will bring bad luck for the boy. The people often have such strong beliefs in the society. These beliefs portray women to be evil. Kunzang Choden in The Circle of Karma reveals some of the Bhutanese socio-cultural nuances in relation with gender stereotype. This is poignantly expressed through the protagonist Tsomo stating Yes, we are women, Tsomo. We are different. We must be less ambitious and more subdued (Choden 2005: 20-23 & 85, 92, 93).
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four walls are of their homes. By virtue of participation in public life, men involve in leadership and decision-making roles. Women make decision concerning house hold management. These primarily constitute of domestic chores and care for the children and the elderly but it is not recognized as productive work in the eyes of the society. The social and cultural norms are important symbols of the society and determine the peoples livelihood, lifestyle and perceptions. Gender in Organizations It is essential to define the notion of gender before I present the discussion on gender in organizations. Most literature on gender states that the concept of gender is socially constructed and therefore culture specific. It is dynamic in nature and can evolve with change in time (CF Lueptow et al 1995: 509-510 & CEPDA/ Gender and Development). This implies that gender is not a static concept and that it must be seen in relation with the cultural context. Culture is not universal either and differs from place to place. Hence an organizations culture invariable also differs from one to another. Therefore, the notion of gender needs to be discussed in light of various organizations. This leads us to understanding the concept of organization culture. Schwartz and Davis define culture as.. a pattern of beliefs and expectations shared by the organizations members. These beliefs and expectations produce norms that powerfully shape the behaviour of individuals and groups in the organization. Denison refers to it as the underlying values, beliefs, and principles that serve as foundation for an organizations management system as well as the set of management practices and behaviours that both exemplify and reinforce those basic principles (CF Brown 1995 : 6 and 7). This shows that organization culture consists of shared beliefs, values, principles and expectations of the members of the organization, which influence the individual and group behaviour in the organizations. This means the organizations culture contributes to the well set practices and procedures in the organizations. Often the established practices have a strong relation with gender stereotypes. Heilman argues that gender bias originating from gender stereotypes has inhibited women from climbing the upper rungs of organizations. She states that deficit theories assume women to be deficient in the characteristics necessary to fulfill traditional male roles. Hence, gender stereotypes contribute to the discriminatory treatment of women in work places. .. gender stereotypes are foundation of gender bias in work settings and the root cause of the discriminatory treatment of women in organizations, which limits their upward mobility. Moreover she mentions that this is negatively reinforced by the stereotyped notion of what women are like- prescriptive and how they should behave- descriptive. According to her, this determines womens devaluating performance, non recognition of their successes and even penalization for being competent. Gender stereotypes, it appears, can derail even the most competent womens ascent to the top. She suggests that only by understanding the psychological processes in terms of how others in the work places react to women and by identifying some key organizational practices and procedures that encourage biased evaluation may contribute to make the work place friendlier for career women (Heilman 2001: 657, 658 &671). Acker shares similar thinking and mentions that the gendered structure of organizations in the form of practices and policies perpetuate unequal power, rewards and opportunities. She states that the gendering of organization contributes to the performance assessment based on gender stereotype and not on individual merit and can create gender division of labour, male dominance and less opportunity for women. She explains that the gender division of labour between caring and providing (Leira 1994) is continually recreated in activities and actions of the most powerful organizations either by default or through intentional policy create caring needs as peripheral, invisible and someone elses (womens) responsibilities (Acker 1999: 196,197, 201 & 202). Using this theory, I would like to argue that Bhutans public, corporate and private organizations
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A recent research conducted on gender disparity in employment and career advancement opportunities has proven that gender disparity exists in Bhutanese organizations. The 10 years of employment data from 1996- 2005 in the civil service showed that there is a gender gap of about 50 percent. Most of the service based organizations like the banking sector showed gender gap in employment. This is found to be directly related with promotion and training opportunities in terms of only a few women availing the career advancement opportunities. The study has pointed a high degree of disparity in recruitment and training opportunities. Most of the male respondents perceive that there is an equal opportunity in training and promotions but a significant number of female respondents expressed that it does not exist. The gender gap of male and female who availed ex-country training from 1996-2002 is found to vary in between 5:1 to 7:1. From 2003 till 2005, the gap was consistently recorded at 4:1. This means that for every four male employees, one female employee is trained simultaneously. This also means that professional development opportunity for women is much lesser than that of men (Chozom 2006: 14, 16, and 22). The latest statistical information from public, corporate and private organizations also indicate that there is a gender gap in these organizations. The 2007s National Labour Force Survey states that female unemployment is 3.9 percent to that of 3.5 percent for male (CF Bhutan Times).35 According to the latest civil service statistic (30 June 2008), women constitute only 29.53 percent of the 19,516 total civil servants. The men have a lions share of 70.47 percent (civil service statistics).36 Also, most of the women hold support positions and not managerial posts. The 2006 civil service statistic by gender shows that there were a total of 5161 women below grade 8 and only 1103 in grade 8 and above. Grade 8 is the upper limit for managers position (Number of civil servants by gender)37. This implies that the Bhutanese bureaucracy is highly masculinized. The corporate and private sectors have only 22 percent as women employees (CF Chozom 2006: 5). In addition, the recent The National Plan of Action for Gender 2008-2013 published by the National Commission for Women and Children (NCWC) states that women occupy only about 5 percent of executive and policy making job. It is mentioned that in 2008, there were 24 women lecturers for every 100 men lecturers at the university level and women comprised 39 percent of teachers in primary and secondary schools.38 The NCWCs national gender report also states that men hold significantly higher employment in urban areas with 76.8 percent as compared to women with 41.5 percent. Instead, about 72 percent of women are still said to be taking up agriculture as the chief livelihood. And only about 55.7 percent of men are involved in agriculture. Moreover, the unemployment rate is higher among women in urban areas with 9.5 percent and men with 5.3 percent. In relation to this, it is mentioned that a majority of widowed population are women and they needed care as they are left out of the male dominated pension holders. A high number of women are also found to be suffering from depression, anxiety and psychosis.39
35 Retrieved the article from Bhutan Times online website http://www.bhutantimes.bt/index.php?option=com_content&task=view&id =1066&Itemid=1 36 Retrieved the information from online website http://www.rcsc.gov.bt/tmpFolder/summary1.htm 37 Retrieved the information from online website http;//www.rcsc.gov.bt/tmpFolders/5-1Page.htm 38 Woman in Mans wake, reveals study Kuensel, Saturday February 21, 2009 Vol.24 No.15, pages 1 and 3 39 ibid
culture are greatly influenced by the gender stereotypes that work against women. Most of the stereotypes are based on the age old beliefs and values that I presented earlier. This has negatively contributed to gender disparity at work. Gender disparity in work places has a strong connection with the socio-cultural stereotypes for it determines the individuals choice of employment.
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According to Bhutan Times story Men still on top, the Bhutanese work places prefer men over women. The study was actually carried out by the Ministry of Labour and Human resources. The Labour Minister is quoted to have commented that nature of work in an organization determines whether a woman is employed in the organization or not. We cant ask a woman to do physical work The minister is said to have mentioned that the earlier courses offered in vocational training institutes involved intense physical labour and as a result many girls dropped out. It is reported that more girls are now completing the courses as it entails less physically demanding curriculum (CF Bhutan Times ).40 It has been attributed to womens inability to provide the job stability that the employers seek due to their child bearing and rearing responsibilities. Most employers in the public and private sectors feel that there is no gender bias. The Chief Executive Officer (CEO) and proprietors of big business houses in the country are of the view that gender is not an issue and that both male and female job seekers are given equal opportunity based on their ability. But they mentioned that single women want to live close to their families and decline remote job postings. This implies that womens families restrict work places on them. This could mean that women are still perceived as weak and vulnerable. The maternity leave is also seen as a hindrance for female job seekers. This is because when the female employees avail maternity leave, there is a need to hire replacements to fill in the gap. In the words of a companys proprietor: The maternity leave issue is a major deterrent for prospective employers but added that she is completely satisfied with the performance of her women employees. This shows that womens reproductive role is perceived as a threat to the organizations. This means that the organizations are gender blind and the managers construct employment policies and practices on gendered lines and not on the basis of meritocracy. The organizations employment rules appear not to provide maternity leave and related flexible working time. The Executive Director of the NCWC thinks that the preference and remuneration must be given on the basis of performance and not gender.41 On the contrary, past research shows that even the principle of merit has contributed to womens slow progress in organizations. Anisworth et als research on the Australias equal employment opportunity (EEO) legislation and affirmative action program to the Equal Opportunity for Women in the Work Place Agency (EOWA) Act found out that during 1990 and 2004 little had changed in management accounts of affirmative action. It is mentioned that after initially denying that gender was relevant or significant in organization reality, managers reconstructed versions of gendered difference to explain the lack of progress in the representation of women in male dominated occupations. The 1990s report indicated that the women were deficit and lacked ambition, interest, initiative, knowledge and skills related with career advancement. Since the affirmative action was based on principle of merit, this discursive construction of women implied that they lacked merit. This provided the managers and organizations with an excuse to avoid responsibility for equal employment opportunity (CF Anisworth et al 2005: 565, 566& 572) But the 2004s report showed that women were ambitious, full time employees, highly visible, whitecollared, professional and career-oriented managers, who were in the process of having children. These traits certainly indicated merit. However, their active need for a flexible working time and maternity leave are perceived as hindrance as they create risk and complexity for the organization
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40 Retrieved the article from Bhutan Times online website http://www.bhutantimes.bt/index.php?option=com_content&task=view&id =1066&Itemid=1 41 Retrieved the article from Bhutan Times online website http://www.bhutantimes.bt/index.php?option=com_content&task=view&id =1066&Itemid=1
The Changing Nature of the Gender Context There is growing change of thinking in terms of the people becoming more aware and sensitive about gender. The Bhutanese state was attempting to remain gender sensitive starting the early 1980s. The National Womens Association of Bhutan (NWAB) was established in 1981 to protect and improve the socio-economic lives of the women (CF Dorji and Yanzom 2006: 1). NWAB is a state supported Non Governmental Organization (NGO) under the patronage of Her Royal Highness (HRH) the Princess Sonam Choden Wangchuck, eldest sister of the fourth king. Bhutan signed the Convention on Discrimination against Women and the Child Rights. Gradually, in 2004, another NGO Respect Educate Nurture Empower Women (RENEW) was established. It works under the presidentship of Her Majesty, the Queen Mother Ashi Sangay Choden Wangchuck. RENEWs main goal is to create a better understanding of gender equality at different levels of the society and to nurture the future roles of Bhutanese women. In addition, a state agency mandated to work for women and children, the NCWC was created in 2004. Its chief aim is to protect the rights of women and children. Each government agency has a gender focal person who works with the NCWC. A Women and Children Unit was also introduced in the Royal Bhutan Police working closely with NCWC. Furthermore, there is a trend of women opting for the traditional male dominated jobs. In recent years, women have joined in as officers and constables in Royal Bhutan Police, as taxi drivers, parking fee collectors, fuel and gas station helpers, professional security guards and archery players etc ( Kuensel 2009: 2). Women were also elected as Chimi (the peoples representatives in the National Assembly) until 2007 and in the parliament following the introduction of democracy in the country. Currently, out of 72 parliamentarians there are 10 women in the parliament. The judiciary also recruited women lawyers and promoted a few women as judges. Usually, men dominated as judges in the sub-districts and districts court including the high court. Moreover, there is growing trend of professional woman remaining single in urban Bhutan. They are fully independent and have chosen to lead their lives all on their own. This is something, their grandmothers and mothers could not do some 30-40 years ago. This category of woman are the achievers, college educated, professional and ambitious. They seem to have it all- professional, respect, money and a modicum of power. They are the New Age Women according to Kuensel (Kuensel 2008: 1). But this new age woman is not bereft of cultural stereotypes. As stated before, the society perceives unmarried and independent women through questioning glasses as if something is wrong with them. Therefore, the way forward appears challenging. There are no women ministers. Most of the senior management positions in the public and corporate sectors are occupied by the men. There is only a single woman secretary in the government. There has not been a break through even in the local government units. The men hold the elected local leaders positions in the local government office. There is not a single woman as district governor in any of the 20 districts. When the 20 years of decentralization in the country was reviewed in 2000, it suggested the need to have women governors. However, some of the heads of the blocks -the lowest unit of local government body expressed their apprehension stating that they will not be able to bow to woman (morem lu gagi chag wang phap ni).42 Only one woman is working as an
42 I was one of the core members of the Decentralization Review Committee in March 2000. Our work entailed interviewing the district governors, elected members of the District Development and Block Development Committees and the district officials in the selected blocks and districts.
(CF Anisworth et al 2005: 572). The researchers conclude that managers rely heavily on gender blind or gender neutral employment policies and merit-based opportunities when seeking to explain EEO. This implies that gender blind, merit- based constructions of EEO hide the more complex and problematic issues underpinnings womens slow progress in organizations (ibid.: 573).
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elected head of a block- out of 205 blocks. It seems that her husband provides assistance while she discharges her duties. Till date, only one woman is holding one of the 3 constitutional positions. But the education sector has seen some positive change in the form of higher girls net enrolment in schools, with 89 percent compared to 87 percent for boys in 2008. In 2008s Bhutan Certificate of Secondary Education Examination (BCSE) for class 10, the girls topped the first 3 positions.43 It has also been noted that the girls have a lower drop out rate than boys till class 9. On the contrary, the same old trend of girls dropping out at higher classes of 11 and 12 and college level has not improved. The report mentions that the drop out rate is 81 girl drop outs for every 100 boys. The college drop out rate is reported to be 48 girl-drop outs per 100 boys. Also, the girls academic performance is lesser at the higher secondary level.44 The 2008s class 10 BCSE showed that boy students outperformed the girl students in science and commerce studies with pass percentages of 90.46 to 84.91 and 100 to 90.91 respectively.45 In addition, most of the educated women and even some men working in public, corporate, private organizations including the NGOs were seriously offended when the chairperson of the PAC of the National Assembly, used the phrase Amsu morem no ni mep literally meaning, unmarried stupid woman to describe the governments unsatisfactory work. They demanded a public apology from the person. Following the public complaint, the NCWC submitted a petition to the speaker of the National Assembly and the government to remove the derogative phrase from the Assembly resolution. The petition objected the use of derogative phrase. Interestingly, Chimi Dorji Wangchuk, the chairperson of the PAC clarified that the phrase was not used to insult women but to express regret or lament for a job that was not satisfactorily done (CFDorji and Yangzom 2006: 18). This clearly implies that even the members of the highest law making body, the National Assembly loosely and widely use cultural stereotypes in the form of derogative phrases and proverbs demeaning women in public discussions without being conscious. This also shows that the Bhutanese society easily accepted the official language ridden with gender biased metaphors. Dorji and Yangzoms research on perception of gender equality with reference to this phrase has interesting results. About 53 percent of the total of 215 respondents viewed that the phrase is an ancient saying and should not be taken seriously. This consisted of 66.7 percent of males and 40 percent of females. Only about 37 percent felt that it is a direct bias against women This consisted of 21 percent males and 51.8 percent females (ibid.: 18). The socially prescribed ideal roles of men and women are evolving with the changing time. The Bhutan Broadcasting Service (BBS) Television covered an interesting story of women playing the game of Khuru (dart) during the Losar (Bhutanese New Year according to the Lunar Calendar). Traditionally, this game is mens domain. This group of women was from the village and seemed not literate in terms of reading and writing. But they commented that that they can do things which men did and there is no difference between the men and womens roles. They were only concerned that they could not shoot the dart at the same distance as the men did and therefore needed a shorter distance between the targets. The men watched and cheered for the women. They appeared to accept the women playing khuru.46 The NCWCs The National Plan of Action for Gender 2008-2013 aims to reduce gender
43 Girls grab top three spots, Kuensel, Wednesday February 11, 2009, Vol 24. No.12 pages 1 and 2 44 Woman in Mans wake, reveals study Kuensel, Saturday, February 21, 2009 Vol.24 No.15, pages 1 and 3 45 Girls grab top three spots, Kuensel, Wednesday February 11, 2009, Vol 24. No.12 pages 1 and 2 46 This story was covered on 25th February 2009s Evening News on BBS TV. The women played the game at Chang Jiji football ground in the capital. They were from nearby Genyenkha village in Thimphu district. They were well dressed and appeared active. They performed charming Khuru dance when the target was hit. They also used five colour scarves to decorate themselves according to the number of points scored. The men watched the game, brought packed food, drink and snacks for the women and seemed impressed. One of the elderly ones even commented that the traditionally male dominated areas are now changing with time.
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Conclusion It is understood that gender bias against women is constructed on gender stereotype which is associated with psycho social process. The psycho social process is very slow as it involves varied human perceptions that are deeply rooted in the societal mindset. This article concludes that the gender stereotype determines the organizations culture in terms of practices and procedures which negatively impacts the female employees. Although there is a positive trend towards womens inclusion in the Bhutanese public, corporate and private sector organizations, these bodies are currently highly male dominated. There are a few numbers of women in the upper realms of the executive and managerial positions. The stereotyped concept of prescriptive and descriptive attributes of women continues to prevent their upper mobility in their work settings. From the earlier discussion, we understood that women are under-represented in civil service, corporate and private sectors, parliament, judiciary and the local governments. They face a high degree of unemployment and suffer from mental illness. Women appear to bear the brunt of derogative mainstream phrases even in public organizational language. The patriarchal society appears cautious in implementing a strong gender sensitive governance system. However, there is a small degree of positive change in the form of gender awareness. Gender sensitive development policies are formulated in the development plans. Lead agencies such as the NCWC, RENEW and NWAB are actively in addressing gender issues. The NCWCs The National Plan of Action for Gender 2008-2013 presents some form of hope. But there is a long road ahead to attain an equal and complete positive change. Only time will tell us how much the Bhutanese organizations have remain committed to evolve from the existing stereotyped notion and provide equal treatment to women. References Brown, Andrew (1995) Organizational Culture, Great Britain: Pitman Publishing Chozom, Tashi (2006) Gender Disparity in Employment and Career Advancement Opportunities: A case of government and corporate organizations in Thimphu, Semtokha: RIM Publication Unit Choden, Kunzang (2005) The Circle of Karma, India: Zubaan-Penguin Publishers CEDPA / Gender and Development Two Halves Make a Whole: Balancing Gender Relations in Development CEDAW Report of the Kingdom of Bhutan Dorji, Tandin & Yangzom, Tashi (2006) Gender Equality in Bhutan: Perception of People in Western Bhutan, Semtokha: RIM Publication Unit
47 Woman in Mans wake, reveals study Kuensel, Saturday, February 21, 2009 Vol.24 No.15, page 3
gaps and improve the lives of the women. The two key delineated strategies are education and employment generation. The projected target for 2013 is to attain 20 percent women representation in the parliament, 40 percent in the civil service, 6 percent in the judiciary and 6-7 percent in local governance.47
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National Statistics Bureau, Royal Government of Bhutan (2007) Bhutan Living Standard Survey 2007 Report, Thimphu: Phama Printing & Publishers Royal Government of Bhutan (2001) Gender Pilot Study Report, Bhutan Royal Government of Bhutan, Ministry of Education (2008) General Statistics, Thimphu: Ministry of Education Kuensel Vol. 2 Issue 39, September 27, 2008 City Bytes Kuensel Vo. 3 Issue 10, March 7, 2009 City Bytes Kuensel Vol 24. No.12, February 11, 2009 Kuensel Vol. 24 No.15, February 21, 2009 Acker, Joan (1998) The Future of Gender and Organizations`: Connections and Boundaries, Blackwell Publishers Ltd, Vol 5. No. 4: 195-206 Ainsworth, Susan et al (2005) (Re) producing gender: management accounts of Affirmative Action, Asia-Pacific Researchers in Organization Studies (APROS 11):564-574 Heilman, E. Madeline (2001) Description and Prescription: How Gender Stereotypes Prevent Womens Ascent Up the Organization Ladder, Journal of Social Issues, Vol 57. No.4: 657-674 Lueptow, B. Lioyd et al (1995) The Persistence of gender Stereotypes in the Face of Changing Sex Roles: Evidence Contrary to the Sociocultural Model , Ethology and Sociobiology 16:509-530, Elsevier Science Inc: 510-530 Samal, Peky (2009, January 28), Men still on top, Bhutan Times. Retrieved from Bhutan Timess web site: http.//www.bhutantimes.bt/indesx.php?option=com_content&task=view&id=1066&Ited mid=1 Krueger, Joachim (1996) Personal Beliefs and Cultural Stereotypes About Racial Characteristics, Journal of Personality and Social Psychology, Vol.71 No.3, Retrieved the Abstract from database available from : http://cat.inist.fr/?aModele=afficheN&cpsidt=3222052 Royal Civil Service Commission website http://www.rcsc.gov.bt/tmpFolders/5-1Page.htm Royal Civil Service Commission website http://www.rcsc.gov.bt/tmpFolders/summary1.htm Drukpa, Gyalwang Rimpoche, Voices of Palden Drukpa, CD Recorded Notes from His Eminence Dzongsar Khyenste Rimpcohes Teachings and Dr Karma Phuntshos Talk Bhutan Broadcasting Service Television News February 25, 2009
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Sanjeev Mehta Professor Royal Thimphu College Bhutan In richly bio-diverse communities often there is a close interaction between man, nature and knowledge. Traditional Knowledge (TK) about the uses of the local biodiversity is for various reasons; such as- food, medicine, fuel, plant breeding and animal products etc. are part of the cultural heritage. The importance of such TK can be seen from the fact that about 85-90% of the needs of the worlds poor population is met by the biological resources. Modern technologies are often developed by using, modifying, and adapting the biological resources. In doing so, they use traditional knowledge either directly or indirectly. TK serves as an important input in R&D. Developer of technologies, mostly MNCs, get the technologies patented and the original TK holders are left even without any right to use it. Patentability under TRIPS does not require prior informed consent of countries or communities from where TK is acquired. This patent system has come under considerable criticism for the failure to prevent misappropriation of the TK, which also has adverse impact on natural environment. Protection of the TK is among the important property rights and environmental issues yet to be resolved. Growing incidences of TK piracy has created the awareness and initiated the debate even among the communities about the ways to protect their Traditional knowledge and folklores. In the face of difference of approach between TRIPS and CBD on the issue of patenting the TK, global efforts are on to harmonize them. This paper seeks to summarize some aspects of the debate on the issue of bringing TK under patent protection. It attempts to explore possible ways to protect TK in the best possible manner. Shall it be considered as a prior art? It also emphasizes the role of database creation as a device to protect the traditional knowledge. It examines the role of defensive and positive protection to the rightful TK holders. 1. Introduction: For centuries man has been interacting with the environment in numerous ways. Traditional communities living in the close proximity with the nature have evolved, and improved the knowledge of using the bio products for food, fodder, medicines, clothing, shelter etc. The system worked wonderfully not only to support the livelihood of poor people, but also to create a rich biodiversity. Traditionally the indigenous communities shared the knowledge amongst themselves. This
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TRIPs AND PROTECTION OF TRADITIONAL KNOWLEDGE
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knowledge and the resources were never treated as private property but as communitys property. Generally, the rights to own and use the local knowledge and resource of these communities were determined by their respective ideas of self-determination and self-governance. Over a period of time and because of the colonial regimes and predominant intervention by the states local self-determination got eroded. With the enclosure of the commons, which were the main stay of bio-diversity and source of livelihood to indigenous but poor communities, private property rights over the commons were established. But still the traditional knowledge was shared freely and continued to remain within the domain of the community. Then in 1990s came the notorious WTO regime, a multilateral institute to promote the globalization and to free the international trade. WTO offered two main instruments to promote unhindered global trade - TRIPS and TRIMS. Trade related intellectual rights (TRIPs) were designed to foster inventions and innovations by providing exclusive rights to the creators of the knowledge and to benefit from commercial profits appropriated from the application of this knowledge. Due to this, traditional knowledge has come under the most severe attack, and its entire foundation has been shaken. Over the last decade the WTO has come under attack due to this and various other other reasons. TRIPs have become most contentious issue, which is hotly debated and discussed. The different parties (mainly DCs & LDCs) have been holding innumerable rounds of meeting to reach some consensus on the contentious issues such as treatment of TK. The objective of this paper is two fold: (i) To highlight the main points of the ongoing debate over the fallouts of the TRIPs on TK and bio-diversity that needs to be understood properly. (ii) To explore possible solutions and points of convergence between the divergent views. 2. What is Traditional Knowledge? Traditional Knowledge, Traditional environmental knowledge, and indigenous knowledge are interchangeable terms. They mean: intellectual efforts and its results, generated by the local and indigenous communities and tribes. This knowledge has constantly been subjected to revision, modification, adaptation, up-gradation and even at times extinction. TK in this context is a dynamic process not static (WIPO, April 2001) that it is often misunderstood because of the prefix- traditional. It is an outcome of complex interaction between man and its environment. It represents symbiosis. For thousands of years, indigenous peoples around the world have utilized the natural resources of their local environments, in an ecologically sustainable manner. Only in the past decade has this traditional environmental knowledge (TEK) been recognized among the western scientific community for its value to contemporary environmental management. There is no unique definition of the Traditional Knowledge. Traditional Environment knowledge is defined by Berkes (1993) as A cumulative body of knowledge and beliefs, handed down through generations by cultural transmissions about the relationship of living beings ((including humans) with one other and with their environment. TK is an attribute of societies with historical continuity in resource use practice: by and large, these are non-industrial or less technologically advanced societies, many of them indigenous or tribal. Traditional knowledge is mostly prevalent in oral forms. It is not codified and is not found in systematized forms such as books and databases. WIPOs fact finding mission uses the term TK to refer to- Traditional based literary, artistic or
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Most traditional communities draw their knowledge relating to the use of biological and genetic resources from their respective ecosystems. TK based innovations are shared amongst different generations and are adopted for new uses. Through this process traditional communities contribute to biological and genetic resources and ensure biodiversity and sustainable development. The traditional knowledge of the indigenous communities has enabled protection and extension of the biodiversity. Traditional environmental knowledge is an important source of food, fuel, shelter, clothing and health to majority of worlds poor population. The importance of TK can be estimated from the facts that 85-90% of the basic livelihood of the worlds poor are based on the direct use of biological resources for food, shelter, medicine, transportation, etc. Over 14 billion people rely on farmed saved seeds and local plant breeding techniques as their primary source of seeds. In India 70% of the total seed supply come from the farmers and also 70% of the healthcare system is supported by the indigenous medicine systems of Ayurveda, Unani and Siddha. (Shiva, Bhar, Jafri, 2002). Traditional knowledge also provide a vast reservoir of input to the modern technologies. Research institutes and MNCs often use TK to develop new products or processes (Brash, R). Free availability of the TK facilitates it use in developing new product or processes without or with the consent of the TK holders. Sectors, which have benefited from these inputs include: food, beverages, pharmaceuticals, chemicals, horticulture, agriculture, construction materials and cosmetics. 3. Patenting Traditional Knowledge and related issues Global trade regime under WTO has threatened the very basis of the lives of poor people and traditional communities. The now infamous article 27.3(b) of TRIPs has created ripples in traditional communities. This article provides that WTO members must provide patent protection to microorganisms, as well as non-biological and micro-biological processes, while plant varieties must be protected either through patents or an appropriate sui generis system. Article 27 is one of the most contentious issues of the new multilateral trade system. Article 27. 3(b) is particularly threatening, as it will adversely affect the very basis of food security i.e.: crop biodiversity. Most of the products and processes are the result evolution of knowledge by traditional communities, which are generally oral in nature and also freely exchanged within and out side the community through informal processes. Patenting of these products and processes by an outsider (without the consent of rightful TK holders) would mean loss of entitlement to use their own knowledge freely. Since these communities use traditional knowledge to acquire food, medicines, fodder, shelter etc., patenting of these products and processes would affect these communities adversely but also cause unrecoverable loss of biodiversity. Commercial appropriation and privatization of TK through IPR poses a serious threat to TK itself. The debate is further complicated by the conflicting position taken by CBD on this issue. CBD recognizes the sovereign rights of the country over the biological and genetic resources. CBD implicitly views these resources as in public domain and access to that is subjected to national legislation. Article 8(j) of CBD maintains that Each contracting Party shall, as far as possible and as appropriate, subject to its national legislation, respect and maintain knowledge, innovations and practices of indigenous and local communities embodying traditional lifestyles relevant for the conservation and sustainable use of biodiversity and promote the wider application with the approval and involvement
48 . For further details see: WIPO. Intellectual Property Needs and Expectations of Traditional Knowledge Holders. WIPO Report on Fact Finding Missions on Intellectual Property and Traditional Knowledge (1998 1999) Geneva, April 2001.
scientific works; performances, inventions, scientific discoveries; designs, marks, names, symbols, undisclosed information, and all other traditions based innovations and creations resulting from intellectual activity in the industrial, scientific, literary and artistic fields.48
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of the holders of such knowledge, innovations and practices and encourage the equitable sharing of benefits arising from the utilization of such knowledge, innovations and practices. Presently, countries have divergent stand on the issue of patenting the TK. LDCs, that are home to many traditional communities, are obviously against patenting of TK and many developed countries want patenting of any knowledge i.e.: bio-products and bio-processes. This debate still continues and would be further brought to discussion at the Cancun meeting. The present patenting regime raises certain questions that need answers: 1. Whether TK be treated as an intellectual property? 2. Whether TK belongs to private domain? 3. Whether WIPO should seek disclosure about the product and processes as a prior art at the time of registration for the patent to prevent bio-piracy? 4. How to establish the ownership right over the TK? 4. TK is a cultural heritage Intellectual property has a wide meaning. According to the article 2(viii) of WIPO convention intellectual property includes: * Literary, artistic and scientific works; * Performances of performing artists, sound recording and broadcasts; * Inventions in all spheres of human endeavors; * Scientific discoveries; * Industrial designs; * Trademarks, service marks and commercial names and designations; Many indigenous communities and people believe that TK shall not be treated as an intellectual property. This belief basically flows from the natural logic that no one can own what exists in nature except the nature itself. In their statement on TRIPs, indigenous people held that Humankind is part of Mother Nature, we have created nothing and so we can in no way claim to be owners of what does not belong to us. But time and again, western legal property regimes have been imposed on us, contradicting our own cosmologies and values. Traditional communities live in close proximity with the nature, and most of their knowledge is developed through the natural environment. This knowledge is an outcome of the exploration of immense possibilities that Mother Nature had provided. This is a free gift of nature to all without any distinction. Patenting of this knowledge as an intellectual property would violate this fundamental belief. If it is commonly understood by outsiders that TK is part of cultural heritage of the indigenous communities the issue of its patenting can be easily ruled out. Common understanding among TK holders is to regard TK as an integral part of a cultural and spiritual context, not simply as a tradable property. Article 27.3b of TRIPS of the World Trade Organization agreements will further denigrate and undermine the natural rights to cultural and intellectual heritage, plant, animal, and even human genetic resources and will discriminate against the indigenous ways of thinking and behaving of the indigenous people. No doubt elements of TK are sometimes commercialized but then it looses its characteristic as
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Article 27.1 of the TRIPS obliges the member nations to provide patent protection for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. This interpretation would leave TK as a patentable property. On the other hand article 8(j) of the CBD applies to in situ conservation of biological diversity, establishes that Contracting Parties shall, as far as possible and as appropriate subject to national legislation, respect, preserve and maintain knowledge, innovations and practices of indigenous and local communities embodying traditional lifestyles relevant for the conservation and sustainable use of biological diversity and promote their wider application with the approval and involvement of the holders of such knowledge, innovations and practices and encourage the equitable sharing of the benefits arising from the utilization of such knowledge, innovations and practices. 5. TK is in public domain TRIPs provide patent protection to any kind of intellectual property. Objective of patent protection is spelled out in the article 7 of TRIPs as the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to transfer and disseminate technology, to the mutual advantage of the producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations. In this way a society reaps following benefits from granting IPR to the innovators: a) stimulates private innovations b) application of the new knowledge in a productive activity c) dissemination of the new knowledge. There should not be any disagreement on the view that any person or institution that invent any new knowledge should have the right to make commercial gains from such inventions having been invested with exclusive monopolistic patent right over the use of knowledge for a minimum period of time. One thing that needs to be understood is that all forms tangible property is protected by laws governing physical property, it is only the personal and intangible forms of knowledge which is protected by IPR. The TRIPs agreement provides for such patent rights to the inventor for 20 years. The real contentious issue in this debate is how the TK should be treated? Traditional knowledge is developed in different stages over a period of time by different generations of a traditional society or by different traditional societies. The property of TK is such that it generates non- rivalry in the use as well as benefits are externalized. This is due the fact that TK is never treated as an intellectual property but more as a gift of the nature. In this context it is not tenable to treat TK as a private intellectual property and therefore it cannot be patented. Also that traditional knowledge is ancient and does not meet the requirements of novelty and inventive step and it is held collectively there is not a single individual or discrete group of individuals that can be identified as an inventor in whose name the application may be filed. All the above-mentioned properties are sufficient to classify TK as a public good belonging to public domain. Moreover most of the TK is not codified and exists orally and it is diffused beyond the communities where it was originally created. There exists no particular owner of this knowledge. If this is the case, patenting of TK is neither conceptually
TK. TK is developed through a continuous process in which many generations and many other communities and individuals are involved, It is part of a cultural and intellectual heritage that a society received and passed on to the next generations. This intellectual knowledge is widely used to develop new plant varieties, seeds, medicines, and animals, through various micro-biological processes, which are sacred and should not be subjected to property ownership. Treatment of this knowledge as an intellectual property would definitely entail the question of its ownership.
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logical nor is practically possible. Even if the TK holder is an individual it would not be possible to acquire a patent because of the intergenerational transfer and evolution of TK. Meeting the criteria of novelty and innovative step would be extremely difficult. 6. The problem area: bio-piracy The major challenge which is thrown open to these traditional societies because of the WTO sponsored TRIPs regime is bio-piracy of the TK by rank outsiders. Given the fact that TK is in public domain, it has been freely accessible even to the outsiders either directly or indirectly. Externalities associated with TK make it easier for an individual or institutional researchers like MNCs to use product or processes associated with TK and to modify them a little to develop a new process or a product. These researchers can easily seek patent rights over the illegally obtained genetic resources or TK and often IPR is granted to the bio-pirates, leaving the rightful TK holders loosing the right to use their own knowledge and genetic resources freely. This would have adverse effect on the livelihood of the traditional communities but would also cause immense damage to bio-diversity. It is felt that extension of patent system to the use and ownership of biological materials and TK is under the influence of MNCs whose interest in these areas is on the rise. Private sector (readMNCs) is governed solely by profit motive, and in order to maximize the profit it produces a single product with very wide application. For this it tends to promote its market monopoly (Lettington RJL, Bridges July -August2001). Monopolistic control over the use of biological materials and TK would undermine heterogeneity of plant and animal variety and therefore further generation of TK. This issue is important because it affects the survival of traditional communities by adversely affecting their food security, health care system and sustainable development. 7. Protecting TK: Approaches and proposals The issues of protecting of TK, biodiversity and patenting of the life forms has come to occupy a central stage in the meeting of council for trade related aspects of intellectual property rights. The discussion has brought the article 27.3(b) under review, which calls upon the member countries to provide patent like or sui generis protection to micro-organisms, non biological as well as micro-biological processes. This article comes in direct conflict with CBD, which provides for sovereign rights over the biological resources. Member countries have divergent stands (WIPO 2002)); the divergence is sharper between the North and South. Forced by this situation Doha ministerial declaration undertook to examine, inter alia, the relationship between TRIPs agreement and the convention on biological diversity, the protection of traditional knowledge and folklore, and other relevant new developments raised by members pursuant to article 71.1. So far WIPOs intergovernmental committee (IGC) on intellectual property and genetic resources, traditional knowledge and folklore has not made any progress. IGC members have sought to develop effective positive and defensive protection measures for TK and related issues. Defensive protection relates to provisions adopted in the law or by the regulatory authorities to prevent IPR claims to TK or a product being granted to unauthorized persons or organizations. Positive protection relates to acquisition of IPR by the TK holders themselves either through patent or by an alternative of sui generis (a special and unique) system. 8. Defensive protection
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Objective of the defensive protection mechanism is to prevent the rising incidences of bio-piracy and to ensure benefit sharing between the bio prospectors and TK holders. The issue of protection of
Debate is extremely polarized between those who argue that the patent system is inherently harmful and unjust with regard to indigenous people and to their traditional knowledge and those who maintain it is not. But by granting controversial patents, TRIPs regime is gaining negative popularity across the globe. The WTOs persistent refusal to address the systems structural deficiencies with regard to transparency and public participation is a dangerous game at a time when so many are openly questioning the institutions authoritativeness and transparency (Bridges ICTSD, July-August 2001). On the other hand CBD provides for conserving, maintaining and promoting wider application of traditional knowledge (article 8-i) and thus has paved the way for the development of mechanisms and instruments to confer positive and defensive protection of traditional knowledge. To provide an effective defensive protection to TK following interrelated issues needs to be worked out(1). Establishment of TK as a prior art and developing TK database (2). Disclosures, Prior informed consent (PIC) & benefit sharing principles, 9. TK as a prior art Theoretically, patent shall be granted to an invention only after the establishing that it meets the requirement of novelty and innovativeness. If the proof of existence of TK from which the new invention is directly or indirectly derived, is available at the time of review of patent application bio-piracy can be effectively checked. Definition of novelty for patent purposes depends on the national or regional law under which a patent is granted. Thus, some national laws define oral disclosures as part of the prior art which will defeat novelty only if they are made within their national borders. Other patent laws define oral disclosures made anywhere in the world as forming part of the prior art. National and regional patent systems can be made less unforgiving Prior art or the state of the art usually refers to the complete body of knowledge that is available to the public before a patent application is filed. Novelty is measured against the state of the art (Holyoak and Torremans). Prior art is technical disclosures that predate the patent application or invention. Patenting applications are processed according to Patent cooperation treaty 1970, which in short termed as PCT, even though patents are granted according to national and regional laws. Articles 15(1) and 15(2) of PCT provide that patent applications would be subjected to international search to discover any relevant prior art. Rule 33.1 of PCT defines prior art as everything which has been made available to the public anywhere in the world by means of written disclosure (including drawings and other illustrations) and which is capable of being of assistance in determining that the claimed invention is or is not new and that it does or does not involve an inventive step (i.e. that it is or is not obvious), provided that the making its availability to the public occurred prior to the international filing date. The PCT is particularly relevant to the traditional knowledge and prior art discussions because of its provision for international searching procedures of prior art (WIPO, April 2002). The international search is carried out through an International Searching Authority. International Searching Authority is expected to discover as much of the relevant prior art as its facilities permit. In any case, the authority must consult the so-called minimum documentation.
TK, bio-piracy and fair and equitable sharing of benefits arising out of the utilization of TK is very important for countries like India. There have been growing incidences of bio-piracy of Indian TK by MNCs: patent on wound healing properties of haldi (turmeric), glyceimic properties of karela (bitter gourd) and brinjal. Earlier basmati rice and neem were patented.
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Patent authorities are responsible to ensure that these substantial requirements of patentability are met by the claimed invention before a patent is actually granted.49 Given the fact that TK is kept in a non-codified manner i.e. orally, and no database exists to prove the prior existence of TK, bio-piracy can easily occur and be undertaken. There are three important considerations in this regard. First, TK is not disseminated and made public through periodicals, journals, publications and databases etc., Second, Even if TK is codified, patent examiners often neither have access to such sources nor do have effective search tools. Third, any discovery or invention that uses TK, which exists in the public domain. Under US patent law, such patents can be nullified only when they are challenged. Burden of proof rests with the contesting party. Often traditional communities cannot afford expensive legal battle out side their country where the patent was filed and granted. Development of the appropriate interconnected (decentralized or centralized) information system including database on TK should be given high priority to prevent bio-piracy. This would provide information base to international searching authority to establish prior art. Already efforts are on to develop such databases. Nuno Carvalho of WIPO has suggested that database to be protected under a special database right because the TK holders are rarely responsible for the compilation and holding of the databases. These databases should be strictly protected for its use as a documentary proof for the existence of prior art.50 Most of the positive and defensive protection to TK, as provided by CBD, is related to the development of registers of traditional knowledge (databases). As databases become more widely available, more comprehensive and precise prior art search can be made possible by the patent examiners. The CBD Clearing House Mechanism could become an alternative to provide a single and centralized entry point to worldwide databases on traditional knowledge Australian National University has suggested creation of Global Bio-collecting Society (GBS) to act as a repository of community /Traditional knowledge and well as to monitor the commercial use of TK (Drahos, P). Similarly many NGOs are working for the development of database such as Peoples bio-diversity register. Computerization of such database and their navigation through cyber space would strengthen the international searching procedure and would effectively help patent offices around the globe to prevent bio-privacy. These days several attempts are made for the documentation of TK and placing it in database. There are certain crucial issues involved in the documentation of TK: Traditional knowledge evolves in communities as a living tradition but storing it in ex situ collections fixes it temporarily as information, and its value as information depreciates rapidly unless it is updated. Documenting traditional knowledge is unauthorized without prior informed consent of the holders TK. These TK holders are generally treated as information providers rather than owners. This would impose limitations to use such database for obtaining positive protection. TK holders should have control over access and use of the database Protection of the data from the unfair commercial/noncommercial use even when the information is disclosed to the public
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49 See Holyoak, Jon and Torremans, Paul. Intellectual Property Law. Second Edition. Butterworths, London, 1998 (Chapter 3, Section B). 50 Carvalho suggested that database be registered with national patent offices. For more information see Carvalho,N.P.(1999), From the shamans hut to the patent office: How long and wide is the road? Review of the Brazilian Association of the intellectual property Vols.40/31
10. Disclosure requirements, PIC, and benefit sharing
Disclosure of all the sources of knowledge and inputs used in inventing or discovering something novel and innovative should be made mandatory to those who apply for the patent registration. Such information could include description of traditional knowledge utilized in the invention. Article 29.1 of the TRIPs Agreement, provides that the applicant shall disclose the invention in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art and may require the applicant to indicate the best mode for carrying out the invention known to the inventor Need is that this article shall be amended so as to incorporate these requirements as patent application procedure.
As a general rule, patent applicants should disclose to the patent authority all information known to be material to patentability. Such information could include description of traditional knowledge utilized in the invention (Ruiz, M 2002). For this patent authority should make it mandatory for the applicants: 1. To conduct their own prior art searches of TK used and include that information in the application. 2. To disclose the source of TK holders, or of the country. 3. To ensure that the use of TK is in consonance with national laws (Carvalho, 2000) and international principle of prior informed consent and benefit sharing as provided by article 8(j) of CBD. 4. Traditional knowledge if used is incorporated with the consent of corresponding knowledge holders. When companies or research institutes or individuals apply for patent, should they be required to disclose where they got the materials or the knowledge? The answer would seem to be self-evident. Unless an applicant themselves provide this information, how can a patent office even decide whether an invention has occurred, and it is not merely an appropriation of already existing knowledge, i.e. bio -piracy? Disclosure requirements need to be streamlined and strengthened. It should make it mandatory for the patent applicants to disclose the sources of different inputs including TK. It should provide for punitive measures if the disclosure is found to be false and this should include not only withdrawal of patent rights but also necessary compensation to the rightful TK holders. Yet there is absolutely no agreement among governments on this simple principle, let alone on how such a requirement should operate. If TRIPs forces the patent applicants on compulsory disclosure requirement, fewer bio-piracy incidences would occur. Developing countries have been demanding for a strong and effective disclosure scheme. The Convention on Biological Diversity (CBD) clearly recognises the right of parties, i.e. states, to control access to genetic resources and to receive a share in any benefits from their commercial use of TK or its further development. This makes stronger the claims of developing countries that have been putting up spirited fight against TRIPs regime for not taking care of this important requirement. The issue of the debate now has become CBD or TRIPs.
It would be interesting to note that representatives of indigenous peoples attending the Workshop on Traditional Knowledge and Biodiversity organized by the Secretariat of the Convention on Biodiversity in November 1997 demanded a moratorium on the registering of traditional knowledge. Such fears can be removed if the above-mentioned issues are taken care of.
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Prior informed consent (PIC) procedure requires that biological /genetic materials, processes and TK that is used as an input shall be acquired with the prior consent from the appropriate government agency in charge of granting such rights. This should be coupled with sharing of the benefit from the use of such knowledge with the provider country. TRIP does not provide for prior informed consent requirements and therefore it does not entail any benefit sharing mechanism. Indias bio diversity act 2002 incorporates provisions for PIC from National Biodiversity Authority (NBA). It also contains provision for benefit sharing arrangements. Similar provision relating to disclosure, PIC and benefit sharing are made or proposed in a number of countries. The need now is for international recognition to national level system to protect TK. Many traditional communities have been making strong protest against this mechanism, which originate from article 8(j) of CBD. According to them PIC should be acquired from these communities and not from the government and benefits sharing arrangements shall be made with them. In the symposium on the Protection of Traditional Knowledge and Expressions of Traditional and Popular Indigenous Cultures in the Pacific Islands Noumea, 15-19 February 1999 traditional communities demanded that economic exploitation of this common heritage is made subject to prior authorization on the part of the holders of the rights in order to generate legitimate income, and it shall be protected by a regime of sanctions designed to deter potential offenders. Emphasis was also placed on the need for collective management of TK as one of the means that could help indigenous peoples to exercise their rights and to secure an economic return on the commercial exploitation of their traditional cultural heritage. 11. Positive protection Article 27.3(b) provides for positive protection either through the IPR or by any appropriate sui generis system. Effective positive protection would require a completely new system, whose development would call for commitment on the part of different governments. Due to this reason IGC discussions on positive protection have not reached anywhere near unanimity. Another issue needs to decide whether TK as a product or as a process shall be subjected to IPR. Positive protection i.e. conferment of patent rights on TK would not be possible even if it is desirable. Mainly the problem arises from the fact that TK belongs to public domain. It would be extremely difficult to determine who actually created TK. Since TK is shared within and outside the community and is the result of intergenerational efforts, no single individual can claim and establish rights over the knowledge created. Given that TK is mainly kept in the oral form, ascertaining the prior art to decide novelty and innovativeness of the knowledge that is sought to be protected by IPR would be a challenging task. Most of TK is ancient do not meet the criteria of novelty and inventive step hence cannot be subjected to IPR. Inadequacy of funds and lack of legal knowledge also limits ability of the traditional community to draft and file patent application. Inappropriate national or regional legal framework also limits the ability OF the TK holders to acquire IPR. TRIPs also provides for an appropriate sui generis (special and unique) system to protect any form of intellectual property. Traditional knowledge does not fit to the concepts of property in forms recognised by IPRs. A sui generis system would require framing of a system of use rights and obligations that can be created and operated at least at a national level. Strengthening of national laws is necessary to prevent bio-privacy and protect its TK. Creation of a national sui generis system would be an essential prerequisite for the international sui generis system. Although it would be useful that international guidelines be agreed upon so that the national systems created are harmonised. A communiqu issued after the international seminar on TK noted that although national sui generis system provided for the protection and growth of TK within national jurisdiction, they
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Local protection to the rights of TK holders through national level sui generis regime including customary laws, as well as others, and its effective enforcement inter alia through positive mutual reinforcement between protection system for TK (Posey and Dutfield, 1996). Protection of TK through registers of TK database in order to avoid misappropriation of TK. A procedure where the use of TK from one country is allowed, particularly for seeking IPR protection or commercialization, only after the competent national authority of the country of origin gives a certificate that source of origin is disclosed with prior informed consent including benefit-sharing conditions obtained. An internationally agreed instrument that recognizes such national level of protection.
On this issue India has maintained that biodiversity rich country should form a coalition so that they can work for creating an internationally agreed system, which provides for national level protection of TK. Union Minister of commerce and industry Mr. Murasoli Maran remarked The need for such effort is urgent and relevant in the context of mandate given by Doha Ministerial Conference to the TRIPS Council regarding the relationship between CBD & TRIPS Agreement and protection of TK and folklore, these are some of the most important outstanding implementation issues which need to be resolved.52 A serious limitation to the protection to the TK (despite of sui generis system) is imposed by the distressing fact that most of the TK holders are not empowered to protect their Knowledge both positively and defensively. Extreme poverty, human right violations, lack of access to land and other resources force them to take measures to acquire basic needs rather than to ensure protection of their TK. As already pointed out that most of the traditional communities treat TK not as an intellectual property but as a cultural and social heritage. This would mean that TK should not at all be subjected to patentability. Their idea is that if it were treated as a property, it would take away the vital feature of TK. For the protection and continued progress of TK, it should be out of the purview of TRIPs. Another contentious issue is the TRIPs provision, which allows even for the patenting of life forms and life creating processes. This provision of TRIPs is compared to CBD provision (article 15), which emphasizes the sovereign rights over these resources. But Doha declarations require WTO members to arrive at a clear understanding, in the interim, that patents inconsistent with article 15 of CBD shall not be granted. One bold move came at the beginning of the review from the Africa Group, which said that all patenting of living matter should be banned worldwide under TRIPS, and that any regime for plant varieties should protect the rights of farmers and local communities. On the contrary, United States proposed that no kind of inventions at all should be excluded from patenting, not even plants and animals. Many traditional communities have demanded amendment in TRIPs to prohibit patenting of all the life forms, which are part of TK.
51 This seminar was organized by Govt. of India and UNCTAD in April 2002. Brazil, Cambodia, Chile China, Colombia, Cube Egypt, Kenya, Peru, Philippines, Sri Lanka, Thailand, Venezuela and India participated in this seminar. 52 These are extracts from the Ministers address to an International Seminar on Systems for Protecting and Commercializing Traditional Knowledge in New Delhi (3-5 April 2002), organized jointly by the Government of India and UNCTAD.
are inadequate.51 In this seminar following common components for international sui generis system were identified-
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12. Conclusion The modalities for protecting traditional knowledge are still emerging and evolving and countries are grappling to understand the issue. The essential aspect of debate between North and south relating to protection of TK and issue of bio-diversity relates to the following issues: Whether TK and life forms should be subjected to patents? If TK is to be protected both positively and defensively, how the issues of establishment of prior art, disclosure requirements, and prior information consent and benefit sharing has to be addressed? Whether TRIPs agreements be revised to make compatible with requirements of CBD regarding to access to genetic resources, TK, and benefit sharing principle.
TRIPs implication on TK is very profound. In the absence of any defense mechanism-institutional, Legal, and financial TK is lost to outsiders at an alarming rate. Unless amendments are made in the TRIPs regime to accommodate the needs and aspirations of billions of people, the credibility of the TRIPs agreements would be questionable. Unless developed countries are ready to meaningfully participate in the WTO discussions, WTO would fall apart. (Already it is termed as world terror organization.) To provide defensive protection to TK, which is more urgent, patent authorities throughout the world need to stress on the stronger search for prior art, especially of TK. As TK is largely kept orally prior art cannot be proved, this promotes bio-privacy. To establish TK as a prior art, case is made for a strong database of TK and its registration. Database so created should be based on consent of the TK holders, and provide them free access right. Such strong database would facilitate positive protection to TK. Prior art should be accepted even if proof is available outside the country where patent application is filed. In this paper I have made a point for stringent disclosure requirements. It should be imperative for the patent applicants to disclose the source of the TK based inputs used in the research leading to invention. It is recommended that any wrong information would cost the applicants loss of patent right. The patent authority should seek existence of the certificate of prior informed consent and appropriate benefit sharing principles. TRIPs agreements do not provide for this but CBD does. This has created a gulf between developed and developing countries. Developing countries wants TRIPs should be amended to accommodate principles enshrined in the article 8(j) of CBD. Many traditional communities wants prior informed consent as well as benefit sharing agreements should be made from them not from the government. The issue of positive protection to TK is complicated by the facts--First, that TK is a public good and secondly it is not considered by its holders as an intellectual property. For them it is a part of cultural heritage. Article 27.3(b) of TRIPs also provides for development of a sui generis system to protect TK beside through IPR.IT is more challenging given poor legal framework and lack of general entitlement to traditional communities due to socio economic backwardness. This paper highlights the need of international guidelines for national sui generis system for its global applicability. Many countries believe that life forms should be outside patent rules, but countries like USA oppose to this suggestions. Ethically too it would be wrong to subject natures gift be subjected to private IPR domain.
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Unless TK is protected both through defensive and positive protection measures, its existence would be at the stake. Loss of TK would mean more than that-loss of bio-diversity, loss of livelihood of billions of poor people, and loss of a rich cultural heritage. References Barsh, R. Who Steals Indigenous Knowledge? Berkes, F. (1993). Traditional ecological knowledge in perspective. In traditional ecological knowledge, concepts and cases, edited by J.T. Inglis, Ottawa,International development research center. Carvalho, N.P. Requiring disclosure of origin or genetic resources and prior informed consent in patent application without infringing the TRIPs agreement: The problem and solutions. Washington university journal of law and policy, Vol.2, 2000. Carvalho, N.P. (1999), From the shamans hut to the patent office: How long and wide is the road? Review of the Brazilian Association of the intellectual property Vols.40/3 Drahos, P (2000). Indigenous knowledge, intellectual property and biopiracy: Is a global biocollecting society the answer? European intellectual property review, issue 6 (2000) Holyoak, Jon and torremans, paul, (2nded.).Intellectual property law Butterworth, London.
Harmonization of CBD principles with TRIPs would make it more acceptable. Many developing countries have already accepted CBD for providing a better alternative. These are possible areas for convergence of diverse opinions to this seemingly cul de sac.
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Lettington R.J.L. The international undertaking on plant genetic resources in context of TRIPs and the CBD Bridges between trade and sustainable development, july-August2001. Posey, D.A. and Dutfield, G., Beyond Intellectual Property: Towards Traditional Resource Rights for Indigenous Peoples and Local Communities (IDRC 1996). Ruiz, M (2002). The international debate on traditional knowledge as prior art in the patent system: issues and options for developing countries. Shiva, V, Bhar, R H, Jafri A H (2002). Corporate hijack of biodiversity Navdanya. WIPO (April 2001). Intellectual Property Needs and Expectations of Traditional Knowledge Holders. WIPO Report on Fact Finding Missions on Intellectual Property and Traditional Knowledge (1998 1999) Geneva, WIPO 2002. Report of the Fourth Session of the Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore (December 9-17, 2002), Geneva. WIPO (April 2002.) Basic facts about patent cooperation treaty. The worldwide system for simplified multiple filing of patent application.
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CHANGE ON MANAGERIAL TRUST IN THE CONTEXT OF AN EMPLOYEE BUY OUT IN INDIA

Mr.Binoy Joseph Senior Lecturer Rajagiri College of Social Sciences Kochi, Kerala India - 680
Tea gardens face a threat of closure. Due to labour problems and pricing mechanism Indian tea companies are performing unsatisfactorily on the global scene. The case of Tata Tea plantations in South India has been taken for this research study. An Employee- Buyout strategy is introduced in a select number of tea estates. Results prove unfruitful. However employees agree with this idea with a fear of loss of job. The new strategy turns out to be a success. The relationship between Organizational Change and Managerial Trust in the context of an employee buyout is studied. A questionnaire is administered upon a sample of 100 respondents. Results are shown as a table. The article concludes by citing key issues for a successful buyout programme. Keywords Tata Tea, Tea Plantations, Employee Buyout, Labour INTRODUCTION The decade of Nineties had been quite depressing for the tea industry in India. It began with the disintegration of the USSR which was solidly a loyal market for the Indian teas. The Russians started looking for cheaper teas. South Indian teas in their pursuit for matching prices offered by the Russians, totally disregarded its quality. In the North too; the industry faced labour problems. The situation in the world markets for tea was characterized by over supplies, a slow growth in demand, and a fierce competition. (Asopa, V.N, 2007). Tea industry in India is at crossroads. There is fierce competition abroad and India is less competitive on account of its high cost and poor quality tea, and ever changing consumer demand. (Asopa, V.N, 2007). Consequently a number of tea gardens are facing closure. Economically, these gardens are not sustainable. Labourers have not been paid for several months. Some of the tea gardens are already closed.
23 EFFECTS OF ORGANIZATIONAL
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EMPLOYEE BUYOUT The Worker Takeover or Employee Buyout (EBO) phenomenon emerged across Europe in the 1970s and 1980s as a reactive strategy by working people to save their jobs when faced with the collapse of their employer, due to the economic crises and industrial restructuring of the period. In an employee buyout, management and a broad group of employees complete a transaction or transactions which result in an enterprise being more than 50% owned by its employees, or a "majority employee owned enterprise." EBO in Tata Tea is a rare example where 69% of the ownership is held by 13,000 odd pluckers, gardeners, drivers, clerical staff and former Tata tea managers It is a rare example of an employee buy-out in India and is probably one of the largest participatory management companies in the world, definitely the first of its kind in the plantation sector. Apart from the size the other interesting features include the context, the causes, the structure and the consequences of the EBO which is covered immediately in the case study part of the article. CASE STUDY The Context Tata Tea is one of the largest tea companies in the world. Over a period of time it encountered problems in its plantations which forced them to exit from them. The focus first was on its South India plantations operations (SIPO) which is one among the two strategic business units in plantations of Tata Tea. Since the major chunk of the companys tea plantations in South India was located in the High Range of Kerala, it became the testing ground for the companys exit strategy Causes The crisis in the tea industry in India could be attributed to a variety of factors including the WTO treaties, the fierce competition in the global tea market amongst the different plantation economies, low productivity of tea in terms of labour and plant output, low demand for CTC (Cut, Turn & Curl) tea in the global market, strict laws of enforcement pertaining to land use by the State Government and demand for higher wages by workers. The high cost of fulfilling social obligations towards the plantation labour is another reason for the Corporates to get out of the plantations (Asopa, V.N, 2007). Experiment It started off in December, 2003 with the managers from plantation being withdrawn and the 600odd pluckers being told to manage the estate themselves. Productivity plummeted the pilot project was pronounced a disaster within three months. Employees did not find favor with this model for want of job security and proper management. Similar solutions of different nature too were explored but in vain. The reason, among others, has been the failure to put in place democratic control and management structures (Ramaswamy, 1999). Employee Buy-out Model Around this time the employee buyout model was seriously examined. A 10-year business plan was prepared in April 2004. This was shared with prospective financial partners, ICICI Bank, which in turn expressed their support. Tata Tea announced a voluntary retirement scheme so as to hand over a right-sized employee base to the new company. Holding 18.2 % stake in the equity of the new company they agreed to shoulder the responsibility of funding and managing the welfare projects
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Figure 1 - The Structure
Division Advisory Committees (DAC)
Joint Estate Consultative Committee (JECC)
Central Management Committee (CMC)
Factory Advisory Committee (FAC)
Joint Factory Consultative Committee (JFCC)
Apart from the workers representative and a staff representative on the board of directors, there are several advisory and consultative participatory management committees comprising a cross section of employees at every level of the estate and factory management and also at the company level. To have closer association between all employees, a formalized participatory management structure has been put in place in the form of committees of management consisting of representatives of all categories of shareholding employees at the Division (the primary work unit of a tea estate), Factory, Estate and Company levels. Such committees of empowered employees suggest improvements in various matters pertaining to their relevant operations, employee welfare and safety, corporate policies and strategies etc. Consequences Given direct stakes in the fortunes of their company, KDHP worker-owners were not only able to wipe off the cumulative losses of 24 million US dollars run up by Tata Tea, within a year, but also register a post-tax surplus of 500,000 dollars as on Mar. 31, 2006. They also managed to declare a 14 percent dividend for its first year of operations. In the first half of fiscal 2006-07, KDHP reported a pre-tax profit of 1.2 million dollars or five times the figure for the same period last year. The
such as the School, the Hospital etc. This paved the way for a smooth transition. Thenmallay and 16 other plantations were bought for Rs680m ($15m) by a new company Kanan Devan Hills Plantations (KDHP) whose shareholders comprised 13,000 pluckers, gardeners, drivers, clerical staff and former Tata tea managers. A rare example of an employee buy-out in India, KDHP, was born in Munnar on March 31, 2005 with a new vision to collectively create a unique and sustainable business with the commitment and involvement of all employees as partners.
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company hopes to post a pre-tax profit of two million dollars by the end of this fiscal that ends on Mar. 31, 2008. Productivity has improved 34 per cent since April, 2005. The company also received many awards for its tea quality in the first and second Golden Leaf India Award, Southern Tea Competition, held in Conoor and Dubai in 2005 and 2006. KHDP has also revealed the first non-tea initiative in the estates 125-year history. Kannan Devan Hills Plantations 91 sq miles can grow plums, apples and pears in high elevation areas and provide pulp for paper mills in low-lying areas and also grow plants for export to European perfumers. By 2010, south Indias largest tea plantation will earn less than 50 per cent of its revenues from tea. There is a sea change in the attitude of workers and culture of the organization. In June, 2007 tea unions in the communist-governed state of Kerala called a strike. Every plantation in Kerala stopped for 11 days except KDHP. GENERAL OBJECTIVE To study the relationship between Organizational Change and Managerial Trust in the context of an employee buyout Specific Objectives To study the perceived Organizational Change in the context of an employee buyout. To study the level of managerial trust of employees in the context of an employee buyout.
Hypothesis H1: There is a positive relationship between Organizational Change and Managerial Trust in the context of an employee buyout. TOOLS FOR DATA COLLECTION Organizational Change The respondents were administered a 14-item questionnaire. In order to measure organizational change the standardized questionnaire which was developed by Ruth Alice (2004) was used. This questionnaire helps to determine whether the employees believe whether the reforms/changes have influenced the performance of the organization positively. The questionnaire was developed on the basis of items taken from widely used satisfaction and commitment scales. The 27 items concerned a wide range of different topics related to employee attitudes such as (a) attitudes toward the organization (e.g. How much are your future plans connected with this organization?), (b) general attitudes toward the work itself (e.g. How satisfied are you with your present work in this organization?), (c) attitudes toward managers (e.g. Do you trust the management and think that their decisions are the best for the organization?), (d) the benefits of the current change (e.g. In your opinion, how necessary are the changes in the organization?), (e) information about the current change (e.g. Do you have enough information about the reasons, content and objectives of the changes?). The survey used the Likert scale so the respondents could show their attitudes by choosing answers that range from strongly disagree (1) to strongly agree (5).
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The four items of the first scale, satisfaction with information (SI) addressing whether employees
Managerial Trust For studying Managerial Trust, the standardized questionnaire developed by Isaiah. O. Ugboro, North Carolina A&T State University. This scale was derived from earlier works on managerial trustworthy behaviors of Butler (1991); Whitener, Brodt & Korsgaard, 1998 and it contains 14 questions. The survey used the Likert scale so the respondents could show their attitudes by choosing answers that range from strongly disagree (1) to strongly agree (5). Data Collection Data is collected from the individual respondent using a structured standardized questionnaire. a sample size of 100 was taken for this study, which included labour, staff and management. The information was gathered from various departments such as Finance, Production, Field, Factory, Non tea operations, Industrial Relations and Management Information Systems. Table No.1 & 2 Regression between Organizational Change and Managerial Trust
Findings Table no.1 shows the regression analysis between Organizational Change and Managerial Trust. The
were satisfied with the information they received, depended on employee involvement in the change process and how much information was given to employees about the current changes and company goals. Naturally, employees want this information before the changes are initiated, rather than after the fact. The second scale from four items addresses satisfaction with the leadership (SL), the following issues were most important for employees: how actively does management solve company problems, can management and their decisions be trusted, and how well can superiors organize the work of subordinates. The third scale connected organizational commitment and job satisfaction (CJ) by combining four questions about the willingness to continue working for a particular organization and satisfaction with the present job. The fourth scale includes three questions about the benefits of change (BC) including how necessary the changes were for the organization and how individuals benefit from these changes.
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R square value exhibited in the Table 1 shows that 64.3% of the variation in the dependent variable i.e. Managerial Trust is explained by the variation in the independent variable, Organizational Change. The result of the regression analysis in the Table no.2 suggests a relationship among Organizational Change and Managerial Trust at significance level of 0.000. Hence the relationship is significant and the hypothesis that there exists a significant positive relationship between organizational change and managerial trust in the context of an employee buy out is accepted. Organizational change here employee buy out has a positive influence on the level of managerial trust. The employees of this organization have a very high level of managerial trust and they have a very important role to play in the decision-making in the organization in the context of employee buyout. This findings very well goes with the findings that workers participation politically can reduce power imbalance, psychologically it satisfies some basic human skills, and for managerial reasons because it contributes to organizational effectiveness. But making it work is difficult. It runs against the natural human instinct not to share power. It is too easy to introduce participation symbolically or superficially without making the various adjustments required to make it work Strauss, G (2006). The employee buyout model in the company has taken care of all the three aspects and can be deemed to be one of a rare example in the present day organizational studies. The purchase of the company by the workers is the first stage of a series of transitions to transform the company that will deliver on the issues of job security and, importantly from a labour process perspective, wide dissemination of job satisfaction throughout the organisation; the emancipation from alienation and the division of labour as a worker owner; and the potential to minimize bureaucracy, hierarchy and managerial controls. Discussion Organizations exist in a dynamic and changing environment. Most of them are undergoing extensive changes with resources being increasingly scarce and staffs being asked to do more with less. Any change will have impact on its individuals bringing changes in their personal, social, economic life which in turn influence their attitudes, beliefs and behaviors. As organizational change occurs, peoples sensitivity to trust and fairness increases. Managerial trust and employee psychological attachment are significant employee factors which play a significant role in behavioral outcomes such as performance, absenteeism, discipline, etc and they are the most important factors which determine the success of an organization. So organizational change will have some influence on the level of managerial trust and employee psychological attachment of employees. Any change implemented on the organization to be effective will have to be supported by change behavior of its employees. Change imposes new roles, responsibilities and relationship among employees. This creates a situation that in a sense forces new attitudes and behaviors in people. The achievement of sustainable change requires strong commitment from its people. Planned changes are always meant to be progressive and beneficial for the employees. Whitener, Brodt, Korsgaard and Werner (1998) identified the characteristics of managerial trust as behavioral consistency, behavioral integrity, sharing and delegation of control, communication and demonstration of concern. Behavior consistency is the perception that the behavior of a trustee (manager) is predictable and reliable. Behavior integrity, according to Dasgupta (1998), is the belief that management tells the truth and keeps its promises to employees. Several studies lend support to the notion that employees trust in management is influenced by their attributions about managements behavior, integrity and consistency (Butler, 1991).
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Paton and Holmstron (as cited in Jensen,A, 2006) outline three key issues for the success of a worker buyout programme. The key design features suggested are: Equity Participation collective and individual equity holdings for all employees ensures individual motivation and the long term stability of the organization Corporate Governance a two tier board is recommended involving key stakeholders, enabling the legitimization of management and the ability to deal with complexity more effectively than the Anglo Saxon unitary board. Employee Participation the emergence of worker self management and a team based model, restructuring the insolvent enterprise from command and control to maximize employee engagement and performance improvement. Trade Union involvement enabling collective bargaining over social and remuneration issues and acting as a catalyst for improved communication and training practices, resulting in high performance workplaces. Networked Companies companies working in a cluster to leverage resources and tendering opportunities, also as a buffer against the market offering greater employment security and hence a willingness of employees to engage in workplace change and the improvement of corporate performance. A financial institution providing a range of financial packages, financial and management advice, training and technical support. In corporate rescue from an insolvent situation, where reconstruction is more difficult, a different model is proposed, one that will also accommodate the bottom up process of a worker buyout. Here the process of concessional bargaining over job cuts and possible cuts in the remuneration package becomes an issue to be resolved with union assistance (Jensen,A, 2006). Conclusion The birth and growth of the KDHP model has opened up a new corporate thinking in the trouble torn plantation sector in India. It is a success story of vision, courage and leadership, blended with innovation, teamwork and collective effort, and driven by hard work. The concept of employee ownership and participation in management practiced as in KDHP for the first time in the history of plantation sector. World Bank and the Indian Government are studying this to revive other defunct tea gardens Limitations Research was conducted by the authors in the organizations premises, with its personnels cooperation and with the organizations approval. The study was a modest attempt to examine not only whether employee-buy out works, but how and even why it works. The intervening variable between participation and its outcomes was not studied with a causal design. This case study is also based on interviews with the key actors, supplemented by available documents and attitudinal surveys. Key actor reports can be biased, attitudinal surveys tell how workers feel about participation, not how it works in practice. The role of trade union in employee-buy out has not been covered in the study. Balanced perspectives on the model would have to be obtained from them .The findings of the study has to take into consideration this important aspect as well. The results of the current research must be interpreted cautiously. First, it should be noted that a common method bias could have occurred in examining the overall perception effects because the independent and dependent variables were collected from the same subject. In addition, it should be
Conditions for success for an employee buyout
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noted that there exists the possibility of a construct overlap between an employees overall perception of organizational change and his or her perception of managerial trust. Finally, a limitation embedded in the sample should be noted. In collecting the data, the authors attempted to include a diverse range of employees in terms of functional and job characteristics. This procedure might have made the sample less concentrated on a specific area or factor, but does not represent the random sampling procedure. Therefore, the sample used in the current research should be interpreted as a convenience sample, and the results should be cautiously generalized. Note Author is thankful to Mr. T.V Alexander (MD, KDHP Co (P) Ltd.) and Mr. Mohan. C. Varghese (Senior Manager, KDHP Co. Pvt. Ltd) for allowing collecting data from their Organization. The author also thank Ms Rebecca Chacko MHRM IV Semester student for collecting data for this work from the organization. The contribution of Ms Rose Paul, Research Officer at Rajagiri is also acknowledged.) References 1. Asopa,V.N.(2007). Tea Industry of India: The Cup That Cheers has Tears (Working Paper). No.2007-07-02 .IIM Ahmedabad: India 2. Butler, J.K. Jr. (1991). Towards understanding and measuring conditions of trust: Evolution of a condition of trust inventory. Journal of Management, 17:643-663. 3. Dasgupta, P. (1998). Trust as a commodity. In D. Gambetta (Ed.), Trust: Making and breaking cooperative relations: Cambridge, MA: Basil Blackwell. 4. Holmstron.M. (1993). Spains New Social Economy. Oxford: Berg Publishers Limited 5. Jensen, A. (2006). Insolvency, Employee Right & Employee Buyouts-A strategy for restructuring-A report. ITHACA Consultancy, London. 6. Paton.R.(1989). Reluctant Entrepreneurs. Open University Press. Milton Keynes. 7. Ramaswamy, E.A. (1999). Worker Co-operatives in India: Lessons from Kamani. Economic and Political Weekly, 30 January: 254 -7. 8. Strauss, G. (2006).Worker Participation - Some Under-Considered Issues. Industrial Relations, 45(4): 778-803 9. Whitener, Ellen M., Brodt, Susan E., Korsgaard, M. (1998). Managers as initiators of trust: an exchange relationship framework for understanding managerial trustworthy. Academy of Management Review, 23(3): 513-530
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ENTERPRISE DEVELOPMENT AND MANAGEMENT
CHAPTER
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ENTERPRISE DEVELOPMENT & MANAGEMENT
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FACTORS MOTIVATING CONSUMERS BUYING BEHAVIOR TOWARDS BOTTLED WATER IN BANGLADESH: A MULTIVARIATE ANALYSIS
Md.Wahidul Habib PhD Research Scholar Department of Economics Jadavpur University Kolkata, India E-mail: wahidul.habib@rediffmail.com Abdullah Iftikhar Lecturer Department of Business Administration Southeast University Dhaka,Bangladesh E-mail: abdullah_sagar@yahoo.com Sharmin Ahmed Bachelor of Economics (Hons) Student Department of Economics East West University Dhaka, Bangladesh E-mail:sharmin70@hotmail.com
Bottled water is drinking water packaged in bottles for individual consumption and retail sale. In Bangladesh, bottled water entered the market after the 1988 flood when hepatitis broke out widely and people began to regard tap water as unsafe. Recently, different types of bottled water are selling in the local market. The aim of the paper is to explore the factors used in selecting bottled water by the Bangladeshi consumers. A survey was conducted among the four types of consumers such as university students, service holders, housewives, and businessmen. A total of 257 consumers were interviewed. They were selected by stratified random sampling procedure. According to correlation matrix,there is highly positive correlation between status and potable , shape of the bottle and good quality , good quality and hygiene , hygiene and maintain standard procedure. On the other hand, there is highly negative correlation between free from chemical smell and shape of the bottle , free from chemical smell and good quality. A multivariate analysis technique like Factor Analysis was used to identify the factors. The result shows that packaging is the most important factor in selecting bottled water by the Bangladeshi consumers followed by status, taste, reasonable price and attractive advertisement. The results of the regression analysis indicate that taste, safe, status and potable have a significantly positive impact on the overall customer satisfaction.
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Key Words: Bottled water, consumer behavior, multivariate analysis.
Bottled water is drinking water packaged in bottles for individual consumption and retail sale. The water may be used as mineral water, purified water, sparkling water , spring water and sterile water. In Bangladesh, bottled water entered the market after the 1988 flood when hepatitis broke out widely and people began to regard tap water as unsafe. Recently, different types of bottled water are selling in the local market(Chowdhury 2009). Nowadays, bottled water has become a part of our social life. Consumers purchase bottled water primarily for survival. The brand preference of Bottled Water is mostly influenced by a number of factors such as hygienic, taste, packaging, status, reasonable price and attractive advertisement so on. The aim of the paper is to explore the factors used in selecting bottled water by the Bangladeshi consumers.
2. Review of Related Literature So far we know, a limited number of research studies, articles relating to various aspects of consumers buying behavior towards bottled water have been published home and abroad. However, critical reviews of some of the important research studies/articles have been made in this study. Qin and Brown(2008) examined the ability of two hypotheses(safety concern and institutional trust) to explain male/female attitudes toward genetically engineered salmon and the effect of attitudes on male/ female differences in purchase intent.Nagpal and Krishnamurthy(2008) find that compatibility between alternative valence and task influences decision time, decision difficulty, attribute recall, and effort. Kim et al (2008) identified perceived enjoyment, perceived monetary value, perceived usefulness and perceived ease of use as four major factors that directly affect Korean mobile phone users SMS adoption. Nuruzzaman (1996) investigates the activities, problems, and performance of a Bangladeshi company. His paper suggests that, in pricing, the company always considers consumers demand and the competitors challenges. Mass media advertisement is preferred in case of promotion and the performance of marketing of soft drinks largely depends on perfect blending of the elements of the marketing mix to cope with the changing marketing environment. In a similar study carried out on a different Bangladeshi company, Solaiman and Chowdhury (1996) also show evidences of customer oriented distribution network practices. Khalili et al. (1998) reviewed the marketing strategy of soft drinks, demand for various brands, quality control etc. and found them to be very important factors for selling soft drinks. Hossain and Bhayani (2005) identify some attributes such as taste, flavor, digestive, price, color, calorie content, sugar content, pungent, hygiene, brand image, power of freshness, good for health, light, mental satisfaction, good container, sweetness, lemon. soft, good packaging, caffeine, and increase status of soft drink which have strong influence on consumer brand preference in Bangladesh especially among the young consumers of soft drinks. Habib et al (2008) explored the factors used in selecting soft drinks by the Bangladeshi consumers. They tried to compare of the factors concerned between carbonated and non-carbonated soft drinks. They conducted a survey among the four types of soft drinkers such as college students, university students, office-goers, and passers-by or visitors. They interviewed 467 soft drinkers from the four groups of drinkers. For analyzing data, they employed both descriptive and multivariate statistics. Results of the study revealed that the factors affecting the selection of soft drinks in Bangladesh are price, brand image, flavor, color, and advertisements. Lastly, Khan et al (1992) examined four different brands of bottled water and counted aerobic bacteria. They identified all four brands unable to maintain satisfactory standards.
1. Introduction
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Thus it appears from the preceding discussions that consumers buying behavior towards bottled water has not been addressed from the angle of multivariate analysis. It would, therefore, not be unjustified to state that present study is the first of its kind in Bangladesh and can be used for guidelines for the similar studies in years ahead. 3. Objectives of the Study The study has been conducted keeping the following objectives in mind: i) To identify factors that affects the buying behavior. ii) To analyze the factors influencing brand preference of bottled water. iii) To identify factors those have a significantly positive impact on the overall customer satisfaction. 4. Research Design 4.1 Sampling Procedure The sample for the study consisted of 257 respondents out of which 72 respondents from Dhaka, 70 from Chittagong, 35 from Rajshahi, 36 from Khulna , 20 from Sylhet and 24 from Barisal. They were selected by stratified random sampling procedure. The initial sample units were divided into different stratum- university students, housewives, businessmen, and service holders on the basis of their occupation. Then we select the sample randomly from that stratum. Dhaka, Chittagong, Rajshahi, Khulna, Sylhet and Barisal were purposively chosen for the study as they are divisional cities. 4.2 Questionnaire Development and Pre-testing To achieve the objectives of the study, a structured interview schedule was developed to collect information from the remaining sample population. Here we introduce Likert Scale for measuring the attitude of the respondents. Initially draft questionnaire was prepared. The initial questionnaire was pre-tested and necessary correction was made before being finalized. 4.3 Data Collection The study is compiled with the help of primary data. Primary data were collected from the respondents on the basis of interview schedule through personal interview. The study was conducted during the period from May 2008 to August 2008. Moreover, the desk study covered various published and unpublished materials on the subject. 4.4 Data Analysis In the present paper, we analyze our data by employing descriptive statistics, factor analysis and regression analysis. For the study, the entire analysis is done by personal computer (PC). A well known statistical package SPSS (Statistical Package for Social Sciences) 12.0 Version was used in order to analyze the data. 5. RESULTS
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5.1 Demographic Profile The obtained sample represented a diversity of age groups, occupations and educational backgrounds. As shown in table 1, majority of the respondents are housewives and university students and their
Table 1: Demographic Profile Sample Characteristic Employment Status University Students Service Holders Housewives Businessmen Total Age 15-24 Years 25-34 Years 35-44 Years 45-64 Years 64+ Total Education Completed Year 10 or Less Completed Year 11 to 12 Certificate or Diploma Undergraduate Degree Postgraduate Degree Total Gender Male Female Total Division Dhaka Chittagong Rajshahi Khulna Barisal Sylhet Total 5.2 Correlation Matrix According to table 2, there is highly positive correlation between status and potable (0.414), shape of the bottle and good quality (0.385) , good quality and hygiene(0.341) and hygiene and maintain standard procedure(0.337). On the other hand, there is highly negative correlation between free from chemical smell and shape of the bottle(-0.532) and free from chemical smell and good quality(Frequency (Percentage) 92(35.8) 49(19.1) 102(39.7) 14(5.4) 257(100.0) 97(37.7) 46(17.9) 53(20.6) 57(22.2) 4(1.6) 257(100.0) 48(18.7) 141(54.9) 12(4.7) 23(8.9) 33(12.8) 257(100.0) 110(42.8) 147(57.2) 257(100.0) 72(28.8) 70(27.2) 35(13.6) 36(14.0) 24(9.3) 20(7.8) 257(100.0)
percentages are 39.7 and 35.8 respectively. The same table also reveals that 37.7 percentage respondents belong to age group 15 to 24 years and half of the respondents (54.9 percentage) were completed 12 years of education life. Most of the respondents are female (57.2 percentage) and half of the respondents are stayed in Dhaka (28.8 percentage) and Chittagong (27.2 percentage) divisions.
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0.481).They are significance at 1% level. Table 2: Correlation Matrix of Different Attributes of Bottled Water
2 3 4 5 6 7 8 9 10 11 12 13 14 15
Attributes
1.Safe 1.000 -.003 .007 .337(**) .255(**) .116 -.071 -.072 .110 .188(**) -.162(**) -.081 .121 -.110 .122(*) .010 .033 -.084 .240(**) -.078 -.073 -.140(*) -.133(*) .226(**) -.016 .123(*) .050 .175(**) .113 -.078 .149(*) .101 .100 -.080 -.087 .102 .154(*) .096 -.056 .043 .001 .065 -.067 .008 -.082 .175(**) .106 -.014 .059 -.032 -.341(**) -.010 -.070 1.000 1.000 -.106 .385(**) .287(**) -.016 -.481(**) .264(**) .106 .155(*) -.120 1.000 -.319(**) 1.000 .155(*) -.110 .414(**) .025 -.087 1.000 .068 -.114 .305(**) 1.000 -.033 .090 1.000 -.173(**) 1.000 1.000
2.Maintain Standard Procedure
3.Reasonable Price
4.Potable
5.Hygienic
6.Available Everywhere .026
7.Status
8.Good Quality
9.Natural Taste
10.Reputed Brand
11.Shape of the Bottle
12.Free from Chemical Smell 13.Attractive Advertisement 14.Well Known Company 15.Free from Harmful Chemicals and Contaminants
** p<.01 and *p<.05
298
1.000
.177(**)
.051
.091
.314(**)
.074
-.268(**)
.088
.223(**) -.031
-.049
.016
.257(**)
-.532(**) 1.000 -.276(**) -.201(**) .097 -.299(**) .007 .257(**) .044 .041 -.149(*) -.083 1.000 -.273(**) .138(*) 1.000 .158(*) -.047 -.145(*) 1.000
-.180(**)
-.155(*)
-.083
Table 3 shows that the attributes of factor loadings on each of the six factors that emerged with eigen values being greater than 1.0. Collectively, the six factors explained 63.927% of the variance. Variables with a factor loading of higher than 0.5 are grouped under a factor. A factor loading is the correlation between the original variable with the specific factor and the key to understanding the nature of that particular factor (Debasish 2004). Factor1: Hygiene and Availability- included hygiene (0.671), available everywhere (0.669), maintain standard procedure (0.653), reputed brand (0.502) and 11.50% of total variance can be explained by it. Factor 2: Packaging and Quality-included shape of the bottle(0.843), good quality(0.698), free from chemical smell (-0.572) and 11.23% of total variance can be explained by it. Factor 3: Taste-included natural taste(0.814) and free from harmful chemicals and contaminants (0.456) and 11.21% of total variance can be explained by it. Factor 4: Safe-included safe (0.748) and well known company (-0.576) and 10.09% of total variance can be explained by it. Factor 5: Status and Potable-included status (0.839) and potable (0.684) and 9.97% of total variance can be explained by it. Factor 6: Price and Advertisement-included reasonable price (0.772) and attractive advertisement (0.661) and 9.93% of total variance can be explained by it. Table 3: Factor Analysis of Different Attributes Related with Brand Preference Factor 1. Hygienic and Availability Item 5. Hygiene 6. Available Everywhere 2. Maintain Standard Procedure 10.Reputed Brand 11. Shape of the Bottle 8. Good Quality 12. Free from Chemical Smell 9. Natural Taste 15. Free from Harmful Chemicals and Contaminants 1. Safe 2. Well Known Company 7. Status 4. Potable 3. Reasonable Price 13.Attractive Advertisement Factor Loading .671 .669 .653 .502 .843 .698 -.572 .814 .456 .748 -.576 .839 .684 .772 .661 1.681 1.513 1.496 1.489 11.209 10.086 9.974 9.928 Eigen Values 1.725 Explained Variance 11.5000
2. Packaging and Quality 3. Taste 4. Safe 5. Status and Potable 6. Price and Advertisement
1.684
11.229
5.3 Factor Analysis
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5.4 Regression Analysis Table 4 indicates that the F ratio for the multiple regression model is statistically significant (F=6.198***, p<.001). The adjusted R2 value of the multiple regression model is .109, indicating that 11% of the variation in the overall satisfaction is explained by the independent variables. Table 4 also reveals that taste ( =.158**, p<.01), safe ( =.151*, p<.05) and status and potable ( =.307***, p<.001) were positively and significantly related with overall satisfaction of the consumers. Table 4: Regression Analysis of the Overall Satisfaction Independent Variables Intercept Hygiene and Availability Packaging and Quality Taste Safe Status and Potable Price and Advertisement Model Statistics Adjusted R2 F Ratio *p<.05, ** p<.01 and *** p<.001 Dependent Variable: Overall Satisfaction, 2.187*** -.043 -.045 .158** .151* .307*** .089 .109 6.198***
6. Conclusions and Recommendations From the above analysis, it is clear that safe, maintain standard procedure, reasonable price, potable, hygienic, available everywhere, status, good quality, natural taste, reputed brand, shape of the bottle, free from chemical smell, attractive advertisement, well known company and free from harmful chemicals and contaminants have emerged important factors for preferring a specific brand of bottled water. From the factor analysis, it identified six factors, which are responsible for preferring a specific brand of bottled water. These six factors can be used as guideline for the concerned producers. The results of the regression analysis indicate that taste, safe, status and potable have a significantly positive impact on the overall customer satisfaction of bottled water. Manufacturers should understand the various factors that influence consumers choice behavior. The attributes that are affecting the brand of bottled water in Bangladesh revealed in the study should be given due consideration by respective producers. The findings of the study may be used as an index for an improvement in their products for wider acceptance and formulating marketing strategies accordingly. Also the findings of this investigation have implications for consumer research by both academics and practitioners.
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Chowdhury Ameer H. (2009). Bottled Water, Arsenic Contamination and the Poor of Bangladesh. Institute for Environment and Development Studies(IEDS)-Bangladesh. Available at: www.citizen. org/cmep/Water/cmep_Water/reports/Bangladesh/ (Retrieved on 12-02-2009). Debasish Sathya Swaroop (2004). Exploring Customer Preference for Life Insurance in India-Factor Analysis Method. Vilakshan 1(1). Habib Md. Wahidul, Islam Dr. Nazrul , Muzzaffar Ahmed Taneem (2008). A Study of the Factors Used in Selecting Soft Drinks by the Bangladeshi Consumers. First International Conference of Global Business and Management Forum (GBMF) 2008, Pearl School of Business(PSB). 7th to 8th November. Gurgaon. India. Habib Md.Wahidul, Nazmul Abdul Kader , Faruq Omar (2007). Factors Affecting Consumers Buying Behavior Towards Color Television. 9th South Asian Management Forum: Management for Peace, Prosperity and Posterity 2007, Dhaka: Association of Management Development Institutions in South Asia (AMDISA), February 24-25,2007, North South University, pp.389-396. Hossain Md. Enayet , Bhayani Sanjay (2005). Consumer Attitudes Towards the Soft Drink (SD) in Bangladesh: A Look at the Impact of Brand and Attributes. Management Trends 2(1). Khalili Masumur Rahman, Billah Masum , Islam S.M. Milon (1998). Beverage: A Potential Industrial Sector. Monthly Panorama, 10. Khan M. R., Saha M. L. , Kibria A. H. M. G. (1992). A Bacteriological Profile of Bottled Water Sold in Bangladesh. World Journal of Microbiology and Biotechnology 5(8): 544-545. Kim Gil Son, Park Se Bum, Oh Jungsuk (2008). An Examination of Factors Influencing Consumer Adoption of Short Message Service. Psychology and Marketing 25(8):769-786. Nagpal Anish , Krishnamurthy Parthasarathy (2008). Attribute Conflict in Consumer Decision Making: The Role of Task Compatibility. Journal of Consumer Research 34:696-705. Nuruzzaman Md. (1996).Marketing of Soft Drinks in Bangladesh: A Case Study on Bangladesh Beverage Industries Ltd. Dhaka. Business Review 2 (1). Qin Wei, Brown J. Lynne (2008). Factors Explaining Male/Female Differences in Attitudes and Purchase Intention Toward Genetically Engineered Salmon. Journal of Consumer Behaviour 7: 127-145. Solaiman Md. , Chowdhury Md. Tayub (1996). Marketing of Soft Drinks in Bangladesh: A Case Study of Eastern Beverage Industry Ltd. in Chittagong. Journal of Marketing Studies 1(1).
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25 ENTREPRENEURIAL COMPETENCY
MAPPING: A STUDY OF YOUTHS IN TRIBAL REGION
Dr. Hanuman Prasad Assistant Professor, Faculty of Management Studies, M.L.S. University, Udaipur, Rajasthan 313001, India, drhanu73@yahoo.com And Miss Neetu Kala Research Scholar, Faculty of Management Studies, M.L.S. University, Udaipur, Rajasthan 313001, India, mba_k_nitu@yahoo.co.in The lure of being ones own boss has spread its roots in the minds of youths. But improper entrepreneurial education, inability to recognize potential and success insecurity compels them to choose secured job path. The city of lakes Udaipur is surrounded by tribal population where the earning for livelihood is a major thrust. Diverting youth of tribal regions may prove to be dual edged sword in solving problem of both livelihood and employment generation. Therefore the present paper attempts to map the entrepreneurial competencies among the youths studying in tribal region at both graduate and under graduate levels along with examinining the current education system. The present paper is exploratory in nature. A sample of 272 graduates and under graduates of various stream are surveyed in tribal regions of Udaipur. A four tier entrepreneurial education system for enhancing entrepreneurial participation of young generation has been offered towards end. INTRODUCTION The presence of entrepreneurism in an economy is a healthy sign. The economic growth increasingly relies on entrepreneurship as its driving force (Kourilsky and Esfandiari 1997). Even it is widely acknowledged that entrepreneurship is critical to the development of knowledge economy (Hannon et al 2005). The industrially developed countries like USA, Germany and Japan bears the evidence that an economy is an effect for which entrepreneurship is the cause. (Khanka 2003). It is a dual edged sword which on one hand enchases available opportunities and promotes capital formation; on the other, it solves unemployment and poverty problems present in an economy. The youths are considered to be pillars of a nations economy. Thus, their contribution in entrepreneurial activities is inevitable. The city of lakes Udaipur is surrounded by tribal population. The earning for livelihood is a major thrust in this region. The youth participation in entrepreneurial activities in this region may prove to be a boon for solving the problem of livelihood. Moreover, the issue of great concern youth empowerment will also be automatically dealt. Although lot of efforts have been done by Government and non government agencies to improve their living standard but very little effort has been made to divert this population towards self employment generation. An individuals career choice is determined by a variety of factors such as family background and expectations, availability of opportunities etc. But among them education system plays a dominant role in nurturing mindset of individuals. Despite of the awareness about the entrepreneurial lure
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Therefore the present paper attempts to map the entrepreneurial competencies among the youths studying in tribal region at both graduate and under graduate levels and examine the current education system in this view. ENTREPRENEURSHIP: EDUCATION AND YOUTH PARTICIPATION The word entrepreneur is derived from the French verb enterprendre and its literal meaning is to undertake. The term entrepreneur may be used in connection with those who incubate new ideas, start enterprises based on those ideas and promote added value to society based on their independent initiative (Shukla 2003). Entrepreneurship refers to a process of action an entrepreneur undertakes to establish an enterprise. Entrepreneurs act as architects of their business. The essence of entrepreneurship is to create something new and promote industrial development in an economy (Raju 2003). It is general perception that the youth have more ability to take risk due to his age aggressiveness. The lure of being ones own boss has also spread its roots in the minds of individuals. Therefore the contribution of youth in entrepreneurial activity is inevitable and demanding. Interest in entrepreneurship is best explained by a students major and status, not gender (Shinnar et al 2009). Entrepreneurship needs nurturing from various institutions. Special nurturing is to be provided for youth entrepreneurship to be actualized to the fullest extent. Entrepreneurial education plays a dominant role in shaping the employment dreams and desires of individuals. It is a life long learning process starting through elementary education to all levels of education. It is also recognized that entrepreneurship education is a crucial component for building entrepreneurial individuals, cultures and economies and for creating entrepreneurial opportunities (Hannon et al 2005). ENTREPRENEURIAL COMPETENCY: A competency is what a successful employee must be able to do to accomplish desired results on a job. (Gokhale 2005). The underlying characteristic of a person which results in effective or superior performance in a job may be defined as competence. In organizational terms, competency is described as a cluster of related knowledge, attitudes, skills and other personal characteristics that. affects a major part of ones job, correlates with performance on the job, can be measured against well accepted standards, can be improved via training and development (Parry 1998). The list of individual competencies that represent the factors most critical to success in given jobs that are part of the individuals current career plan is known as competency map. Competencies are built up over time and are not innate. It typically takes experience on the job to build competencies. Knowledge, Skills and Abilities (KSAs), by contrast , might be brought into the job by the entry level employees (Gokhale 2005). Entrepreneurship is not only lucrative but it also provides individuals with challenges and the opportunities to maximize their power autonomy and impact (Heilman and Chen 2003). Although it involves thrill of risk and challenges, but it is the only pathway to achieve the dream of being financial independent. Entrepreneur requires certain knowledge, skills or personality which is generally called as entrepreneurial competence or traits. Success of an entrepreneur is governed by entrepreneurial competencies (Shukla 2003). Innovation and risk-bearing are regarded as the two basic elements involved in entrepreneurship (Khanka 2003). Bovee et al opines that an entrepreneur should be adaptable to situations, alert to social environment, ambitious and achievement oriented,
among youths of tribal region, improper entrepreneurial education, inability to recognize potential and success insecurity compels them to choose a secured job path.
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assertive, cooperative, decisive, dependable, dominant, energetic, persistent, self confident, tolerant of stress and willing to assume responsibility. REVIEW OF EXISTING LITERATURE Studies on various aspects of entrepreneurship have been conducted across the world. Few of them are reviewed here. Frishammar and Horte (2007) examine the relationship between market orientation and entrepreneurial orientation, and performance in new product development. It shows that a market orientation and innovativeness were positively related to performance in new product development, while pro-activeness and risk taking show no such relationship. The issue of group entrepreneurship has also been given due attention by researchers as it offers an opportunity for instilling basic managerial skill and values amongst the rural poor. The SHGs (Self Help Groups) involvement in self- employment activities certainly contributes to group entrepreneurship at the grassroots level. A study by Manimekalai and Rajeshwari (2000) puts light on group entrepreneurship and related challenges prevailing in India. Group entrepreneurship through SHGs is an investment in the poor and an engine of development, and an idea, which could be given a serious try in future. Similarly many facts regarding why do young people become entrepreneurs has been explored by Street (2003). The study focuses on Youth Business International (YBI) programs to help the business communities to replicate what families and friends do for young people coming from disadvantaged background. Another study by Mentoor and Fredrich (2005) attempts to map entrepreneurial competencies possessed by the young students. The study ascertains whether a traditional first-year university business management course with an entrepreneurial component can contribute to the entrepreneurial orientation of students. The major features of entrepreneurs and innovators identified are knowledge, skills and attitudes. Gokhale (2005) elaborates the concept of project manager competencies and puts forward the how to aspects with the help of a real life case study of a project management competency mapping exercise based on 230 action-oriented definitions of PM Competencies. The impact of education system on entrepreneurial orientation and need of innovation in education system has been widely deliberated issue by researchers. A study by Kourilsky and Esfandiari (1997) reports the effects of an entrepreneurship education intervention (the New Youth Entrepreneur) on lower socioeconomic black high-school students knowledge of basic and advanced concepts in entrepreneurship. The study results confirm that appropriate curricular innovation can significantly influence the acquisition of entrepreneurship concepts and skills by lower socioeconomic black students. Another study by Hannon et al (2005) also highlights the need for innovation in the supply of entrepreneurship education in UK higher education institutions to enhance graduate entrepreneurship. Similarly, another study has developed a scale to measure the dimensions of entrepreneurship in Business Schools. The study suggests that Association to Advance Collegiate Schools of Business (AACSB) deans must reassess the schools mission, nourish entrepreneurship, reward and support opportunity creation and discovery, and link entrepreneurship with the schools strategy (Hazeldine and Miles 2007). McGowan et al (2008) highlights the role of universities in academic entrepreneurship and challenges in seeking to transfer the entrepreneurship agenda from faculties of business and management to faculties of science, engineering and technology. Shinnar et al (2009) investigates student and faculty attitudes toward entrepreneurship and entrepreneurship education. The study also address whether entrepreneurship should be part of the coursework for students. Even after extensive review of literature, no study has been noticed by researcher which attempts to map entrepreneurial competencies among youths of India in general and tribal region of Rajasthan state in particular. Thus this issue has been deliberated in this study.
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The study aims to map entrepreneurial competencies in youths of tribal region and examine that whether current education system is able to develop sufficient qualities among them. The study has employed descriptive survey research design. A questionnaire consisting of an instrument to measure entrepreneurial competencies in form of 23 statements related to daily routine habits and practices was developed. After a pilot survey and incorporating suggestions of a penal of experts to establish content validity, the questionnaire was administered on 300 students of under graduate and graduate level studying in tribal regions of Udaipur (Rajasthan) division (Banswara, Dungarpur, Sagwara, Jhadol and Udaipur). Out of which 28 responses were excluded due insufficient information. Finally, the 272 responses were used to analyze the data using SPSS. FINDINGS The responses were collected from a well developed questionnaire designed to measure personal as well as entrepreneurial competence related data. The respondents were asked to rate on five point Likert type rating scale, 23 statements related to their daily routine activities. These ratings were given scores 0-4. The instrument reliability was estimated by calculating Cronbachs alpha. Overall reliability for the instrument was .808. These values are above threshold limits of 0.75 of Cronbach alpha values. Table: Reliability Statistics for Entrepreneurial Competence Cronbachs Alpha .808 Cronbachs Alpha Based on Standardized Items No. of Items .822 23
Validation of Entrepreneurial Competence Index The scores given to statements were added to find Entrepreneurial Competence Index (ECI). A correlation between ECI and Personal Aptitude Score (PAS), measured in terms of innovation, managerial capability and risk taking to check internal consistency in responses. Following hypothesis was formulated. H1 There is no relationship between aggregate ECI and PAS Table: Relationship between Entrepreneurial Competence and Personal Aptitude Hypothesis H1 Pearson Correlation .359** Sig. (2-tailed)) .000 Result Rejected
** Correlation is significant at the 0.01 level (2-tailed). A positive correlation of .359 and significance value of .000 proves that the hypothesis is rejected. Thus it is enough to indicate that the consistent results have been attained from the respondents. However on this basis absolute validity cannot be claimed. Relative Importance of Factors Contributing Entrepreneurial Competence The 23 statements of instrument were reduced by asking 6 factor solutions from SPSS to overcome the difficulty in analyzing large number of variables. The principal component analysis and varimax methods of extraction and rotation have been applied. The value of Kaiser Meyer Olkin (KMO)
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statistic of .858 was found greater than the desirable value of 0.5 and Barltelets-test of sphericity was also found significant at 0.05 levels of significance with a chi-square statistics 1438.456 for 253 degrees of freedom, proving that the matrix is not an identity matrix. Thus the factor analysis is an appropriate technique for the data set. The Factor analysis solution has explained 52.398% variance. The factors so obtained were identified as performance efficacy, decisive, optimistic mindset, vibrant personality, sovereign aspiration and persuasive. Among the factors identified the first factors performance efficacy formed by clubbing eight statements explained maximum variance of 15.53% followed by decisive factor with variance of 8.29%. Optimistic mindset and vibrant personality factors have explained variances of approximately 8% while sovereign aspirations and persuasive by 6.88% and 5.78% respectively. Influence of Level of Education on Entrepreneurial Competence The study included respondents from graduate as well as undergraduate level. To test the impact of education level on entrepreneurial competence following null hypotheses were formed. H2 There is no difference in aggregate entrepreneurial competence index (ECI) between the graduate and undergraduate levels of education. In the similar manner H3, H4, H5, H6, H7 and H8 were framed for performance efficacy, decisive, optimistic mind-set, vibrant personality, sovereign aspiration and persuasive respectively. Test of difference between means (t test) at 5% levels of significance with 270 degrees of freedom was used to test these hypotheses. The results are summarized below: Table: Influence of Education level on Entrepreneurial Competence Hypothesis H2 H3 H4 H5 H6 H7 H8 t value -1.554 -1.671 -.811 -1.184 1.035 -.571 -2.088 Sig. (2-tailed) .121 .096 .418 .237 .302 .568 .038 Result Accepted Accepted Accepted Accepted Accepted Accepted Rejected
Except hypothesis for persuasiveness, all other null hypotheses were accepted which means statistically significant difference in entrepreneurial competence does not exist between the graduate and undergraduate level respondents. The reason behind this may be the presence of students of various disciplines in respondents which may have averaged the responses. It is normally assumed that commerce students have better understanding of entrepreneurial and managerial qualities as compared to other students. The testimony to the fact is focused entrepreneurial development programs organized to inculcate skills among engineers and agriculture scientists. The differences in persuasiveness may be due to the fact that students at undergraduate level have limited exposure that is why they are less convincing and influential.
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The neutral impact of education level on entrepreneurial competence examined in the earlier section required an analysis of influence of stream of education on entrepreneurial competence. The stream of education as asked in questionnaire was classified into three broad categories i.e. commerce, science and arts. Thus the following null hypotheses were formulated. H9 There is no difference among various streams of education with reference to aggregate entrepreneurial competence score (ECI). In the similar manner H10, H11, H12, H13, H14 and H15 were framed for all competency factors like performance efficacy, decisive, optimistic mind-set, vibrant, sovereign aspiration and persuasive respectively. The statistical technique F ANOVA for one way classification has been applied to test these hypotheses and the results are summarized as under: Table: Influence of Stream of Education-F ANOVA Statistics Hypothesis H9 H10 H11 H12 H13 H14 H15 FANOVA 4.340 2.399 3.002 1.440 1.885 4.309 .712 Sig. .014 .093 .051 .239 .154 .014 .491 Result Rejected Accepted Accepted Accepted Accepted Rejected Accepted
The results shows that H9 and H14 were rejected at 5% levels of significance which means statistically significant differences exist among the various streams of education with reference to aggregate entrepreneurial competence score and sovereign aspirations. The post hoc analysis and a study of relative mean shows that the commerce stream students have highest mean followed by science and arts respondents with reference to aggregate competency score. The commerce students are having significant difference in competency score as compared to arts and science students. Although the science respondents are ahead of arts respondents but the difference is statistically insignificant. The hypotheses on performance efficacy, decisive, optimistic mind-set, vibrant, and persuasive have been accepted. This may be due to the fact that few qualities are independent of education stream. Influence of family background on entrepreneurial competence It is normally advocated that family background is an important determinant in determining entrepreneurial competence. Thus family income and parents occupation has been used to examine. Family income was classified into four categories based on annual income and parents occupation into three categories i.e. service, business and agriculture. These hypotheses were tested using F ANOVA one way classification. H16 Family income levels and aggregate score of entrepreneurial competence (ECI) do not differ significantly. H17 There is no difference between among the categories of parents occupation and aggregate entrepreneurial competence (ECI). The H16 was rejected as it attained F-value of 4.599 which is significant at 5% levels of significance.
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This may be due to the fact that the lower income families give preference to secured salaried job. While H17 was accepted as it was found to be statistically insignificant with F value of 2.13. Research implications It is usually advocated that entrepreneurial education is a life long learning process starting through elementary education to all levels of education. Many schools even believe that they are already addressing the issue of entrepreneurship by offering variety of curricula (Kourilsky and Esfandiari 1997). The results of the study also show that most of the respondents of tribal region are also rich by entrepreneurial competencies but due to non availability of right direction they are not able to choose right path. In case of Rajasthan state of India, at school as well as college level curricula indirectly contributes to developing entrepreneurial KSAs but they are not enough to direct and motivate them for venturing. It can be observed that most of the students set their future target at school level for secured high salaried job without orientation of lure of entrepreneurship. Most of them plan for becoming doctor, engineer or civil servant. The people of tribal region even set target of lower salaried jobs despite of being rich of KSAs. If this population is diverted towards entrepreneurship, it not only will improve their generations but even countries idle resources will also be optimally utilized. It was observed by the researcher that most of the children are motivated by the stories and biographies of rulers, politicians and freedom fighters existing in school books. Inserting success stories of entrepreneurs may prove to be sound strategy to target the child mind at early stage. Similarly, inserting a subject on entrepreneurship at upper school and graduate level as compulsory subject for all streams like Hindi and English may also give directions to choose right path. Recently, government of India has issued guidelines to include environment as compulsory subject in all graduate and post graduate level. Similar action is needed with regards to entrepreneurship. Further at last, a four tier structure is suggested by the study. At primary and upper primary education level insertion of success stories of entrepreneurs, chapters on basics of entrepreneurship and lure of entrepreneurship at higher secondary level, a compulsory subject on stream related entrepreneurial opportunities at graduate level and at post graduate level a separate specialization course compulsory for all universities and colleges. Although, some universities are running post graduate courses on entrepreneurship but they are facing problem of non availability of good candidates. The root cause of this problem is students choice of job oriented courses. This problem will also be solved by the four tier structure as the lure of entrepreneurship will be widely spread by throughout entrepreneurial education. Epilogue Entrepreneurship is one of the most advocated topics now a day. It has emerged as major discipline in paving the way for empowerment of youth. But its reach to minority of youth has created worries for India. A suitable environment needs to be created for spreading its reach from minority to majority of youths. As it has been identified in the study that graduate and undergraduate respondents entrepreneurial competencies do differ while the stream of education has substantial influence. This indicates that entrepreneurship education needs to be imparted in science and arts students. The implementation of four tier structure suggested in the study may prove to be boon for diverting individuals towards entrepreneurial choices. The respondents of tribal region may also be motivated to participate in entrepreneurial activities through this system where entrepreneurial orientation is inculcated by compulsion to prepare mid set of entrepreneur.
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The study has identified six factors of which no difference were found in first four factors viz performance efficacy, decisive, optimistic mind-set, vibrant across the education level and stream of education.
* Bovee Courtland L, Thill John V, Wood Marian Burk, Dovel George P . Management. in Shukla, MB (2003). Entrepreneurship and Small Business Management. Allahabad: Kitab Mahal. * Frishammar Johan, Horte Svenake (2007). The Role of Market Orientation and Entrepreneurial Orientation for New Product Development Performance in Manufacturing Firms. Technology Analysis & Strategic Management. 19(6). 765788. * Gokhale Dhananjay (2005). PM Competency Mapping. PMI Global Congress Proceedings. Singapore. * Hannon Paul D, Collins Lorna A, Smith Alison J (2005). Exploring Graduate Entrepreneurship. Industry and Higher Education. February: 11-23. * Hazeldine Mary, Miles Morgan (2007). Measuring Entrepreneurship in Business Schools. Journal of Education for Business. March/April : 234-239. * Heilman, ME, Chen (2003). Entrepreneurship as a solution: the allure of self employment for women and minorities. Human Resource Management Review. 13: 347-364 as stated in Prasad and Verma (2006). Women Entrepreneurship in India. The Indian Journal of Commerce. 59(2): 95-105. * Khanka SS (2003). Entrepreneurial Development. New Delhi: S. Chand and Company Ltd. * Kourilsky Marilyn L, Esfandiari Mahtash (1997). Entrepreneurship Education and Lower Socioeconomic Black Youth: An Empirical Investigation. The Urban Review. 29 (3):205-215. * Manimekalai N, Rajeshwari G (2000). Grassroots entrepreneurship through Self Help Groups. SEDME Journal. 29(2): 77-98. * McGowan Pauric, Sijde Peter van der, Kirby David (2008). The role of universities in the entrepreneurship industry: Promoting the entrepreneurship agenda in HEIs. Industry and Higher Education. 22(1): 4959. * Mentoor ER, Friedrich C (2005). Is entrepreneurial education at South African Universities successful?. Industry and Higher Education. June :.221-232. * Raju G (2003). Women Entrepreneurship. SEDME Journal, 30(4): 15-20. * Parry Scott (1998). Project Management Competency Development Framework, PMI as in Kumar Dileep M (2006) Career- Competency-Based Human Resource Management. http:// www.indianmba.com/Faculty_Column/FC305/fc305.html visited on 2nd March, 2009. * Shinnar Rachel, Pruett Mark, Toney Bryan (2009). Entrepreneurship Education: Attitudes Across Campus. Journal of Education for Business. January-February:151-158. * Shukla, MB (2003). Entrepreneurship and Small Business Management. Allahabad: Kitab Mahal. * Street R (2003). Thought Leadership Conference. Welcome address at special plenary session: Thought leadership conference. New Delhi.
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26
ENTREPRENEURSHIP EDUCATION IN BANGLADESH: A STUDY BASED ON PROGRAM INPUTS

Dr. M. Tahlil Azim Assistant Professor, Independent University, Bangladesh And Mr. Mohammad Muzahid Akbar Senior lecturer, Independent University, Bangladesh
The study attempts to conduct an input based evaluation of the Entrepreneurship Development courses offered at BBA and MBA level in different public and private universities in Bangladesh. It has used primary data collected through a survey by using a structured questionnaire prepared based on an Entrepreneurship Education Model proposed by Azim (2007). It is observed that the entrepreneurship courses offered by different universities in Bangladesh as a whole have medium level of effectiveness in terms of meeting the objectives. Keywords: Entrepreneurship, Education, Skill, Trait, Knowledge INTRODUCTION Entrepreneurship is widely recognized as a critical factor in economic development. Schumpeter (1934) viewed entrepreneurship as the major conducive factor to economic growth. McClelland (1961) treated it as the causal factor of development. Keeping the critical role of entrepreneurship in mind Bangladesh has paid attention to the development of entrepreneurship in the country in order to uplift the standard of living of its people. In this connection, among other measures, there are both public and private efforts for entrepreneurship development in the country through education and training intervention. Courses on Entrepreneurship have been introduced at different academic levels and Entrepreneurship training programs have been designed and offered through different public, private, and development institutions or organizations in Bangladesh. However, the poor level of industrialization, modest level of economic growth and massive unemployment in the country indicate that Bangladesh could not make significant headway in entrepreneurship development. So, naturally it points to the effectiveness of Entrepreneurship education and training in the country. Against this backdrop, the present study focuses on the evaluation of entrepreneurship education at University levels of Bangladesh. The study attempts to evaluate the Entrepreneurship Development course(s) offered at BBA and MBA level in different public and private universities in Bangladesh in terms of their objectives and contribution in developing trait, skill, and knowledge among the students. It also focuses attention to understand the facilitators characteristics and teaching approaches of these courses offered in Bangladesh.
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The study has been based on primary data collected through a survey by using a structured questionnaire with five point Likert scale (0-4). The respective instructors in different Academic Departments offering entrepreneurship course(s) in public and private universities have been chosen as the respondents of the survey. A total of 58 questionnaires (78% of the total respondents) have been received and found up to the expectation, of which 16 from Public Universities and the rest 42 from Private Universities. The questionnaire is prepared based on an Entrepreneurship Education Model (EEM) proposed by Azim (2007). Data analysis is based on simple descriptive statistics. In order to sketch a comprehensive picture of Entrepreneurship Education in Bangladesh at University level the most common descriptive statistics like, mean, percentage, standard deviation, variance etc. are extensively used. CAN ENTREPRENEURSHIP BE TAUGHT? Despite exponential growth in the entrepreneurship education and training, the debate on whether entrepreneurs are born or made and whether entrepreneurship can be taught or not still rears its head from time to time. Some biographies of successful entrepreneurs often read as if such people entered the world with an extraordinary genetic endowment (Alain et al. 2008). Their personal characteristics, family heritage or exceptional opportunities etc are believed to be instrumental for transforming them into great entrepreneurs. Entrepreneurial education has also been criticized for attempting to teach what, until recently, has been considered unteachable. It has been the established understanding among business professionals that some people are born entrepreneurs and will succeed with or without education, while no amount of education can provide business success for someone who lacks the entrepreneurial spirit. It is also argued that much entrepreneurial learning is `implicit, being hard to verbalize, occurring incidentally, and drawing on intuition and `tacit skills (Marsick and Watkins 1990) and hence it is difficult to transmit from facilitator to the students. Contrary to the above propositions there are many arguments and evidences that speak for the contribution of entrepreneurship education and training in developing entrepreneurs and entrepreneurial people. There are many counter stories of those who hit on the entrepreneurial jackpot without the benefits of genetics (Henry et al. 2005 II). The entrepreneurial traits and genetics do not fall into any sensible pattern for start-up successes. Banfe (1991) suggests that there is a serendipity of unpredictable events that does not have much to do with family heritage. Most of the proponents of entrepreneurship education take a mid-way considering the teachable and non-teachable aspects of entrepreneurship. Miller (1987) believes that not all aspects of entrepreneurship can be taught, and that educators cannot create entrepreneurs any more than they can produce foolproof, step-by-step recipes for entrepreneurial success. However, Miller (1987) believes that educators can provide an understanding of the rigorous analytical techniques required to set-up a new business and an appreciation of the limitation of those techniques. He also claims that many of the entrepreneurial characteristics, like self-confidence, persistence and high energy levels, cannot be wholly acquired in the classroom. Stuart Meyer, professor at the J.L. Kellogg Graduate School of Management at Northwestern University comments on teaching entrepreneurs: They either have it or they dont. I cant teach students the personality traits necessary to take risks, but I can teach them to analyze those risks, to be analytical about their choices, and to learn from mistakes made in the past (Farrell 1984 p. 63). John R. Thorne, professor at the Graduate School of Industrial Administration at Carnegie-Mellon University agrees that we cant teach entrepreneurship, but we can teach the mechanics of starting a new business, and impart practical knowledge to our students (Farrell 1984 p. 63). David Rae (2005) maintains that while education can provide cultural
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awareness, knowledge and skills for entrepreneurship, the art of entrepreneurial practice is learned experientially in business rather than the educational environment (Gorman et al. 1997, Jack and Anderson 1999). Gorman et al. (1997) report that the findings from the studies indicate that entrepreneurship can be taught, or if not taught, at least developed by entrepreneurship education. This supports the findings of Vespers (1982) US based study of university professors, which demonstrated an overwhelming consensus that entrepreneurship can be taught. Supporting this view, Kantor (1988) claims that, based on his study of 408 entrepreneurship students in Ontario, most generally believed that the majority of entrepreneurial traits and abilities can be taught, with abilities perceived as being more teachable than traits. This concurs with the findings of the study conducted by Clark et al. (1984), which indicates that teaching entrepreneurship skills aided the creation and success of new businesses. Thus many factors are unrelated to genetics and support the counter paradigm that entrepreneurs are often made, not born. However, the success of an education program in developing entrepreneurs and entrepreneurial people or in other words, the answer to the question, whether entrepreneurship can be taught or not is not a mere yes or no, rather it is inextricably linked with the objectives, content, structure, pedagogy and approaches of teaching of entrepreneurship programs. EEM MODEL Based on extensive survey of literature on Entrepreneur, Entrepreneurship and Entrepreneurship Education & Training, T. Azim (2007) visualizes an Entrepreneurship Education Model. Figure 1: Input Based Entrepreneurship Education Model (EEM)
Trait s focused in the con ten t
nAch Internal locus of control Creativity and innovation Risk Taking Self confidence Vision
C on ten t Effec tiveness Skill s foc used in the con ten t

Communicati on Organizing Leadership Decision Mak ing Opportunity recognition Networking Time management Stress management
App roac h Effec tiveness

Lecture Case stu dy Exposure to entrepreneur Oral presentation Games & Competition Simulation/role play Group Dis cussion Preparation of Business plan Creative exercise
Pr ogra m Effectiveness
Know ledge foc used in the conten t

E-Ship concepts Govt. incent ives Govt. regulat ions Sources of Fund Support services Market research Business plan Start up avenues E-ship development -
Fa cilitati on Effec tiveness

Education/training Research Business exposure Perception
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FINDINGS AND ANALYSIS There are 27 public and 53 private universities approved by University Grants Commission operating in Bangladesh. Of them entrepreneurship development course is offered by almost all the universities having commerce/business faculty. No university in the public or private sector is found to offer a full fledged honors or Masters Program in Entrepreneurship. A total of 20 departments/faculties in public universities are found to offer at least one course in entrepreneurship either in undergraduate or graduate level or in both level. Private Universities typically offer BBA/MBA degree under the business faculty/School. Each program usually has a number of core courses which are compulsory for all the students in the faculty/school. With few exceptions, entrepreneurship course is taught as a core course in most of the Private Universities. Various aspects of entrepreneurship courses offered in different public and private universities in Bangladesh are described in the following sections. Objectives of the courses An enquiry is made to know what objective(s) the entrepreneurship courses are offered in the country. In line with the Gibbs (1999) typology of objectives of entrepreneurship education programs where he outlined three objectives (mutually not exclusive) like (i) to inform about entrepreneurship, (ii) to prepare student to be entrepreneurial and (iii) to prepare students to become entrepreneur, the survey finds that the teachers at universities in Bangladesh offer entrepreneurship courses more or less with all three objectives in mind. However it is interested to note that around 70 percent of the respondents mention that they teach entrepreneurship with an aim to let their students prepared to become entrepreneur. It indicates that around 30% dont have even the objective to let their students prepared to become entrepreneur. Table 1: Objectives of the course
Objectives of the course Frequency % of respondents (58) % of total responses (109)
Let my students know about entrepreneurship Make my students entrepreneurial (not necessarily that they will start their own business) Let my students become entrepreneur (start their own business in future) Total Source: Field Survey
37 31 41 109
63.79 53.45 70.69
33.94 28.44 37.61 100%
Considering the importance of efforts (inputs) in determining the effectiveness of an entrepreneurship education program, the model is developed on the basis of three key inputs viz. Contents (what is taught?), approaches (how it is taught?) and facilitation (who is teaching?). In other words, the model envisions that the effectiveness of an entrepreneurship education is determined by its content effectiveness, approach effectiveness and facilitation effectiveness. The content of the program is further divided into three major components of traits, skills and knowledge. The model is shown above in figure 1.
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Levels of traits developed through entrepreneurship programs In the survey an attempt is made to identify what levels of efforts are exhorted to develop six most sought after traits among the students through the entrepreneurship course. The mean score of 2.77 on a scale with maximum ceiling of 4 indicates that the facilitators of the courses give medium levels of efforts to develop these traits. As it is evidenced from the table below that the most effort is found to discharge to develop creativity and innovation followed by self confidence, vision, need for achievement, risk taking and internal locus of control. Since traits are the major determinants of being successful entrepreneurs, without developing these traits at high level it is more unlikely that the students will be able to initiate ventures by putting their personal endowments at risk. Table 2: Traits developed by entrepreneurship courses
Item Creativity and Innovation Self confidence Vision Need for Achievement Risk Taking Internal Locus of Control Mean 2.91 2.89 2.89 2.72 2.68 2.51 S. D .28 .44 .35 .45 .65 .80 Public 2.81 2.63 2.75 2.69 2.81 2.31 Private 2.95 3.00 2.95 2.74 2.64 2.60 Levenes Test for equal variance F (sig.) .001 .000 .000 .475 .092 .979 t (Sig) .204 .083** .190 .706 .266 .232
** Significant at 10% level. Source: Filed Survey As regard the difference between public and private universities in relation to traits, it is found that only in case of self confidence trait, there is significant difference at 10% level. Levels of Skills developed through entrepreneurship programs Entrepreneurs are doers. With their above average skills they make things happen. Presence of certain skills makes them different from non-entrepreneurs. Consequently the experts on entrepreneurship recommend for developing certain skills among the students in entrepreneurship courses. In the study, eight very important skills are surveyed and it is found that with a mean score of 2.66 (out of 4), the faculty members pay medium level of efforts in developing these skills among their students through entrepreneurship courses in Bangladesh. No single skill is found to receive high level of effort i.e. score more than or equal to 3. The most taken care of skill is organizing skill followed by leadership, decision making, opportunity recognition, communication, and networking skill. Stress management and time management skills are observed to be paid least attention. Moreover, the high standard deviation for these two skills indicates that there are wide variations in efforts among the faculty members to develop these skills.
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Item Organizing skill Leadership skill Decision Making skill Opportunity recognition skill Communication skill Networking skill Stress management skill Time management skill
Mean 2.93 2.86 2.79 2.72 2.64 2.60 2.55 2.18
S. D. .36 .34 .61 .72 .74 .64 1.09 1.08
Public 3.00 2.88 2.94 2.69 2.56 2.25 2.94 1.94
Private 2.90 2.86 2.74 2.74 2.67 2.74 2.29 2.29
F (sig.) .070 .727 .027 .665 .961 .000 .142 .142
t (Sig) .160 .863 .116 .813 .637 .060 .278 .278
** Significant at 10% level Source: Filed Survey Concerning the difference between public and private universities in relation to skills, it is observed that only in case of networking skill, there is significant difference at 10% level. Levels of Knowledge disseminated through entrepreneurship programs Awareness about the whole process of entrepreneurship/starting a business is crucial for developing self-efficacy and desirability among the potential entrepreneurs. To this end, it is expected that an entrepreneurship course will keep its students/participants informed about certain important information and facts. The survey on this area finds that with the mean score of 2.81 (out of 4) the teachers of entrepreneurship courses in Bangladesh pay medium level of attention to this area. An investigation into the various components of knowledge and information disseminated through entrepreneurship courses shows that theoretical aspects of entrepreneurship, preparation of business plan, franchising as a Business Start up avenue and ways to develop entrepreneurship in the country receive high level of attention from the entrepreneurship educators in Bangladesh while institutional sources of fund, government and private support services for entrepreneurs, legal issues related to starting a business, acquisition as an avenue to start a business, government incentive for entrepreneurs, and procedures of market research receive medium level of attention. Tax regulation related to starting and running a business gets the least consideration.
Table 3: Skills developed by entrepreneurship courses
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Table 4: Knowledge disseminated by ED programs

Item Entrepreneurship concept, benefits, functions, qualities, theories etc. how to prepare a Business plan franchising as a Business Start up avenue entrepreneurship development in a country how the entrepreneurs can avail Institutional sources of Fund what government organizations provides support services to the entrepreneurs what private organizations provides support services to the entrepreneurs Government regulations (related to starting a business) buy out (acquisition) as a Business Start up avenue Government incentives how to conduct Market research Tax regulations Mean 3.71 3.57 3.00 3.00 2.81 2.78 2.69 2.67 2.62 2.53 2.53 1.83 S. D 0.46 0.92 0.99 1.30 1.37 1.08 0.99 1.03 1.24 1.14 1.22 1.20 Public 3.81 3.63 2.94 3.06 2.94 3.13 2.81 2.69 2.63 2.44 2.31 1.38 Private 3.67 3.55 3.02 2.98 2.76 2.64 2.64 2.67 2.62 2.57 2.62 2.00 F (sig) .014 .589 .504 .267 .189 .008 .670 .864 .166 .436 .264 .819 t (Sig) .25 .77 .77 .82 .66 .064** .56 .94 .98 .694 .396 .076**
** Significant at 10% level Source: Field Survey As evidenced from the table # 6 high degree of standard deviation for institutional sources of fund, ways to develop entrepreneurship in the country, acquisition, market research, tax regulation, government incentives, and government regulations indicate that there are marked variations among the universities in relation to teaching these aspects in the entrepreneurship courses. As far as the difference between public and private universities is concerned, significant difference at 10% level is observed for information about the government support services and tax regulations for starting a business in favor of public and private universities respectively. Approaches used by the faculty members in entrepreneurship programs To prepare the students with the right set of traits, skills and knowledge base so as to start their own businesses it is far more important to use appropriate approaches in imparting entrepreneurship education. However, the survey in this respect shows rather a wearisome picture in Bangladesh. With mean score of 2.12 (out of 4) the educators in Bangladesh are found to use slightly over low level of assortments of approaches in teaching entrepreneurship courses. It is noted that the teachers are more comfortable with the traditional lecture based teaching. However, moderate level of scores for student presentation, business plan project, group discussion, case study analysis and exposure to the successful entrepreneurs are indications of concerns of the teachers about using various approaches of teaching entrepreneurship.
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Item lecture method oral presentation by the students prepare a business plan group discussion case study Exposure to entrepreneurs exercise to nurture the creativity role play/simulation games and competitions
Mean 4.00 2.89 2.75 2.55 2.27 2.00 1.79 .55 .27
S. D. 00 1.80 1.86 1.93 1.29 .91 2.00 1.39 1.02
Public 4.00 2.50 1.75 1.50 2.44 1.81 .50 .25 .50
Private 4.00 3.05 3.14 2.95 2.21 2.07 2.29 .67 .19
F (sig.) -.082 .013 .152 .217 .602 .000 .029 .046
t (Sig) --.305 .023* .010* .562 .341 .000* .230 .409
* Significant at 05% level One grave concern is that the poor scores for using approaches like exercise for nurture creativity, simulation and games & competition. These approaches are believed to be instrumental in developing creativity and innovation, need for achievement, internal locus of control, organizing skill, leadership skill etc. among the participants which are the back bone of entrepreneurship. The poor score in using non-traditional approaches may be attributed to the class size. In many universities, class size is more than 50 or nearly 50 which is not a convenient size for practicing various innovative approaches in the class. About the difference between public and private universities concerning approaches used, it is noted that assigning students to prepare a business plan, group discussion and exercise to nurture creativity are found to have significantly different at 5% level. Level of Facilitation effectiveness in entrepreneurship programs As regard facilitation effectiveness of entrepreneurship courses in Bangladesh it is observed that the teachers offering the course(s) have medium level of efficacy with the mean score of 2.46 (out of 4). However, the teachers have very high level of perception (3.6) about the viability of entrepreneurship as a career choice for their students which is very important for enthusiastic delivery of the lessons. The level of education/training and research experience of the teachers maintains medium level with score 2.47 and 2.31 respectively. Table 6: Facilitation effectiveness in ED programs Criteria Mean Education/ training 2.47 Business exposure 1.71 Research 2.31 perception 3.60 * Significant at 05% level Source: Field Survey S. D. 1.16 1.64 1.33 .85 Public 1.75 .75 2.44 3.06 F (sig.) .542 .000 .192 .010 t (Sig) .003* .001* .656 .167
2.74 2.07 2.26 3.48
Table 5: Approaches used in entrepreneurship Programs
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The business exposure of the teachers is found to be the least available criteria among the teachers. And in a country where job opportunities are limited, a person has to choose a career upon completion of his/her university degree and usually sticks to it. So those who choose teaching at universities as career at the early stage of their career by and large dont switch to other job opportunities and vice versa. So it is natural that the university teachers will have low level of business exposure. However, some teachers are involved in family business or with other business in the form of consultancy etc. Very high level of standard deviations indicates wide dispersions among the universities in relation to facilitation criteria. As regard, the difference between public and private universities about teachers qualifications, it is observed that the teachers in private universities have significantly (at 5% level) better education/ training and business exposure than their public counterparts. This can be attributed to the fact that in most of the public universities, the teachers are elderly and did their masters while entrepreneurship course was not offered at the University level whereas at the private universities most of faculty members are relatively younger and have their BBA/MBA where they could take a course on entrepreneurship. Regarding, business exposure it can be argued that many teachers in the private universities join the university at different levels from corporate jobs whereas in public universities, usually the teachers join the university just after completion of their Masters level education. Overall Program Effectiveness The entrepreneurship courses in different universities in Bangladesh as a whole are found to operate with medium level of effectiveness with the mean score of 2.36 on the scale of 4. In terms of frequency it is observed that most of the programs (53.4%) are run at medium level while 27.6% at low level and only 19% at high level. Following table shows the overall picture of program effectiveness of entrepreneurship courses in Bangladesh. Table 7: Overall Program Effectiveness Level of effectiveness Low Medium High Total Source: Field Survey frequency 16 31 11 58 Parentage 27.6 53.4 19 100
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Thus from the study is it confirmed that Entrepreneurship course(s) is (are) being offered in different Public and private universities in Bangladesh mostly as either mandatory or optional course(s) for the students of business schools. There are variations in terms of objectives, contents, approaches of teaching and the characteristics of facilitators offering the courses. The study observes that the entrepreneurship courses in different universities in Bangladesh as a whole operates with medium level of effectiveness. As regards the efforts for developing traits, skills and knowledge relevant for entrepreneurship, the facilitators put medium level of efforts. Concerning the methods of teaching, it is noted that the teachers are more comfortable with the traditional lecture based teaching. However, moderate level of scores for student presentation, business plan project, group discussion, case study analysis and exposure to the successful entrepreneurs indicates their concern about using various approaches of teaching entrepreneurship. As regard facilitation effectiveness of entrepreneurship courses in Bangladesh it is observed that the teachers offering the course have medium level of efficacy with the mean score of 2.46 (out of 4). In the face of the weaknesses identified in the study the following recommendations may be useful in improving the standard and utility of entrepreneurship education offered in different public and private universities in Bangladesh. - The entrepreneurship courses should be offered with the objective of creating entrepreneurs rather than just as a means of letting the students know about entrepreneurship. - Having exposure to entrepreneurship as a career option may lead the students to self employment or starting their own businesses. So the course should be mandatory for all the students in business. Moreover, the contents of the course particularly, traits and skills, if developed properly will increase the students employability as well. - To make the courses more effective the facilitators in both public and private universities should focus more on the use of multiple approaches, such as business plan writing, group discussion, exposure to entrepreneurs in the form of either life story analysis or presentation of live entrepreneurs, role play/simulation, games and competition, student presentation, creative exercises etc. - In order to improve the facilitation of the entrepreneurship course it should be taught by the teachers who have attended this course or received training on entrepreneurship, have research experience in entrepreneurship, and have exposure to business either in the form of involvement in family business, prior employment in business houses or operation of own businesses.
CONCLUSION
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REFERENCES Alain, Fayolle. et. al. (2008). Assessing the impact of entrepreneurship education programmes: a new methodology, Journal of European Industrial Training, Vol. 35, No.9 Azim Tahlil (2007) Entrepreneurship Education and Training in Bangladesh: An Input-Based Assessment, (Unpublished Doctoral Dissertation). Chittagong: University of Chittagong. Banfe, C. (1991) Entrepreneur From Zero to Hero, Van Nostrand Reinhold, New York. Clark, R.W. et al. (1984) Do courses in entrepreneurship aid in new venture creation? Journal of Small Business Management, 22 (2), 26-31. Farrell, K. (1984). Why B-schools embrace entrepreneurs. Venture, 6(4), 60-63. Garavan Thomas N. & O, Cinneide Barra (1994) Entrepreneurship Education and training programs: A review and evaluation, Journal of European Industrial Training, Part- I, 18 (8), 3-12, Part-II 18(11), 13-21. Gibb, Alan A. (1999). Can We Build Effective Entrepreneurship through Management Development? Journal of General Management, 24 (4), 1-21. Gorman, Garry et al. (1997). Some research perspectives on entrepreneurship education, enterprise education and education for small business management: a ten year literature review. International Small Business Journal, 15 (3), 56-78. Henry Colette et al. (2005) Entrepreneurship education and training: can entrepreneurship be taught? Part I. Education & Training 47 (2). Henry Colette et al. (2005) Entrepreneurship education and training: can entrepreneurship be taught? Part II. Education & Training 47 (3). Jack, S.L. & Anderson, R. (1998) Entrepreneurship education within the condition of entreprenology, Proceedings of the Enterprise and Learning Conference. Aberdeen. Jones Colin. & English Jack. (2004) A contemporary approach to entrepreneurship education, Education & Training, 46 (8/9), 416-423. Kantor, J. (1988) Can entrepreneurship be taught? A Canadian experiment, Journal of Small Business and Entrepreneurship, 5 (4), 12-19. Marsick, V. & Watkins, K. (1990) Informal and Incidental Learning in the Workplace, Routledge, London. McClelland, D.C. (1961) The Achieving Society, D. van Nostrand Company, Princeton. Miller, A. (1987) New ventures: a fresh emphasis on entrepreneurial education, Survey of Business, 23 (1), 4-9. Onstenk Jeroen (2003) Entrepreneurship and Vocational Education, European Educational Research Journal, 2 (1), 74-89. Rae David (2005). Entrepreneurial learning: a narrative-based conceptual model. In The Institute for Small Business Affairs 27th National Conference, 2-4 November 2005. Newcastle Gateshead. Schumpeter Josep A. (1934) The Theory of Economic Development, Harvard University Press: Cambridge MA.
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Vesper, K. H. (1982). Research on education for entrepreneurship, In Kent, C.A. et al. (Eds.). Encyclopedia of Entrepreneurship, (pp. 321-43). Prentice-Hall: Englewood Cliffs, NJ.
INSTITUTIONAL RENEWAL AND MANAGING CHANGE
CHAPTER
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INSTITUTIONAL RENEWAL & MANAGING CHANGE
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The Future of Knowledge Corporate

Seema Arif Professor Punjab College of Business Administation, Lahore Pakistan
This is a theoretical paper attempted at meta-synthesis of many researches done globally as well as in Pakistan exploring the impact of globalization upon the higher education, particularly at the business and management schools in private universities of Pakistan. The universities are transformed into knowledge industry following the market model of education but it has been observed that this transition is not so smooth for the academia, who themselves have been trained by the service model and it raises certain moral and professional complications. Higher education does not impact only on personal lives of individuals but it shapes the destiny of the society as well. To acquire balance between demands set by globalization and the responsibilities fostered by tradition would be an art and the debate gradually unfolds how it can be achieved. Globalization and Higher Education Bill Readings, associate professor of comparative literature at the University of Montreal, professed in 1997 that the University is becoming a transnational bureaucratic corporation in confirmation to Zemskys view that the University...no longer participates in...the historical project of culture. Universities, they (Massy and Zemsky 2002) said, are becoming more like holding companies. The forces associated with globalization have conditioned the context in which educators operate, and profoundly altered peoples experience of both formal and informal education. Schools and colleges have, for example, become sites for branding and the targets of corporate expansion. Many policymakers automatically look to market solutions. (Smith 2002) Globalization and market model of education has set new challenges for the higher education. Giroux (2000) laments that as a consequence of higher education being perceived as a commodity, framed in market terms, and encouraging the entry of commercial concerns has turned higher education and training have been seen as lucrative markets to be in. It is not just a system of developing alternate means of funding higher education as governments were found to be incompetent at providing adequate funds in many developing countries as pointed out by Stewart (1992): the processes of globalization are more threatening the autonomy of national educational systems and the sovereignty of the nation-state hindering the development of democratic societies because the nature of this expansion of intervention we can see that the overriding concern is with economic growth and international competitiveness. Moreover, in the process we have almost forgotten that education ever had any purpose other than to promote growth. (Wolf 2002: xiii).The real danger is that unthinking adoption of the market model prevents the development of an approach to management in the public services in general or to the social services in particular based on their distinctive purposes, conditions and tasks. (Stewart 1992: 27) Classic features of globalization, delocalization and the activities of multinationals, have infiltrated the boundaries of higher education as well in so called attempt to raise standards of living in a developing region. Globalization is due to create its impact following its insidious consumer-based
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The reconfiguration of the goods and services in question so that they can be priced and sold The inducing of people to want to buy them The transformation of the workforce from one working for collective aims with a service ethic to one working to produce profits for owners of capital and subject to market discipline The underwriting of the risks to capital by the state. (p.4)
The changing perception about the needs of job market have been framed in such a way that it had become essential for the policy makers and the public and private sector to restructure education system and provide due opportunities to process of commodification in higher education supplemented by further efforts to create standardized 'products' in order to find economies of scale. In order to accomplish this target sophist approach towards education was employed and highly tailored set of courses delivered in compact modular MBA programs were developed gradually adapting themselves from full time to part time and then distance education degree programs. By doing so the perception have been created that the participants and not students of such courses will add such a value to their existing knowledge and skills, that doing without it would not be possible at all, and deciding against it would be a very bad move (Wolf 2002). It was not just stated but practiced mercilessly as well as major lay offs and cut offs were observed in multinational corporate sector as well as the banking sector, that people had to look forward to avail best opportunities to grab at diplomas, certification and degrees for business education. It had opened new gates for prosperous economy for universities and many institutes emerged both at private and public level offering courses in business education. The structure that had been adopted to meet technological demands of modern business and industry had been found so lucrative and attractive that whole of education system including hard and social sciences and humanities have also fallen for it. Here appears the contrast that have been pointed out by Stabile (2007) in an eternal controversy between virtue and the sophist approach about education at large but higher education in specific. This debate has not been limiting to Stabile but university academia caring for higher academic purpose of education, i.e. the larger concern for humanity and its service have been brought well into light by several other thinkers and educators as well, such as Eric Fromm 1976, Polyani 1957, Engell and Dangerfield 2005, Khurana 2007 and Fisher and Chan 2008 to name the few. We observe many divides among different societies across globe, there is an information rich and information poor society; there is a digital divide among various global regions and not just socioeconomic and political divide is seemingly at work as has been observed in history. While predicting future of humanity the eminent socio-biologist E.O. Wilson has commented: Today the greatest divide within humanity is not between races or religions, or even, as widely believed, between literate and illiterate. It is the chasm that separates scientific from pre-scientific cultures. (2000, p. 45) The civil society is justified to raise its bow of concern that following this trend the future survival of many cultures and races is threatened seriously. However, the issue has not been taken up seriously
appropriations of freedom and choice (Giroux 2000, p.6). Whether or not this freedom will expand or delimit the choice of local developing region is further estimated by following criteria outlined by Leys (2004). According to him (Colin Leys) such a transformation - the making of a market entailed the meeting of four requirements:
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as the divide deepens between the cultures, some calling it a moral and ethical issue while others the scientific and technological. Whether the university will help to solve this problem or will itself fell ensnared to it is an issue of great concern. The society and the academia both have been ignoring this concern considering it a particular philosophic dilemma while ignoring practical issues of the time, till we have reached a global catastrophe, first of all in environmental degradation followed by global financial crises and economic recession. Most of the globalizing agenda seems to be failing at reaching any positive solution for humanitys most pertinent concerns: poverty and peace and its hybrid terrorism. Now the time is ripe to raise the question: who have been responsible for it - the changing knowledge theory and practice or failure of the world to grasp and adapt to it appropriately? All business and industry responsible for carbon emissions and green house effect are led and managed by highly knowledgeable and technical staff, graduates of Ivy League and other ivory towers across the globe. Whether something has been missing from their education and training which has led them to take such immature decisions about the future of humanity or they have been too busy for cost effective return of the heavy spending on their education, making profits for the few and ignoring the loss of humanity at large. As duly recognized by Fromm decades ago, we are to ascertain him that this system of education primarily looks to having rather than being (Fromm 1976). Smith (2002) has thus concluded that perversion of education and the exploitation of learners have not only attacked on the notion of public goods and truly liberal ideas of education but learning itself has increasingly been seen as a commodity or as an investment rather than as a way of exploring what might make for the good life or human flourishing. Teachers and educators ability to ask critical questions about the world in which we live has been deeply compromised as well. The market ideologies assimilated in perspective of the market model of education and the direction of the curricula set to deliver not the knowledge to shape wisdom but to patronize a set of required skills needed at the market, are facing critical attention of education thinkers. Most of all is criticized the greedy attitude of the institutions to embrace corporate sponsorship, as in the wake of doing so they have enslaved themselves to the corporate sector instead of mastering them. It has all combined to degrade their work to such an extent as to question whether what they are engaged in can be rightfully called education. What is Knowledge Corporate? Willis (1977) has accused university higher education for complacent contribution to injustice being more a cause of promoting social inequalities rather than parting the gap. Peter Smith (2004) has further argued that higher education is currently structured in such a way that it simply cannot educate significant numbers of people with lower income status. It is thus, very hard to realize that unfortunately the access to higher education is limited and present trends of higher education, especially that of business schools are more elitist promoting contention between corporate interest and labor. Thus, it is not that people do not want to educate themselves, but their dream education is out of reach. Presently, not only those people are in crises that are not educated but those are more in turmoil who have their degrees in business education or are in process of getting it. As the global economic recession proceeds, there will be further cut offs and lay offs and perhaps the business schools will be loosing their potential future market of students and academia. It is not a very good prediction for the knowledge corporate a term coined for business school of the modern university, which exists to make profit and for doing so it indulges in 1) trade of knowledge in form of seeking alliance with international universities in exchange of curricula and technology; 2) trade of the knowledge workers in form of seeking partnership with business and industry for search of academia both locally and globally and 3) trade of the students in attempt of seeking more and more foreign and international students with a capacity to pay high fees. The
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1. How does the high rising competitive global corporate culture followed by business schools is going to affect the teacher and the teaching at local level? 2. What is the present status of business schools globally and what are they doing to capture their share in global market by using technology and innovation and how will it impact the teaching profession in the long run? 3. Whether or not the criticism held against business schools is genuine and what they must do to realize ambitions as well as aspirations of the society. The Market Model of Higher Education Pusser and Doane (in Martinez and Richardson 2002) have promulgated that the term market is ubiquitous and applied to various aspects of higher education with little hesitation. They have discussed issues of competition, efficiency, and productivity, and whether traditional market models enhance our understanding of postsecondary degree production and training. The focus of this market is not national influence of the state but global impact of customer satisfaction. It is global because mostly in developing countries people want products favoured by developed countries. Hence, a tussle arises between the state and the university about where and how to spend the funding provided in wake of attracting quality customers as traditionally state choices have been governing and influencing institutional diversity, services, and perhaps the incentive for providers to utilize forces such as technology to run their affairs about teaching and learning. Higher education means taking a leap higher and higher setting the pace of intellectual evolution in a given society, a necessary prerequisite for raising of the human and social capital. Market influences leadership decisions as it governs consumer expectations and needs which are largely shaped by technology advancement. According to the model developed by Armajani (1994), strength of the market seems to be a function of a) the level of higher education funding provided by the state; b) the percentage of educational costs the student bears, and; c) the role and extent the private sector plays in providing higher education services.
Source: Mario Martinez and Dick Richardson (2002)
future of the knowledge corporate thus depends upon its chief agent, the knowledge worker, the faculty or the academia, how do they look up to this challenge and meet it. Keeping in view the perspective of previous argument this thematic paper seeks to answer following three questions.
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Martinez and Richardson (2002) have concluded in their case study the ideal market will exist only where perfect information exists and there is a perfectly even balance of influence among the three subjects. Students can attend the institution of their preference because there is the right number of institutions (public and private) and there is a perfect balance between student aid, state appropriations, how the institutions set their prices and what students are willing and able to pay. We all know that such an ideal situation exists no where, but still it gives us the idea to develop a market where higher education is organized and financed in a way that maximizes public and private benefits, and, finally, the state receives information from all higher education consumers so that the equilibrium of influence among the three players is maintained. State meeting public demand Ruppert (1995) has suggested that other forces will impact higher education policy, including a continued decline in available resources, an increasing perception of value in higher education to society, ever increasing expectations from society, and increasing skepticism by the public of organizations and agencies it funds. A general understanding informs us that the higher education governance systems need to be more economic and efficient and designed in such a way as to be responsive to the publics demands for more effective teaching and other services in the wake of reduced resources as it is implied especially in the developing countries where the demand is shaped by powerful trends of demographics, the global economy, and information technology, all of which have potential to influence higher education policy in the future (Mingle 2000). Lately a perception has grown that HEIs need to grow out of the influence of the state appropriations and replace with service contracts in an effort to achieve more efficient operations and delivery of instructionin essence; it would more effectively meet the needs of the market. Here the government or the state does not remain in power, i.e. the authority accountable for HEIs. In such situations the institutions primarily may gain some speed and momentum on its desired path; but at the same time the horse also looses its harness. The experience tells us, breaking away from external standards of accountability does not lead us to a better level of quality. Though internal standards of accountability, such as customer satisfaction provide a reasonable ground to remain efficient on certain grounds, but even here lack of set of uniform principles to measure quality the organization may loose hold of the vision it had started its destination with. If the government has to look for larger public interest, then it has to maintain connection and communication with the HEIs keeping in perspective not the market model but the service model of higher education. Institutions like HEC (Higher Education Commission Pakistan) have been of great help in securing and improving quality in higher and tertiary education in Pakistan. The Age of Money Engell and Dangerfield (2005) have ascribed the title Age of Money to present age, where nothing matters more than money and each and every way is sought to fill ones pocket. During this age university has also observed happy times as lot of money kept pouring in form of grants, government and public funding, aids but above all through ever rising student fees. The salaries of academia had increased considerably and perhaps for the first time, the teaching profession was recognized a source of making money. As the market model unfolded itself, pushing the service model behind, everybody in the university was there to make money. Many people from various businesses and industry also joined university as part time or adjunct faculty with their quick time recipes of teaching and teaching materials for the students. Such part time faculty had been more beneficial, especially for cutting cost of infrastructure as well as of provision of long term benefits to the faculty; hence, the model was quickly adopted by newly established private universities.
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Hiring visiting faculty has been economical for the university but this economy has cost dearly in the life of students as their campus life has been just reduced to academic tutoring rather than whole person development. In a recent study of student satisfaction at private business schools in Lahore, Pakistan it was found out that most of the students are not dissatisfied with the quality of teaching or curriculum related to academics but they are more dissatisfied with quality of campus life identified as 1) infrastructure problems, hostel, parking place, sitting area for students, and toilets etc. or they were dissatisfied with the status of co-curricular activities at the university, especially the girls for their lack of opportunity to take part in sports (Arif 2007). Following haphazard timetables and schedules of afternoon and evening classes, the modular structure and most of the time dealing with visiting faculty on short time basis has also been perceived as inability of students to develop commitment and long term relationships as well as lack of capacity of following a structured discipline (Arif et al., 2007). This phenomenon has also been observed in studies done on turnover and retention in the industry, which has exhibited a positive correlation with student behaviors described above, seemingly a product of following unstructured discipline and routine in college life. It seems that students are being prepared to meet short term goals in life and not for life itself as a whole. Teachers are no longer master of fate of students; it is now the other way round. Following the market-model informs us that it is prudent to adopt what will sell, thus consumer choice is very important. However, the structure of the university rests upon the principle that teachers guide students and help them achieve their desired destination in best of ways possible. However, students especially the undergraduates cannot determine what is ultimate good for themselves. Not only their own personality is under becoming, their intelligence maturing and the skills shaping, so honing after their wishes can be disastrous for the university. The university management must have clear cut standards to meet with the requirements of the education program. Serious education entails unpopular decisions on the part of administrators and faculty. It appears that we have left the realm of reason and entered that of conviction and mass conformity. That is where that blind following has led us into more corruption and deterioration of values, standards and principles of living as students are not getting the education they deserve, a failing that affects their wisdom and judgment more than their intelligence. The future of the business school depends upon the right positioning of the academia because decades ago, the current modular system was developed for the seasoned professionals who had joined university for the refurnishing of their skills especially related to latest technology and it worked with them. But it is failing to work with students who are yet to learn and enter in professional field. Engell and Dangerfield (2005) raise their brow of concern when they realize that the self-fulfilling prophecy continues to unfold as people are getting into professions and jobs that are expected to pay more rather than considering their personal abilities and aptitudes, which is further deteriorating the situation. Research not teaching is rewarded. While pursuing the market universities advertise about their priced faculty, star achievement of students, hi-tech facilities and its reputation of excellence. However, when it comes to real undergraduate teaching, most of the load is shifted to visiting and adjunct faculty along with fresh graduate teaching assistants. It has been noted that professorial salaries correlate negatively with teaching load. Higher education now reserves all its highest rewards for published research (Massy and Zemsky 1994). Not to teach has become a reward as primary task of higher education faculty is
Permanent versus Visiting Faculty
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no longer to educate, especially the undergraduates (Engell and Dangerfield 2005). The shift of academia toward more non-teaching roles has been very swift as Fisher and Chan (2008) have commented that elite professors are now busier in developing patents, CDs and course-work material for distance education which earns them lots of royalties; as a consequence, even academic research has been compromised at leading universities. Not only the human resource (academia) but also finances are drawn more towards research than teaching. Teaching seems to become a part time job for the professionals or a full time load for the adjunct and the visiting faculty. The equity is lost when these teachers receive only hourly wages; their job is not secure and is under constant stress. Moreover, securing a permanent position at the university has also become difficult as permanent faculty is a greater financial liability and the good businessman avoids that. However, avoiding responsibility does not pay much. Being unable to realize ones responsibility towards academia results in loss of commitment on the part of faculty, which may not cost directly the university but it matters a lot to the students. It has been observed in a study that inability to hold quality teachers results in withdrawal or decreased enrollment of quality students which ultimately impacts the branding of the university (Arif 2007). The increased stress of work overload and insecurity of job has been predicted to be a substantial cause of teacher burnout as well. () Loss of quality teachers and students results in poor academic culture in the university reflected in the poor skills of graduates, which the university has been so far bragging about a certain promise to deliver in their finished good. The society fails to receive the value added product by any means and the business and the industry has yet lot to complain about the inadequacy and inefficiency of the product handed over to them. People are becoming increasingly skeptic of the value of the degree and service provided at the private business schools. Enrollment and especially the quality enrolment of the students have significantly dropped in the previous year. There is no harmony between the means and ends; as appropriate means and ways have not been adopted, there is no assurance that the desired goals will be achieved. Compromising with the good of students is not going to do any good to the society. The moral foundation /basis of education system rest upon providing good to the society. Failing to offer the promised good not only the university will be at loss but collective social and economic structure will collapse. There is another debate raised by Stabile (2007) what is causing our higher education system to decline. Is it because it is not rooted in values? Traditionally the graduates of literature were trained in management skills and they were there at public administration posts, governing people. Now most of these posts are occupied by people holding degrees in business management, sharpened in their skills, but perhaps lacking in values that are hosted by literature and other disciplines offered by classic education system. Conclusions Business education is designed at an intersection of hard sciences, social sciences and humanities. Its behavior has been erratic some times more tending towards computing sciences and using database evidence for decision making- the data drawn from a fraction of the population and taking it as reality and applying it on the whole population. Though most of the theories are grounded in social sciences but it must not loose sight of humanities as most of its decisions have direct impact upon human beings. Thus business schools needs to better raise and streamline their scheme of studies and courses they offer, but more than that they need to offer better and structured discipline to their students to transform them into quality workforce. What we have missed is the appropriation of balance in opposing forces of the world. While bent towards scientific and rational component of education
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Lack of mastery in verbal skills, and especially the regional languages does not indicate merely the inability to read and write in those languages but incompetence to tap at the local wisdom coded in the literature of those languages resulting in lack of capacity to assimilate or adapt to values imbibed in the culture of region during the process of education and thus incapability to offer the values to people of their community in their professional lives. Such an education system fails as it does not create an effective role modeling in the community Historical evidence suggests that at times the university facilitated social change, other times was shape by social and political transformation, and at other times remained curiously distant or fractured in its mission. Today universities are adapting and focusing more upon technological transformations rather than moral or social one, which are due to commence if we aspire to have sustainable futures and want to deal with issues like poverty and environmental degradation - a gift of industry, technology and mechanization to the humanity. Tab (2001) has professed: university will be a very different place in another decade or two, and what it will look like depends to a large degree on what version of globalization wins out. As globalization is a new phenomenon, both the society and the university had to learn a lot about its various aspects. Once the learning phase is over, believing in the competence of our academia and the capacity of education system it is hoped that they will emerge successful by letting go of the useless keeping with them only the experiences which will be fruitful for the next generation. The rigor of competitiveness will bring out the best in the faculty as well and the best will survive in the profession whereas the rest will have to beg leave. In the end to determine the direction of knowledge corporate, it is implied that the business schools need not split its programs into the studies of business, finance and management studies separately, as was there in the past, but its curriculum must be well integrated with study of ethics. That is, values and technology need a better balance and where knowledge and skills need not be compromised, they must indicate its graduates ability to hold oneself accountable for whatever actions they take and they emerge confident, able to determine implication of ones decisions and actions on individual, social and communal life and held one self responsible for individual as well as collective action in ones professional life. References Arif Seema (2007). Dynamics of Quality Services as Perceived by Students of Higher Education in Pakistan. Proceedings of the International Conference on The Studies of Sustainable Development and Complex Systems. Tongji University, Shanghai, China. October, 2007 Arif Seema, Bashir Irfan and Ahmed Shafiq (2007). Leading for Quality: Opportunities and Constraints Faced by Private Sector Universities in Pakistan. Proceedings of the 5th PIQC Conference on Quality Assurance in Education, June, 2007. Lahore. Pakistan Armajani B (1994). A Model for the Reinvented Higher Education System: State Policy and College Learning. Paper Commissioned by the Education Commission of the States. Cheit Earl F (1985). Business Schools and Their Critics. California Management Review. 27 (1): 43-62
we have ignored the moral and affective component of the knowledge. Now we are wary of lack of ethical practice in the professional lives of people.
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Engell James and Dangerfield Anthony (2005). Saving Higher Education in the Age of Money. VA: University of Virginia Press. -- (1998). The Market-Model University: Humanities in the Age of Money. Harvard Magazine. http://harvardmagazine.com/1998/05/forum.html Fisher Donald and Chan Adrienne S (2008). The exchange university : corporatization of academic culture. Vancouver: UBC Press Fromm Eric (1957). The Art of Loving 1995 ed.. London: Thorsons. Fromm Eric (1976). To Have or to Be, 1979 ed. London: Abacus. Giroux HA (2000). Stealing Innocence: Corporate cultures war on children. New York: Palgrave. Griffin Rosarii (ed.) (2002). Education in Transition: International Perspectives on the Politics and Processes of Change. Oxford: Symposium Books Grosjean Janet-Atkinson and Grosjean Garnet (2000). The Use of Performance Models in Higher Education: A Comparative International Review. Education Policy Analysis Archives 8 (30) Harvey David (1989). The Condition of Postmodernity. Cambridge Massachusetts: Basil Blackwell, Inc. Khurana Rakesh (2007). From Higher Aims to Hired Hands: The Social Transformation of American Business Schools and the Unfulfilled Promise of Management as a Profession. NJ: Princeton University Press Leys Colin (2001). Market-Driven Politics: Neoliberal democracy and the public interest. London: Verso Books Martinez Mario and Richardson Dick (2002). State higher education report cards: Whats in a grade? The Review of Higher Education 26 (1): 1-18. Massy William F and Zemsky Robert (1994). Faculty discretionary time: Departments and the academic ratchet. The Journal of Higher Education 65(1): 1-22. Polanyi Karl (1957 [1944]) The Great Transformation: The political and economic origins of our time. New York: Beacon Press. Smith Mark K (2002). Globalization and the incorporation of education. The Encyclopedia of Informal Education. www.infed.org/biblio/globalization.htm. Smith Peter (2004). The Quiet Crisis: How Higher Education is Failing America. Bolton, MA: Anker Stabile Donald R (2007). Economics, Competition and Academia: An Intellectual History of Sophism versus Virtue. MA: Edward Elgar Publishing Inc. Stewart James (1992). Guidelines for public service management: lessons not to be learnt from the private sector in P. Carter el. al. (eds.) Changing Social Work and Welfare. Buckingham: Open University Press. Tabb William (2001). Globalization and Education as A Commodity. Clairon. PSC-CUNNY: Summer Willis Paul (1977). Learning to Labor: how working class kids get working class jobs. Farnborough. England: Saxon House. Wilson Edward O (2000). Sociobiology: The New Synthesis. Cambridge, Mass.: The Belknap Press of Harvard University Press. Wolf A (2002). Does Education Matter? Myths about education and economic growth. London: Penguin
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CHALLENGES AND PROSPECTS

Dr. MUNA KALYANI and Dr. BASANTA KUMAR Faculty, P.G. Department of Business Administration, Utkal University, Bhubaneswar, India. E-mail: dr.munakalyani@yahoo.com
Change is a living process and its impact on economic environment of business while creating business opportunities for the stakeholders is perennial. Trade union as a stakeholder is also subject to the impact of changing environment .The new economic order has given new dimensions to the trade union movement, marginalized its position because of more threats than opportunities and has kept away from the main stream of business allowing many dilemmas to face on account of global competition, cross border cultures, rapid technological change, shifting attitude of government, demographic shifts, employers focus on maintaining no-union status, out sourcing, lay off and retrenchment etc. In this context, Indian Trade movement is at crossroad. These issues pose formidable challenges to Indian Trade unions and collective actions. The changing business dynamics compel trade unions to collaborate with business progress rather than adversarial in approach-the only option to survive in the long run. Against this backdrop, this study has made on changing role of the Indian trade unions for the last two decades i.e. since the beginning of the economic liberalization started in 1991 and future challenges and prospects on the eve of the present economic crisis.
INTRODUCTION Trade union history is as old as industrial society. As industrial society changed over the years in terms of technological advancement, work organization, liberalization etc. so have the structure, strategy and dynamics of unions. However, developments during the recent past have posed serious challenges to trade unions across the globe and exposed the weaknesses of trade unions, forced them to rethink their positions, policies and programmes in the changing business scenario. Today trade unions are defensive, less militant and more pragmatic about the productivity and efficiency of their organizations. Changes have initiated a new beginning in the history of trade union movement. In this scenario trade unions can sustain themselves only through a pragmatic approach that compels them to develop wider networks in association with management and other civil society organizations.
28 INDIAN TRADE UNION MOVEMENT :
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BRIEF HISTORICAL PERSPECTIVES OF INDIAN TRADE UNION MOVEMENT The trade unionism in India developed quite slowly as compared to the western nations.. Indian trade union movement can be divided into four phases. The first phase (1850 to 1900), during this phase the inception of trade unions took place. During this period, working and living conditions of the working class were poor and their working hours were long. Managements were only interested in productivity and profitability. However small associations like Bombay Mill Hands Association came up by this time. The second phase (1900 to 1950); this phase was characterized by the development of organized trade unions and political movements of the working class. During this period, four central trade unions were formed, federated and politicized and white-collar unionism also grown. The dynamics of trade union movement were started becoming militant, offensive, aggressive and pragmatism more than concerning productivity and efficiency. The Trade Unions Act, 1926 is the only legal framework for the trade union movement in the country enacted. The third phase (1951 to 1990), India was declared a sovereign democratic republic in 1950 under the Constitution, incorporating a set of fundamental rights and directive principles and the country adopted planning as an instrument of its economic and social growth. The trade union movement relied on state intervention to make the rules of the IRS and for the growth of union movement. The tripartite structures of consultation like Indian Labour Conference, Wage Boards, Industry Committees, Work Committees and participation in the planning process ensured cooperation from unions and provided voice mechanisms to them. Trade unions militancy increased and become high during 1960s and 1970s (See table 1.1). Table-1.1 Industrial Disputes in India (1950-1996) ---------------------------------------------------------------------------------------------------------------------Year 1950 1951 1956 1960 1961 1966 1971 1975 1976 1980 1981 No. of Disputes 814 1,071 1,203 1, 583 1, 357 2, 556 2, 752 1, 943 1, 308 2, 856 2, 587 1, 799 Workers Involved 7, 19,833 6, 91,321 7, 15,130 9, 86, 268 5, 11,860 14, 10, 056 1, 38, 937 10, 32, 609 1, 18, 73, 731 19, 00, 333 15, 88,004 17, 69, 877 Mandays Lost 12,806,704 38, 18,928 69, 91, 040 65, 36, 517 49, 18, 755 13, 846, 329 16,545, 636 21, 900,891 12, 745, 735 21, 925,026 36, 583, 564 35, 358, 372
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1987
1989 1990 1991 1992 1993 1994 1995 1996
1, 786 1, 825 1, 810 1, 714 1, 393 1, 201 1, 066 611
13, 64, 000 13, 08, 000 13, 42, 022 12, 51, 000 9, 54, 000 8, 46, 429 9, 90, 700 4, 52, 000
32, 663, 000 24, 086, 000 26, 428, 090 31, 26, 000 20, 301, 000 20, 983, 082 16, 290, 000 11, 500, 000
Source: Various issues of the Hand Book of Labor Statistics and Annual Report, Ministry of Labor- 1996-97. The trade unions militancy, industrial disputes and aggressive dynamics started decreasing during 1980s and got sharp decline in 1990s. But the protest movement was often shaped by political forces of the country. The fourth phase (1991 to 2008), includes the economic reform process initiated by Rajiv Gandhi got momentum since June 1991. ECONOMIC LIBERALIZATION AND GLOBAL AND INDIAN TRADE UNION MOVEMENT Unionism is in recession today and India is no exception. The decades of the 1980s and 1990s have been bad years for trade unionism all over the world. Union membership has been declining in most developed countries, with the USA and UK leading, and even Japan not far behind. Worker apathy is not a small factor either. The reassertion of capitalism under the New Economic policy (1991) has been a major reason but a wedge also appears to be operating between trade unionists and their rank and file members. The overall trends are of declining unionized workforce, increased unemployment, unfavorable public sentiment and management and government pressure on unions. This combination is certainly ominous. Many factors explain the decline of labor power across the globe in the era of globalization. Table-1.2 shows such decline in some of the developed industrialized countries. It shows that Italy is the only country in this category where the incidence of union density has increased. This may be so due to some country-specific consideration. The decline noticeable is particularly steep in France, UK, Austria and Germany. Table-1.2 Percentage of trade union members among total workforce inSelected industrialized countries. -----------------------------------------------------------------------------------------------------------Countries Austria Denmark 1970 63.6 62.6 1980 59.6 87.8 1990 56.2 88.9 1997 46.6 89.9 2003 35.2 75.5 ------------------------------------------------------------------------------------------------------------
1988
1, 745
11, 91, 033
33, 946, 925
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France Germany Italy Netherlands Norway Spain Sweden UK
21.0 37.7 38.5 39.8 57.9 -66.6 48.5
17.1 40.6 49.0 39.4 64.4 13.8 78.2 54.5
9.2 38.5 39.2 29.5 70.3 16.8 82.4 38.1
8.6 33.4 38.0 28.9 71.3 15.1 86.4 30.2
5.8 22.2 47.1 23.9 63.0 11.5 78.0 25.9
.............................................................................................................................................................. Source: Accessed on12 January, 2006 from Cornell Institute of Industrial Relations (IR) Statistical Record on Trade union Membership at http://www..ilr.cornell.edu/library/ downloads/FAQ/UNIONSTATS2002.pdf The labour power is declining in Indian contest as well. One of the key indicators of the decline is the increasing degree of peripheralization, leading to employment of contract, casual, part-time and ad hoc workers. Decline in organized sector employment and union membership is noticeable in India, presently mere 7 per cent of Indian workforce working in the organized sector which at one time was higher than 10 per cent; and a major portion of them belongs to public sector employees. The gradual erosion of union membership in India can be seen from Table-1.3. This table shows the total number of unions registered, the total number of unions submitting returns, and the membership of unions submitting returns. The table shows that the decline is noticeable both in the number of unions submitting returns as well as the total membership of these unions. It is clear that during the year 2001, as against 65264 registered unions not even 10 per cent submit the statutory returns required to be filed under the Trade Unions Act, 1926. Only 5693 have filed retunes under the Act; and the total membership of these unions during the same year has declined (Debi S.Saini, 2006 ) Table-1.3 Growth of Workers Trade Unions and Membership in India --------------------------------------------------------------------------------------------------------------------Year Trade unions on register Trade unions submitting returns Membership of unions submitting returns ( 000)
--------------------------------------------------------------------------------------------------------------------1990 1991 1992 50797 52773 54885 54969 8386 8351 9073 6776 6931 6094 5739 3129
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1993
1995 1996 1997 1998 1999 2000 2001
57163 58206 59875 61199 64040 65286 65264
8048 7229 8774 7291 8061 7231 5693
6516 5594 7373 7229 6394 5417 4454
Source: Ministry of Labor and Employment, Government of India. Global and Indian trade union movement have witnessed the retrogressive evolution of trade unions from strength to weakness, weakness to infirmity and possible from infirmity to extinction. Now, the current verified membership of top twelve Central Trade Union Organizations(CTUOs) including agriculture and rural workers of India are exhibited in Table-1.4. It is also indicating Indian trade union membership decline. Table-1.4 Current verified membership of top twelve Central Trade Union Organizations of India S. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Name of the CTUOs BMS INTUC CITU HMS AITUC UTUC(LS) UTUC NFITU TUCC NLO HMKP IFFTU Finally Verified Membership 3116564 2692388 1775220 1480963 938486 843256 584523 529782 230139 138877 3516 428
-----------------------------------------------------------------------------------------------------------Total = 12334142 -----------------------------------------------------------------------------------------------------------Source: Ministry of Labor and Employment, (CLC, Central) as on 12th, January, 2009.
1994
56044
6265
4093
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CHARACTERISTICS OF TRADE UNIONS IN INDIA The trade union movement in India is marked and characterized by inter and intra union rivalry, political affiliation and rivalry, disunity, organizational and financial weaknesses, outside leadership, weak legal framework, the limited scope of activities, conflicting attitudes, and lack of relations between sco-economic development and trade union dynamics. These characteristics have hampered their healthy growth and effectiveness. Since, last 18 years, Indian trade unions are facing a different kind of crisis. The neo-liberal ideology, loss of formal sector jobs, increasing importance of informal sector, rise of modern service sector, greater bargaining power of capital, high and rising employer militancy, state retrenchment, lay-off, pay-cuts, closures in the economic sphere, business-state coalition, some tough judicial decisions, all these have posed formidable challenges and prospects to unions and collective actions (K.R.Shyam Sundar, 2006). EMERGING CHALLENGES AND PROSPECTS OF INDIAN TRADE UNIONS Successfully facing challenges lead to better prospects in every activity. The activities of trade unionism, in the last 18 years or so, unions are under great depression and recession around the globe in general and India in particular. The thrust of our economic reform has been to allow a wider scope for the operation of the free market by dismantling the old structures of licences, controls and regulations. Concerns related to equity, social justice or self-reliance has become subordinated to the logic of the market. Neo-liberal policy has made the employers too powerful by allowing them the right to hire and fire at will. In the name of restructuring, the Voluntary Retirement Scheme (VRS) and Exit Policy are indiscriminately adopted to retrench the organized workforce and to close down most of the sick industrial units. The proposed Industrial Relations Bill which is lying with Indian Parliament for some years would breakdown the strength of organized labour. The recommendations of the Second National Commission on Labour (2002) also have threatened the interest of the working class. The right to strike may soon become a prerogative only of the recognized negotiating agent and that too after it attains the support of 51 per cent of the workers strength through ballot. The union which leads an illegal strike must be derecognized and debarred from applying for registration for a period of two or three years. Some state governments like Gujarat, Andhra Pradesh, Madhya Pradesh, Maharashtra and Karnataka have also proposed to introduce a flexible labour policy applicable to the units working under Special Economic Zones. With increasing state support for the capital and the expanding culture of the free market, (B. Ghose, 2008) is one of the reasons for trade unions facing the decline. The Trade Unions (Amendment) Act, 2001 is an attempt to stop the mushrooming of unions and to reduce the number of outsiders. This has come into effect from January 2002, has also imposed restrictions on the registration and outsiders of unions. Now, the eligibility for registration, requires 10 per cent or 100 of workers (whichever is less) employed in an establishment or industry with a minimum of 7 workers as members. It has limited the proportion of outsiders to 1/3rd of the total number of officer-bearers or, 5, whichever is less, and 50 per cent in the organized sectors. The trade unions will face a threat to lose affiliation if workers dont support them. The goal of one industry- one union becomes an easy solution which will strengthen unions bargaining power. It is unfortunate, for not having a central legislation on unions recognition tilldate. The expanding horizon and challenges of the Indian trade unions exhibits both compulsions and hopes for future of the working class in the country. The challenges and prospects of Indian trade union movement are exhibited in Table-1.5.
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Challenges and Prospects CHALLENGES 1. Outside trade union leadership: The leadership of most of the trade unions in India has been outside leadership mainly drawn from political parties. They play a pivotal role in the Indian trade union movement due to inability of insiders to lead, low educational standards, poor command over communication skills and negotiation skills, fear of victimization by the employer, even the Trade Unions Act, 1926, itself provided the scope for outside leadership. They weaken the growth due to personal benefits and prejudices while fulfilling own aspiration. 2. Multiple unions: Multiple unions both at the plant and industry levels pose a serious challenge to industrial peace and harmony in India and dissipate their energies, dilute their power and reduce their effectiveness. PROSPECTS 1. Building inside leaders: The outside trade union leadership should be stopped and internal leadership has to be developed fully by changing the Trade Unions Act, 1926 and by joint efforts of management and working class. Management should ensure that the victimization will be at zero level, even if the trade unions are led by insiders, extensive training in the areas of leadership skills management techniques and programmers, should be provided to the workers, special leave should be provided to the officebearers in case of union productivity works and allowed them to lead their own movement. 2. Single union or united labor front: Unions must present a joint front. They should form a sort of labor party and all the trade unions in the country should be affiliated to it. It gives adequate strength to grow and prosper its movement. 3. Regulation of union rivalry: The union rivalry is said to be an industrial conflict in general and functional conflict in particular, as such it can be oriented, regulated and nurtured in the direction of unions and industrial development. 4. Sound financial position: It is an essential ingredient for the effective functioning of trade unions, because in the process of rendering services or fulfilling their goals require enormous financial commitments. It is imperative to strengthen its financial position by increasing membership fee from at 25 paisa per member per month to a substantive amount through amendment of The Trade Unions Act, 1926 and other sources.
3.Union rivalry: Inter and intra-union rivalry have been a potent cause of industrial conflict, responsible for weak bargaining power and slow growth of trade union movement in the country. 4. Weak financial position: Most of the unions in India suffer from inadequate funds. This unsound financial position is mostly due to low membership and low rate of membership fees. The other sources of union finances are donations, sale of periodicals, etc. The items of expenditure include- allowances to office bearers, salaries to the office staffs, annual convention/meeting expenses, stationary, printing, postage, telegrams, etc.
Table-1.5
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5. Role of judiciary: The greatest challenge to trade union movement is labor jurisprudence after liberalization. Before, it was delivering worker-oriented jurisprudence. In neo-liberal era judiciary delivered several judgments that curtailed the established labor rights.. The Supreme Courts judgments on contract labor absorption issue in the SAIL case and on strike by Tamil Nadu government employees and teachers are notable big blow to the trade union movement in the country. 6. Micro focus: This focus becomes a challenge. Trade unions should not limit their scope of activities concerning to mere wages, incentive, bonus bargaining and welfare of working class only.
5. Positive orientation toward role of judiciary: Then the attitudes of judiciary and government are business and development oriented in this case trade unions should also respect in coping and adopting developmental role. Trade unions need to concentrate on employees developmental issues like continuous skill upgradation/ multi-skilling, career management as a counter strategy for retrenchment/ downsizing initiatives and also to turn themselves in line with changing expectation of workforce. 6.Macro focus: Trade unions must widen the scope of activities by showing interest in sharing industry related information, balance sheet, technological, market related trends, competitor position, customer trends, etc.
7. Bargaining: The traditional mindsets and 7. Sharing: Currently, trade unions are showing attitudes of bargaining of trade unions have their willingness to share responsibilities, risks, changed into sharing with management in and privileges of managing the industry. obtaining employees benefits. 8. Global competition: Global competitive challenges can be met through either or both of the following strategies- cost cutting and value addition. Companies now are trying to employ, say, a fourth of the workforce they used to have, pay them double the wage, and get four times the output. That is why trade unions often do not cooperate with management in productivity-enhancing measures that make workers redundant. 9. Rapid changes in technology: Rapid changes in technology and the resultant phenomenon of drastic decline in employment elasticities, technological obsolescence and workers loss of control over jobs are challenges for trade unions. 8. Global competition: Globalization opens the scope of Indian trade unions dynamics worldwide. They can take global opportunities being affiliated with global federations, taken membership, employments in case of retrenchment and lay-off. Situation demands to review and redefine their mission, vision, structure, task, functions and roles in the context of new challenges.
9. Employability in rapid technological changes: It is the responsibility of trade unions leaders to impart training and education to keep the members employability progressing.
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10. Shifting attitudes of judiciary and government: There is a marked shift in state policies worldwide including India from being labor friendly to investors friendly. When governments are union friendly, unions grows; when they are neutral, unions and unionism stagnate; when they adopt anti-union polices, unions and unionism decline. The attitude of judiciary is also changing. The recent judgments of the Supreme Court about contract labor in Steel Authoritys case (2001) and the Tamil Nadu government case on strike (2003) sent clear messages to the unions that they mean business (B..D.Singh, 2004). 11. Protective regulation: The legislation concerning trade unions do not protect its dynamics to grow and develop in a positive direction while maintaining a balance between changing scenario and labour productivity.
10. Shifting attitudes of unions: A situation of do or die has emerged as outcome of changing attitudes of judiciary and government. It clarifies that trade unions have to change and orient their attitudes towards business development and survival, and own image building. An image that reflects and governs the dynamics of trade unions by the principles of competency and commitment. This will build a very congenial work culture. The winds of change which are blowing started a changed thinking, outlook, and attitude among the trade unions.
11. Protective regulation to self-sustenance: Trade unions must change mindset to pool resources and strengthen to sustain and grow on their own instead of looking towards the state for help in the form of legislation and wage boards. 12. Trade unions strategies: Trade unions will need to continue to diversify their activities, both internally and externally. Internally they are trying to increase their value to workers by offering a new range of services, such as legal and financial advice or help with upgrading skills. Externally they are strengthening their position by seeking new alliances with civil society-for example, with environmental groups, womens associations, or community associations. By making common cause with such groups, many trade unions have been able to secure public support for critical employment issues such as the plight of lower-paid workers. Such a response from trade unions is still rather uncommon in India.
12. Managerial strategies: The labour market strategy of employers has been, to cut labour cost and employ flexible labour. The managerial strategies in response to increased competition included reduction in core labour and expansion of peripheral categories of workers, reduction in employment by coercive methods, shift of production to non-union areas, sub-contracting work, prolonged lockouts, and closures. Capital mobility, elastic labour demand, huge reserves of unemployed and informal workers immensely weakened the power of unions.
STRATEGIC RESPONSE FOR STRENGTHENING UNIONS AND UNIONISM IN INDIA Indian trade unions started responding to the new challenges with a kind of pragmatism that not only seeks to forge the long cherished ideal of working class unity, but also help them to accommodate and adjust with the new reality. It needs to continue to diversify their activities, both internally and externally. Internally they are increasing their appeal to workers by offering a new range of services, such as legal and financial advice or help with upgrading skills. Externally they are strengthening their position by seeking new alliances through civil society-with environmental groups, one such
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alliance forming NGOs espousing the cause of displaced workers and undertaking income generation and livelihood programmes for them. The entry of global industries into the local market has brought a new factor, the international division of labour, into play. Now local disputes are to be solved internationally with the real master either hiding himself or remaining far away from the reach of any union activity. Trade unions, realize the importance of the nexus between the performance of the enterprise and the will-being of its workers, and the commonality between making enterprises competitive and improving the quality of life of their members. Country first, company second, and self third is an approach that at least one of the national trade union centers India has adopted as its focus (C.S.Venkata Ratnam, 2006). Furthermore, unions today are concerned about the expanding unorganized section of labour. It has promoted some NGOs and new trade unions to involve casual and temporary workers and workers of informal sectors in their fight for social security, minimum wage, and justified life. And also, trade unions are including their concern for managing a company professionally and need to pay attention to the new horizon industries like IT, BPO and retail sector as these industries have been the employment generating ones in recent times. The post-liberalized scenario, thus, depicts a gradual though slow shift towards cooperative, stable and peaceful trade union dynamics in India. CONCLUSION Neo-liberalism has changed the dynamics of Indian trade union movement, they face several challenges and its response is determining the future which is inadequate, require radical measures to redefine their strategies and roles to sustain their position first and grow. Currently, Indian trade unions are moving along with the progress of business. References *B.D.Singh, (2004). Industrial Relations (1st Edition). New Delhi: Excel Book, pp.46-47,and 7475. *B.Ghosh, (2008). Economic Reforms and Trade Unionism in India- A Macro View. The Indian Journal of Industrial Relations Vol. 43, No.3, 358-359. *C.S.Venkata Ratnam, (2006). Industrial Relations (1st Edition). New Delhi: Oxford University Press, pp.164-165. *C..S.Venkata Ratnam, (2007). Trade Unions and Wider Society. The Indian Journal of Industrial Relations, Vol.42, No. 4, April, 621-622. *D.S.Saini, (2006). Declining Labour Power and Challenges Before Trade Unions: Some Lessons From A Case Study on Private Sector unionism, Vol. 47, November 4, 912-913. *E.M.Rao, (2007). The Rise and Fall of Indian Trade Unions: A Legislative and Judicial Perspective. The Indian Journal of Industrial Relations, Vol. 42, No. 4, April, 678-679. *International Labour Organization, (1999). Decent Work, Geneva. *K.Mamkoottam, (2006). Emerging Trends in The Trade Union Movement. The Indian Journal of Labour Economics, Vol. 47, November 4, 886-887. *K.R. Shyam Sundar, (2006). Trade Unions and New Challenges on One Step Forward and Two Steps Backward. The Indian Journal of Labour Economics Vol. 47, November 4, 896-897.
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*R.S.Dwivedi, (2000). Managing Human Resources, Industrial Relations (1st Edition).New Delhi: Galgotia Publishing Company, pp. 196-197.
Damber Singh Kharka, Executive Director Druk Holding and Investments Thimphu : Bhutan and Sonam C. Namgyel Ministry of Foreign Affairs Royal Government of Bhutan The close economic dependence of Bhutan on India for most development aspects continued since Bhutan opened up its economy in the early 60s. Bhutan had initially depended entirely on India for major developmental activities in the early stages of plan developmental periods. Although the percentage of total aid inflow from India has declined over the years, it still accounts for a substantial amount that finances much of the development activity of the nation today. The strong economic dependence of Bhutan on India in terms of developmental support could have macroeconomic effects on the Bhutanese economy. It is therefore in this interest that an analysis of the relationship between the two nations inflation has been studied. One will see from this study that Bhutans inflation rate is heavily dependent on that of India. Furthermore, an interesting observation is in the fact that the countrys own monetary and fiscal policies do not seem to explain or really have an impact on the rate of inflation in Bhutan; rather the inflation in Bhutan correlates strongly to that of Indian inflation. The analysis in this paper shows that the trend in inflow of developmental funds from India (as a percentage of total inflow of developmental fund) has been declining over the years but also highlights how the relationship between the two nations inflation has remained very strong. In this regard, it may be safe to assume that the developmental budgetary support may not necessarily explain the close relationship between Bhutanese inflation and Indian inflation. Furthermore, the economic growth trend in Bhutan does not seem to flow parallel to the Indian economic growth trend, thereby ruling out the justification that the two nations inflation is closely trailed due to the close integration of the growth of the two economies. So what is the rationale behind this relationship for inflation? The trade scenario is as such: Bhutan imports almost every type of consumer and producer related commodities essential for development and day to day living. In addition, the Ngultrum is pegged with the Rupee. This study claims that the close trade relation and currency peg are the causes of strong dependence of Bhutanese inflation on Indian inflation. Economists and risk analysts normally suggest that putting all eggs in one basket and also hanging the basket in a bicycle as we travel is always considered risky from any angle. However, given the unique and friendly relationship between Bhutan and India, it is important to note that the risk that normally is envisaged in such a scenario may not be relevant. Nonetheless, it is useful, at least from an academic view point to assess some of the emerging changes.
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BHUTAN AND INDIA: INFLATION & DEPENDENCY
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INTRODUCTION In this modern colonialism-free era of globalization, connectivity and porous borders, it is evident that while colonial powers no longer exist, growing capitalistic practices have replaced it with economic powers. These economic powers, which mainly consist of large countries that have competitive economies driven by various industries and modern technology such as that of India, the USA, Japan and so on, in many ways, dictate the economies of lesser developed countries such as Bhutan. Economic relations between Bhutan and India date back to the 1960s under the joint initiative of the then Prime Minister Jawaharlal Nehru and the late king of Bhutan, Jigme Dorji Wangchuck. From being an almost closed economy around 1960, Bhutan has completely changed itself into a small open economy. The close economic dependence of Bhutan on India on most development aspects continued since Bhutan opened up its economy. Bhutan imports almost every type of consumer and producer related commodities essential for development and day to day living. On the other hand Bhutan exports huge amount of electricity to India. However, the trade gap has remained large and is financed by generous grants from abroad largely from India. As the most important trading partner of Bhutan, in the early 1990s, about 88 per cent of all exports were destined for India; with that proportion increasing to 95 per cent ten years later. During the same period, Indias share in imports has increased from 74 per cent to 81 per cent. Furthermore, the domestic currency Ngultrum is pegged to Indian rupee at a one-to-one exchange rate, guaranteed by at least 100 per cent reserve backing of all the Ngultrum issued. Inflation in Bhutan is labeled to be essentially imported inflation, although our own monetary and fiscal policies could be responsible to some extent, tracking closely the inflation in India, which has remained relatively low by international standards. The macroeconomic environment of Bhutan can be described as quite sound in that it has low budget deficits, low and stable inflation, a highly open trade regime, and a current account surplus (including grants from abroad) in its external transactions. However, at the same time the Bhutanese economy is also highly dependent on India, in several crucial areas as mentioned above. This puts the economy in a vulnerable position, for in the absence of diversification in trade and production, the Bhutanese economy may become more dependent on imports as hydro power earnings increases. All the issues highlighted above lend credence to a thorough investigation and analysis so that economists and policy makers can reflect on the current situation and assess some of the emerging changes in relation to Bhutans economic dependence on India. Objectives of the Study The broader goal of the research has been to study and analyze aspects of the Bhutanese economy, looking particularly into the dependence on India. In this broader framework the study has pursued the following research objectives: I. Firstly, this paper intends to study and analyze the extent of dependence of Bhutanese inflation with that of Indian Inflation. In particular, the study desires to isolate the effect of domestic monetary and fiscal policy effect on inflation and compare it with the effect of Indian inflation.
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II.
Economic dependence can also be apparent from the analysis of budgetary support from Government of India to the Royal Government of Bhutan, trade dependence and currency pegging. Observations on the trends of inflow of budgetary support, trends in trade balance and rationale for currency peg will be discussed as an extension to the first objective.
Research Methodology The present study is based on secondary information. The sources of secondary information comprise of annual reports of the Royal Monetary Authority (RMA), price indexes from RMA, Annual Trade Statistics, and developmental budget accounts for the past five-year plans. The degree of Bhutanese economic dependence with India is assessed using Bhutanese inflation as a dependent variable and Indian Inflation, Money supply (M2) and Bhutanese GDP as independent variables using linear regression model. If there is economic dependence then inflation of two nations should have a close relationship. This model should also help in analyzing the effect of domestic economic policies vis--vis the Indian inflationary effect on Bhutanese inflation. If Bhutanese inflation follows Indian inflation then it is important to gain an understanding of what factors explain such a relationship. Hence, Bhutans economic dependence is further analysed with a simple trend analysis of the Indian budgetary support/grant as a percentage of total grants received by Bhutan. The paper also assesses the trends in GOI support as a percentage of annual expenditure of the Bhutanese government for the period 1981 2006. Other variables that are analysed (using simple graphical techniques) in relation to Indo-Bhutan inflationary trend include a brief discussion on the currency peg, a GDP growth comparison and movements in the trade balance. Literature Review External aid, particularly from India, has played a crucial role in the Bhutanese development story. Aid from India has financed much of the prime development activity in Bhutan with full financing for the first five year plan (1961-1966) and substantial percentages of the total budget for the following five year plans. According to a Joint Research Project of the Centre for Bhutan Studies (CBS) and Institute of Developing Economies, Japan External Trade Organization (IDE/JETRO) (2004), Although Bhutans source of foreign aid has significantly diversified since it joined the UN, Indian assistance accounted for about 41 percent of total external outlay during the 8th FYP period (1997-2002) and India continues to be the major donor of external aid to Bhutan today. The Indian government has provided a great deal of assistance to some major projects launched in Bhutan such as the Tala, Kurichu, and Chukha hydropower plants; Paro Airport; the Bhutan Broadcasting Service; the Dungsum and Penden cement plants; Indo-Bhutan Microwave Link; building major highways; and exploration of mineral resources to name a few. Tashi Choden (2004) discusses Indo-Bhutan relations and points out how the Indian government was a pivotal source of funding from the very start of development in Bhutan. The first two fiveyear plans were wholly financed by India. Tashi Choden points out that the relationship between India and Bhutan is also one of economic security because of Bhutans mountainous terrain and landlocked nature.
An analysis of this objective should help us understand the degree of dependence. On the issue of dependence of Bhutanese inflation on Indian inflation, the preresearch notion is that Bhutanese inflation is fundamentally a borrowed one and that the Bhutanese monetary and fiscal policy have very little or no effect. This hypothesis will be tested in this research.
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The Indo-Bhutan Treaty of 1949 forms the basis for formal relations between the two countries. The ten-article treaty provides for, among others, peace and friendship, free trade and commerce, between the two countries and the government of India agrees to grant the Government of Bhutan every facility for the carriage, by land and water, of its produce throughout the territory of the Government of India, Under this treaty, the border towns of India is a Ngultrum payment area for Bhutan and the transactions with Indian Rupees is pegged on a one-to-one basis. The Indian Rupee is legal tender in Bhutan, while Bhutanese Ngultrum is informally transacted freely in the bordering towns. This transaction is mostly confined in the immediate border areas within a maximum 3040 km lateral distance, validated basically by small businessmen, traders and others involved in transactions with their Bhutanese counterparts. Galey (2003) questions and discusses the validity of the currency peg in Bhutan by comparing Bhutanese economic conditions and seeing if it satisfies characteristics of Optimum Currency Areas (OCA). He bases his analysis on Robert Mundells definition of OCA (1961) which is, a domain within which exchange rates are fixed. He mentions that OCA rests on the existence of a high degree of mobility of factors between countries and regions and between those that experience symmetric shocks from outside shocks such as oil crisis. Mckinnon (1963) adds to the list of criterion claiming that size of a country and its openness are one of the main factors that facilitate formation of an optimum currency area. A higher level of fiscal integration and a highly diversified economy also makes better candidates for currency areas than less diversified economies. According to Galey (2003), most, but not all of the economic characteristics discussed in the theory of optimum currency areas appear to apply to the Bhutan-India case. It can be concluded that the Bhutanese governments decision to peg its currency to the Indian rupee and to allow the rupee to circulate in Bhutan is an optimal policy. With regards to the policy of using the currency peg, it can be concluded that it has been deemed appropriate by international authorities such as the International Monetary Fund (IMF). According to Public Information Notice No.01/53 (2001) released by the IMF, Directors endorsed continuation of the exchange rate peg to the rupee in light of the strong economic links with India. Inflation in Bhutan is borrowed from India. This is a common statement that one comes across when discussing the level of inflation in Bhutan. Given the rapid rise in monetization of the Bhutanese economy, one would expect a high degree of inflation and while this was indeed the case in earlier times, inflation has been majorly curtailed. Osmani, Bajracharya, Tenzing and Wangyal (2005) point out how, rapid increase in money supply has not, however, led to rapid inflation, as a large proportion of the additional money supply has served to integrate an increasing proportion of the barter economy into the cash nexus. According to statistics, inflation rates fluctuated around an average of 8-9 percent in the 1980s and 1990s. However, since 2000, the average inflation rate has almost been halved and now stands at less than 5 percent. Osmani, Bajracharya, Tenzing and Wangyal (2005) point out how this stability has, however, been achieved not primarily through active monetary or fiscal policy, but through the exchange rate policy of keeping the local currency Ngultrum pegged with the Indian rupee. Adoption of a fixed exchange rate with the largest trading partner ensures that inflation in Bhutan is essentially one of the imported varieties, tracking closely the inflation in India. For many, the dependency of Bhutan on India for trade and aid opens up room for concern. According to the Asian Development Banks Country Economic Review (2003) the composition of Bhutans merchandise trade shows that India remains its largest trading partner accounting, on average, for some 90% of Bhutans exports and about 70% of imports. Furthermore, in addition to the grants that the Indian government provides, the level of debt coming from India alone is extremely high. The report states that as of June 2002, India had provided most soft loans to Bhutan, with cumulative
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Despite the supposed pros and cons of close ties and economic dependence on India, the fact remains that this relationship is one that is highly valued by the leaders in the Kingdom. In His Majesty the Kings address to the graduates of Sherubtse College in 2007 he stated: For Bhutan, India is a true source of optimism for our future. As our closest neighbor and friend Bhutans rapid socio economic growth was always assisted by Indias steadfast support. As the worlds largest economy, our young democratic system will always benefit from Indias experience. As the economic power of the future, our economy will benefit from cooperation with India. I know for certain that India is deeply committed to Bhutans growth as a democracy and as a neighboring economy. Scope and Significance of Study The steps involved in the conduct of present research work include detailed review of related research works to date, collection of primary and secondary information from the sources mentioned above, analysis of data, examination of economic variables, interpretation of the tabulated information and drawing necessary conclusions. The study however, does not look into long term time series data. To that extent, this study may be limited. Given the fact that very little work appears to have been done on the independence of the Bhutanese economy, the results of the study are expected to benefit economists, officials of the central monetary authority, policy makers and development planners for it would be useful to be aware of the status of the Bhutanese economy with particular reference to an analysis of the independence of it. This study could also prove to be of use to researchers, mainly with regard to the history of economic relations. It could provide a platform for and open new avenues for further research as well. RESEARCH FINDINGS and DISCUSSIONS 1.1 Dependence of Bhutanese Inflation on Indian Inflation
The paper looks into inflation in Bhutan in comparison to Indian inflation. The Bhutanese economy has advanced tremendously in the past decades, particularly in the past five years. The speed of monetization has been impressive. Rapid increase in money supply has not, however, led to rapid inflation, as a large part of the additional money supply has served to integrate an increasing proportion of the barter economy into the cash nexus. 1.1.1 Trend Comparison
Inflation is measured through the consumer price index. As most goods in Bhutan are imported from India and with the exchange rate parity, inflation in Bhutan is borrowed from India. One will notice from the chart below that this statement is valid and holds true. The trends in Bhutanese inflation are synonymous with that of India, with Bhutan always trailing a little behind at higher rates (with the exception of certain years where Indian inflation is higher than that of Bhutan). There is a very close relationship between Bhutanese inflation and Indian Inflation. Having identified the close ties between the two inflations, the next agenda of this research is to assess the dependence of Bhutanese inflation on Indian inflation in order to test Bhutans economic dependence on India.
gross disbursements totaling $216 million primarily for the development of the hydropower sector. This dependency level is reiterated in the fact that, over the past years, domestic resources financed only 15% of the average annual development budget, making Bhutan highly dependent on external assistance to fund its development programs and initiatives.
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Figure 1: Chart depicting trends in inflation for Bhutan and India
1.1.2
Regression analysis of Bhutanese inflation on Indian inflation
In addition to justify the graphical trend analysis of the raw data, the paper runs a regression model of the following functional form for the 1986 2006 period. Inf_BT = Fn(Inf_IND, M2, GDP) Where Inf_BT: Bhutanese inflation Inf_IND: Indian inflation GDP: Bhutanese gross Domestic Product at constant price for 1981 - 2006. M2: Bhutanese Money Supply for 1981 - 2006 To be sure that the net effect of Indian inflation on Bhutanese inflation is isolated, the other variables on which inflation usually depend are included in the model. Money supply (M2) that normally indicates monetary policy variable and GDP which is composed of Government fiscal policy parameters are also included in the regression model for this purpose. Linear regression of Bhutanese inflation against Indian inflation, Bhutanese Money Supply (M2) and Gross domestic product for the last 26 years shows us that Indian inflation has a significant effect on Bhutanese inflation with a coefficient of (.678) and significance level of 99%. Surprisingly the other two variables that are supposed to capture domestic policy effect have shown no significant relationship with inflation. Everyone would have expected that the domestic money supply should be positively related with inflation as the monetary theories state that higher the money supply, the higher the inflation would be. Similarly, there is some relation expected between the GDP and price changes asGDP is supposed to reflect the transaction demand for money. Detailed results of the regression model are presented in the table below.
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Model
Unstandardized Coefficients B Std. Error 2.042 .198 .001 .000
Standardized Coefficients Beta
Sig.
(Constant) INF_IND M2 GDP
1.895 .741 -.001 .000
.928 .678 -.998 .843 3.743 -.730 .634
.363 .001 .473 .533
a. Dependent Variable: INF_BT In order to find out the effect of Indian inflation on Bhutanese inflation, firstly a uni-variable model of the form: Inf_BT = F(Inf_IND) In fact the relation between dependent (Inf_BT) and independent (Inf_IND) variables has been found even stronger both in terms of magnitude (.8050) and significance level of a 100%. The result of an uni- variable model is presented in the table below. Table 2: Coefficients table from Regression Analysis of Bhutanese inflation against Indian inflation
Model 1 (Constant) INF_IND Unstandardized Coefficients B Std. Error .965 1.116 .879 .132 Standardized Coefficients Beta .805 t .865 6.645 Sig. .396 .000
a. Dependent Variable: INF_BT A common belief revolving around inflation is that the impact of a change in money supply on inflation is not seen immediately. To test this theory, a regression model that considers one period lag on money supply has been tried. Results show that Bhutanese inflation still bears a strong relationship with Indian inflation and is not even remotely related to Bhutanese Money Supply. Table 3: Coefficients table from Regression Analysis of Bhutanese inflation against Indian inflation and money supply lag in Bhutan.
Model Unstandardized Coefficients Std. B Error 1.561 1.822 .874 -7.860E-05 .183 .000 Standardized Coefficients Beta t Sig.
(Constant) INF_IND LAGM2
.856 .757 -.122 4.781 -.770
.401 .000 .449
a. Dependent Variable: INF_BT
Table 1: Regression Analysis of Bhutanese inflation against Indian
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The ultimate interpretation of findings is that Indian inflation is key to creating Bhutanese inflation and domestic monetary policy as reflected by money supply does not really matter. Bhutanese inflation is explained by Indian inflation and not by domestic fiscal and monetary policy parameters. The finding that our inflation depends on Indian inflation may not surprise most policy makers in Bhutan as they usually accept that inflation in Bhutan is a borrowed one from India. However, the fact that Bhutanese policy tools (M2 and GDP) are ineffective is certainly an issue of concern. If a fluctuation in M2 that would normally represent the monetary policy and GDP, which could be used as a proxy for fiscal policy does not effect inflation, then policy makers may not find enough easy tools to manage inflation. Therefore, it is essential to explore further and find out why Indian inflation is more important compared to M2 and GDP in explaining Bhutanese inflation. Is it because the Bhutanese economy is highly integrated with India in terms of the development budgetary support, trade relationship and one-to-one currency pegging. The paper looks into each of these issues. 1.2 Analysis of trend in Indian Budgetary support for Bhutanese Economic Development
As a result of close bilateral ties between the two nations, India has played a focal role in the Bhutanese development story. Being a major financer of development, India basically financed the first two five year plans entirely. According to statistics published by the Indian embassy in Bhutan, Indian assistance to the developmental process in Bhutan via the implementation of the five year plans- has formed a major chunk of total external assistance to Bhutan. Up until the fourth plan, Indian contributions accounted for more than three quarters of assistance. i. Development plan dependence
The fifth five year plan and subsequent five year plans account for lesser percentages of aid showing that there has been a further diversification of sources of aid. In other words, other agencies and donors seem to have started giving aid to Bhutan from 1981 onwards. Hence, one could say that Bhutan was almost solely dependent on India for developmental assistance during the initial stages, mainly prior to the 1980s. Table 4: Table depicting allocations to the five year plans
(In millions of rupees) 1961-66 (1st Plan) 1966-71 (2nd Plan) 1971-76 (3rd Plan) 1976-81 (4th Plan) 1981-87 (5th Plan) 1987-92 (6th Plan) 1992-97 (7th Plan) 1997-02 (8th Plan) 2002-07 (9th Plan) Total 107.2 202.2 475.2 1,106.20 4,440.50 9,500.00 23,500.00 32,610.00 70,000.00 Indias 107.2 202.2 426.6 853.00 134.00 4,000.00 7,500.00 10,500.00 7338.00 % of Indias 100% 100% 90% 77% 30.20% 42.10% 31.90% 27.60% 10.48%
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Source: Indian Embassy in Bhutan Another significant aspect demonstrated by these statistics is the fact that the growth process of
ii.
Indian grants/aids as a percentage of total grant received
A detailed analysis of grants from India for the time series 1981-2006 shows us that a majority of grants received by Bhutan have come from India. According to these statistics, Indian contributions have continued to comprise of almost three quarters of the total external aid. With the exception of years such as 1991-1992, where Indian contributions formed 32-37% of the total grants, the average contribution of India for this time series is 56.2%, thereby accounting for more than half the total grants being received. Figure 2: Graph depicting trends in Indian contribution to total grants
Source: RMA Annual Reports 1.2.3 Indian Aid/grants as a percentage of RGoB Expenditure Another way of assessing the rate of dependency of Bhutan on India over the years is to calculate the ratio of amount of Indian grants to the total government expenditure. This measures the dependency of the annual budget on contributions from India. It shows that the dependency ratio of Bhutan on Indian aid has, when smoothed out, maintained a constant rate of decline over the years. According to these statistics, the peak of dependency for this time series was in 1982 at 53.24 percent and the lowest rate of dependency was found in the year 2001 with 9.4 percent. This development is most likely in response to the commissioning of the hydropower projects, which incidentally, are also projects that have primary assistance from the Indian Government.
Bhutan has progressed a great deal with our reliance on Indian grants for development reducing to 10.48% of the total allocations. Regardless of such observations, Bhutan and India continue to enjoy close bilateral and economic ties. The degree of dependence in terms of percentage of Indian contribution to five year plan budget allocation has steadily decreased over the years. This suggests that Bhutan has diversified in terms of development budget dependence with India.
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Figure 3: Graph depicting the dependency ratio of Bhutan on Indian Aid
As stated above, the dependency on India in terms of budgetary support has, in relative terms, continuously declined since the first five year plan. However, the inflation scenario in Bhutan is still strongly dependent on that of India, thereby suggesting that the cause of close dependence of Bhutanese inflation on Indian inflation may not necessarily be due to the budgetary dependence of Bhutan on India. 1.2.4. Project support in Hydropower sector
The focus of development financing has shifted over the course of the decades from the establishment of basic infrastructure and roads to improve communications and connectivity internally, gradually shifting to the development of industries and trade. Some of the major projects in which India has assisted are the development of the various hydropower projects. Bhutan is endowed with copious water resources and this feature is a crucial aspect required for fulfilling Bhutans objective of socio-economic development. Bhutans four major river basin systems (Punatsang Chhu, Drangme Chhu, Wang Chhu and Amo Chhu) have their sources in the alpine zone and flow north to south to join the Brahmaputra in India. Bhutans water resources are of pristine quality, except for a few localized pollution problems near urban and rural habitation. The estimated and identified hydropower potential in Bhutan is 23,500 MW with a mean annual energy production capability of 99,200 GWh. According to the Power System Master Plan (1993), there are 78 potential run-of-river sites in Bhutan for hydropower development with a capacity above 10 MW and it is estimated that if 25 out of the 78 sites are developed, 16,435.80 MW of electricity can be generated. Although agriculture accounts for the largest share of GDP, hydropower is the engine of Bhutans small economy. The average annual GDP growth rate of almost 7 percent since 1985 has been largely propelled by the construction and commissioning of the 336 MW Chhukha hydropower plant. Furthermore, the commissioning of the Tala hydropower project of 1020 MW that occurred early 2006 is expected to increase the GDP growth to 18.1 percent by 2007. An added benefit of the hydropower plants is the establishment of several energy-intensive industries such as Ferro-alloys, cement and calcium carbide.
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Indian assistance for the construction of the major hydropower plants has been based on a 60 percent grant and 40 percent loan financing model. While based on the same financing scheme, the hydropower related Indian Rupee denominated loans have varying terms. Of all the projects, Chhukha received the best terms and conditions with an interest rate of 5 percent per annum and a repayment term of 24 years. Kurichhu carries the highest interest rate of 10.75 percent and a repayment period of 12 years. The Tala loan has an interest rate of 9 percent and 12 years for repayment. The Indian Government has financed all the major hydyel project investments in Bhutan with the exception of the Basochhu Hydropower Project. Nonetheless, it may be noted that the financing modality has undergone some changes over time. The financial structure particularly the debt:grant ratio has undergone some changes from 40:60 to 60:40 from initial projects to the recently executed projects. Furthermore, unlike in the past, we have also started seeing the participation of private businesses from India in financing investment projects in Bhutan such as the case of example TATAs participation in Dagachhu. Prior to the construction of every export-oriented hydropower plant, a Power Purchase Agreement (PPA) which states the export tariff of electricity, is negotiated with India, currently the only market for Bhutanese hydropower exports. A revision of this tariff is negotiated at the political level. Electricity exports to India are Bhutans main export, accounting for almost 38 percent of total national revenue in 2004. For major projects such as Chhukha, over 90 percent of its power generation is exported to India and the remaining is supplied to seven western and south-western dzongkhags. Kurichhu exports over 80 percent of its generation to India and the remaining power is supplied to the eastern and central parts of Bhutan. The value of electricity exports to India increased from Nu. 41.96 million in 1986/87 to Nu. 230.66 million in 2003/04 and the total energy sales increased from Nu.236.37 million in 1998/99 to Nu.538.99 million in 2003/04. 53 The commissioning of the Tala plant is expected to further boost domestic revenue by an estimated Nu. 2.6 billion a year.54 The India-Bhutan relationship in terms of hydropower is of a win-win nature. Bhutan has the potential for hydropower plants but not enough money to develop it. India has the money to finance development but faces chronic power shortages in the northern parts of its country. In fact, the estimated shortage of roughly 10,000 MW is projected to rise to 20,800 MW by 2010 in India.55 In light of this information, one could say that there is a shift in relationship for Bhutan from being solely dependent on India to one of mutual co-dependence.
53 MOTI (2005), The integrated master plan study for Dzongkhag-wise electrification in Bhutan Interim Report. Japan International Cooperation Agency and Nippon Koei, Co. Ltd and Department of Energy, Ministry of Trade and Industry, Royal Government of Bhutan: Thimphu. 54 Osmani, Bajracharya, Tenzing & Wangyal (2005), Macroeconomics of Poverty Reduction: The Case Study of Bhutan, Report prepared for UNDP Bhutan.Pp.193 55 WEC (2001), Extract from the survey of energy resources 2001. World Energy Council. Retrieved from http://www.worldenergy. org/wec-geis/edc/countries/India.asp
India has very much been a part of the development of Bhutans hydropower potential since the commissioning of the first hydropower plant, which occurred in 1967 in Thimphu with an installed capacity of 360kW. Since then, 26 other hydropower plants of varying sizes have been constructed. The first major hydropower project, the 336MW Chhukha hydropower plant was built in 1988 and fully financed by the Government of India. This was followed by the 60MW Kurichhu Hydropower plant in Eastern Bhutan, fully commissioned in 2002. With the exception of the Basochhu I and Basochhu II hydropower plants and the Rongchhu hydropower plant, all other hydropower plants have been built and commissioned with the assistance of the Indian Government.
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Be that as it may, the benefits for Bhutan outweigh that for India. According to the Master Plan, if no new hydropower plants are developed after Tala, the peak power supply capacity will fall short of the projected peak power requirements. This is especially true for the power system in eastern Bhutan which is only supplied by Kurichhu with an effective output of 45 MW. Hence, the current strategy of seeking Indian assistance for the development of hydropower plants will have to continue. 1.3. Comparison of GDP Growth Rates
Given the largeness of the Indian economy and its closeness in all aspects with Bhutan, one could expect a trickle-down effect of economic progress to the Bhutanese economy. We have seen from our earlier analysis that the Bhutanese economy has a strong relationship with the Indian economy in so far as the Bhutanese inflation is explained. However, on other aspects like budgetary dependence, the trend has shown some reduction in dependence and slight diversification. The question one must ask then is: will India shining in terms of one of the fastest growing economies have a trickle-down effect on Bhutan? This aspect can be assessed by studying the relationship between Bhutanese economic growth and Indian economic growth. A regression analysis with Bhutanese economic growth rates as the dependent variable and Indian economic growth rate as the independent variable has been run for a period of 26 years (1981 2006). GDP_GRB = F(GR_IND) Where GDP_GRB is Bhutanese Real GDP Growth Rate between 1981 2006 GR_IND is Indian Real GDP growth rate at a constant rate for the same time period. Table 5: Coefficients table from Regression Analysis of Real GDP Growth rate of Bhutan against Real GDP growth rate of India
Model 1 (Constant) GR_IND Unstandardized Coefficients B Std. Error 8.977 4.883 -.104 .347 Standardized Coefficients Beta -.061 t 1.838 -.299 Sig. .078 .767
a. Dependent Variable: GDP_GRB The regression coefficient of (-0.299) is totally unexpected although it is not significant at all and hence confirms no existence of any relationship. On the contrary, one could expect to have a positive coefficient signifying some dependence of Bhutanese economic growth on Indian economic growth. However, given that there appears to be no relationship between the GDP growth of the two nations, the trickle down benefits to Bhutan due to fast growth in India is not seen. It is therefore also fair to assess that the existence of close dependence of Bhutanese inflation on Indian inflation is not due to the integration of economic growth. So far in this paper we have seen a very strong dependence of Bhutanese inflation on Indian inflation but what may explain this strong dependence is not yet clear. We do not find a correlation between the GDP growth rates of the two nations and the trend analysis of the budgetary dependence ratio also shows a constant decline over the years. In the next few sections we will analyze issues of the currency peg and trade dependence, and focus our discussion on how Bhutans high level of dependence on India for trade and the existence of a currency peg are likely reasons for the strong dependence on Indian inflation.
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Firstly the paper discusses the Bhutanese currency peg with India and its implications. The currency peg of the ngultrum to the Indian rupee was introduced with the start of the ngultrum in 1974. Bhutan also allows free circulation of the rupee in Bhutan. Rupee is accepted as legal tender and Bhutanese currency is accepted in frontier regions of India that have major business transactions with Bhutan. With this peg, Bhutanese currency has no independent exchange rate vis--vis other major currencies of the world. However, statistics and studies have shown that the policy of pegging the ngultrum to the rupee remains a feasible and wise policy. The peg has served Bhutan well, especially given the close economic links with India and has helped to anchor inflation expectations. 1.4.1 Implications of the Currency Peg at the National Level
Maintaining the currency peg is evidently very important for the strength of the currency. According to a survey conducted with officials from the Royal Monetary Authority of Bhutan, by following this policy that has been used for over thirty years, the Bhutanese economy and trade have enjoyed various advantages such as: Instilling confidence in the currency: Given the small size of the economy and close economic ties with the Indian economy, it was necessary to begin monetization of the economy on a dual currency basis. The RMA adopted the policy as a crucial strategy to introduce Ngultrum as the legal tender. The publics confidence in the value of Ngultrum depends upon its convertibility at least at par with the Indian Rupee. External trade considerations: Given the geographical situation, it is inevitable that India is and will continue to be the dominant trading partner as well as the conduit to and from other countries. Bhutan shares three quarters of its borders with India and a large part of cash income comprises of exports to India while at the same time India is the largest source of Bhutans imports. Saves transaction costs and removes uncertainty: Due to India being the dominant trading partner, pegging the Ngultrum at par to the Indian rupee saves transaction costs and removes uncertainty due to exchange rate fluctuations. Under these circumstances, the pegged exchange rate regime is the most appropriate exchange rate arrangement for Bhutan. Anchor for price: Reflecting close trade and financial links with India, price changes in Bhutan largely follow those in India. Around 80 percent of total imports, both consumption and investments continue to be from India. The pegged exchange rate is therefore, an important policy consideration to provide an anchor for stable domestic price. In other words, the arrangement helps in stabilizing inflation by inducing greater policy discipline and instilling greater confidence in the currency. Bhutan has benefited from the stable prices prevailing in India as reflected in the relatively low inflation.
1.4
Currency peg with India
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1.4.2
Implications of moving away from the currency peg
Pegging the exchange rate limits the RMAs ability to pursue independent monetary policy and, this in turn limits the use of exchange rate for adjustments in case of shocks/imbalances. However, since most of the trade is with India, doingaway with the peg would pose difficulties in maintaining the exchange rate. The cost of goods and services would have increased and price stability would have deteriorated. The Bhutanese ngultrum, to put it simply, would have devalued. Classical economists would argue that such devaluation in currency would lead to an increase in Bhutanese exports as Bhutanese goods will now be more affordable and much cheaper. Subsequently, imports from abroad would decrease as affordability on the Bhutanese part would have reduced. This, in theory, would boost the balance of trade (BOT) in favour of Bhutan. However, this scenario is not at all true in the case of Bhutan. For such a situation to occur, Bhutanese products would have to be in great demand outside and there would have to be locally produced substitutes for imported goods. There would have to be a substantial level of demand externally but for what goods? What could Bhutan possibly export that would be in such heavy demand? The truth is our export market is limited. Hence, even if our exports were to become cheaper for the outside, its extra earnings would grow only till a certain extent. For exports to really improve, we need to invest in areas in which there is growth potential, solidify our export base and establish our own niche market. On the other side of the BOT, imports in Bhutan will most likely not reduce even with devaluation in the ngultrum simply because we provide almost no alternative locally. The basic amenities are unattainable in the local markets. Where would one presume to get a pair of boots, sneakers or even something as simple as toothpaste if it were not imported? Until we become self-sustainable in most basic amenities, via the manufacturing of local goods etc., Bhutanese will never stop importing from abroad. Given the present trade situation, where Bhutans external trade is not sufficiently diversified, pegging the Ngultrum to the Indian rupee remains the best option. Removing the peg could destabilize the economy. The price stability may no longer remain at containable levels. In this context, the currency peg history provides more justifiable reasons as to why Bhutanese inflation has a strong correlation with Indian inflation. 1.5 Bhutanese Trade Portfolio with India
As has been indicated in the sections above, India is a focal trade partner for Bhutan. This is due mainly to the geographical proximity and extensive aid offered by the Indian Government. Bhutan relies on Indias market for exports and as an outlet for third country exports. Furthermore, Bhutan imports a range of products from India extensively. On the export side, nearly three fourths of all export earnings are derived from activities based primarily on indigenous natural resources such as electricity generated by hydropower, wood products from forest resources and minerals. On the imports side, products range from capital goods, foodstuff to other miscellaneous items. As Bhutan is an import-dependent economy, there has been minimal compulsion to protect the domestic economy with import tariffs or quantitative restrictions. Due to limited domestic market, the industrial sector has been largely export oriented. The Balance of Payments (BoP) with India has sustained large deficits in the past and this has been manageable mainly due to the large grants given by donors such as India and hydropower earnings. The overall BoP with India improved from a deficit of Nu. 228.9 million in 1989 to a positive balance of Nu. 1024.5 million in 1998/99. Since then, the trade deficit grew again to Nu. 784.6 million in 2004/05 and stood at Nu. 450.6 million in 2005/06. This deficit has apparently grown due to the import of plant and machinery related to the construction of the Tala hydropower plant.
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Table 6: Table of the Balance of Trade with India (in million rupees)
Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Exports 3079 3227 4041.9 4181 4711.2 4377 4700.5 5137 5925.9 7761.6 9969.8 14488 Imports 2630.2 2896.2 3453.6 3620.9 5845.3 6231.3 6988.8 7581.3 10260.1 10193.9 12795.1 13053.9 Balance of Trade 448.8 330.8 588.3 560.1 -1134.1 -1854.3 -2288.3 -2444.3 -4334.2 -2432.3 -2825.3 1434.1
Source: RMA Annual Reports An evaluation of the balance of trade based on a comparison between the exports and imports with India for the past ten years points out that while the BoT maintained low but positive amounts in the late 1990s, the BoT seems to drastically drop over the course of the next four years with an all time low in 2003, which was probably due (as mentioned earlier) to the purchase of capital goods for the construction of the hydropower plant. Nonetheless, the downward trend in the BoT demonstrates the level of dependence of the Bhutanese economy on trade with India. This dependence could be reflected further as a positive correlation between the price indexes of the two nations. It is noted that Bhutans close dependence on India for trade, commerce and maintenance of the currency peg is to Bhutans advantage. In the same regard, the close economic dependence is also a factor that explains the existence of a close correlation between Bhutanese and Indian inflation. Some may disagree on this being a positive scenario and may argue against it. Regardless of a stance on this feature, any efforts for economic diversification to avoid the close inflationary relationship must consider the pros and cons of such a diversification theory.
It is approximated that Bhutanese trade with India accounts for more than 85% of the total trade. It may be interpreted that the import of items from India to Bhutan brings in the trends of Indian inflation right along with it. Hence finding a strong correlation between Bhutanese and Indian inflation should not come as a surprise.
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2.
Economic Diversification - Emerging Change
First and foremost, a decline in dependence on aid would be a welcome gesture to politicians and political theory based on the belief that a heavy level of dependence threatens the integrity and sovereignty of a nation. A decision to move away from extreme dependence on India would enable flexibility and could also allow the Bhutanese government to pursue trade relations with the other neighboring giant next door, if looked purely from an economic perspective. At present, the funding for planned development and major economic project financing mostly come from India. However, this type of investment financing is a government to government arrangement and not much has been explored in terms of business to business tie ups. A step towards lessening and diversification from present model of economic dependence, one could try out business to business contacts between two nations for investment financing. Change in this direction has already started with TATAs participation in the Dagachu Hydropower Project. In addition to this, the establishment of Druk holding and Investments (DHI) in Bhutan as a government holding company with the mandate of fund raising and investment within and outside Bhutan could bring about a major paradigm shift in the Bhutanese way of investment financing. An emerging change that may feature gradually in support of diversification of the present model of financial dependence could be in the form of financing commercially viable projects through alternate financing modalities such as Public Private Partnership, Private Private partnerships and IPOs (initial public offerings) from the Indian capital market and Foreign Direct Investment (FDI). Such a change in investment financing modality is more and more pronounced in a developing economy like that of Bhutan that is becoming increasingly open day by day. It has been established that Bhutan relies on India to a great extent, not only as a partner in development and aid but also as an outlet for exports. Judging from the statistics establishing the direction of trade in Bhutan, one can see that India accounts for 77.2 percent of the export market even today with very limited alternatives. The imports coming into the country have various sources but India still accounts for 68.7 percent of the imports that came into the country in 2006. The trend analysis show gradual decrease of percentage of dependence and natural movement towards trade diversification. However, given the landlocked terrain of Bhutan and with extremely limited access to the outside world, diversifying our trade relations could pose great risks. If the Government of Bhutan were to diversify and withdraw from the Free Trade Agreement for instance, there would be no guarantee of free movement of goods between India and Bhutan, thereby cutting off major export and import links. It would also take away the current system of import and export subsidies, which is presently to the advantage of Bhutan, especially for products like petrol and diesel in which Bhutan receives substantial subsidies and occupies a huge chunk of our imports. Such scenarios will have immediate negative repercussions on the trade balance and the economy of Bhutan. Individual traders and consumers in Bhutan are likely to be the primarily effected. This is further augmented by the fact that most of the roads and communications networks rely on going through India. Given the realities, we do not see a trade diversification for Bhutan from India emerging at a faster rate. Speedy diversification of trade and economic dependence on the whole from India is neither advisable nor an easy task but continuous efforts towards decreasing overdependence and careful management of the economic dependency portfolio is not less important.
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The level of economic dependence of Bhutan on India extends across the board and encompasses all aspects. First and foremost, Bhutan depends on India for aid; for development; and almost entirely for trade. The dependency ratio of Bhutan on India has reduced over the years but it still stands at 23.32 percent. The growth of the Bhutanese hydropower industry, a huge source for economic growth, has been almost fully financed by the Indian government. Our public debt to India has arisen mainly out of the development of this particular sector. It should therefore come as no surprise that the Indian government has been instrumental in the Bhutanese development story till date. Yet the growth rates in economy for the two countries do not trail one another as would be expected (as noticed by the non-existence of the relationship between the GDP growths of two nations). Rather, it is the deeply intertwined economic system that has resulted in the borrowed form of inflation in Bhutan contrary to those who would think that inflation in Bhutan is affected by macroeconomic variables such as money supply and GDP growth. The existence of a system of dual currency (one-to-one exchange rate) and close trade and bilateral links with India seem to cause the close relationship between Bhutanese inflation with Indian inflation a form of Bhutanese economic dependence on Indian. Some will argue that economic dependence is inevitable and not a cause for concern in this globalized world while others may recognize it as a risk concentration. Nonetheless, independence and selfsufficiency is what a country should ultimately strive for. Too much dependence on one economy could reduce strength for self determination; hence gradual and calculated steps in diversification may be advisable. Accessibility and infrastructure development are keys to expansion of economic relations with others. Firstly, an improvement in the accessibility and ability for traders to expand their links with others is required. The importance of this is that such a strategy would facilitate economic diversification which will ultimately reduce dependency on India for trade. Secondly, the local production base must be developed and strengthened as the years progress so that the country can be fairly self sufficient and become a strong competitor in the regional market. This strategy that aims at import substitution and export enhancement will strive to put the BoT in a positive balance with India, thereby ultimately reducing the level of dependence. Only then can Bhutan look into an expansion of economic relations and gradually attain a certain level of economic independence from India. However, despite the emerging changes in shifts of the dependency and other development realities show that Bhutans economic relations is closely intertwined with that of India and therefore economic independence from India may be difficult to achieve in the foreseeable future.
CONCLUSION
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REFERENCES 1.Agreement on Trade, Commerce and Transit Between the Government of the Republic of India and The Royal Government of Bhutan, Signed on 29 July 2006, http://www.eoithimphu.org 2.Asian Development Bank. (2003, September). Country Economic Review: Bhutan. Retrieved September 22, 2007 from http://www.adb.org/Documents/CERs/BHU/default.asp 3.Choden, T. (2004). Indo-Bhutan Relations Recent Trends, Center for Bhutan Studies, Vol. 11 -6. 4.Galey, K. (2003). An analysis of Pegged Exchange Regime between Bhutan and India.. Journal of Bhutan Studies, Vol.8 5.His Majesty Jigme Khesar Namgyel Wangchucks address to the graduates, Sherubtse Collage Convocation, (2007) 6.Indo-Bhutan Treaty of 1949. 7.Indo-Bhutan Friendship Treaty, Signed on 8 February 2007. Retrieved from http://www. eoithimphu.org 8.International Monetary Fund (2007, October). IMF Country Report No. 07/350. Publication services: Washington, D.C.. 9.International Monetary Fund (2001, May 23). Public Information Notice (PIN) No. 01/53. Retrieved September 20, 2007, from http://www.imf.org/external/np/sec/pn/2001/pn0153.htm 10.International Monetary Fund (2005, July 18). Public Information Notice (PIN) No. 05/91. Retrieved September 20, 2007, from http://www.imf.org/external/np/sec/pn/2005/pn0591.htm 11.McKinnon, Ronald I. (1963). Optimum currency areas, The American Economic Review, Vol. 53, No. 4. 12.MOTI. (2005). The integrated master plan study for Dzongkhag-wise electrification in Bhutan Interim Report. Japan International Cooperation Agency and Nippon Koei, Co. Ltd and Department of Energy, Ministry of Trade and Industry, Royal Government of Bhutan: Thimphu. 13.Mundell, Robert A. (1961). A theory of optimum currency areas, The American Economic Review, Vol. 51, No. 4. 14.Osmani, Bajracharya, Tenzing & Wangyal. (2005). Macroeconomics of Poverty Reduction: The Case Study of Bhutan, Report prepared for UNDP Bhutan. 15.The Centre for Bhutan Studies (CBS) and Institute of Developing Economies, Japan External Trade Organization (IDE/JETRO). (2004). Economic and Political Relations: Between Bhutan and Neighbouring Countries A Joint Research Project. 16.The Royal Monetary Authority (RMA) Annual Reports. (from September 1886 September 2007). 17. WEC (2001). Extract from the survey of energy resources 2001. World Energy Council. Retrieved from http://www.worldenergy.org/wec-geis/edc/countries/India.asp
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Jose Mathews Gaeddu College of Business Studies Gaeddu, Chukha , Bhutan Email: josmathews@gmail.com Change management programmes in organizations are implemented based on different models like Lewins model and similar ones. The crux of the programme is to be an approach from within that attunes the individual to the organization. The current models do not take into account a crucial aspect of change management that is, the micro variable, the individual, who eventually exercises macro significance in the organization. This paper finds out the crucial individual processes in greater detail. The diamond model proposes cognition, affective state, motivational processes and the behavioral processes as the key elements of any long-lasting change management programme. Key Words: Forces of Change, Quadruple Forces, Organizational States INTRODUCTION Change involves remolding an existing pattern of relations, work processes or structural configurations so as to make it more efficient and effective in relation to outcomes. Change has the nature of a double process in that it demands replacing an old system with a new system, which involves the identification of the old, and the substitution of the new forms. The heart of change management involves the organic processes that include the individuals, dyadic relations, group configurations and the organization as a whole. The mechanic aspect of change refers to the hard aspect like technology, structural layers, etc. Whatever be the form of change like enriched team building activities, horizontal structures, the introduction of new working hours or a new system of computation, the organic processes constituted by the human factor hold the key to change management and they are the layers and the building blocks of change. Thus in any change management programme, the individuals working in the organization are the kings of change and not the subjects of change management. The forms of change in an organistion can be many. We may broadly classify the change forms into: structural, interpersonal and task-based or technology based. The structural form of change is introduced when the classical structures of organization prove to be ineffective and unviable, which is shown in unproductive outputs. The old bureaucratic or the tall structures follow the model of centralized authority and rigid chain of command, which renders the organizational life inflexible and separated from the organizational goals and individual growth tendencies. The interpersonal changes involve rejuvenated and responsive work relations that make use of the human ingeneuity. Impersonal and unrealistic pattern of interpersonal relations make the human activity dull and negative. In the task-based arena, the use of outdated technological methods hampers the realization of organizational goals, which then necessitates the change mode of operations.
30 DEMYSTIFYING THE MANAGEMENT OF CHANGE PROCESSES: THE QUANDRUPLE FORCES MODEL
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CONCEPTUAL FRAMEWORK OF THE STUDY: NEED FOR A NEW PERSPECTIVE Change models prevalent and which are in vogue suggest different approaches to change. The three phases of Lewins model account for change by unfreezing, changing and refreezing, which are assumed to take on automatic reaction among the participants consequent to the change efforts of the management. The model makes an oversimplified view of change by suggesting that the three movement phases take place in a mechanistic way (Sturdy and Grey, 2003). It is not easy and simple to unfreeze the learned habits and patterns of behavior required for organizational change. It requires a well thought out and deliberate effort on the part of the management and the consultant to bring about a fundamental shift in the work patterns of members, which cannot be assumed to be automatic and simple just as a machine changes its operations by reversing its movements. In the strict sense, unfreezing can mean making loose or disentangling the learned and expert behavior. Disentanglement is theoretically possible and can be accomplished on paper whereas in practice it is seldom possible. Unfreezing is an individual centered process that cannot be left to chance and without which change cannot be initiated. Action research model as a planned change intervention emphasizes cyclical processes of research and action. The very cyclic nature distances the change participants from the underlying purpose, objectives and ways. The iterative cyclical approach imparts a sense of automaticity and repetitiveness to an otherwise complex and multifaceted change programme. The cyclical nature of research and action leaves behind vital and essential components of change thereby making the programme halfcompleted, without much depth and substance. Moreover the action research programme is narrow in its focus as it is too problem-centered and it ignores the vital forces of much of the organizational processes. The microscopic approach projected in this model makes it a transformative activity with much depth and extensiveness. The model of Maycunich (2000) is circular in nature in that assumptions lead to choices, which lead to commitments and actions, which again give rise to further assumptions, which are modified following reflections. The model presents a barren perspective because of the superficial way it takes in operationalising the change processes. This cosmetic way of managing change does not go deep in understanding the idiosyncrasies involved in organizational change. The amorphous manner in which assumptions are made, making of choices, getting the commitments and bringing forward actions may not be in tune with the real dynamics that are operative in any change programme that includes the complex network of processes and activities of individuals, groups and organization as a whole. In the overview of change activities, Cummings and Worley (2001) depict the importance of cognitive and affective components. These relate to creating a readiness for change, learning of the core ideology of the change programme and the envisioned future. Roberto and Levesque (2005) have analyzed the change process into four stages of chartering, learning, mobilizing and realigning. This is a model that integrates the change participants into the change stream. Unlesss the participants wholly and meaningfully get immersed in the change stream, the change programme will not accomplish the purpose. Change stream implies the whole gamut of change from the start with the crystallization and assimilation of the objectives and goals, the midway of getting to know the nitty-gritty of change and the end with the conclusive accomplishments. Chartering is the process in which the purpose, scope and the way people will work with one another are clarified. Learning is the stage of specifying the way managers develop, test, and refine ideas through experimentation. In the stage of mobilization of resources, commitment to the project is obtained by the use of symbolism, metaphors, forceful stories and anecdotes to
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The DICE model of change put forward by Sirkrin et al. (2005) explicates the Duration required for change (D) Performance Integrity (I), the abilities and skills of the members to complete the change initiative on time, that is the Commitment expressed(C) by the management and employees towards change and Effort(E), the extra effort required to bring about change. The change models so far considered may be further differentiated on the basis of two general factors: the content and the process dynamics involved in any planned change programme. The content of change represents the intended components of the to- be introduced programme or that becomes the subject of change and the content varies from time to time. For example in a customer relationship change management programme, the contents represent the novel way of managing the customers. The process aspects represents the how of change, that is how can the customer relationship executives be inducted into the change plan or how can they be encouraged to embrace the change programme. The contents (task, technology, structure and people) are imported from outside whereas the process aspects are to be nurtured and built up within the organization keeping in view the overall purpose of the plan. The Emergence of the New Perspectives
High
Transactional
Transformative
Processes
Cosmetic
Instructional model
Low
Low
High
Contents Fig.1. Emergence of the New Perspectives The content and the process dynamics, the two significant variables that can be identified in the change models and in the process of change management, when plotted result in four different ways of understanding the change. The Fig.1shows these four ways of conceptualizing and implementing change in any organization. Accordingly in the situation of low contents and low processes, the change perspective that we get is the Cosmetic model. In this model change is introduced for the sake of change and no effortful plan in any of the realms of cognition, affectivity, motivation or behaviors are planned. And the contents are loaded to the minimum implying that the quantum and the magnitude of change are limited to certain peripheral, non-significant organizational activities.
engage hearts as well minds of the participants. The model has a perfect blend of both the content and processes factors of change, in which content refers to the what of change and process refers to the how of change.
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In the Instruction-based model, high amount of content marks the change model and no attempt is made to activate the quadruple. In this content loaded plan, change takes place at random and in an unsystematic manner without the quadruple inputs. For example, changes may be initiated via the medium of lectures and conferences. Transactional model (high amount of processes and low amount of contents) underlines the greater readiness and preparation to initiate change. The participants undertake (and not to undergo) certain change characteristics, which means that he does not change. The fanfare that surrounds the change programme is not accompanied by corresponding loaded contents. The transformative change denotes that change participants embrace and imbibe change in the deepest way possible. The heart and the essence of the change is that which he does not miss in the implementation programme. The participant undergoes change and more significantly he has changed to the tune of the entire change event. THE QUADRUPLE FORCES MODEL: AN APPROACH FROM WITHIN In these approaches of change management, whether structural, interpersonal or task-based, the underlying principle of change management is the individual(s), the micro variable that always has macro significance considering the fact that change is always pervasive and the organic processes form the root of change. As such the affective, motivational, cognitive and the behavioral components become the essential process of change (Hellriegel and Slocum, 1980). The significance of the model stems from the fact that changes from without (structural, interpersonal, technological or task-based) stems from changes from within (cognitive, motivational, emotional and behavioral). The Fig.2 shows the diamond in the dynamic configuration of the eight key variables -the contentsand the individual related processes of change. The four interrelated variables of contents and the four interrelated variables of processes constitute the quadruple forces of change at two levels of change. The Fig.2 explains this interrelationship, which means that change is seldom brought about unless corroborated by the activation of the process variables. People Cognition Affectivity
Task Emotion
Structure Motivation
Technology
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Fig.1.The Quadruple Forces Model Organizational change pertains to any one, two, three or four realms of task, structure, technology and
The technological upgradation can be in the hard or soft form. Hard form technology implies the introduction of heavy machines and its use in the manufacturing and related processes. Soft form technology related to office/paper work requires the readiness or the psychological set at the cognitive level, whereas the hard form technology demands behavioral/ physical (psychomotor) flexibility. People-related changes are at the levels of communication, leadership, decision-making, worker participation and the overall interpersonal relations in the organization. People-focused change demands thorough patience and cooperation from the employees. The old and deeply entrenched habits are to be unfrozen and the futility brought out. In their place new and effective behavioral acts are to be refrozen or substituted so as to establish a new dynamism in the interpersonal arena of organizational life. These changes are hard to come by because of the individual and collective resistance. The individual specific cognitive, affective, motivational and behavioral processes hold the key to effect change on a wider plane of organizational activites. These processes are so crucial that change can be navigated by activating them so as to break all the hurdles of change. Cognitive Process of Change Management Understanding what goes on inside a managers mind has generally been avoided because managerial beliefs cannot be observed, touched, photographed, verified or quantified (Fisher, 1989). In the diamond model, cognitive aspect emphasizes the process of knowing and generation of information and knowledge. Cognitive structures characterized by the activities of interpretation, belief systems, schema, reasoning, thinking, memory and related processes are thus the change agents even though they are invisible and can only be inferred. A powerful cognitive structure identified as the base of cognitive restructuring is the mental model. Within the organizational behavior and development literature, organizational changes that attempt to alter these mental models are defined by a number of terms including organizational transformation and double loop learning (Ellinger and Bostrom, 2002) and cognitive restructuring programmes. To be successful, change management programmes often require radical changes in how members perceive and think, that lead to the generation of new schema and consequent action. Mental models are the images, assumptions and stories, which we carry in our minds (Senge, 1990) or individual theories-in-use, determine what individuals see and shape how they act (Weiss, 2001). Each mental model represents a possibility, constructed from perception, imagination, or comprehension (Mc Daniel, 2003) and they provide a unified account of deductive, probabilistic and modal reasoning (Johnson-Laird and Byrne, 2000). Cognitive scientists have studied mental models as to how models engender thoughts and inferences (Mc Daniel, 2003). Mental models are thus psychological representations of real, hypothetical or imaginary situations and these models of reality are put to use to anticipate events, to reason and to underlie explanations (Johnson-Laird, et al, 1998). It is in the context of the mental model that the change management programme is to be understood.
people (Singh, 2005). Task related change involves new forms of work, work redesign, combination of work and anything that has innovative and productive value in the work performance. Structural changes can be in the coordination and control mechanisms of the organizational activities. The vertical horizontal and lateral relations may be the subject of change introduced in the whole organization.
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All the mental models have a few key characteristics (Mc Daniel, 2003) whether of the change participant or of the change consultant. And they are: mental models include what a person thinks is true, mental model are similar in structure to the thing or concept they represent and it allows a person to predict the results of the actions. Thus the mental models of a change participant are to represent the change situation that enables him to execute the change programmes more in accordance with his internal picture that are to be produced by educative and instructional strategies. Argyris and Schon (Weiss,2001) argue that the cognitive representations can have two dimensions: espoused theories are public explanations of what people say they use in choosing their behaviors and theories in use (the theory behind peoples actions) are what people most often do. When espoused theories prepare the groundwork for future actions, the theories-in-use actually determine what the actions to be made are. Thus to be effective the change management programmes are to follow the theories-in-use, which are to be scaled and put into change management programmes. Behavioral Components Behaviors follow cognition and in the change management context, to effect structural, interpersonal, technology-based or task-based changes. Behavioral components or behavioral processes (Garvin, 1998) in the change management programme involve the acquisition, development and maintenance of an array of behavioral patterns that represent, in almost all the cases, the desired forms of behavior that substitute the old form of behavior. The repertoire of behaviors of change programme may be understood in the following dimensions: reactivity-proactivity; inhibition-flexibility; passivity-activity; simple-complex; withdrawl-enactment; non-controlled-self-regulated patterns of behavior. For the successful accomplishment of the change programme, the response pattern of subjects is to be transformed from the old to the newpatterns. A reactive behavior corresponds to an automatic form wherein the wholesome nature of the behavior is lost. It means that the behavior is not always targeted and specific to the situation. The automatic reflexive form of behavior takes the precedence in the reactive mode whereas anticipation, foresight and planning rules the proactive form of behavior. In behavioral inhibition, the participant fails to learn new forms of behavior and if not regression to the old patterns of behavioral sequences, the participant continues to maintain the same pattern of behaviors. In behavioral flexibility the change participant is to enact newly learned simple and complex patterns of behavior. Along with the readiness to engage in complex behaviors, the flexible mode quickens the change management programme. Passivity-activity dichotomy of behavioral acts embodies the low energisation and the high energisation components, respectively. In the passive mode the participant is rather hesitant and indifferent to act whereas in the active mode, change programmes are quickly translated into action. In the simple realm, a series of limited responses, acts and behaviors are to be enacted and in the complex realm, different layers of behaviors are to be enacted either in batches on in distributive forms. In the arena of complex change management, sequences of interlinked behaviors are to be rendered so as to conform to the scheme of change management.
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Subramanian(2005) has differentiated four modes of managerial action:radic mode of action(personal action taken by an individual to balance his concern for needs and objects with concerns for the
Sarasvathy (2001) has differentiated between a causative mode of action and an effectual one. In causative action the ends guide the behavioral sequences and in effectuation the means dominate the behavioral acts. Thus in causation the effects are given and the means are fashioned to that effect whereas in effectuation the means are given and the different effects are created from that means. Yet another classification of action pertains to reasoned action and goal-directed action. In reasoned action, the individual employs the intellectual resources at hand to accomplish the planned objectives. In goal-directed action, the motivational and emotional processes contribute to the action mode. In other words intelligent design overrules the reasoned action and the satisfaction ring revolves around the goal-directed action. In another classification of change action, responsibility and authority forms the nature of participants behavior. In delegated action the members are to follow the procedure suggested/imposed by the change agents and they are not to have much discretion in the manner of participating in the change programme. In the participatory mode, the modus operandi of change management is decided upon by the consent of all the participants so as to make it self-directed and integrated. Emotional Dynamics Emotions are viewed as specific reactions to events (Kiefer, 2005) and there is general agreement that emotion consists of three distinct aspects: physiological arousal, emotional expression and emotional experiences of which emotional experience is the most explored but the least understood aspect of emotion because we do not know how emotional experiences are created (Kang and Shaver, 2004). Emotional experience is composed of the interrelated physiologically aroused state and the psychological process that are related to the personality and the cognitive process of the person. According to Fernandez-Dols and Russell (2003), cognitive appraisal provides an explanation for similar or specific situational factors and individual differences that elicit different forms of emotional experiences. The link between the physiological arousal and the emotional experience is thus mediated by the cognitive process activities that channel the nature of emotional experience. Emotional experience is an integral part of intelligence in that emotionally relevant information is processed in an adaptive way (Sibia, et.al, 2004). In the domain of emotional experience, the nature, quality and the intensity of emotions have significance of organizational nature in explaining the change management programme. Organisational gains are linked with pleasant feelings of the participants (Bartunek, et.al, 2006) in which pleasantness and unpleasantness are understood to be a dimension of emotion along with the dimension of positive and negative emotions (Averill, 1997). But the ways these emotions are elicited and managed differ from individual to individual or from one change context to another change context. There are empirical evidences supporting the role of emotional intelligence in organizational and social behavior (Ashkansay and Daus, 2005). EI has emerged as a potential new construct for explaining behavioral variance not accounted for by traditional measures of general academic intelligence or personality (Landy, 2005).
needs and objectives of others),centric mode of action(individual gives priority to his needs and objectives and subordinate the needs and objectives of the group as a whole and of others with whom he works),rational mode(personal action taken to accomplish predetermined objectives)and spontaneous mode(an intuitive action to accomplish the desired objectives).
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We find two distinct models of emotional intelligence: ability model and the mixed model. The mixed model is associated with Goleman and it is a broader and more inclusive description of emotional intelligence and the ability model of Salovey and Mayer provides a more restrictive description of EI (Weinberger, 2002). Mixed model comprises a mixture of cognitive and noncognitive traits or personality traits and behavioral preferences, while the ability model is more in the line of traditional measures of intellectual intelligence (Ashkanasy and Daus, 2005). EI as conceptualized by Mayer and Salovey consists of four interrelated abilities: perceiving emotions, using emotions to facilitate thoughts, understanding emotions and managing emotions to enhance personal growth (Emmerling and Cherniss, 2003). Cognitive psychologists believe that it is useful to distinguish between strategic and automatic processes with the latter being relatively independent of conscious intent or effort whereas the former involves willful actions and deliberations (Mathews and Macleod, 1994) so as to manage and control emotions in the successful accomplishment of the change management programme. In the full-blown emotional intelligence process, it is the predominance of the strategic and conscious processes that activate the change efforts. Individuals whose emotional dynamics are characterized by low intelligence ability exhibit automatic and non-conscious efforts in their emotional life. High resistance shown by members is symptomatic of automaticity in emotions whereas low emotional resistance implies strategic efforts. Motivational Processes Motivation as the energized behavior has the components of the pull of incentives from the external world and the push of driving forces that move the individual towards some meaningful and relevant goals. The motivational mechanism explained by the deficiency felt at the psychological level involves a constant tension or urge to do an act that reduces the drive which becomes cyclical. The sources of motivation thus can originate from some inborn urge or acquired drive like the need to excel in a change programme. In the causation of motivational forces, valence, instrumentality and expectancy theory predicts that positive outcomes operate in the sophisticated way (Leon, 1981). The expectation of obtaining favorable outcomes following the change programme increases the motivation of participants to initiate change. An important prediction of expectancy theory is that harder the goal the higher the performance and force to exert performance is also higher for the hard goal than for the easy goal (Matsui, et.al.1981). Related to the greater force exerted for higher goal, we have commitment of the participant in the change programme that indicates the motivational nature. Commitment is presented as a significant energizing force for motivational behavior (Meyer, et.al, 2004). Commitment as a psychological construct implies the investment of effort and resources to a designated task. Moreover feelings of relatedness toward work colleagues and feelings of competence jointly and positively affect the change motivation (Richer, et.al, 2002). BUILDING THE GROUNDWORK OF THE CHANGE PROCESS The quadruple forces identified denote the most significant mediators of the process of change. For proper realization of the change programme, the organizational members must be ready for change, behaviorally, affectively, motivationally and cognitively. The absence of readiness on the part of members to embrace change leads to change failure in the medium term and the long term.
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Since change can be conceived at the individual, group and the organization levels we may identify the working of the quadruple forces as to generate greater insights and to make the change programme truly effective. Tables 1 show how the quadruple forces are unraveled in the management of change. Affective Individual Greater sensitivity to the feelings of others Openness to experience Refined emotional expression Self-regulated and self-expressed emotions Guarded reciprocity in emotionality Group Intergroup favorableness disposition Grater clarification of group emotions Group emotional integration Motivational Ability to be goal directed Perceived effort-reward relation High intrinsic motivation Expectancy of outcomes Satisfaction following performance Behavioral Behavioral flexibility Freedom of communication Ability and willingness to be assertive Ability to guide and steer the Flow of relations Self-respect and other respect in relations. Cognitive Inculcating the cognitive orientation to change issues Freedom to think and learn Freedom to experiment with ideas Comparing and contrasting change options Creativity enhancements
Development of group commitment Greater cooperation and cohesiveness Participative orientation Ability to form super- ordinate goals Development of organizational commitment Sense of belongingness to the organization Profit sharing Greater participative management
Cooperation Conformity Compliance Greater social exchange Joint activity Team work
Exchange of ideas Thinking together Group analysis of problems Development of goal settings Innovative activities
Organizational Favorable organizational climate Identification with the organization Organizational integration Able to meet emotional needs
Active participation in organizational activities Able to follow the organizational culture Organizational socialization
Holistic idea about the change programme Ability to understand the organization wide implications of change Able to relate organization to the environment
Table .1 Individual, Group and Organizational Analysis for the Quadruple
The psychological processes comprising the three streams of cognition, affectivity, motivation and behavior make up the mosaic of the change programme. It is this arena that creates the positive inclination and willingness to embrace change as it is introduced in the task, structure, technology and people realms of the organization.
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The Quadruple Forces and the Organizational States The state of the organization may be identified in relation to the quadruple forces. The interactional activity of the forces produces different organizational states, given in Table 2.Organisational states can be diagnosed as ranging from the total absence of readiness to initiate change to total readiness to embrace change. The four process variables are reduced to three for the purposes of simplicity and parsimony. Instaed of separating motivation and emotion, they are combined together so as to give greater strength to the individual process forces. And this is theoretically correct keeping the common characteristics of emotion and motivation. C1 B1 A1B1C1 A1 A1B1C2 C2 C1 B2 A1B2C1 A1B2C2 C2
A2
A2B1C1
A2B1C2
A2B2C1
A2B2C2
A1= Affective-Motivational Activation A2=Affective-Motivational Inactivation B1=Behavioral Inflexibility B2=Behavioral Flexibility C1=Cognitive Activation C2=Cognitive Inactivation Table .2.Organisational Diagnosis in Relation to Quadruple Forces Affective-Motivational activation, Behavioral inflexibility and Cognitive activation The state of the organization is presumed to be affectively vibrant, motivationally active and cognitively alert but dragged by behavioral inflexibility. The absence of social contacts and social networks prevent members from transacting smoothly within the organization. Formal and informal activities may be reduced to the minimum resulting in inhibition and withdrawal from the change programme. Affective-Motivational activation, Behavioral inflexibility and Cognitive inactivation These organizations planning some form of change may be suffering from two drawbacks. Along with the behavioral inflexibility, members do not have clear idea or information or knowledge about the change programme. There may not exist a clear dissemination of knowledge in the organization. The hurdles created in the smooth flow of information or an ineffective knowledge management system reduces the possibility of a successful change programme.
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This is the most ideal state for change implementation. Members are emotionally predisposed to embrace change, motivationally directed to accomplish the goal, formal and informal interactions are at an optimum stage and the members have sound knowledge of the change programme. Affective-Motivational activation, Behavioral flexibility and Cognitive inactivation The members are emotionally and motivationally prepared for change, which can be due to soothing effect and the expectation of favorable outcomes. Certain upheavals or group activities can also produce the activation. The external environment may push them to states of excitement brought about by novelty and unfamiliarity. Behavioral flexibility without a proper base in knowledge will not bear fruit and the members will miss both the content and the context of change. They will only be enamored of the paraphernalia surrounding the change programme. Affective-Motivational inactivation, Behavioral inflexibility and Cognitive activation The sound knowledge base that members have painstakingly acquired, however, is devoid of a colorful back-up in that it fails to get translated into action and the knowledge components no longer enthuse or excite the members as far as the goals of the change programme are concerned. The ideological base is kept outside the real organizational processes, as the members do not establish concrete exchanges with the goals of the change scheme. Affective-Motivational inactivation, Behavioral inflexibility and Cognitive inactivation This is the opposite of the ideal state in that it is the most undesirable arena of change. The members are totally in darkness since the purpose, the processes and the contents of the change are not divulged to the members. They may not show even the primary interest to learn about the change or they are inhibited in their behavioral repertoire. The members are just passive recipients and they unwillingly move along the track of work. Affective-Motivational inactivation, Behavioral flexibility and Cognitive activation It is the apathetic disposition and the negative inclination to move along the tracks of change that require to be resurged and activated. Since the behavioral flexibility is not accompanied by corresponding true emotionality, the change programme misses the soul and heart of change. The knowledge that the members have acquired over a period may prove to be beneficial in future considering the possibility of activation the members may get by changing the personal or group contingencies. Affective-Motivational inactivation, Behavioral flexibility and Cognitive inactivation The only advantage that this form of organization enjoys is that there is a collective movement to bring about change in the intended manner. The members may conduct any number of meetings so as to make change happen to the benefit of members. The external activity has no corresponding parallel in the emotional and cognitive spheres, two important pillars of change. Actions are devoid of substance leading to chaos. The organizational states identified are never static instead they are dynamic. Depending upon the top management commitment the quadruple may be activated so as to attune the members to
Affective-Motivational activation, Behavioral flexibility and Cognitive activation
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the change programme. The interaction of the four variables thus produces different states, which ultimately determine the fate of the change programme. CONCLUSIONS The diamond model suggested paves the way for an effective change management programme. The model offers a solution to problems of change management including individual and group resistance of organizational members towards change initiatives, snails pace change transition ways and the structural and functional inertia being shown by members. All the change management models reviewed spread out an impeccable scheme of strategies directed to achieve the goals. The change strategies are doomed to fail unless supported and corroborated by an effective approach in which the cognitive, behavioral, motivational and affective processes are fundamentally transformed and recharged so as to make them the four inner pillars of any change management programme.The perfect blend of the contents and the processes make change programme a unique organizational activity. References Ashkanasy, N.M.and Daus, C.S. (2005).Rumours of the death of emotional intelligence in organizational behavior are vastly exaggerated, Journal of Organisational Behavior, 26,441-452. Averill,J.R.(1997).The Emotions: An Integrative Approach, New York: Academic Press. Bartunek,J.M.Rousseau,D.M.,Rudolph,J.W.and DePalma,J.A.(2006).On the receiving end:Sensemaking,emotion and assessments of an organizational change initiated by others, Journal of Applied Behavioral Science,Vol.42(2),182-206. Cummings, T.G. and Worley, C.G. (2001). Organization Development and Change (7thed.), Singapore: Thomson Publishing Ellinger,A.D.and Bostron,R.P.(2002).An examination of managers beliefs about their role as facilitators of learning, Management Learning,Vol.33(2),147-179. Emmerling, R.J. and Cherniss, C. (2003).Emotional intelligence and the career choice process, Journal of Career Assessment, Vol.11 (2), 153-167. Fernandez-Dols, J.M. and Russell, J.A. (2003). Emotion, affect and mood in social judgments, In T.Millon and M.S.Lerner (Eds.), Handbook of Psychology, Vol.5, New York: John Wiley and Sons, Inc. Fisher, K.K. (1989).Managing in the high commitment workplace, Organisational Dynamics, (Winter):31-50. Garvin, D.A.(1998).The process of organistion and management, MIT Sloan Management Review, Vol.39 (4), 33-50.
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Hellirigel, D and Slocum, J.W. (1980).Assessing organizational change approaches: Toward a comparative typology, Group and Organistion Management, Vol.5 (1), 35-47.
Johnson-Laird, P.N., Girotto, V.and Legrenzi, P. (1998).Mental models: A gentle guide for outsiders, Retrieved from www.si.umich.edu. Kang, S.M.and Shaver, P.R. (2004).Individual differences in emotional complexity: Their psychological implications, Journal of Personality, Vol.72 (4), 687-726. Kiefer, T. (2005).Feeling bad: Antecedents and consequences of negative emotions in ongoing change, Journal of Organisational Behavior, 26,875-897. Landy, F.J. (2005).Some historical and scientific issues related to research on emotional intelligence, Journal of Organisational Behavior, 26(4), 411-424. Leon, F.R.(1981).The role of positive and negative outcomes in the causation of motivational forces, Journal of Applied Psychology, 66(1), 45-53. Matsui,T.,Okada,A.and Mizuguchi,R.(1981).Expectancy theory prediction of the goal theory postulate, the harder the goals, the higher the performance, Journal of Applied Psychology,66(1),5458. Mathews,A.and MacLeod,C.(1994).Cognitive approaches to emotion and emotional disorders, Annual Review of Psychology,45,25-50. Maycunich, J.W.G.A. (2000).Organisational Learning Performance and Change.An Introduction to Strategic Human Resorce Development ,Oxford:Perseus. Meyer,J.P.Becker,T.E.and Vandenberghe,C.(2004).Employee commitment and motivation: A conceptual analysis and integrative model, Journal of Applied Psychology,89(6),99-107. Mc Daniel, S. (2007).What is your idea of a mental model? Boxes and Arrows: The design behind the design, August Issue, Available Online Richer,S.F.,Blanchard,C and Vallerand,R.J.(2002).A motivational model of work turnover, Journal of Applied Social Psychology,Vol.32(10)2089,Available online. Roberto, M.A.and Leverque, L.C.(2005).The art of making change initiatives stick, MIT Sloan Management Review,Vol.46(4),53-60. Saraswathy, S.D. (2001).Causation and Effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency, Academy of Management Review, Vol.26 (2), 243-263. Senge, P.M. (1950).The Fifth Discipline, New York: Doubleday. Singh, K. (2005). Change Management and Organizational Development, New Delhi: Excel Books. Sibia,A. Misra,G and Srivastava,A.K.(2004).Towards understanding Emotional intelligence in the Indian context, Perspectives of parents, teachers and children, Psychological Studies,Vol.49(2-
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3),114-123. Sirkin, H.L., Keenan, P. and Jackson, A. (2005).The hard side of Change management, Harvard Business Review, Vol.83 (10), 109-118. Sturdy, A.and Grey,C.(2003).Beneath and beyond organizational change management: Exploring alternatives,Organisation,Vol.10(4),651-662. Subramanian, N.(2005).Four modes of managerial action, The Hindu Speaks on Managemnt,Vol. II.Chennai:Kasturi &Sons. Weinberger, L.A. (2004). Emotional intelligence: Its connection to HRD theory and practice, HRD Review, Vol.1 (2), 215-243. Weiss, J.W. (2001). Organisational Behavior and Change: Managing diversity, crosscultural dynamics and ethics, New Delhi: Vikas Publishing House.
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A SAARC Recognized Body

MANAGEMENT FOR GROWTH AND DEVELOPMET

South Asian Management Forum Change and Continuity :

assOCiatiON Of maNaGEmENt dEVELOpmENt iNstitUtiONs iN sOUtH asia

ASSOCIATION OF ManaGEmEnt DEVELOPMENT INSTITUTION IN SOUTH ASIA

List of Paper Titles and Contributors MANAGEMENT OF CAPITAL MARKETS 1

DEMOCRACY AND GOVERNANCE

OrGaniZation ManaGEmEnt And CulturE

EntErprisE dEvElopmEnt and maNaGEmEnt

INSTITUTIONAL RENEWAL AND MANAGING CHANGE

MESSAGE FROM THE CHAIRMAN

MESSAGE FROM THE CHAIRMAN

(Bap Kesang) Chairman 10th SAMF Advisory Committee

Karma Tshering Chairman SAMF Organizing Committee

Thimphu, Bhutan 3rd April, 2009

Advisory and OrGaniZinG CommittEE

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