Saturday, April 17, 2010

Transparency is the crying need as we embrace market based reforms

Markets function when profitable private sector enterprises are transparent in revealing who really owns them and benefits from the profits. Be it the recent disclosure regarding how promoters of large MFIs in India have benefited from the high RoE churned by these institutions, that has created an adverse impression that affects the sector as a whole, or the muck surrounding the Indian Premier League. The positive is that the ownership patterns are out in the open. If the law allows for opaque functioning of any enterprise, it will invariably lead to corrupt practices with the complicity of corrupt lawmen.  The scale will be enormous in case these happen to be for-profit enterprises operating at a significant scale. Conversely if enterprises function in a transparent manner and disclose their ownership structures, innovations will ensure that goods and services that earlier classified as public/merit/club goods will also be adequately provided for by the market.

(Only?) Markets can provide for sanitation services in India.

A recent UN study has found that cell phones are more common in India than toilets. Private sector has ensured the availability of cell phones at prices that are attractive to the masses in India. Had it been for the public sector telephony would still have been the privilege of the elite. Sanitation (toilets) in India has been treated as a merit or a public good - something that the private sector cannot provide for.

It may be worthwhile to explore the business model of DMT mobile toilets (http://www.dmttoilet.com/aboutus.htm ). DMT is a for profit entity that has exploited technology to make available mobile toilets. Quite clearly these toilets are easy to maintain and require significantly lower investments as compared to the fixed structures that we have in India. While Sulabh was a pioneering concept, the technological model needs to be evolved. Also, a transparent for-profit model will ensure that these services are provided for adequately.

(I am sure CKP would have wanted to do a case study on DMT. I hope I am able to write one and post it on this blog as a remembrance post.)

CK Prahalad is no more.

CK Prahalad is no more. He was a professor of Corporate Strategy at the Stephen M. Ross School of Business in the University of Michigan. He is best remebered for his "bottom of the pyramid" argument.  I had met him in a workshop where I had the privilege of being a resource person alongside him. Many in my circle would criticize him for presenting poor as a business opportunity. I held him in high regard for the same reason. He was the inspiration behind this blog.