Tuesday, April 13, 2021

Rafale Controversy: Why India Needs To Learn The ‘American Lesson’ In Arms Deal To Fight Corruption

The French media report alleging corruption in India’s Rafale fighter deal has revived the debate on how corruption is intrinsic to the way global arms trade takes place. 

According to the report by French portal Mediapart, Rafale manufacturer Dassault paid one million euros to a controversial Indian middleman, who is already under probe by India’s federal agency CBI for his links with Agusta-Westland helicopter scam, one year after the signing of the government-to-government contract between India and France in 2016 for the delivery of 36 Rafale fighters. 

The story may or may not be linked with the purchase of these fighter jets because it does not clearly say that the middleman helped the Dassault in getting the Indian order. The noise made by the critics of the Rs 59,000 crore deal is based only on inferences.

However, the story does rekindle the debate on how corruption is intrinsic to the way global arms trade takes place. It is believed that the arms trade is the most damaging of all trades, accounting for around 40 percent of all corruption.

And this corruption is not particular to a typical ‘western’ company bribing a ‘developing’ country in Asia or Africa to secure a deal. It is truly global. 

The Dirty Deals

There have been well-known cases of bribe recipients belonging to developed countries such as Austria, Belgium, Greece, Israel, Portugal, and the US. 

In fact, in the US, we have had the ‘Fat Leonard’ scandal, stemming from corrupt port services contracts for the US Navy’s Pacific operations and implicating officers and civilians up and down the ranks. 

It was discovered that a contractor based in Singapore, Glenn Defense Marine Asia Pte. Ltd. (GDMA), which provided everything from meals to tugboat services to the US 7th Fleet, had bribed more than two dozen officers, enlisted, and civilian employees to not only provide confidential information on ship movements but also to steer Navy ships toward harbors that offered a higher profit margin to GDMA. 

The bribes also netted the company information about its competitors’ bids and favorable recommendations within the contracting process. Last year, two former service members — Captain David Williams Haas and Chief Petty Officer Brooks Alonzo Parks — pleaded guilty to receiving gifts of hospitality and entertainment. 

There are a number of systemic features of the arms trade that encourage corruption, of which two are particularly noteworthy.

First, since it has deep and abiding links to matters of national security, people often tend to overlook the wrongs committed while procuring the deals. The ultimate decision-makers, the political executive, often raise the fear that more noise on sophisticated arms will compromise the nation’s defense preparedness.

As a result, it is really hard to get convictions for arms trade corruption. The government and company officials often enjoy political protection. 

This is true in both the seller and buyer countries. Countries exporting arms consider that their arms companies not only generate national wealth and employment but also create goodwill in the buyer countries. This is particularly so when the defense industrial policy of the exporting countries seeks to maintain advanced technological capabilities in the face of limited domestic demand, widespread international competition, and a buyer’s market.

No wonder why authorities in exporter countries are loath to prosecute major arms companies for corruption; these are considered otherwise to be essential strategic assets. 

In this regard, there is the glaring example of the then UK Prime Minister Tony Blair’s 2006 decision to cancel a corruption investigation into the Al Yamamah arms sales to Saudi Arabia. Blair thought it wiser to protect British arms giant BAE Systems and clear the way for further Saudi contracts. 

Tornado fighters were part of the Al Yamamah arms deal. (Wikipedia)

Secondly, the rubric of national security facilitates the emergence of a small coterie of brokers, dealers, and officials, when the countries do not have an open and transparent system of interactions among the foreign Original Equipment Manufacturers (OEMs) and various stakeholders in the buyer countries such as the private and public sector enterprises that need foreign collaborations, the political and bureaucratic officials and military personnel who ultimately use the arms. 

Prescription For Preventing Corruption

As Amit Cowshish, a former Financial Advisor (Acquisition) & Additional Secretary and Member Defence Procurement Board, Ministry of Defence, India, says, “Securing an appointment with the higher officials is a task in itself. The situation is slightly better when it comes to interaction between the Services Headquarters (SHQs) and the industry but this is of limited help as the decisions are generally taken by the ministry and not the SHQs. 

“There is thus a need to create a forum for free and frank interaction between the MoD, SHQs and the industry to resolve the issues as they arise lest they become roadblocks in the endeavor for indigenization.

In fact, other departments, such as the Ministry of Finance, Department of Industrial Policy and Promotion (DIPP), etc. must also participate in such interaction as the MoD, acting on its own, cannot resolve all the problems faced by the industry. This is necessary for infusing life into the policy initiatives taken by the MoD”.

Notably, compared to their competitors elsewhere, the US arms companies are lesser prone to scandals. The American military, as cited above, may have been involved in corruption, but major companies like Boeing and Lockheed have so far avoided major controversies abroad unlike the BAE system or Euro-fighters (bought by Qatar) and Embraer (the helicopter scam in India and subsidy controversy in Canada). And that is because of two things. 

One, their largest buyer happens to be an internal one – the US Department of Defense. So, they are comparatively less dependent on exports than their European counterparts. 

Secondly, and this is more important, the arms procurement system in the US is transparent and open. Here, not only influence-peddling in the form of unlimited campaign contributions, lobbying, and a 2-way revolving door is entirely legal, but also lawmakers frequently add money to the defense budgets to generate extra spending in their constituencies. As a result, there is little incentive to take the risks that come with illegal forms of corruption. 

Viewed thus, there may be merits in the argument that if lobbying in India becomes legal as is the case in the United States, there will be lesser corruption in defense contracts.

Proscription of lobbying means that the decision-making process is non-transparent, hence more prone to corruption. The more laws or provisions that you have on restricting business activities, the better the scope is for unscrupulous decision-makers and executives to make money through corrupt means. 

Therefore, it is said that it is better to make the process transparent by making the lobbyists register themselves and disclose their activities and expenditure as is the case in the US.

And once these activities are transparent, people will know who are the elected officials and the administrative bureaucrats the lobbyists have met. That way, they will be able to know better the rationale behind a particular policy decision and be in a better position to evaluate it.

A lobbyist is like a lawyer. A lawyer is paid to fight a case in court. If the judge is convinced by the merits of his argument and decides the case in his favor, the judge is not called corrupt. He is corrupt only when he takes bribes to deliver the verdict in favor of the client of the lawyer. 

Ironically, while India considers lobbying illegal, it has indulged in this practice from time to time in foreign countries, particularly the United States.

It is an open secret that there was a time when there was stiff competition between India and Pakistan over hiring the better, hence costlier, lobbying farm in Washington DC to pursue their respective interests. For instance, India had availed the services of the lobbying firm Patton Boggs to help clinch the India-US nuclear deal in 2008. 

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