Somewhere in the Indian Ocean, there happens to be an island. The populace are primarily agrarian. Food gatherers and pastorals co-exist. It is cut off from most of the world. The people are poor. Needs are limited.
Huge reservoir of Iron ore is discovered. It can last for generations. It could make the nation and its people rich, the way oil did to the Arab countries. However, there is no factory to make steel. The entire production of ore is exported, as there is no demand in the island.
After exporting ore for nearly 3 decades, the people are still poor. All the money that the nation earned seems to have evaporated. The mining company, politicians, contractors, engineers and the bureaucrats seems to have cornered all the benefits. Salaries of government employees who constitute one percent of the population, have quadrupled in a short span. The social benefits are unmatched anywhere in the world. Mining companies export at market rate. Huge bonuses are paid to senior staff of the company. The CEO of the mining companies earn a hefty bonus. Investors are laughing all the way to the bank. Government collects its dues through taxes and royalty.
For decades there is hardly any visible social development in the island. Most of them are forced to believe that the airports, shopping malls and parliament building are symbols of development. All the tax collection both direct and direct; goes into salary, pension and interest. The retired armed force personnel, living happily on the pension, is asking for more. On the other hand there is no social security for the farmers and un-organized labour. No money is left for school, hospital, canal or road. The people, who once lived upon the mining sites, have been evacuated, without any monetary compensation. They have no claim over the land. It all belongs to the Government, like the erstwhile king.
A new party takes power in the island. It wants to eradicate poverty on war footing. It puts a ban on the export of iron ores. The country would like to sell steel. It would like to encourage steel plants. From the very next day, iron ore export is banned.
Greenfield steel plants are set up all over the country. In the first phase they are set up at the constituencies of the Party President, Minister of Industries, Minister of Iron & Steel, Speaker of The House, and of course the Prime Minister. Public Sector Banks are asked to fund on easy terms. Special Economic Zones are created on coastal areas. Tax Holidays for ten years are provided. Land is provided on long lease at throw away price. Electricity is subsidized. Roads from mine to factory and then to port are constructed, in the name of development and progress. Entrepreneurs smell an opportunity. Steel plants are set up far away from the raw materials, market or port. Property Dealers with connections are now steel barons; as licenses are distributed on first come first served, like railway reservation tickets.
Excess steel is produced than consumed. No takers of steel in the domestic market. People are poor to make houses. Government is broke to invest in school buildings, hospitals, cemented roads and canals. Factories are not running to its full capacity. Industry is not able to pay interest, forget clearing principal. Loan is restructured again and again. Non performing assets of banks pile up. The Central Government creates a cell by the name Steel Exports promotion Council to look for market abroad.
Chinese come to the island. They are keen to buy every ton of steel that it produces. They are willing to pay international price. A committee is set up. Chinese will be richer by transforming steel to white goods. Government then decides not to export. It will make our island poor. It imposes 80% export duty. Instead it now encourages entrepreneurs to set up manufacturing plants to make automobiles.
So we have cars all over the place, made with technology imported from the west. Loans for automobiles are provided at cheaper rates than education loans. More cars are produced than required. Poor islanders can’t buy the cars, except for a chosen few. Upper middle class can afford a car, but does not want to spend substantial amount for fuel. Rich prefer to import.
The think tank of the nation decides to export car. Our land is cheap. Our manufacturing cost is cheap. We have talent. Our infrastructure is in place. The five-year plan is to make the island into an automobile hub. We will export cars, not steel, not iron ore. We can manufacture car at a fraction of cost, to the developed world. Special economic zones are created.
So the cars are supplied to the developed world. They put stickers on the cars – front, back and the third one on the steering wheel, with international brand names. Cars are sold at double the cost price.
So there is a catch again. Why should we make International Car companies make rich. Why can’t we develop our own brands? We will sell cars in America or Europe with our brand names. If Japanese can sell why can’t we. A delegation is sent to Japan.
Brand names are developed. Names are inspired from their rivers, mountains and ministers. These brands are not selling in international market. Factories have a pile of unsold cars. Banks are unable to recover loan. Non-performing assets are high. Tax collection is at all time low. Government is functioning on borrowed money. Fiscal deficit is high. Inflation refuses to come down. But who cares as long as the salary and pension is credited to their bank account, at the end of each month.
The dream is shattered. The poor islanders blame their fate and ancestors.
Sanjay Agrawal's Blog 