The global arms business is one of the most unethical trades where ends justify means. But one of the greatest ironies in the defense trade is that when individuals or companies take shortcuts or use unfair means to procure more or bigger orders to increase their business volumes, live lavishly and support their staff or dependents– it becomes a big issue and everyone has a right to criticize them. But when a country or its head of state, tries to convince or at times, in a not so polite way pushes, dumps, or leaves no choice for the other country to buy its obsolete or surplus technology– this ‘blackmail’ becomes a justifiable strategic initiative to boost the trade, economy and noble cause to create jobs for its people. It is hailed as a patriotic instrument of foreign policy. Unfortunately this is what international trade and diplomacy today, is all about where powerful countries for their own selfish commercial interests, actually—determine what the meek buy, don’t buy or from whom. NEERAJ MAHAJAN speaks to MARK PYMAN Director, Defense and Security Counter Corruption Programme at Transparency International UK who has seen different dimensions of the problem in 129 defense companies and 82 countries.
Is corruption in defense deals something unique to India?
No…Not at all, corruption in defense deals is a common feature in every country of the world.
What is the volume of corruption in defense deals?
MARK PYMAN Director, Defense and Security Counter Corruption Programme at Transparency International UK
We produce a digest every two months that monitors all the allegations and scams in defense corruption. It has 40-50 articles on individual corruption cases. Quite a bit of that is duplication – so one could say between 5-10 scandals of one kind or other are reported from somewhere around the world every month.
What are the shades of corruption in the defense deals? What would you say if I classify them into good deals or bad deals with many different shades of grey in them. None of them were actually made in heaven, someone on earth brokered them?
(Laughs) It does not have to be so. In countries where there have been many such grey deals people come to accept that is the norm. That is not the case. I think the first kind of corrupt deal is where the specifications are incorrect, that is where somebody has altered the specifications to favor one company. So even if the subsequent bidding is entirely clean, they are actually bidding for something for which the field has already been rigged unfairly against them. Let me give you an example, we were involved in a tender for some aeroplanes in Columbia and someone inside the government had specified that fuel tanks had to be resistant to bullets so that someone shooting from ground could not penetrate the fuel tanks. In that particular tender there was only one manufacturer who could provide that sort of plane. So obviously there was an unfair advantage. That’s one kind of corruption which is quite important and happens quite often. Second kind of corruption is where large sums of money is paid to middlemen or as bribes to the government. And the third one is the corruption in the offsets program which determines who wins the main contract and subsequently lot of money is passed on as part of the offset program.
What are the peculiar aspects of this corruption in the Indian context?
The first and the most obvious one is that India is currently one of the largest markets in the world, for arms that obviously is driving the opportunity for bad behavior by the companies. Second thing is that the Indian defense procurement is a very complex mechanism. Sometimes that very complexity allows for corruption opportunity.
Every deal may have some people who are actively involved, some passive… There might be some who directly do not do anything but act as facilitators…. What are the different shades of people who are involved in the defense trade?
Within the ministry there would be the procurement officials and atleast three tender committees– technical and commercial committees – to evaluate the bid. They would be the people who may be directly involved. Then you might have a wide cast of powerful people who are in a position to influence a deal at several levels. They could influence it at the level of actual technical specification. So what might happen is that the technical document put out by the ministry of defense it might be that someone has modified the specification to favor a particular company. That is one way of doing things. Secondly because the bid goes to many different committees – there is an opportunity for people to influence the proceedings of these committees. As you rightly described there are either agent or people of influence having an impact on the members of the committees. Thirdly big defense deals are always political because of obvious strategic and domestic reasons because of large amount of money is involved. So you find people of influence working with politicians in order to influence the decision.
Another trend is that Presidents and Prime Ministers of one country try to influence defense spending by another country. Are they not behaving as glorified salespersons?
(Laughs) Yes. That has always been with us. The President of United States and most of European Prime Ministers have been doing that. It may not be corruption, its old fashioned national political lobbying. The best way to counter that is for the defense ministry to have a very strong and robust procurement process which is not possible to be altered by last minute advocacy by one Prime Minister or another.
What would you say when one country’s policy makers or decision makers lower their gates to allow themselves to be bargained into buying things they actually don’t need but still do just to improve their relations with another country?
At the level of the governments sometimes it might be that strategic thing they want to do. They are using the defense deal as a political strategy. That’s not corruption. That might just be the political desire of the government. What that means that they might buy the wrong equipment – it may not be the best equipment but its not corruption. The concern is when a government is really pushing that the country buys a particular product and actually it fails evaluation and absolutely should not be chosen. Then you need t he defense policy chief to be very firm
In the last 60 odd years India has had many defense deals… some created controversy, some didn’t – but according to you were they clean deals?
I do know that the Indian government puts a lot of effort in trying to make some clean deals… but as we have seen in the past and the present it is really hard to achieve. Based on our experience of other countries, as well we have noticed that you need a defense ministry that is strongly focused on cutting out corruption in order to succeed in this effort. Simply having a set of rules is not sufficient; you need very strong commitment of the senior defense ministry officials to stamp out corruption.
Can defense deals be done without involving agents or middlemen — whatever name you might call them?
Yes. There is no doubt that defense deals can be done without middlemen. Several countries work with procedures that leave no space for middlemen. Norway and Australia are examples of this category and there are other countries like South Korea are trying hard to eliminate middlemen. Yes it’s quite possible to eliminate middlemen; it just needs a firm resolve of the defense ministry.
It might be possible, but is it desirable as even if you don’t pay commission, you need somebody who can give you the right advice about which product to buy, its capability as well as to act as a conduit to make the company deliver what it promised?
That’s very genuine and that’s why you need to be professional in what you are doing in the defense ministry. You need to distinguish between sensible advice and somebody trying to influence a deal. They key difference between the two is someone getting paid. For example if you are using advisors either on the government side or on the company’s side those advisors must be above-board. The way in which they are being paid needs to be made public and proportionate. Controls like these can go a long way in removing some of the less desirable advisors.
Based on your experience of corruption and transparency, why do you think – we in India ended up spending more than the actual deal but failed to get to the bottom of some very controversial deals like Bofors, HDW and others?
To me that’s a tragedy because it is so important to get to the bottom of what is wrong in these corrupt deals and I can only assume that the investigations got diverted by the people who did not want to see them come to a proper conclusion.
Who are these people?
We had a similar case in UK involving BAE Systems deal in Saudi Arabia. In this case the trial was stopped by the Prime Minister. The investigation was stopped by the Prime Minister who said this would affect UK’s relations with Saudi Arabia. As a result of that the trial was stopped and the true investigation was never completed. That’s one particular example. I think in many other case senior people use their influence to disrupt or stop the investigation. For that you need a very strong investigative body to hold off such influence.
Finally, what should India do to evolve a system of clean deals?
Because India is so central for arms purchases at the moment, what it means is that India has a tremendous opportunity to really put in place a strong anti-corruption mechanism for its arms purchases particularly in the ministry and organizations like your vigilance commission. And it has an opportunity for example to demand from the companies very high standards of integrity and anti-corruption – much stronger than it usually demands. Because it is such a big buyer India is in a position to dictate what it is looking for by way of the bidding companies. I think you really have an opportunity between now and the next decade to really ask for much higher standards from the bidding companies and in turn reduce corruption among the serving officers.