Monday 14th August, 2006

Prakash Persad
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Striking a balance

One of the more difficult issues facing developing countries presently is that of striking a balance between industrial development and protecting the environment. The fact that the critically important issues of health and safety are intrinsically interconnected with both serves to highlight the need for proper analysis, planning and execution.

There are no easy answers and dialogue between all stakeholders is therefore essential. The adage that nature abhors a vacuum is only too true when it comes to communication.

In the absence of proper and credible information, rumours quickly fill the communication space with the attendant outcomes.

Hinduism has always stressed the need to respect and protect the environment. This is manifested in the reverence and regard for rivers and mountains in particular. It also propounds the ethical acquisition of material possessions as one of the four legitimate goals of mankind. If we are to use this as the basis of an industrialisation policy then the effecting of it must require that economic studies and evaluation must go beyond the methods presently being employed.

For starters, return on investment, while an important criterion, cannot and should not occupy centrestage. This is not an antiquated socialist or communist position. No, it is capitalism with a heart. Unbridled capitalism must give way to humane capitalism.

In humane capitalism, protection/maintenance of the environment is as important as profits. The idea that there are mutually exclusive is not necessarily true. Profits are benefits from an investment. While the shareholders of the company are the ones who invest capital, the citizens of the country invest equity in the form of its natural resources; land, air, water and energy. So it is only fair that the general citizenry be also classified as shareholders.

Clearly there is a need to put a proper form to these categories of shareholders. Just as “normal” shareholders go to great lengths to minimise their risks, then should not the same also apply to the “citizenry-class” of shareholders?

In fact, this latter class of shareholders has even more incentive to minimise risk. When there is an industrial accident or consistent pollution that results in long term or delayed health effects, they not only suffer a reduction in investment returns but also suffer a reduction in the quality of life with attendant medical costs and sometimes loss of life. Quality of life and life must be given a higher priority than the quantum of profit.

So investment on returns must take into consideration both categories of shareholders. The important question now must be what mechanisms are put in place to ensure that the interests of the citizenry is safeguarded.

It goes without saying that the government of the day has that responsibility. But governments are not monolithic entities. They are, at best, a conglomeration of competing interests operating within a party framework.

So it would be prudent to have some additional mechanism to ensure that the interests of the citizens are always given their due priority. One simple way to implement this would be to expand the present method of public consultation with the public, particularly the community in which the industry would be located.

What is being proposed is this. In addition to the initial public consultation, and it must be stressed that consultation is distinct and different from the act of merely informing, there must be a continuation of the reporting to local and central authorities (which may be statutory bodies and or parliamentary committees) for the purposes of discussing and resolving environmental issues that may arise and to ensure that pollution limits are being observed.

There is no doubt that companies would baulk at this. But just as the Enron fiasco has resulted in the greater and stricter accounting and reporting procedures to safeguard the interests of financial shareholders, the Bhopal disaster and others must result in greater accounting and reporting to the equity shareholders.

This should not be viewed as obstructionism to the growth of business but rather a logical expansion of the reporting and accounting mechanisms of public shareholding companies. It would represent a further democratisation of business practices.

This process being proposed is meant to assist in furthering the industrialisation in manner that balances the concerns of all shareholders. It may appear difficult at first but it is going to serve the interests of all over the long term.

Development dictates that the resources be used for the development of the country. Financial investments are needed and appreciated. Similarly for local equity investments. The protection of the environment is one of the most important investment we can make for the future of the country. It should be seen as exactly that. An investment, nothing more, nothing less.

Finally, dialogue and reporting are an integral part of the democratic process. Democracy may, at times, be tedious and frustrating, but it is the most successful system we have, to date. It is slow but it is sure.

Prakash Persad is chairman of Swaha Inc

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