Financial Crisis

Hi all,

I have one issue to discuss...I know all the classes are over now! And even Exam too...!

But had one issue for discussion so posting my thoughts on the blog...

Well, As we all know about the financial meltdown across the Globe leaving the finance giants and banking sectors in a HUGE HUGE trouble.

Most of the construction companies and infrastructure developers are indirectly affected from this Financial Meltdown, since they get their finances for the project from these finance and bank sectors....

So now the issue is:

“What can we (Infrastructure Developer/Government) do to come out of this FINANCIAL DEPRESSION?”

Putting in simpler terms what strategies can be thought of, so as to ease the fund flow?

To minimize the effect our Finance Minister has come up with a strategy to lower the Interest Rate and try to boost the present financial condition...[Source: Business Line]

What can be the other mechanisms to avoid/minimize the effect of Financial Crisis?

I know that this problem is not so easy to solve...

One option would be to give a pause to the development/improvement programs for the time being!

Another option would be to take small projects, which involves lesser capital and can be borne by the developer himself.

Another (Strange & Out of Hat) option would be to do every development/improvement project on CREDIT!!!

Can you suggest some of the strategies??? Since the thoughts what I mentioned above are not the right solutions!!!

- Jeetu

PPPs for affordable housing

Very recently, my research has moved in the direction of figuring out whether PPPs can be used to develop affordable housing in Tamil Nadu for the Economically Weaker Sections (EWS) and Low Income Groups (LIG) in society. There has also been a lot of talk recently on building 'nano homes' and the last edition of Infrastructure Today had several articles related to this.

The second master plan for the Chennai Metropolitan area estimates housing demand for the EWS and LIG segments to be 8,00,000 by 2026. Informal estimates seem to suggest that we are currently building at the rate of a mere 2000 houses per year! This seems to be a clear case for PPP where private sector efficiencies might have to be harnessed to deliver 8,00,000 houses by 2026. The catch is that by definition, affordable housing (300 sq ft pirced at Rs 3,00,000, say). is not very profitable and therefore might not be very attractive to the private sector.

So how do we solve this conundrum? I have some thoughts but would like to see suggestions that you guys come up with.

Stanford Blog on Infrastructure

Stanford University's Collaboratory for Research on Global Projects (CRGP) also hosts a blog that contains several infrastructure-related articles from an international perspective. All of you might consider browsing through this at some point.

Only Central & State Government must handle future metro projects...

This is the essence of an article in a news paper (23rd sep) written by E.Sreedharan (managing director of Delhi Metro Rail Corporation Ltd) to Montek Singh Ahluwalia (Deputy Chairman, Planning Commission, Government of India).


Already news came (on 30th Aug) in Economic Times that govt is willing to construct all future metro projects through BOT process. If this is true, private companies are the owners. The central Govt is just there to release funds. So there is a chance that they can extend the railway network thereby their properties near the project may increase to 2 to 3 folds.

Govt tries to charge less fares for the prosperity of the society and the private companies are not interested to take up the project unless they get high package amount. this may some times leads to losses for the Govt.

BOT projects are difficult to extend or repairs as each private company has their own way of constructing.

There is a chance of grabbing the valuable Govt lands for the construction. These all can be saved if govt involves, thereby ticket fares can be decreased so that purpose is served. In one Sentence, Govt have to handle large govt lands to private companies in the future if they nod for BOT projects as the private companies are the owners.

Conclusion: Only central & State Govt are the owners of future metro projects as BOT projects leads to more trouble in the future.

Both Central & State Govt s must involve in the metro projects. Only State Govt ownership also doesn't help much as it lacks the uniformity among the states.

This also helps to encourage the manufactures and producers in India.

BTO

I would like to add on the issue of What Rajesh told in class.
in context with doing a BTO.to go about doing a BTO , Build-Transfer-Operate. Building a infrastructure by the private sector and transferring it to public sector and the operation through the same private sector.
one thing when the Govt.raises the tax during transfer , can hold good, instead of private players raising the tax and getting vast opposition.
Also giving the operations and maintenance to the same private sector will be more efficient, than giving to another private player who might complain about the standards of the infrastructure and quality issues. also such a move would ensure quality standards, or other wise when two players one for building and another for operation might subsidize the quality at the cost of other.

PPPs in the USA

I recently read this article in the New York Times that talks about the perception of PPPs in the USA. The article makes for very interesting reading because almost all the issues mentioned are identical to those currently faced in India. For instance the article talks about opposition to private ownership of roads, reservations about government "selling out" to private companies and so on. Yet, the USA also seems to face the same problems with respect to crumbling infrastructure and lack of financial resources. Developed or developing country, PPP issues seem to be quite similar!

SEZ BY GVK IN TAMIL NADU

This is article from times of india (20/8/08) . IT shows interest of TIDCO in development of SEZ.
Gvk company offered six times of actual value of land and also training and job opportunities for those who sold the land. I think these offers made people to sell land voluntarily. One more interesting aspect is pondicherry govt promised to supply power to the SEZ. If govt provides support in all aspects i think India will be on par with China in few years.

Problems in Power

I read a very interesting article this morning in the Hindu Business line on States going back on power contracts that they signed with private power providers.

We will talk about this a lot more when we get into PPPs, particularly when we discuss the Dabhol example. However it might be interesting for all of you to see the political dimensions of the infrastructure problem. The article says that the new Meghalaya government cancelled a contract entered into by the old government on the grounds that it was a "violation of the states policy"! The moral of the story is that you might have demand (a need for, or a lack of power), and you might have supply (private power providers), but other social/political/legal/environmental issues can easily scuttle the project!

Comments?

PPP in IRRIGATION

We have seen in one of the classes that in India there has been 0% PPP till now in irrigation. But its interesting to see that the worlds first PPP irrigation project started in Morocco in 2004. Here is the article.

World's first PPP irrigation project for Morocco

Available online 7 October 2004.

The Moroccan government has chosen a private partner for the planned public private partnership (PPP) irrigation project in the citrus-growing area of Guerdane, Taroudant province.

This Guerdane project is the first PPP irrigation project in the world.

Surface water is urgently needed for irrigated citrus farming in the 10 000 hectare Guerdane perimeter, which currently depends largely on the extraction of rapidly diminishing groundwater supplies drawn up from the Souss basin.

The bid for the Guerdane PPP irrigation project was won by a consortium led by Omnium Nord-Africain (ONA), a Moroccan industrial conglomerate. As part of its contractual obligations, the ONA-led consortium will enter into a 30-year concession for the construction, co-financing, and management of an irrigation network. The network will channel water from a dam complex, located 60 miles from Guerdane, to 600 citrus farmers. The Guerdane irrigation project will cost an estimated US$85 million to build.

Reference: science direct doi:10.1016/S1359-6128(04)00448-3
Also a good pdf on PPP in Irrigation is available here :http://www.oecd.org/dataoecd/30/0/37739223.pdf

Banks & Indian Infrastructure Projects

Recently, the India Infrastructure Company Ltd (IIFCL) has bagged sovereign guarantees for raising Rs 5,000 crore for funding big-ticket projects in the country and some MoUs were signed by IIFCL with the three public sector banks — Canara Bank, Vijaya Bank and Syndicate Bank, with an option of raising the funds either from the domestic or international markets.

This will be also done though several global venture capital funds by extending the funds to the IIFCL either direct debt or in the form of equity.

IIFCL's funding for projects would be in the form of direct participation in project loan syndications along with the banks or in the form of refinancing support to the lending institutions. This was because bank finance for infrastructure was likely to face asset liability mismatch problems in view of the long lending tenures. The MoUs with the three banks involved providing IIFCL's support in their project lending efforts. This included participation in big-ticket loan syndications. IIFCL would function on the basis of the credit appraisal and due diligence reports of the banks.

Till date, Canara Bank was lead bank in 13 projects, Syndicate Bank was the lead in four projects and Vijaya Bank was the syndicate leader in two projects. So far, IIFCL had signed 10 MoUs with banks and financial institutions. Banks such as Canara Bank and Vijaya Bank already have substantial exposures in infrastructure projects that include power, roads, telecommunication and urban projects. as for instance, Canara Bank now has an exposure of Rs 12,000 crore in the sector and it intended pushing up this figure to Rs 20,000 crore by this year end. Vijaya Bank's exposure is Rs 3,500 crore in the sector.

Some concerns like assets liability mismatches (ALM), other lending risks, risks in project financing, the risks involved interest, liquidity and credit risks etc. could be eliminated with the participation of IIFCL, as ther would be no fixed rate lending for projects. Lending would be on commercial terms, that could involve floating or periodic resets in loan covenants.

The curent statistics reveal that funding requirements for infrastructure was estimated at $360 billion or about Rs 3 lakh crore per annum. Even assuming a conservative debt equity ratio of 3:1, bank funding would have to be at least Rs 2.25 lakh crore each year. As per reports, these investments in infrastructure were necessary to sustain the high GDP growth of 9 per cent.

Hence, I feel that there is no risk associated with the funding source since as mentioned above, small capped players will play their role safely with the aid of big players like IIFCL.

Explicitly modern concession agreements speak about the significant role played by lenders in deciding the flow of funds and ensuring their right and timely utilization. Effective implementation of 'Equador Principles' in Indian Infrastructure would fetch long term benefits. Lenders ofcourse would be able to contribute to streamline the projects since they are a fundamental part of Project building. The Government has also realized these facts and would be keen to keep up with the pace of FDIs and hence should encourage more participation of International + National Financial Institutions in Indian Infrastructure Projects.

It is upto the Policy Makers and Decision Imposers to take an advantage of this current scenario before the fruits are ripped off!!!!

Negotiations....

There is no doubt that pre-planning and indepth analysis will definitely lead to making project a success. When we deal with construction Projects, we may encounter 'N' no. of parties with their 'N' different opinions. Its very difficult to come to conclusive terms. So often disputes arises and 'negotiations' become a very deterministic tool to approach the problem / difference of opinions.

Time is the essence of any project but as long as time is utilized effectively in resolving the issues, the project success can still be guaranteed. The main theme behind negotiations lie in understanding the issue at the root level rather than simply blabbering about issues. Most of the times issues arise due to miscommunication, false information, misconceptions, incomplete data, etc. that could be exemplified by our case studies. Conoco and NGOs could have used efficient and fair negotiations with the indegenous people to come at consensus. At times, the absence of regulatory or mediatory agency could help in sorting out the matter. It can be stated from the "Game" that was demonstrated last week.

People should be really aware about their requirements and they should consult the right people in right way by means of right negotiations at the right time.

Some of the organizational behaviour qualities like attitude, leadership, teams, cross functional groups, can highly influence the 'tactics of negotiation', which if utilized in proper direction, could fetch successful results.

The successful married life of couples who understand and adjust with each other and negotiate clearly to resolve their problems, can be a paradigm for the success of negotiations on construction projects.

multi cultural projects

hi all,
There's an interesting article about the risks faced in a multi-cultural venture in an infratructural project. There has been a rise of multicultural project teams, widely separated by geography with team members from different cultures and backgrounds working together to achieve a common objective, in past few years. The key factors affect the success of these projects can be as follows:

• The lack of physical proximity is the first key factor. The geographical separation of a project team poses difficulties of communication.
• For the project manager of a multicultural project, there can be difficulties in assessing the skills and competencies of team players. Training and education standards and the relative value of qualifications can be very different in different parts of the world. Job methods vary and can be different because of specific local conditions such as working in heat, earthquake risk or local trade practices.
• Mobility can be a problem that affects competence: it can be difficult to find people who can work effectively away from their home environment.
• Another key issue affecting multicultural project teams is language. A project must have a common language to ensure a common understanding. In many situations, this means that non-native speakers are working in their second or third language with a consequential loss of effectiveness, as well as increased risk of mistakes or misunderstanding. In situations where interpreters or translators are required, this has the effect of significantly slowing down the whole communication process and is very costly. Even where team members of different nationalities speak the same language, there can be difficulties. Words in American English can have totally different meanings to English in the UK, whilst conventions and abbreviations can often be very different.
• Risk is present in all projects but becomes more pronounced in global projects where there are often new risks, particularly if the project is being built in a part of the world where security is an issue. In some countries, contract law is not well established and other local laws may not be well understood by other nationalities.
• Risks in communications and risks arising from misunderstandings and misinterpretation are much greater.
• Risks in communications and risks arising from misunderstandings and misinterpretation are much greater.
• There are differences of standards in many countries that can extend to attitudes towards health and safety. Design standards can vary and local factors such as climate, topography and infrastructure can dramatically affect a project. Local customs can also be bewildering, especially for staff living overseas where there might be different attitudes towards gifts, entertainment and hours of work.
• In many countries of the world, different ethical standards apply. This affects attitudes towards the law and, indeed, national laws can be very different in different territories. In some countries, bribery and corruption have become institutionalised and are the only means by which some local officials can earn a living.

PPPs in US infrastructure

This months issue of the Journal of Construction Engineering and Management brought out by the American Society of Civil Engineers has an interesting article on the use of Public Private Partnerships (PPP) in US infrastructure projects.

As we all know, most infrastructure in the US is quite old and is in great need of renewal and replacement. PPP is an efficient way of mobilizing resources and achieving optimal project performance. So how many of the infrastructure projects in the US are done through the PPP mode?

The authors conduct a survey and find out that only 12% of the organizations surveyed have used BOTs or PPPs to build infrastructure!! The authors then attempt to understand why the other 88% continue to use conventional modes of public finance and come up with several explanations. A common thread that runs through these explanations is a lack of capacity within public agencies and a lack of exposure to PPP's, thereby making the implementing agencies a little skeptical of the overall potential of PPPs. In addition, the US also has no laws on PPPs unlike the Model Concession Agreements in India.

The research done in this paper is not very rigorous - the method of analysis is merely a straight aggregation and averaging of survey data. However, what is interesting is that the lack of capacity (i.e. understanding, know-how of fundamentals) as regards PPP leads to an over-reliance on public procurement even in developed countries. Many of the same arguments explain why there is a lot of rhetoric on PPPs in India, but relatively few projects that are actually implemented in this fashion.

What can we do to improve the situation? Comments?

The bujagali project: what is happening?

The bujagali project is spreading its success among the locals. The locals started to eek out a living by setting up food-stalls near the site.The landlords have started to rent their lands near the site. People are going for loans to set up businesses and improve their living standards.The article below explains it! http://allafrica.com/stories/200710031232.html


another related article i found regarding the project financing were
http://allafrica.com/stories/200710021168.html
http://allafrica.com/stories/200710030062.html

This project is just taking shape! hope there is a lot in it for the Ugandans!!!

Setusamudram Ship Canal Project

Hello all.
If you remember, sir talked about the viability of the Setu Samudram project in terms of reducing the time of navigation in the last class. I think this makes a good case study for IPM course!
Here is my understanding of the project.

• The project does not serve the very purpose it is being done! It will reduce the travel distance by only 120 nautical miles. And usually the ships travel at 12-13 knot speed. But when it enters setu samudram waters, they have to slow down to half of the speed. This ultimately means saving of only around 1 hr 30 mins of travel time, if the same ship had gone via normal route around Sri Lanka. Now the question is, is it worth spending Rs. 2400 crores on this project just to save 1.5 hrs? and remember, no ship will pay a huge toll and use this shipping canal. The project, if realized, will be an economic disaster.
  
• Next worst thing is the effect on the marine ecology. The coral reef will be completely destroyed by dredging of the sea bed. These are the coral reefs that slowed down the Tsunami waves and lessened the effect of it on to the other side of Indian coast. Not only that. The water surrounding the island nation of Sri Lanka is the habitat for very rare species of whale which is on the verge of extinction. Their habitat will be severely affected by this project.
• Now onto the social impact of the project. Thousands of fishermen have to quit fishing and also the place, which is their habitat for hundreds of years. There is absolutely no rehabilitation plan so far being thought of for them. And the govt is hardly listening to their woes.
• There is also zero planning on the part of the parties involved in the dredging as to where to dump the excavated soil. The contract document says, it will be dumped in some safe place. But what is that place? where it is? how to transport the soil to that place? what are the aftermaths of dumping those thousands of tonnes of soil from sea bed on to the land? No answer what so ever.
• In terms of strategic gains, India is gaining only 1 out of 10 or even less. The Setusamudram area on to the Lanka side has a lethal sea-bourne marine unit of LTTE. The consequence of any friction with LTTE - I need not tell it!
  
• In fact, an issue like this shows how poorly we are managing our strategies. China has already built naval control points all around India. Pakistan has been of great support and help to China. China is building an ultra modern naval point off the Karachi shore, to control West part of India. It already has one such base in one of the Myanmar islands, and is closely watching the activities at Chandipur, the missile karma-bhoomi of India. And it is no secret many of the LTTE weapons are China made!!
• It is a nonsense argument that the project will bring economic prosperity to Tamil Nadu. It will only bring disasters!

• one China friendly 'National Newspaper of India' along with its buddy blind politicians of Tamil Nadu is supporting the project so much as if without this there wont be any progress in Tamil Nadu! how to stop this misguidance?
  
• where are the NGOs, Arundhati Roy and Medha Pathkar?!
• why are the govts silent on these aspects? what are the possible solutions to the socio - economic - environmental issues?
  

Wonder what happened to the Stockton case? The activists won, after all. A couple of months back, the Stockton City Council voted to end the Privatization Contract. Previously, two court rulings found that the deal 'violated the law'. Somehow, I'm not surprised, I had a feeling that they would pull it off eventually.

The end of the contract:

http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/08/05/EDC2RA7OG1.DTL

The first ruling:

http://www.arena.org.nz/water38.htm

The second one:

http://www.polarisinstitute.org/usa_judge_rejects_stockton_water_privatization_project

"Eligible" Suicides.....

A few days back, an article got featured in "The Hindu" about the agrarian crisis in Vidarbha. The article was about Prime Minister's visit to Vidarbha last year where he announced relief packages for heavily indebted farmers. This resulted in farmers breathing a sigh of relief which unfortunately didn't stay for a long time. Suicides toll rose from 2,425 in 2005 to 2,832 in 2006.

And after 1 full year when PM arrived in Mumbai to review the situation, he was greeted with success stories. We should appreciate the Government's work as they are mentioning that only 836 suicides cases of "eligible" are being registered. If a whole family commits suicide, the suicide count would be increased by 1, no matter how many dependents were there in that family. If a farm was registered over a person's name during ancient times, and now if descendant of that person who is farming the land commits suicide would not be considered as a "genuine" suicide. In a district in Vidarbha, there were 30 suicides in July this year but not a single one was "genuine".

We cannot pinpoint the blame on one single individual or organization for the crisis. Leaving the protagonists apart, which include indebtedness, no monsoon, social evils, etc, an important role was played by lack of implementation of tons of planned/unplanned strategies.

The situation started aggravating in 2004 when the State Government cut down the prices of cotton by Rs 500 per 100 Kg which resulted in nothing but a huge increase in the no. of suicides.

I am ending this by a few suggestions which could upturn the crisis. The Govt should take some action to reduce the debt of the farmers, if can not make it zero, so that they would at least get relieved from the distressful present situation. Secondly, proper allocation of resources which includes distribution of money from relief packages, irrigation water, electricity, etc. Thirdly, proper implementable planning should be done to avoid such situations in future.

Microfinance and Infrastructure

A short while back, Debopam had made a post on microfinance. In a recent issue of "Infrastructure Today", there was an interesting article on how microfinance had been used for a water supply project in Tirupathi.

There were 4 organizations involved - the government, microfinance institutions (MFIs), NGO's and the people in that area. The NGO's helped the people organize themselves into a SHG. The people then took a loan from the MFIs to build the project and the government provided skills training on construction, operation and maintenance.

Overall it was an interesting case on how microfinance could be successfully used to provide rural infrastructure. However, it can only work when the community has the resources to pay back the loan to the MFIs and therefore there should be an ability and a willingness to pay.

Criticise or Privatize???

Since privatization seems to be the current hot topic, i thought i would share some of my HUMAN ideas here, in my first blog. What i mean is......no figures and analysis here, not yet...just opinions and feelings. I would then like to progress to actual analysis based on facts and figures in my future blogs. Any criticisms( especially negative) will be appreciated since i really want to understand this better.
The need for privatization was discussed at large in class. To summarize(just a few of them) had been:
1) the govt doesnt have enough funds to finance a lot of the infrastructure projects.
2)the govt has taken quite a sum as loans from financial institutions and,as such, is finding it difficult to repay the loans without taking on additional debts.
3)the already existing infrastructure requires maintenance...which in turn needs money.

No matter how we play it around, it all finally comes down to money. Its a lack of money thats making the govt think about bringing private players on to the field. In spite of the fact that it makes the govt look inefficient, the willingness of the govt to accept that such a situation does exist is credit worthy. Maybe experience, which can indeed be a bitter teacher, is what has made people wary of privatization. Most people equate privatization with economic divide. As most things,even though there is some truth in this, I personally believe that thats not entirely true.
Let me explain. We all agree that private players' motive(for the large part) is profit( money again). Now if I were to open my own establishment I would try to do 2 things(once the establishment is running smoothly):
Build a reputation and Expand my clientele.

Building a reputation is important only in the case of competition. Which is pretty obvious. Monopoly implies i dont have to work to build my clientele. They have no choice but me.
Expanding my clientele is important to me for the reason that, assuming man is a creature of habits, once he has decided on whose service he will use, my only option to make more
(of course) money is to make sure more people know of the service I am providing. This means I will try to reach the far reaches of the nation before my competitor does. Think telecom Given the competition is right, the service I provide will be cheap(if the technology is so widespread) which means that more people will be able to use telecom and because I want to reach them before my competitor the speed at which things progress will also increase. This technology would improve their business, bringing in...thats right....more money and so improve their lifestyle for the better. Given they have more money now(relatively) they can get choosy and that will make me improve my quality of service so that my clientele doesnt look for other options. In their own way both should be satisfied. This is a classic example of "you scratch my back and I scratch yours". Which, I believe, gives both the parties relief.And is not that what we wanted in the first place ...... greater good to more number of people???

Monopoly can mean 2 things
One that I have no competition, in which case, I am the only choice they have (whether my service is good or bad).The other is the time period for which I own the infrastructure in which case even if I have competition but the government has given me the ownership for a long period of time, I might just slack off. And in this case legally nothing can be done(unless the govt was intelligent enough to have an escape clause). In almost all the cases they do(cos believe it or not, the govt has intelligent people for the most part) and thats why all those legal papers have sooooo many sheets.

Ideally one would wish for no private participations. And that would mean to have an extremely efficient government. Given that the ideal situation does not exist what is the next best thing? privatization?? personally, i believe, its the best choice we have(next to only maybe PPP).

I feel its really selfish and narrow-minded if you feel that you cant handle the thought of few 'private' people making money out of doing something that would help society in some way, in any way. Do not forget its not easy and cheap controlling something as huge as infrastructure. So if some 'private' people(who are working their heads off) actually makes a little profit out of the whole thing along with making the life of some person (who was until then just a figure ..a number ...in one of the government papers) comfortable.... then please just think of their profit as their fee.

And if you dont like THAT idea....then the best thing instead of holding rallies and shouting and complaining would be to tell the govt a way( a feasible way) to get the country out of this rut.
P.S Dont forget the govt has done its homework much better than you or me since they have been around far longer than us.

Privatization :only solution

Hi everyone,
Following the discussion in class about pros and cons of privatization and public undertakings,I think some excerpts from an article by Naira Yakoob are worth mentioning.

Privatization means transfer of risk by the government or public sector to the private sector by giving up management control and usually ownership (at least majority shares) in an enterprise. It differs from commercialization as in this case the government retains business risk and ownership but makes changes in the way the company operates so that it runs on business principles. Privatization or de-nationalization helps to establish a capitalist economic system, competition, readily available products and services, high quality, more exports, better services, more opportunities, growth, etc. The primary objective of privatization should be to find the private owner who is most likely to improve the performance of the company. Due to the poor performances of our government-be it in the field of political governance, education, industry, etc., it becomes very important to resort to privatization of these institutions and systems. An example to support would be privatization of many companies producing consumer goods. People had to queue, sometimes for days, to get cement, rice, sugar, milk, etc. Now it’s readily available and at times maybe cheaper where competition prevails. Many of the improvements we take for granted now are the result of privatization.
In a set up or environment with a strong tradition of socialism and bureaucracy, the government's privatization program has always had its impediments. Generally, the government adopts, if it does, a very complicated privatization policy. They then use complicated procedure for selecting the owner, impose conditions on the management of the company, sell only part of the company to retain partial control or to intervene in management, restrict or prohibit foreign investment, sell the company shares to small domestic investors who have little ability to manage and so on. Special interest groups such as wealthy businessmen and ruling politicians usually pressure the government to keep the undertakings running that ought to be liquidated. Thus a large share of the State’s productive assets and work force remains locked up in inefficient and unprofitable companies. The reviving and awakening of the governmental units and institutions to the modern practices and modus operandi seems difficult or impossible. Efforts to improve the functioning of these institutions by the government may not be effective for many years. The point that even the private organizations in this State are not very well established or performing is genuine. But the blame can be placed mostly on the political governance- laws, policies, and institutions created by governments. What is needed is a change in the administration and management of the sick and bad-performing units. The reins should be handed over to the private organizations or individuals with competent and ethical management skills. A fresh approach is required- enterprise restructuring, privatization, and liquidation of non-performing and sick units or even commercialization for a start. What is important is that they should deal with competition and quality issues. The non-performing or sick companies can either be restructured or commercialized. However, at times selling organizational assets can be a better decision and hence liquidation can be resorted to. The best way to improve the performance of private business is to eliminate government barriers to competition like tariffs, licensing, legalities, and other restrictions. With the initiative to start up privatization in all government sectors, it will start a drive towards quality, competitiveness and high standards.