Commentary

The Commonwealth Games Is Government Failure, Private Sector Success

Now that the Commonwealth Games have commenced, glitches and all, we can assess them more soberly than the high-pitched media sound bites of recent weeks. Many critics complain that the Games show India in a terrible light. In fact, they provide a pretty accurate representation of the country.

Globally, the big picture shows India as a major success story. In fact, it is largely a story of private sector success and government failure. Many Indian companies have emerged as world class, but government services and corporations have, with some honourable exceptions, remained ridden with waste, corruption and callous inefficiency. The Commonwealth Games accurately mirror this reality: they too represent a mix of private sector success and government failure.

The one clear success has been the construction of the world-class Terminal 3 at Delhi Airport, which was ready by July, well in time for the Games. This is an airport of 5.4 million sq ft capable of handling 34 million passengers per year. It is the eighth largest in the world, and is recognized as a global hub. It is India’s first airport with automatic parking spread over seven levels, designed for 4,300 cars.

This is a private sector success. Terminal 3 was built by the Delhi International Airport Ltd (DIAL), a consortium headed by GMR of Hyderabad, with Fraport of Germany, and Malaysia Airports as partners. The Airports Authority of India has a 26% stake.

Now, while some private sector successes can truly be hailed as world class — in computer software and small autos, for instance — other private sector successes have been tainted by crony capitalism. Here again the CWG gives an accurate representation of India. The Terminal 3 project was tainted by allegations of crony capitalism. The company, DIAL, was allowed to change its revenue formula, and Terminal 3 was allowed a substantial cost overrun. The company explained this as flowing largely from an increase of the airport floor space and the number of aerobridges. Many critics remained unconvinced.

Cost overruns in large complex infrastructure ventures (like the Olympic Games) are hardly unknown. But, soon afterwards, GMR along with two partners won an international bid for a new airport at Istanbul, Turkey. This clearly represented global competitiveness, not crony capitalism. In some ways this echoed the Dhirubhai Ambani phenomenon: a new industrial star rises meteorically on the basis of “political management”, but soon demonstrates, to general surprise, that this is just a step on the road to global competitiveness. Maybe managing Indian politicians and bureaucrats is so complex and difficult that it creates phenomenal management skills that pay global dividends in due course.

Delhi Airport was to be connected to the city by metro in time for the Commonwealth Games. This task was entrusted to Delhi Metro, generally viewed as an outstanding public sector performer. On this occasion, however, it failed entirely.

By now readers have been regaled with stories of dubious and shoddy deals and panicky attempts to get the Games facilities ready in time. One overbridge collapsed, fortunately before the Games started. Many instances came to light of huge over-payments for items and dubious tendering procedures. One ceiling collapsed. The joke went round that Suresh Kalmadi tried to hang himself in shame, but failed because the ceiling on which he hung himself collapsed.

Journalists found that workers on building sites were not being paid the minimum wage. Last-minute checks revealed the Games facilities in filthy conditions even as foreign teams were about to pour in. Three Ugandans were injured and hospitalized when their car was wrecked by a malfunctioning security system.

The contrast with China’s successful management of the 2008 Olympics is truly stark. But it is not the case that India is universally shoddy. Ambani, Infosys or Tata are known for completing large, complex projects on time and within budget. The public sector, alas, is known for the very opposite.

China’s success has been largely government driven. Even so-called private companies in China are often controlled by party bosses and officials. The state mercilessly destroys slums and other structures without adequate compensation when it so feels, as in the 2008 Olympic facilities.

The contrast between China’s management of the 2008 Olympics and India’s management of the CWG shows, yet again, that China is largely a government success, while India is largely a private sector success. Economic reforms have enabled the private sector to bloom in India, but many key tasks can be done only by the government — law and order, justice, rural infrastructure, welfare measures, basic education and health, and much more. Unless the government improves its performance dramatically, India cannot hope to catch up with China.

Swaminathan S. Anklesaria Aiyar is a research fellow at the Cato Institute’s Center for Global Liberty and Prosperity.