Wednesday, 3 March 2010

Conflict of Interest

Mohsin Khan, a well known Pakistani economist, made an interesting observation the other day which deserves thought.

He asked me if there is an Urdu translation for the term “conflict of interest!” My Urdu being relatively limited, I called a couple of serious Urdu scholars in Pakistan. After some hesitation and much thought, they came up with multi-syllable Persian and Arabic formulations.

So Mohsin’s point is well taken: “it is not surprising that Pakistanis do not know the meaning of conflict of interest!” Consequently we find that

· Industrialists serve on policy committees advising on matters that could affect them.

· Industrialists, businessmen and agriculturists are on the board of the central bank setting exchange rate and interest rate policies from which they directly benefit.

· Businessmen as commerce ministers while running their businesses boards

· Bankers serve in many places while running banks

These are only some examples of “conflict of interest” in our government. I am sure many of you could come up with many more.

This is an issue that needs to be watched very carefully in all societies even the US. Nobel Laureate Stiglitz points to deep seated conflict of interest at the heart of the recent financial crisis in the US.

Huffington Post records {To Stiglitz, the core issue is that regional Fed banks, such as the New York Fed, have clear conflicts of interest -- a result of the banks being partly governed by a board of directors that includes officers of the very banks they're supposed to be overseeing.

The New York Fed, which was led by current Treasury Secretary Timothy Geithner during the time leading Wall Street firms like Citigroup, JPMorgan Chase, AIG, and Goldman Sachs were given hundreds of billions of dollars in taxpayer bailouts, presently has on its board of directors Jamie Dimon, the head of JPMorgan Chase. He's been there for three years. He replaced former Citigroup chairman Sanford "Sandy" Weill.

"So, these are the guys who appointed the guy who bailed them out," Stiglitz said. "Is that a conflict of interest?" he asked rhetorically.

"They would say, 'no conflict of interest, we were just doing our job,'" he answered. "But you have to look at the conflicts of interest."

A message left for a New York Fed spokeswoman after regular business hours was not returned.”

"The reason you talk about governance is because in a democracy you want people to have confidence," Stiglitz said. "This is a structure that will undermine confidence in a democracy."}

Our media could learn from this and look at “conflict of interest” in all appointments.

Perhaps we should just adopt the term “conflict of interest” in Urdu.