US woos India's trade; blames corruption for lack of inward investment

Money laundering follows international trade so when the USA makes a bid to woo India into direct business and finance relationships, the scene is set for increased funds flows which will include proceeds of crime going both ways.

US Treasury Secretary Paul O'Neill is visiting India. In his prepared remarks to the Confederation of Indian Industry and the American Chamber of Commerce New Delhi, India, O'Neill raised a series of issues that are of considerable importance:

"A third of this nation lives on less than [one US] dollar a day."

"It is especially difficult when the private sector is unable to attract the investment it needs to fund new ideas; when the environment does not support market experimentation and implementation of new ideas, when entrepreneurs and investors are intimidated by excessive regulation and corruption; and when the government fails to effectively invest in the people, so that people have the education and good health that are prerequisites for achieving their goals and raising standards of living."

"In India, average import tariffs are over 32 percent and more than three times higher than many other Asian economies -- Indonesia, Malaysia, Philippines and Sri Lanka to name just a few. This figure does not include many hidden obstructions to free flow of goods across the borders."

"While several large companies have invested in India, many more have stayed away. Respect for property rights and protection against public or private thievery is an essential requirement for economic success."

"Unreasonable regulation also deters international businesses and local entrepreneurs alike from entering new markets and creating value. No one wants to spend time and capital fighting a system that is unfriendly to success and fears competition."

O'Neil's message, which in full is a clear warning to India not to rely on aid or the arrival of foreign capital until it sorts out internal corruption and crime so that domestic investors become comfortable with the idea of putting their money into banks (actually missing the important cultural history of wealth in India which is traditionally stored in gold but O'Neill's ability to understand the places he visits is becoming demonstrably inept), is a clear analysis of the problems facing much of the poor world, especially those in traditionally agricultural industries.

But such messages are often a signal to pathfinder businessmen to seek an early entry into markets, perhaps with representative offices.

World Money Laundering Report has previously reported on what Silkscreen Consulting calls "The Capital Gap" - where funding from legitimate sources is not available, especially for small loans, and especially in technology industries where the machinery is often imported. That gap is easily filled with proceed of crime, especially crime committed overseas.

With the ease of bypassing the formal banking system prevalent across India, the repatriation of such funds is simple, cheap and not subject to audit.

As there is a need to bring money back into India, it will become a stopping off point for dirty money.