Kleptocrats prefer dictatorships to democracies – The Sequel

In this column on 14 December 2010, entitled ‘Kleptocrats prefer dictatorships to democracies, FIFA World Cup 2018 and 2022, its effect on FDI,’ the whole issue of the highly-controversial award of the hosting of the Football World Cup to Russia and Qatar, respectively, was analysed and a corollary was drawn to the transparent and accountable behaviour of nation states and how that behaviour will have an effect on attracting international sporting events, Foreign Direct Investment, exports and tourism.

 

British allegations

The column revolved around the management of FIFA by President Sepp Blatter, and the allegations made by the British Football Association. At that time the British allegations were dismissed as the proverbial sour grapes, as London’s bid to host the world cup was unsuccessful.

Andy Anson, leader of England’s 2018 World Cup bid, said at a Zurich press conference, soon after the result: “I still find it hard to understand what happened. When you have the best technical bid, fantastic inspection visits, the best economic report, and from what people told us, the best presentation, it’s hard to stomach that all that seemed to count for absolutely nothing. I would say right now, don’t bother bidding unless you know the process is going to change. You got to open it up to all the member associations. You got to widen the electorate. For me you should have transparency and open voting so that everybody knows who voted for whom, because I don’t believe that the secret ballot actually helps transparency at all. It leads to the situation we had on Thursday, where people promise you something and don’t deliver.”

Blatter’s ‘coronation’

On 1 June 2011, Sepp Blatter was re-elected, uncontested for a fourth term as President of FIFA. His one challenger Mohammed Bin Hammam of Qatar, the President of the Asian Football Federation, had been earlier suspended by the Ethics Committee of FIFA over allegations of bribery in his attempt to unseat Blatter.

The allegation was that the leaders of the Caribbean Football Union, including Jack Warner, a FIFA Vice President, had been offered $ 40,000 to back Bin Hammam. Bin Hammam denied the allegation and accused Battler himself of being corrupt, saying that he gifted laptop computers to voters as bribes. Commentators called the election Blatter’s coronation.

The 1 June election was to be decided by a mere 208 votes. No incumbent has ever lost since 1974. Blatter has held the presidency of FIFA for 13 years and the electorate had to give him four more years since he was uncontested.

Bin Hammam was once an ally; he is a Qatari who played a key role in winning the 2022 World Cup for Qatar. Bin Hammam withdrew his candidacy hours before the election, after the FIFA ethics committee found that he had a case to answer over allegations that $ 40,000 was paid to Caribbean officials to further Bin Hamman’s candidature.

Qatar win under a cloud

The Qatar win for hosting the World Cup is itself under a cloud after Jack Warner of the Caribbean Football Union, who has also been suspended by the FIFA Ethics Committee, made public an e-mail from the Secretary General of FIFA Valcke on the subject of Bin Hammam challenging Blatter, saying, “For Mohamed Bin Hammam, I never understood why he was running. If he really thought he had a chance or just being an extreme way to express how much he does not like anymore Blatter. Or he thought you can buy FIFA as they bought the World Cup.”

In a series of comic sequels, Valcke first confirmed the authenticity of the e-mail, then said Warner had been selective in revealing only parts of it, and then later said that the e-mail was written in a ‘lighter’ tone!

He said: “What I wanted to say is that Qatar, in its winning bid, used its financial strength to lobby for support. They were a candidate with a very important budget and have used it heavily to promote their bid all around the world in a very efficient manner. I have at no time made, or was intending to make, any reference to any purchase of votes or similar unethical behaviour.”

Blatter, at a subsequent press conference, defended the award of the 2018 and 2022 World Cup events to Russia and Qatar: “There is no problem for FIFA… there is no issue with 2022.”

The Qatar 2022 bid, which had earlier denied bribery allegations raised in the British Parliament, again denied any wrongdoing, repeating Valcke’s plea that the e-mail was quoted out of context.

Warner of the Caribbean Football Association, who had also been suspended by FIFA’s Ethics Committee based on the allegations of bribery by Chuck Blazer, the American General Secretary of the regional confederation over which Warner presides, has in turn made allegations that Blatter made a gift of $ 1 million and computers to Concacaf (the North, Central American and Caribbean Confederation) in support of Blatter’s re-election. Blatter defends himself that these donations were legitimate donations made in terms of FIFA’s Goal Project to assist poorer regional football associations.

FIFA, the Vatican of international sports

FIFA has been described as the Vatican of international sports – A virtual nation state that does not have any territory or an army. But like any other big power, or a nation which has big power pretensions, it brooks little questioning of its behaviour, authority, procedures, financial accounts or processes.

FIFA, unlike, a nation state, has never acquired the moral authority which any group of citizens of a sovereign state should reasonably aspire to achieve in the eyes of their peers in the international community. FIFA claims that it is a unique organisation, which is accountable only to its own members or the ‘football family’.

Like the sort of extended family, political and commercial dynasties which we South Asians are so inured to, FIFA ridicules the very thought that nonfamily members may have any right to pry into its affairs, let alone dictate a standard of transparent conduct for FIFA.

Blatter’s press conference in Zurich after Bin Hammam and Warner were suspended by FIFA’s Ethics Committee and Blatter himself was cleared of wrongdoing on bribery allegations reinforced the view that FIFA was thoroughly dysfunctional organisation.

One would expect, in such a situation, from a man who holds the top position in what is said to be the world’s most popular sport, at least that he would sound a note of contrition, or make an admission of some responsibility for the mess that has made the FIFA election hit the world media headlines, for all the wrong reasons.

Not Blatter; he presented himself as a man far too involved international football to be bothered by something as trivial as corruption charges, even if it involved the validity of his own re-election!

All about ‘results’

In the financial year 2010, FIFA’s post tax profit was $ 220 million; FIFA does not call it profit, but labels it as ‘results,’, as if it was a football score! FIFA’s annual accounts run to 116 pages, detailing the millions it earns from the World Cup, but hardly any details of other money losing ventures, or what its officials or executives earn.

The clear message is that FIFA like to have a handsome ‘result’ (profit) but not the burden that goes with it – transparency, financial accountability and good corporate governance. The international congress which runs international football elects FIFA’s executives. Regional confederations have enormous power. This has led to the emergence of ‘regional warlords’ each with his own power base in his region.

Bin Hammam and Warner are both regional leaders of this nature. It is something similar to power that regional and provincial Chief Ministers wield in some South Asian states. There is hardly any check or balance on their power.

In India we have the example of a senior Congress Politician who headed the Organising Committee for the recently-concluded Delhi Commonwealth Games, who is now in Delhi’s infamous Tihar jail on charges of corruption and abuse of power. In that case India’s national laws on corruption were enforceable, but for FIFA that is not the case.

Accountability

How are international organisations like FIFA to be held accountable? Sovereign nation states are liable to be judged by international law, treaties and conventions, enforced to some extent by international organisations like the UNO and its associate agencies, and the International Court of Justice. Who would question international sporting organisations like FIFA? Is there absolutely no way of holding such organisations to a reasonable standard of accountability and transparency?

Like in most situations, the controllers of funds provide the answer to this conundrum. It’s the famous old adage underlying the Magna Carta, the Boston Tea Party, the anti colonialist movement, opponents of dictatorships and such like – ‘no taxation, without representation’.

Today this concept has evolved towards demanding good governance, high standards of accountability and transparency from those who deal with funds managed by any entity, whether it is a national government, corporate, non government, family or community owned enterprise.

Cacophony of concerns

Key financial backers of FIFA, to the tune of hundreds of millions of dollars have raised a cacophony of concerns over the happenings at FIFA. Just before the coronation event in Zurich, key sponsors such as Visa, Emirates and Adidas, which together provide more than $ 1 billion for the World Cup tournament, expressed unprecedented concern over FIFA’s behaviour.

FIFA made about $ 1 billion in sponsorships in the four years leading up to the World Cup in South Africa; this is 26% of its total revenue. Deals with six top tier ‘partners’ Visa, Coca-Cola, Sony, Emirates Airlines, Hyundai and Adidas are each worth hundreds of million dollars. Four of the six FIFA ‘partners,’ the top tier sponsors who finance multiple world cups, have gone public with their concerns.

A spokesperson for Visa said: “The current situation is clearly not good for the game and we ask that FIFA take all necessary steps to resolve the concerns that have been raised.”

Emirates Airline, which signed a $ 195 million deal with FIFA, said: “Emirates, like all football fans around the world, is disappointed with the issues that are surrounding the administration of this sport.”

Another sponsor, who had paid more than $ 100 million in a multiple year deal with FIFA, told journalists that high level meetings were taking place to ensure that “the World Cup was not tainted” by the scandal. The source said: “FIFA knows it’s not a good thing for their business, what the sponsors want is for them to take steps immediately to resolve these issues. To be frank, everyone hates FIFA but loves the World Cup.”

Coca-Cola, which has signed a sponsorship deal until 2022 with FIFA, has said that the allegations were “distressing and bad for the sport”. Adidas, which has paid $ 351 million to sponsor the World Cup from 2005 to 2014, has deplored the “negative tenor” of the public debate as “neither good for football nor for FIFA nor its partners”.

Lower level sponsors such as Castrol and the tyre maker Continental have also expressed concerns, saying that they did not approve of anything which damaged footballs reputation. Another corporate who paid FIFA around $ 30 million to sponsor the 2014 World Cup in Brazil has said that the events “could affect our negotiations to sponsor future World Cups”.

Blatter’s background

Blatter had worked for FIFA for 23 years before he was elected President first in 1998. Before that he had served as Head of the World Society of Friends of Suspenders, Head of Public Relations of the Valaisian Tourist Board in Switzerland, General Secretary of the Swiss Ice Hockey Federation and Director of Sports Timing for Longines.

This last assignment brought him into contact with the Swiss-based International Olympic Committee and from there to FIFA. Even in the 1998 election Farah Addo, President of the Somali Football Federation, claimed that he had been offered $ 100,000 to vote for Blatter against his rival.

Answers needed

The issues raised by the major sponsors of FIFA will have to be answered. There are already questions being raised on the 2022 World Cup award. Theo Zwanger, President of the German Football Association, has said: “There is a considerable degree of suspicion that one cannot simply sweep aside. I must expect that awarding this World Cup under these conditions needs to be examined anew.”

The International Olympic Committee (IOC), the other major international sports non government organisation, went through a similar baptism of fire due to its own cash-for-vote’s crisis during 2002 Salt Lake City Winter Olympic games. Jacques Rogge, IOC’s President, has said that the IOC emerged stronger out of the experience. So the reform of FIFA in order to achieve more transparency, accountability and good governance seems inevitable.

How is this analogous to a nation state attracting international sporting events and Foreign Direct Investment, more exports and tourists? Simply because the persons who take decisions on the locations of these events and investments will not want to be publicly cauterised like FIFA is being presently, over the allocation of the 2018 and 2022 World Cup locations, nor to be embarrassed spectators to the local organisers ending up in jail, like the hapless Kamaldi, and other members of the Commonwealth Games Organising Committee in Delhi.

Even if the persons in those critical decision making positions are kleptocrats themselves, they will in future steer clear of corrupt, dictatorial and kleptocratic regimes, to avoid the possibility of repercussions on themselves, when the proverbial cat jumps out of the bag, in the way Blatter and his cronies in FIFA have brought on themselves.

Indian example

In India leading business persons, both in the new economy sector like BPO and old economy multinationals have expressed concern on how the recent tsunami of corruption allegation against people in high places will affect India’s reputation generally and specifically as a destination for FDI, tourism and the export industry.

The doyen of India’s BPO industry, N.R. Narayana Murthy, mentor and founder of Infosys, has said that “the goodwill for India that existed, a couple of years ago has gotten diminished now”.

At the other end of the spectrum, Kishor Chaukar, Executive Director of Tata Sons, the family holding company of the multinational conglomerate, has said: “The dimensions of these corruption allegations are so large, the wrong doing being brought into focus in such a public manner, that a large number of youths are saying that ‘this is enough’ to crony capitalism.”

Lesson for Sri Lanka

In this context readers would recall the comment by Brian Aitkin, leader of the International Monetary Fund’s recent review mission to Sri Lanka, who urged Sri Lanka to focus on transparency and improve governance to bolster market confidence and attract higher Foreign Direct Investment.

He told newsmen that the Government must win private sector confidence by being more transparent in awarding tenders for large scale infrastructure or development projects.

In essence this is the same thing that Visa, Coca Cola, Emirates, Adidas, Hyundai, Castrol, Continental and other sponsors are telling FIFA. Their customers will not be happy with them supporting an institution where corruption, lack of transparency and lack of accountability are seen as endemic.

The same principle will apply in selecting locations for international sporting events and making Foreign Direct Investment decisions, or for sourcing goods for export and visiting for a vacation.

Analysts have expressed concerns that Sri Lanka is in a similar predicament to Japan, which was hit by a triple whammy, an earthquake, a tsunami and a nuclear accident, sequentially.

In our case the whammys are the UN-SG’s Darusman Committee Report, former UN spokesperson in Sri Lanka-Gordon Weiss’s book ‘The Cage – the Battle for Sri Lanka and the Last Days of the Tamil Tigers’ and the Channel 4 film ‘The Killing Fields of Sri Lanka’. Counter measures will have to be taken to ensure that FDI, exports and tourism are not affected.

Warner resigns

The latest from Zurich is that Jack Warner, Vice President of FIFA who had been suspended from FIFA pending an investigation into the bribery allegations, has resigned, and as a consequence all Ethics Committee procedures against him have been closed and the presumption of innocence is maintained. So another cover up! When will they ever learn?

The latest UNCTAD figures on FDI to India show that in 2010 there is a drop from the 2009 figure. Analysts maintain the allegations of blatant corruption at the highest level must have some impact on this.

Again, in the late 1980s when tourist arrivals from Germany to Sri Lanka were dropping, one reason this was attributed to by inbound tour operators was the impact of the large numbers of asylum seekers of Sri Lankan origin in Germany at that time. It gave potential holiday makers a negative impression of the country.

Channel 4 film

A local Sunday newspaper reports that the Channel 4 film ‘Sri Lanka Killing Fields’ “has already resulted in cancellation in bookings for the forth coming tourist season. The hotel trade expecting a boom time with the war being concluded has spent large amounts in refurbishing their properties but with the airing of the Channel 4 video the image of the country has taken a battering.”

Another Sunday newspaper reports that the British Government has also expressed concerns on the Channel 4 film and indicated a timeframe for action. So also it reports has the headquarters of the Commonwealth of Nations in London, the Commonwealth Secretariat, which says: “There is understandable widespread abhorrence at what the programme purports to show. These concerns have been conveyed to the Government of Sri Lanka.”

Analysts are concerned because the 2013 Commonwealth Heads of Government Summit is to be held in Sri Lanka and Sri Lanka is also bidding to host the 2018 Commonwealth Games at Hambantota.

Analysts worry about the connection between governance, kleptocrats, international sporting events and Foreign Direct Investment, exports and tourist arrivals, due to these reasons.

(The writer is a lawyer, who has over 30 years experience as a CEO in both government and private sectors. He retired from the office of Secretary, Ministry of Finance and currently is the Managing Director of the Sri Lanka Business Development Centre.)