Tuesday, July 31, 2012

A number of companies that dropped out of the Sensex

A number of companies that dropped out of the Sensex in 1991 are still showing shaky fundamentals. But then again, there are those who have at least mastered the art of survival

ACC remained strong even post-liberalisation, but perhaps didn’t get its due attention from the Tata Group, which sold its 14.4% stake in 2000 to Gujarat Ambuja. Now under Swiss giant Holcim, the company’s revenues are growing at a CAGR of 8.3% over a 4 year period to reach Rs.79.76 billion in FY 2009-10, though profit at Rs.11.2 billion is less by 9.07% of its value in FY 2005-06. Grasim is a more surprising case of a company that was dropped in 2010. Post its consolidation with Ultratech, Grasim is the eighth largest producer of cement in the world with a capacity of 52 MTPA as compared to 8.5 million tonnes in 1995. Even post-demerger of the cement business, Grasim’s total revenue was Rs.46.46 billion in 2010-11 largely contributed by its other key strength – VSF.

The automotive segment has the obvious cases of Hindustan Motors & Premier Automobiles; legacy companies which were like chickens in the headlights when competition intensified. Both remain bit players. The former is still struggling with a consolidated net loss of Rs.505.2 million on revenues of Rs.5.7 billion in FY 2010-11 and the latter posted sales of just Rs.1.71 billion and a net profit of Rs.381.2 million. Ballarpur Industries was another case study that struggled to cope with South East Asian competitors post 1991 till scion Gautam Thapar led an impressive turnaround. Ceat from the Goenka group similarly fell from its perch and was in fact an overleveraged loss making company in 2001. Even today, its net profit at Rs.35.163 billion for FY 2010-11 puts it significantly behind competitors like MRF at Rs.74.63 billion and JK Tyres at Rs.48.31 billion. While the Tata Group owned Indian Hotels is expanding into new segments, its revenues at Rs.16.73 billion for FY 2010-11 are just growing at around 2% yoy since FY 2006-07 and profits at Rs.1.41 billion are in fact down by 56.2% since that year. Siemens India presents an interesting case of an MNC that dropped out of the Sensex. The company suffered from overzealous expansion into capital intensive sectors to go into the red, and also missed the mobile boom to Nokia. It went for a turnaround in the late 1990s and has been showing promise again.

While the new entrants show tremendous promise, it’s hard to say how many of them will stay twenty years hence. It is a rule of the markets that as companies grow larger, they find it increasingly difficult to adapt to market changes. And the new crop that come into their place tends to be better suited to live by the new rules of survival and natural selection.


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Monday, July 30, 2012

Policy-ILLEGAL MINING IN KARNATAKA: LOKAYAUKTA REPORT

The Furore over The Report on Illegal mining in Karnataka, compiled by Lokayukta Santosh Hegde has already compelled Chief Minister B. S. Yeddyurappa to step down from his post; there is more to come.

No option but to act

B&E: You have been under threat for doing your job sincerely. The SC ban will further irk miners. Do you see it as a threat?
U. V. Singh (UVS): Why is there a threat to me? I have not done anything wrong. Even if there is a threat, I take it as a part and parcel of my life. The baseline is that if there is something wrong that you wish to rectify, there will be hundreds of troubles and hurdles in the way. You have to learn to be strong enough to cross all these hurdles.

B&E: The Lokayukta report has exposed the rot that runs deep into the system. What immediate steps would you recommend?
UVS: SC has intervened and mining is suspended for the time being in Bellary. We do hope that the new scheme of things will be in the form of reform. I am also part of the Central Empowerment Committee. Even after the CEC gets out of the scene, there should be some sort of independent monitoring committee. There should be some independent body with an eagle’s sight, so that all this does not repeat.

B&E: With the kind of effort that has gone into the compilation with this report, do you think it could trigger the impact the beginning of a more regulated environment for mining in the state ?
UVS: Definitely. There will certainly be more regulation now. There are more things that will emerge. Whosoever is there, will definitely take up the issue because things have now reached up to the SC. There is no option but to act.


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Saturday, July 28, 2012

Stratagem-FIAT INDIA: PROBLEMS IN TATA–FIAT JV

Losses are Accumulating and Troubles are Increasing with every passing day... But still Fiat has to give more than 100% to save its JV with Tata Motors. Because its failure may just end Fiat’s journey on The Indian Soil. 

But then, to some extent, Fiat also needs to blame itself for the disaster. After the initial engine problems faced by the Linea at the onset of its India journey, the model now stands no where in the segment it operates in. While the model sold 350 units in June 2011, its competitors like Hyundai Verna sold as many as 4,102 units. Similar has been the fate of its hatchback – Grande Punto. While many consumers were impressed by the design and features of the car, its relatively smaller engine and cheap plastic quality resulted in lowering the unit sales of the product. As a result, players like Volkswagen, which entered India much later, now have a stronger hold in the Indian market. Against Fiat’s 1% market share, Volkswagen already has captured 2.6% of the Indian market.

In the mean time, going one step ahead, Ratan Tata has already made it public that the JV has not delivered results as initially expected and his personal rapport with Sergio Marchionne has not translated at the professional level. Moreover, citing Fiat’s faults for the failure of the JV, in an interview with market research firm J. D. Power, Tata had said, “I think that Fiat has to launch more models in the market to keep the dealers interested. It also has to look at its cost structure in terms of parts and components.” But considering that the JV is still of utmost importance to both the companies, the question remains, is there a comeback in sight?

Well, the first spark was seen in 2008-09 season when Fiat introduced products like Fiat 500 followed by Linea and Punto. The launch of 500 was to showcase the power of Italian engineering to the Indian consumer while the Linea was to establish its presence in the sedan segment and Punto was supposed to bring gigantic volumes at the door of the company. Undeniably, 500 did its job efficiently, but the other two simply failed, creating the mess. However, in the current season, the Italian major again seems determined to stage a comeback. And it’s not only the new positioning strategy which attracts customers by saying ‘Diesel on the price of petrol’, it has also announced a major reshuffle in its board. For the less informed, two of its key India members Giovanni Bartoli (third most powerful executive in Fiat SpA and one of the senior-most board members of Fiat India) and Harald Jakob Wester have already stepped down from the company’s board. And to replace them the company has nominated Ezio Barra, Giovanni Sella and Silvia V. Blina – all senior officials at the company’s Turin headquarters. In fact, Gianni Coda, Alessandro G. Baldi and Alfredo Altavilla, who are currently serving on the board, have been given additional responsibilities. In addition, to boost operations, the company invested Rs.1.5 billion in April this year.


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Friday, July 27, 2012

Towards a More Global Vision

The Car Maker has now set its Sights on Global Markets for its Nano and Luxury Brands.

The last fiscal was particularly memorable for Tata Motors, which crossed another milestone by clocking sales of one million units globally. After CEO Carl Peter Forster took over in April last year, Tata Group’s automotive business has been going from strength to strength. Profits surged by over 196.3% and PAT climbed to Rs.104.37 billion. Sales of Tata Motors small car Nano climbed to 6,515 units for May 2011 as compared to 3,550 units for May 2010. While domestic sales remain buoyant, Tata Motors has been looking beyond Indian shores to sell its wares and is actively seeking to expand its global footprint. The company’s small car Nano is already being exported to neighbouring countries like Sri Lanka and Nepal. Plans are also afoot to tap the South American, African and South East Asian markets very soon. In Europe, the Indica Vista has already been introduced in Poland and Italy, and it is now being planned for launch in Spain. At the Geneva Motor Show this year, Tata Motors unveiled the all new Tata Pixel, a car which it would design and develop to cater exclusively for the European markets. While sales of its other models may have flagged in the past three months owing to a spike in the fuel price and car loan rates, but the company remains bullish about its future sales figure. To offset the impact of rising inputs and commodity costs on the competitive pricing of its cars, Tata Motors is focusing on paring down costs. “We are focusing on cost efficiency inside the company to neutralise the impact of the increasing raw material cost to the maximum extent possible.” says Debasis Ray, Head- Communications, Tata Motors.

India’s largest automobile company is also the owner of global marquee car brands like Jaguar and Land Rover, which it has now launched in India as well. The first showroom of the iconic British luxury brand Jaguar LandRover was recently inaugurated by Ratan Tata in Mumbai. True to their pedigree, both Jaguar and Land Rover have become coruscating jewels in Tata Motors’ crowning achievements. For the record, JLR posted 481.9% growth in profits for the year FY11.

To keep its portfolio refreshed, the company has been launching new models and more desirable variants at regular intervals. Its recent launches include the new Tata Manza sedan, a newer model of its legendary Tata 407 Pick-up, the Tata Super ACE and its new truck Tata Prima. “I think they have taken all the right steps to become a global OEM. The short term challenges always remain but in long term they will to succeed,” says Abdul Majeed, Leader, Automotive Practice, PwC India. So far, Tata Motors has played its cards well, both in the domestic market and in scanning the overseas horizons.


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Thursday, July 26, 2012

Solar VS Nuclear What Should India bet its Money On?

Proponents of Nuclear Energy are Blatantly and Deliberately disregarding The Solar Energy Option, many with Their own Ulterior Agendas B&E Analyses why India needs to Urgently look Beyond Nuclear Energy towards The Solar Option for a Sustainable, Safe and Secure Energy future

Twenty Five years post the chernobyl disaster, The Fukushima Daiichi Nuclear Disaster in Japan has once again reignited the global focus on The Mammoth Dangers surrounding Nuclear Power Generation. While The World is actively considering shifting to The Solar Energy option, Nuclear Energy Proponents in India are claiming that investment in Solar Energy is a lost cause. B&E exposes the perfidy in pro-nuclear arguments and analyses how India can align profitably over the coming years to solar energy

“Foolish romance!” If you were the Executive Director of the Nuclear Power Corporation of India Ltd (NPCIL), and if you were to provide your views on the viability of solar energy, would you give that answer? Unbelievably, Nalinish Nagaich, Executive Director of NPCIL, did just that in an unsolicited communication to us, while attempting to discredit solar energy. As per Nalinish, “Solar power is nothing more than a foolish romance as far as large scale deployment or energy-intensive applications are concerned.”

That, sadly, is the unlettered and opinionated perfidy that is the hallmark of individuals whom B&E calls pro-nuclear-extremists. In a post-Fukushima world, where nations like Germany have decided to shut all their nuclear power plants in the next 11 years to shift to renewable sources like solar, where the Swiss Cabinet has called for the decommissioning of Switzerland’s five nuclear power reactors to replace them with alternate sources, where the Chinese government is considering doubling of its solar photovoltaic (PV) power generation target by 2015 to 10 gigawatts (GW) from the current 5 GW, India has people like Nalinish Nagaich at key positions in our top government organisations refusing to accept the phenomenal danger that nuclear energy generation options present, and also refusing to accept solar energy as a viable alternative.

While the motives behind such a polarized and illogical anti-solar view seem unclear at the outset, the moment one realizes the fact that India has practically zero usable uranium reserves (the government confirms our uranium reserves are at around 115,000 tonnes; and almost all of this is of low quality and not usable), and that India therefore has to necessarily import high quality uranium from the western nations, that one starts seeing the unsaid monetary connection of the billions of dollars that the Indian nuclear industry holds for foreign firms and domestic pro-nuclear lobbyists. The Indian nuclear industry is estimated to be worth a smashing $100-250 billion.

This ironically amusing stand – of groups in India lobbying for an energy source for which India has no raw material – is pitiable. In November 2010, for example, India celebrated its 20th nuclear power plant, a 220 MW plant set up in Kaiga (called ‘Unit 4’) becoming active. In the celebrations that followed the plant going operational, was forgotten the fact that the Kaiga Unit 4 plant was actually built a few years back; but due to the non-availability of uranium fuel, India just couldn’t make it active. In fact, between 2006 to 2008, nuclear power generation in India fell by 12.68%; from 2009-10 to 2010-11, the same rose by 40.94%, proving how erratic is its behaviour.

And after all this, nuclear power generation still contributes only 2.75% of total power generated – again, providing a grim certification of how lack of a continuous uranium fuel source stymies the option from the scruff of its neck. Comparatively, nuclear energy currently accounts for 15% of electricity generation globally. The US generates 20% of the nation’s electricity from its 104 licensed reactors at 65 plant sites (Barack Obama’s FY2012 budget would nearly triple the loan guarantee ceiling for nuclear power plants from $18.5 bn to $54.5 bn).

No surprises, NPCIL now claims that by 2032, India would be able to generate nuclear power of 63,000 MW by setting up 16 more indigenous pressurised heavy water reactors, of which, ten would be based on reprocessed uranium. There is a mystical silence on how the uranium would turn up in these various plants. Was it a coincidental surprise that in August 2008, the US proposed the lifting of a 35 year old nuclear trade embargo on India? The main motive was clearly business development for western companies like Westinghouse, GE, Areva and many more from America, France, Russia, Spain and other nations.

Fantastically, we’ve not even started talking about the humongous danger the nuclear option poses to human life. The Fukushima Daiichi nuclear plant disaster on March 11, 2011 and the destruction caused thereof have opened up the floodgates on a heated global debate amongst the intelligentsia about whether a nuclear plant can ever be 100% safe. While the world has been berating Japan, a so-called Six Sigma process driven economy, for having not taken enough care to ensure fail-safe measures at the Fukushima Perfecture, on June 8, 2011, the Japanese government – in a report submitted to IAEA – conveniently doubled up its estimates for how much radiation might have leaked into the environment. Yes, we said ‘doubled’ – making the disaster 1/6th as harmful as the Chernobyl blast and proving that there is no fail safe reactor and there is no honest government. That is how uncontrollable a nuclear disaster is, which can maim millions within seconds and can scar millions more for eternity. Researcher Benjamin K. Sovacool has documented in the Journal of Contemporary Asia, in an article titled A Critical Evaluation of Nuclear Power and Renewable Electricity in Asia, that 120 and more “hazardous nuclear accidents” took place in India between the years 1993-95. In 1993, for example, fire broke out in the steam turbines at the Narora Atomic Power Station at Bulandshahar in Uttar Pradesh. The reactor escaped damage. The question is, if by chance the reactor had gotten damaged for whatever reason, what all could have happened? For records, Bulandshahar lies geographically just after Greater Noida, clearly not that far a distance from the national capital of New Delhi.



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Wednesday, July 25, 2012

Scrutiny-SALARIES: IT OFFICIALS AND JUDGES

Salaries of Income Tax Officers and Judges Should be Decided by an Independent Panel and should be made at par with Other Nations

The same goes for judges in India. A recent bill passed by the Parliament had increased the salary of the Chief Justice of India (CJI) from Rs.33,000 to Rs.1 lakh month (equivalent to $2200), while for apex court judges, the salary has been increased to Rs.90,000 (equivalent to $2000) per month. However, a US district judge gets nothing less than $174,000 (as of 2009). The current salary for the Chief Justice in US is $18,625 per month, while the Associate Justices each make $17,825 per month. On an average, an American counterpart earns 8-9 times what an India judge earns!
The same goes for judges in India. A recent bill passed by the Parliament had increased the salary of the Chief Justice of India (CJI) from Rs.33,000 to Rs.1 lakh month (equivalent to $2200), while for apex court judges, the salary has been increased to Rs.90,000 (equivalent to $2000) per month. However, a US district judge gets nothing less than $174,000 (as of 2009). The current salary for the Chief Justice in US is $18,625 per month, while the Associate Justices each make $17,825 per month. On an average, an American counterpart earns 8-9 times what an India judge earns!

In UK, a judge earns £239,845 ($380865). UK spends around €27.4 million ($40.6 million) each year as judges’ salaries. Judges of the Supreme Court earn €257,872 ($382012) each every year. Interestingly, salaries paid to Irish judges are the second highest in the world. A brief glance through High Court judge salaries in France and Germany shows how they earn around $200,000 and $108,000 respectively annually.

India’s judicial pay scale is determined by Pay Commission recommendations, which is done periodically. But the July 2009 National Judicial Pay Commission suggestions were implemented by only Delhi, Maharashtra, and Madhya Pradesh. Similarly, the pay scale revisions of any government employees including income tax officers are based on Pay Commission recommendations approved by the government. In the US, regarding judicial pay adjustment, the pay scale rise is recommended by the Chief Justice. For civilian employees (that includes Internal Revenue Service, IRS, employees) pay scale adjustment, the executive order has to come from the President and it must be ratified by the Congress. A similar pattern is followed in UK and Canada.

In the case of India, where it’s very easy to manipulate laws and dodge the entire system by bribing officials at various cadres, an independent commission to decide the salaries of key government officials in judiciary as well as the IT department is a must. If corruption and high level crimes (by the influential people of society) have to be tackled at the roots, it is imperative that officials in the judiciary and the Income Tax department are at least paid the sky. It’s well said, if you throw peanuts, all you’ll get are...


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Tuesday, July 24, 2012

This Time, The Entire US GDP will be Wiped off!

Question is, will The World see Tech-Bubble 2.0? The Incredible Valuations of New age Internet Startups do Indicate so. And what are we Risking? Amir Moin after an In-Depth analysis, Reveals The Answer – a Mighty lot!

C apitalists hate bubbles. Actually, they first love it. Dimes turn into hundreds of dollars, and before the investors wake up to reality, the stock markets crash. Valuations are reduced to ashes, and what is left of any industry hit by this dust storm is a sight of riches-to-rags investors, with the world looking on in helpless horror. The bursting of the dot com bubble of 2000, is an example. It is not every day that the world can withstand a blow of $6 trillion (the value that stock markets around the world lost between March 10, 2000 and December 31, 2002). And the current times – when US, Eurozone and many countries around the world are still digging themselves out of the slowdown disaster – is certainly not one.

But, the threat is growing by the day. The bubble, we mean. And once again, we find ourselves fearing the unholy apparition symbolising all that the world has suffered in the past, due to the cold savagery unleashed by a handful of financial engineers. And like it happened at the turn of the century, the accused this time again, will be the new age Internet startups. Only this time, the aftermath will be more unpleasant. This is how. Of the 308 companies that went public in 1999 (when the dot-com cycle was at its peak) the 24 largest of them, were valued by the bourses at $70.96 billion (the largest being Agilent Technologies, which was valued at $13.6 billion). As per Morgan Stanley, currently, the combined valuation of just the top five most sought-after unlisted Internet start-ups (which are forecasted to hit bourses anytime by mid-2012), totals a higher $71.3 billion (the largest of them being Facebook, at $50 billion)!

We are staring at a dangerous outcome. Events synonymous to those that led to the previous bubble are being seen in the present days. During the first half of 1999, New York was ablaze with venture capitalists funding any and every dot com start-up. IPO activity surrounding these companies was at an all-time high. According to Thomson Reuters, Wall Street made an estimated $1.3 billion in underwriting fees during that period. Investors in tech-stocks were the happiest of the lot. On March 10, 2000, the NASDAQ index peaked to an all time high of 5132.52, before closing at 5,048.62. That day, the total m-cap of companies listed on NASDAQ was $1.98 trillion. By December 31, 2002, the stock exchange had shed 73.55% of value – amounting to a loss of $1.46 trillion. If a similar mishap is repeated today, the NASDAQ alone will lose $3.01 trillion by December 2013 (as per March 31, 2011, valuation of domestic stock exchanges by World Federation of Exchanges ). Simulate the tumbling reaction on stock markets around the world, and you arrive at value lost of $14.77 trillion over the next 33 months – enough to wipe out the total GDP of US (which stood at $14.80 trillion for 2010, as per US Bureau of Economic Analysis) – sending a ‘stock’ shock wave 146.17% higher than the 2000-2002 Internet-apocalypse!



 
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Friday, July 20, 2012

... And The Face of all that is Shamefully Wrong at ISB

Now look at it this way again to get a better perspective. Soon after the SEC investigations and allegations against him were made public, here is what Rajat Gupta did-or had to do-in the United States. He took ‘leave of absence’ from the $1.4 billion venture fund New Silk Route which he had founded. He quit the boards of Goldman Sachs and Procter & Gamble. His resignation was also accepted by the boards of Genpact, American Airlines and Harman International. In fact, even as this issue goes for printing, we get news that Rajat Gupta has resigned as Chairman of the Governing Board of the Public Health Foundation of India. Some of his colleagues in this board are Nobel Prize winning economist Amartya Sen and Planning Commission Deputy Chairman Montek Singh Ahluwalia. But Gupta continues to be the Chairman of Board of ISB. What is strange is the manner in which Gupta is clinging on to ISB, the B School he helped found by using his amazing network of corporate contacts across the world. If he can quit his positions of trust and authority in the United States as a result of the serious charges against him, why is he further damaging the already damaged reputation of ISB by clinging on? In fact, the official response from ISB is nothing short of brazen, something you would expect from the office of corrupt politicians we all love to hate. It says, “ We note that the U. S. SEC has initiated administrative and civil proceedings against our Chairman, Rajat Gupta. We also note the statement of the counsel for Rajat Gupta, which asserts that the allegations are totally baseless. The ISB community is confident that Rajat Gupta will be vindicated. He continues to be the Chairman of the ISB Executive Board.”

This is not the first time that ISB has been publicly embarrassed because top people involved with the B School have been found involved in notorious scams. The other big name that shamed ISB was M Rammohan Rao, the former Dean of ISB. Rao also happened to be a Board member of Satyam, whose promoter B Ramalinga Raju is now accused of monstrous financial skullduggery. Rao happened to preside over a Board meeting of Satyam that took the controversial decision to buy out Maytas Properties and Maytas Infrastructure, both firms promoted by the family of Ramanlinga Raju. The former Dean of ISB, Rao was an ‘independent’ director of Satyam with the responsibility of protecting the interests of the company and its shareholders. Quite clearly, Rao brazenly failed to perform his duty and would probably have got away with it if other shareholders had not raised a hue and cry about that controversial Board decision of Satyam. Even when the decision of Satyam and the Board was slammed by one and all as one of the worst examples of crony capitalism, Rao remained with the ISB. It is only when Ramalinga Raju made a public confession of his wrong doings and Satyam virtually collapsed that Rao quit as the Dean of ISB. And of course, I have already talked about Anil Kumar, the Ex-Mckinsey honcho and co-founder of ISB who was forced to take ‘leave’ from ISB when the U.S. SEC formally charged him with insider trading back in October, 2009. He is now the star witness in the trial against Rajratnam.

The obvious question to be asked is: what exactly is going on at ISB, that is touted as one of the most prestigious B Schools in the world? Is the institution being run by academicians or by wheeler dealers who conveniently take leave when their follies are exposed in public? Equally important, if Rajat Gupta-either voluntarily or not-has quit his positions in almost all other companies and institutions, what kind of message is being sent by ISB about its adherence to ethics and good governance when Gupta stubbornly clings on to the helm at ISB?

This magazine had two years back ranked ISB as the number one B-School in India. However, good faculty and teaching alone doesn’t make an institution great. It is now clear ISB has become a symbol of all that is rotten in Indian corporate culture. Our corporate titans think that money can buy everything. So ISB has a big campus and has got the money to get the best faculty to come and teach. But education is more than having moneybags and wheeler dealers. It is primarily about running the institute with real educationists. However, just like the Indian corporate sector, ISB seems to believe in running itself with the help of wheeler dealers. And just the way the empty headed corporate heads of India blindly follow the McKinseys of the world without questioning their intellect or commitment, ISB has been getting one after the other fixers on board with extremely questionable ethics and not necessarily high intellect. It is a shame that they have not yet forced Rajat Gupta to resign. If this is the example it is setting for its students in terms of ethics, the Financial Times must stop ranking ISB in their future surveys. Or, is ethics not important when it comes to judging a B-School?


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Thursday, July 19, 2012

What stops The Supreme Court from Allocating The India Gate lawns and other Government Clubs to house The Destitute in Delhi?

The Supreme Court has every year chided the government and given it a deadline for setting up immediate temporary shelters. As happens every year, the Delhi government immediately took up parks and community centres in various localities around Delhi and splendiferously set up tents for the homeless. While the intent was generous, the government conveniently chose to ignore the plight of the typical Delhi family whose children could not use the park, and who had to suffer the social and criminal behaviour that some of the homeless exhibited.

If you believe we’re heartless in saying this, think about it, why doesn’t the government set up homeless shelters in the expansive India Gate and Presidential lawns? What stops the Supreme Court from encouraging positive use of those lawns? Did you cite national security? Or did you mention cleanliness?


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Wednesday, July 18, 2012

In Sudan, An Eelection And A Beginning

President of The United States of America [Presented by Business & Economy in Strategic Alliance with The New York Times]

Not every generation is given the chance to turn the page on the past and write a new chapter in history. Yet today – after 50 years of civil wars that have killed two million people and turned millions more into refugees – this is the opportunity before the people of southern Sudan.

Over the week (of January 9 to January 15, 2011), millions of southern Sudanese will vote on whether to remain part of Sudan or to form their own independent nation. This process – and the actions of Sudanese leaders – will help determine whether people who have known so much suffering will move towards peace and prosperity, or slide backward into bloodshed. It will have consequences not only for Sudan, but also for sub-Saharan Africa and the world.

The historic vote is an exercise in self-determination long in the making, and it is a key part of the 2005 peace agreement that ended the civil war in Sudan. Yet just months ago, with preparations behind schedule, it was uncertain whether this referendum would take place at all. It is for this reason that I gathered with leaders from Sudan and around the world in September to make it clear that the international community was united in its belief that this referendum had to take place and that the will of the people of southern Sudan had to be respected, regardless of the outcome.

In an important step forward, leaders from both northern and southern Sudan – backed by more than 40 nations and international organisations – agreed to work together to ensure that the voting would be timely, peaceful, free and credible and would reflect the will of the Sudanese people. The fact that the voting appears to be starting on time is a tribute to those in Sudan who fulfilled their commitments. Most recently, the government of Sudan said that it would be the first to recognise the south if it voted for independence.

Now, the world is watching, united in its determination to make sure that all parties in Sudan live up to their obligations. As the referendum proceeds, voters must be allowed access to polling stations; they must be able to cast their ballots free from intimidation and coercion. All sides should refrain from inflammatory rhetoric or provocative actions that could raise tensions or prevent voters from expressing their will.

As the ballots are counted, all sides must resist prejudging the outcome. For the results to be credible, the commission that is overseeing the referendum must be free from pressure and interference. In the days ahead, leaders from north and south will need to work together to prevent violence and ensure that isolated incidents do not spiral into wider instability. Under no circumstances should any side use proxy forces in an effort to gain an advantage while we wait for the final results.

A successful vote will be cause for celebration and an inspiring step forward in Africa’s long journey toward democracy and justice. Still, lasting peace in Sudan will demand far more than a credible referendum.

The 2005 peace agreement must be fully implemented – a goal that will require compromise. Border disputes, and the status of the Abyei region, which straddles north and south, need to be resolved peacefully. The safety and citizenship of all Sudanese, especially minorities – southerners in the north and northerners in the south – have to be protected. Arrangements must be made for the transparent distribution of oil revenues, which can contribute to development. The return of refugees needs to be managed with extraordinary care to prevent another humanitarian catastrophe.

If the south chooses independence, the international community, including the United States, will have an interest in ensuring that the two nations that emerge succeed as stable and economically viable neighbours, because their fortunes are linked. Southern Sudan, in particular, will need partners in the long-term task of fulfilling the political and economic aspirations of its people.

Finally, there can be no lasting peace in Sudan without lasting peace in the western Sudan region of Darfur. The deaths of hundreds of thousands of innocent Darfuris – and the plight of refugees like those I met in a camp in neighbouring Chad five years ago – must never be forgotten. Here, too, the world is watching. The government of Sudan must live up to its international obligations. Attacks on civilians must stop. UN peacekeepers and aid workers must be free to reach those in need.

As I told Sudanese leaders in September, the United States will not abandon the people of Darfur. We will continue our diplomatic efforts to end the crisis there once and for all. Other nations must use their influence to bring all parties to the table and ensure they negotiate in good faith. And we will continue to insist that lasting peace in Darfur include accountability for crimes that have been committed, including genocide.

Along with our international partners, the United States will continue to play a leadership role in helping all the Sudanese people realise the peace and progress they deserve. Today, I am repeating my offer to Sudan’s leaders – if you fulfill your obligations and choose peace, there is a path to normal relations with the United States, including the lifting of economic sanctions and beginning the process, in accordance with United States law, of removing Sudan from the list of states that sponsor terrorism. In contrast, those who flout their international obligations will face more pressure and isolation.

Millions of Sudanese are making their way to the polls to determine their destiny. This is the moment when leaders of courage and vision can guide their people to a better day. Those who make the right choice will be remembered by history – they will also have a steady partner in the United States.


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