The Grey Chronicles

2009.July.25

Understanding GSHL: The Corruption Angle



This series of posts began last 09 July 2009 with a review of Pramod Mittal’s promise, or dreams, made during the inauguration of National Steel Corporation in the Philippines back in 04 February 2004. For the past days, The Grey Chronicles presented the investment forays of Global Steel Holdings Ltd. [GSHL] from the Balkans, Bulgaria, Nigeria, Libya, India and Zimbabwe.

GSHL Investments 2004-2009

GSHL Investments 2004-2009

Almost all the country wherein Global Steel Holdings Ltd. [GSHL] have had investments were prominently in the corruption watch list in most recent times. Global Integrity, a Washington-based think tank, have assessed the strengths and weaknesses of national-level anti-corruption systems beginning 2004 to present, by combining qualitative journalism with quantitative data gathering. As opposed to Transparency International, the Global Integrity “does not measure corruption per se or perceptions of corruption. Nor does it measure governance ‘outputs’ — statistics of service delivery, crime, or socio-economic development.”

In 2004, the Global Integrity Report [GIR] (2004) only revived 25 countries. Only three countries where GSHL have investments were included in the review: the Philippines, Nigeria and India. In 2004, The Philippines gets a “moderate” rating in the Public Integrity Index. Both Nigeria and India were rated: “Weak” in the Public Integrity Index. In Nigeria, corruption remains a way of life, with top public officials and their private-sector collaborators consistently reported to be involved in shady deals. In India, a bust-up in the power corridors of New Delhi was quite extraordinary considering that the Central Bureau of Investigation, India’s premier anti-corruption agency, is known to be notoriously subservient to its political masters. In 2004, GSHL operated in Bosnia, Libya, the Philippines beginning February, bid for and lost BH Steel to LNM Holdings in Bosnia in March, Bulgaria in April, and signed in August the Ajaokuta contract in Nigeria.

Transparency Internation Corruption Perception Index 2003-2008As there was no Global Integrity report published in 2005, the Transparency International Corruption Perception Index [CPI] for 2005 was used. CPI score’ relates to perceptions of the degree of corruption as seen by business people, academics and risk analysts, and ranges between 10 [highly clean] and 0 [highly corrupt] (Lambsdorff, 2005). That year, most countries where GSHL had investments, except for Bulgaria (CPI=4.0), were rated between 2.2 to 2.9. Nigeria’s CPI was even lower at 1.9 ranking 153 out of 158 countries surveyed (GCR, 2006). In 2005, GSHL became a majority shareholder in India’s Ispat Industries Ltd., still operated Bosnia’s GIKIL, Bulgaria’s Kremikovtzi, Libya’s LISCO, Philippines’ GSPI, and Nigeria’s Ajaokuta; then acquired both Nigeria’s Delta Steel and NIOMCO in February and Kosovo’s Llamkos in July.

In 2006, the Global Integrity Report (2006) included 40 countries. Except for Libya and Bosnia, countries where GSHL had investments were included in the review. India, Bulgaria, Nigeria, and the Philippines were rated with “Moderate” in Public Integrity Index. In Nigeria, however, “Almost everyone pays bribes on some level: Professionals, politicians and even youth are wrapped up in a system of illicit money transfers alone.” Serbia, Azerbaijan and Zimbabwe were rated “Weak”. In Zimbabwe, corruption in both the public and private sectors was endemic; graft became a part of life and death alike. Liberia received an overall “Very Weak” rating because most of the government’s revenue vanished into the pockets of its own employees. In 2006, GSHL had been present in seven countries: India, Bosnia, Libya, the Philippines, Bulgaria, Nigeria, and Kosovo. In March 2006, it acquired Zimbabwe Iron and Steel Co. [ZISCO] but cancelled the contract in August, a month after the acquisition of Serbia’s Magnohorom refractory.

Global Integrity Index, 2004-2008In 2007, out of 50 countries, Global Integrity Report (2007) rated Bulgaria 87 out of 100 as “Strong” in Public Integrity Index, yet practical implementation of its laws was better than most. India rated 75 out of 100 for “Moderate” yet pessimism about corruption was pervasive. Bosnia & Herzegovina (69/100), The Philippines (67/100), and Azerbaijan (65/100) were rated “Weak”. The Philippines scored moderately in many important governance areas, with a few exceptions earning very weak performance ratings, yet the change in Philippines’ overall scores from 2006 to 2007, the Report explained, was largely due to a new methodology addressing state-owned enterprises. Azerbaijan’s legal framework was strong, scoring alongside the US, Canada and Japan in a purely legal assessment; however, enforcement of these laws was another matter. Bosnia & Herzegovina had a reasonably good legal framework for fighting corruption (scoring near Japan and France in a purely legal analysis), but practical implementation of these laws was very limited. Liberia (50/100) and Nigeria (54/100) were rated “Very Weak”. Following a violent and contested April 2007 election, Nigeria’s government accountability in all branches and the civil service were rated as very weak. In 2007, GSHL had been present in seven countries: India, Bosnia, Libya, the Philippines, Bulgaria, Nigeria, and Kosovo. In June 2007, it won the bid then failed to deliver for Montenegro’s Berane mine [Ivangrad]; announced acquisition of Azerbaijan’s Dashkesan mines; but was evicted from Serbia’s Magnohrom refractory by December. GSHL lost majority control of IIL in November.

In 2008, Global Integrity (2008) reviewed 50 countries. Bulgaria was rated “Strong” (87/100), while the overall anti-corruption architecture for the country appeared strong, its faces its greatest challenges in the fields of political financing and whistle blowing. The Philippines gained +4 from 2007, was rated “Moderate” (71/100), despite impressive world-class anti-corruption safeguards, it remained challenged by the lack of a formal access to information regime and an election system that bred cronyism and corruption in the political process. The 2008 Grand Corruption Watch List of 13 countries included: Montenegro and Serbia. Montenegro, regaining independence in 2006, continued to face deep challenges with its overall governance and anti-corruption system plus extremely weak regulations undercut effective oversight of state-owned enterprises. While Serbia (62/100) had strong anti-corruption legal measures in place, its anti-corruption agency was seen as ineffective. Azerbaijan, rated Weak (61/100), boasted a strong legal anti-corruption framework across many sectors but suffered from little to no practical implementation. In 2008, GSHL continued operations in six countries: India, Bosnia, Libya, the Philippines, Bulgaria, and Azerbaijan. In April, all GSHL assets in Nigeria were under litigation, while its Kosovo’s Llamkos contract was terminated in May.

This post does not, however, imply that GSHL’s presence in these countries contributed to corruption per se, but rather points out that it invested there during the year when these countries—except for Bulgaria—were on GIR’s watch list or their CPI were in the lower than India’s. Yet, by 2009, GSHL operated continuously in only six countries: India, Bosnia, Libya, the Philippines, Bulgaria, and Azerbaijan. The litigation for its Nigerian assets is still on-going. In Libya, there is a definitive hint that the five-year productivity sharing beginning 2003 was extended. There is no available online information as to the status of its Azerbaijan asset.


Notes:

Global Integrity (2004). Global Integrity Report 2004. Washington, D.C.: Global Integrity, 2004. back to text

Global Integrity (2006). Global Integrity Report 2006. Washington, D.C.: Global Integrity, 2006. back to text

Global Integrity (2007). Global Integrity Report 2007. Washington, D.C.: Global Integrity, 2007. back to text

Global Integrity (2008). Global Integrity Report 2008. Washington, D.C.: Global Integrity, 2008. back to text

Kotalik, Jana & D. Rodriguez [eds] (2006). Global Corruption Report 2006. London: Pluto Press, 2006. back to text

Lambsdorff, Johann Graf (2005). Corruption Perceptions Index 2004, Global Corruption Report 2005. Transparency International, February 2005. pp. 235-38. back to text

Zinnbauer, Dieter & Rebecca Dobson [eds.] (2008). Global Corruption Report 2008: Corruption in the Water Sector. Cambridge: Cambridge University Press, 2008. back to text

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 LicenseDisclaimer: The posts on this site do not necessarily represent any organization’s positions, strategies or opinions; and unless otherwise expressly stated, are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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