Thursday, March 13, 2008

Defending corruption

Fahed Fanek today is criticising the financial and economic committee of the parliament for referring a potential corruption case to the prosecutor general. The committee had studied a report by the audit bureau, which stated that a decision by the Social Security board of directors to buy the failing Zara Hotel in Ma'in was improperly made. According to the bureau report, the shares were bought outside the stock exchange, and the price paid was 80 million dinars over the value of the real assets of the company.

According to Fanek, decision makers in such case should be immune from prosecution, because following up such cases will cause them to shy away from difficult decisions. What he does not say is that the decision to buy the shares was a political and not an investment decision. The government at the time wanted the venture to keep going, and really didn't care what the economic prospects were, because it was not coming out of their own pockets.

I have written before about how the government tries to use the social security fund for political expediency (with a reference to another Fanek article defending the government for doing this). This is a recurring issue, and now that the government is planning issuing a new law to curtail retirement benefits of the social security, it is a good time to put all past decisions into the light.

Political pressure and corruption will always be a threat to social security funds. This is precisely why there should be no immunity for board members of the SSC. Decision makers in the social security investment board should be held accountable so that they resist political pressure from the government. This is the best way to protect them from this pressure and it is a good way to protect our money.



At 2:52 PM, Anonymous Anonymous said...

Thanks for raising a very serious issue. Everybody (especially in a so called civilized, moderate, pro western democracy country should be accountable to his or her decisions (especially)those controling OUR money. Fanek has passed the threshold where he feels he can scold anyone opposses his Chutzpah. Hawatmeh was very polite when he tried to criticize the old fart in a very roundabout way. I think you have some background on econmics and you have the prowess to reduce him to stop his bollocks


At 2:57 PM, Anonymous Anonymous said...

does fanek have any sense of credibility left in him? defending a social security fund which is projected to go belly up ? I bet he would have defended Enron back in the day too...
hey when are you going to talk about the central bank diversifying its reserves, I'm curious whatchu think of that

At 4:56 PM, Blogger Mohanned said...

You did read his article the other day when he limited jordanian resources to begging and policing the region?

At 11:33 PM, Blogger Unknown said...

This is one post that I, and I bet many other bloggers, would love to see you publish in the newspaper - to respond to Fanek and to reach a non-english-reading non-internet-savvy audience.

did you consider writing under a pen-name in the news papers?

At 2:58 PM, Anonymous Anonymous said...

Khalaf, given that I consider your blog a trusted source of objective news, I would like to take the liberty to use your comment section as a forum to state my take on and disagreement with the content of this post.

I won’t touch on Fanek’s op-ed piece as much as on the portrayal of the actual news in the official media (mainly Al-Rai). I might only add that in focusing on Fanek we might be running the risk of shooting the messenger while obscuring the message.

I was stunned and really disappointed to read the heading in Al-Rai newspaper (Wednesday March 12) that read “The Parliament Financial Committee turns “Zara” File to the Public Attorney (Prosecutor)”. If I had not known any better, I would have thought from the headline alone that Zara Investment is corrupt to say the least. This is tantamount to defamation and image assassination. Therefore, allow me to state for the record what Zara Investment is.

Zara Investment happens to be the largest 5-star hotel company in Jordan and the largest employer in the 5-star hotel category. Its employees form a substantial share of the overall labor in the tourism sector. Its efforts in promoting Jordan are significant. According to a recent study the properties of Zara invest in marketing and promoting Jordan out of their own income alone close to the equivalent of 20% of what is allocated for promoting tourism in Jordan as a whole. Zara Investment was one of the very first private sector companies that brought the credibility to the notion of public private partnership for the good of the country. Its venture into the owning company of the Hotel Intercontinental was an excellent example of how privatization can work for the benefit of all, public and private. When conditions turned sour in Petra, Zara worked out a scheme whereby layoffs where managed to minimize the negative impact of the economic slowdown. In 1994, Zara Investment was the only company that put its money where its mouth is at a time when a lot of talk of investment was only lip service and for useless public consumption. Zara invested then with two main pillars in mind, Jordan and the Jordanians.

To have the name of such a great company embroiled in such a facetious story aimed at settling accounts among certain public servants is unfortunate and despicable to say the least. For whatever it is worth, I have no vested interest in defending Zara except that I feel obliged to highlight facts about a leading company whose name is being dragged in mud.

The individuals who had the vision to invest with Zara while its projects where under construction are people who should be commended for their courage to think outside of the box and to invest in one of the most vibrant sectors that Jordan has. Today the proof is in the pudding and what the company has achieved and what it stands for is a testimony to the wise investment decision taken then.

Zara Investment has highlighted the beautiful face of Jordan. I think we owe it a big thank you instead of this mud slinging that is a best extremely damaging, bitter, counterproductive and cynical.

Thank you and my apologies for the long comment.

At 5:36 PM, Blogger Mohanned said...

Great! The last commentor should work as the head of PR in zara! Everyone at all positions should be hel accountable to whatever dicisions he/she makes. This is one of the basics!

By the way, khalaf did you read fanek's piece for friday? It is lovely!

At 6:23 PM, Anonymous Anonymous said...

So, in the fact sheet above.
Where does the extra 80 million JDs rank?

At 7:29 PM, Anonymous Anonymous said...

The point from my above very long comment was to shed light on Zara as well as on the fact that it is caught in cross fire between the Social Security Corporation and the Financial Committee at the Parliament.

Mohanned, I seriously consider myself a PR person for any company (or anything for that matter) that makes me feel proud as a Jordanian.

Ahmad al-sholi - I just checked and the investment in question is already up by almost 40%.

At 4:57 PM, Anonymous Anonymous said...

based on the market value or the paid amount (35-115) millions?

At 4:20 PM, Anonymous Anonymous said...

وحتى لا ينطبق علينا جميعا " لقد سبق السيف العدل"

This article by Saleh Tayeh appeared in Al-Rai today (March 19). It is worth reading in order to better understand the issue at hand, which has been grossly misrepresented by the media.

مؤسسة الضمان الإجتماعي وشركة زارة والمدعي العام

لقد قرأت في الصحف قبل أيام قليله بأن الجنة المالية في مجلس النواب الذي نجل ونحترم، قد قررت و أنها بصدد اتخاذ قرار بتحويل موضوع مساهمة مؤسسة الضمان الإجتماعي في شركة زارة الى المدعي العام.. لقد قررت ان أدلي بدلولي في هذا الموضوع.

At 5:03 PM, Blogger Khalaf said...

Thanks for the info on Zara. Of course, the point is not strictly whether Zara was a good investment or not. The point is whether a) decisions are made under political pressure rather than sound investment imperatives and b) should decision makers be held accountable if they act improperly. The issue is whether they act in good faith. I am not saying that people should be punished if investments go bad. That is always a possibility with investments. However, when people are entrusted with such massive amounts of money, they should be subject to scrutiny. If they can't handle the heat, they should stay out of the kitchen.

At 4:02 PM, Anonymous Anonymous said...

Tayeh's piece several good points. I also agree with Khalaf on the importance of scrutinizing and holding accountable those entrusted with investing tax payers' money. These are all standard procedures. What strikes me in this whole story are two things:

1) Do those investigating the story understand the simplest principles in finance and investment? Do they understand best practice even if it leads to a loss? Do they have an understanding of the entrepreneurial nature of investment? Or are they just looking at huge numbers and getting worked up for not getting a share of the action.

I witnessed the parliament tackling much more important numbers where they failed miserably. Two numbers that jump to mind are the discussion of the budget and the vote of confidence given in December 2007:-). Our representatives have poor qualifications and they do not have the proper understanding nor the proper staff structure to assist them in serving their constituents in a meaningful way. Thank God it is 3omrah season now....this should fill the busy schedules of our dear representatives!!!!!!!!!!

2) Piecemeal approaches dilute the whole point of tackling corruption. If a corruption file is to be opened, then all stenchy stories should be taken out in the open and equally scrutinized. I can think of many more important, more relevant, and more likely cases.

This SSC strikes me as more cynical than what meets the eye. It looks like a settlement of score with individuals who were in power then and they are in more power now.

At 2:10 PM, Anonymous Anonymous said...

I would love to see the financial committee send the corruption file of the Prince Hamaza contract to the general prosecutor, where the sewage enter the operation rooms in the hospital. Oh, pardon me...the contract was implemented by the head of the committee the one and only Khaleel Attiyyeh


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