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Public Sector and Governance

Connecting Sri Lankans to Prosperity

Eliana Cardoso's picture

The presidential election in Sri Lanka this January resulted in an easy win for the incumbent Mahinda Rajapakse. The end of the long lasting civil conflict with Tamil separatists, strong remittances and an IMF agreement boosted investors’ confidence. Foreign exchange reserves recovered from about one month of imports in the first half of 2009 to six months of imports by January 2010.

Now that the war is over and the global economy recovering, the government needs to grasp the opportunity to do the right things and avoid hurting confidence in the country’s stability, which is key to the rise in foreign investment and tourism.

The bad news is that the withdrawal of GSP Plus by the European Union countries can hurt industrial exports. The EU decision is worrisome. Thanks to the increase in manufacture exports from 6 percent of total exports in 1975 to 60 percent in 2005, firms began to lead Sri Lanka‘s connectivity with the rest of the world.

Is India's Fiscal Consolidation at Hand?

Eliana Cardoso's picture

“What you don’t touch, for you lies miles away. (…) What you don’t coin, you’re sure is counterfeit.” These sophisms are voiced by Mephistopheles, under the guise of the Court Fool, in Goethe’s Faust. He aims to convince the Emperor to mint more coins, for money buys everything: parks and palaces; breasts and rosy cheeks. The Commander-in-Chief accompanies the scene and speaks his mind: “The Court Fool is wise, for he promises benefits to all.”

Economic theory, in contrast to the Commander-in-Chief, the Court Fool and other populists, states that all government handouts come at a cost – regardless of whether they are distributed in the form of subsidies or direct transfers. Financing them is only possible by raising taxes and getting into debt (or creating more money… and inflation).

India’s Turn

Eliana Cardoso's picture

An Ideal Husband, the play by Oscar Wilde, tells a story of unrealistic expectations. Lady Chiltern, a woman of strict principles, idolizes her husband, a rising star in politics. Their life is filled with nectar and ambrosia, until the appearance of Mrs. Cheveley. She comes with a letter – one that proves Sir Robert Chiltern’s fortunes were made on the back of privileged information during the construction of the Suez Canal. In exchange for this letter, she seeks support for the construction of a new canal in Argentina.

More and Better Jobs

Eliana Cardoso's picture

Forget the Homo Sapiens and the Homo Economicus. The guy who traces our destiny is the Homo Ludens, the man who plays. Johan Huizinga, a professor of history and linguistics, in his 1938 book, says that art and culture originate from our propensity to dance and have fun. But to enjoy life, play and build a peaceful world, you need a productive job that removes you from the daily struggle of making ends meet.

South Asia is unique in the multiplicity of its challenges and opportunities to generate productive employment. Start counting: many workers are stuck in low productivity agriculture and informal employment; there is low female labor force participation; the skill base is low; the countries in the region struggle with pervasive vulnerability and uncertainty, large economic and social disparities, and persistent conflict and violence.

Yet, there is no work that looks at all these factors in an integrated manner for the region. This is the reason why the World Bank’s first South Asia Region flagship report will focus on More and Better Jobs. This blog will keep readers informed on the progress of the report during next year.

How to Make a Billion Dollars Work

Parmesh Shah's picture

Large-scale public services and expenditure, especially those specifically designed for the poor, are vulnerable to leakages. Whether it is access to quality health care or education, clean water or entitlements under a development scheme; the poor face many barriers in accessing the public services and programs that are intended for them.

Social accountability interventions aggregate citizen voice and strengthen their capacity to directly demand greater accountability and responsiveness from public officials and service providers. Such interventions include the use of tools such as community scorecards, citizen report cards and social audits.

In 2007, three social accountability interventions were introduced in India in public programs on a pilot basis, representing budgets that run into the billions of dollars. With social accountability as the common denominator, three different states with three different service delivery contexts have been able to precipitate a series of impacts in just one year.

The Poor and the Middle Class

Eliana Cardoso's picture

Start counting the poor in India and you are bound to get into controversy. In “A Comparative Perspective on Poverty Reduction in Brazil, China and India,” Martin Ravallion (October 2009) calculates that 42% of the population in India in 2005 lived in households with income per person below US$1.25 a day (converted using purchasing power parity exchange rates for consumption in 2005). But he finds only 20% of the population under the US$1.25 poverty line when using a different method as a sensitivity test. The difference is huge. One number is twice the other and corresponds to two hundred million people (more than the whole population of Brazil!).

Ravallion repeats the exercise and finds that in Brazil, in 2005, the population who lived in households with income per person below US$1.25 a day (converted using purchasing power parity exchange rates for consumption in 2005) is 8%. When using the alternative sensitivity test method, it is 10%. Compared to India, the difference is small (2% of the population) between the two measures.

I suspect that instead of trying to calculate the number of people with less than US$ 1.25 a day, policies for poverty reduction should focus on the bottom quintile of the population: the 20% poorest group in the country.

One of my reasons is that inequality matters. Think of poverty as a relationship.

How Will Changes in Globalization Impact South Asia?

Ejaz Ghani's picture

Globalization has accelerated global growth and global poverty reduction. But it has also raised concerns. The current global crisis may change globalization itself, as both developed and developing countries adjust to global imbalances that contributed to the crisis. Will these changes help or hinder economic recovery and growth in South Asia?

There are three models of globalization. These include (a) trade flows (exchange of goods), (b) capital flows (exchange of money), and (c) macroeconomic management. These three models of globalization may not be the same in the future. Changes in globalization could change the composition of trade flows, capital flows, and economic management, which in turn, could accelerate or restrain growth. So how will changes in these three models of globalization impact economic recovery and growth in South Asia?

South Asia as a region is peculiar. Its trade, capital flows, and economic management differ from other regions in how the region has globalized, although it must be mentioned that there is a lot of diversity within the region.

How Should We Best Accelerate Growth and Job Creation in South Asia?

Ejaz Ghani's picture

“South Asia continues to grow rapidly and its largest economy, India, is close to becoming a Tiger.”

Sadiq Ahmed and I were inspired to author Accelerating Growth and Job Creation in South Asia when we were asked by the South Asia Chamber of Commerce, SAARC Business Conclave, FICCI, and a number of policy makers, local research institutes, and CEOs to come up with a strategy on what can be done by South Asian countries to accelerate growth and job creation. So we invited the world’s leading scholars to apply their talents to understanding the economies of South Asia. This gave birth to the book.

It is organized along three themes—an overview of South Asia’s growth opportunities and challenges; sources of growth and policies for the future; and the significance of regional cooperation in promoting growth. The essays combine quantitative data with analytical rigor to provide innovative suggestions in terms of policies and institutions that can propel South Asia towards higher growth, while promoting inclusiveness.

South Asia Advances on Visual Tool Comparing Development over Time

Joe Qian's picture

The World Bank released its Data Visualizer tool last week, which compares 209 countries through the lens of 49 development indicators utilizing data ranging from 1960 to 2007. Using three dimensional bubbles whose sizes are proportional to populations and are color coded to the different regions (purple represents South Asia), they move horizontally or vertically based on their achievements on a number of indicators that range from GDP per capita to the percentage of children that are inoculated against measles.

Users will find similarities with the groundbreaking Gapminder World tool that Swedish Health Professor Hans Rosling first presented to the TED Conference in 2006. He concluded that the world is converging and that old notions of contrasting developed country (generally small families and long lives) with developing country (large families and short lives) to be grossly out of date.

Don’t Throw the Baby with the Bathwater!

Zahid Hussain's picture

Paul Krugman’s September 6 article in the New York Times (How Did Economists Get It So Wrong?) is a humbling warning to the economics profession against the pitfalls of intellectual complacence. It challenges the profession to re-examine the validity of its existing knowledge particularly in relation to globalization and the workings of local and global financial markets.

Granted that economists have to face up to the unpalatable fact that our theoretical apparatus falls far short both as descriptions of how economies function and as prescriptions of how they can be made to function better. The crisis has exposed the limits of economic knowledge. According to Krugman: “The vision that emerge as the profession rethinks its foundations may not be all that clear; it certainly won’t be neat; but one can hope that it will have the virtue of being at least partly right.”

In this process of reappraising existing economic knowledge, there is a real risk of going overboard and wrong the right knowledge. Using the global economic crisis as an excuse, there are emerging tendencies to reject tested economic wisdoms in areas such as the role of foreign capital and trade policy in economic development.

One school of thought that is attempting to rise from the ashes is known as (old) Structural Economics.

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