This blog is based on the report The Web of Transport Corridors in South Asia -- jointly produced with the Asian Development Bank, the United Kingdom’s Department for International Development, and the Japan International Cooperation Agency
One of the oldest, the Grand Trunk Road from the Mughal era still connects East and West and in the 17th century made Delhi, Kabul and Lahore wealthy cities with impressive civic buildings, monuments, and gardens.
In India alone—and likely bolstered by the successful completion of the Golden Quadrilateral (GQ) highway system—several transport proposals extending beyond India’s borders are now under consideration.
They include the International North-South Transport Corridor (INSTC), linking India, Iran and Russia, the Asia-Africa Growth Corridor, and the Bangladesh, China, India, and Myanmar (BCIM) economic corridor.
The hope is that these transport corridors will turn into growth engines and create large economic surpluses that can spread throughout the economy and society.
These two cities are the economic hubs of China and India respectively, two emerging global powers.
The distance between them, about 5,000 kilometers, is not much greater than the distance between New York and Los Angeles.
But instead of crossing a relatively empty continent, a corridor from Shanghai to Mumbai—via Kunming, Mandalay, Dhaka, and Kolkata—would go through some of the most densely populated and most dynamic areas in the world, stoking hopes of large economic spillovers along its alignment.
“Build and they will come” seems to be the logic underlying many massive transport investments around the world.
However, the reality is that not all these investments will generate the expected returns.
Worse, they can become wasteful white elephants—that is, transport infrastructure without much traffic—that would cost trillions of dollars at taxpayers’ expense.
First, countries need to change the mindset that transport corridors are mere engineering feats designed to move along vehicles and commodities.
Second, sound economic analysis of how corridors can help spur urbanization and create local jobs while minimizing the disruptions to the natural environment, is key to developing successful investment programs.
Specifically, it is vital to ensure that local populations whose lives are disrupted by new infrastructure can reap equally the benefits from better transport connectivity.
For instance, more educated and skilled people can migrate to obtain better jobs in growing urban areas that are benefiting from corridor connectivity, while unskilled workers may be left behind in depopulated rural areas with few economic prospects.
But while corridors can create both winners and losers, well-designed investment programs can alleviate potential adverse impacts and help local people share the benefits more widely.
In that vein, India’s Golden Quadrilateral, or GQ highway system, is a cautionary tale.
No doubt, this corridor had a positive impact.
Economic activity along the corridor increased and people, especially women, found better job opportunities beyond traditional farming.
But this success came at a cost as air pollution increased in the districts near the highway.
This is a major tradeoff and one that was documented before in Japan when levels of air pollution spiked during the development of its Pacific Ocean Belt several decades ago.
Another downside is that the economic benefits generated by the GQ highway were distributed unequally in neighboring communities.
What is the new study Innovation Paradox all about?
The potential gains from bringing existing technologies to developing countries are vast, much higher for poor countries than for rich countries. Yet developing-country firms and governments invest relatively little to realize this potential. That’s the origin of what we are calling ‘The Innovation Paradox’.
Why do firms in developing countries lag behind when it comes to innovation?
The Innovation Paradox, argues that developing country firms choose not to invest heavily in adopting technology, even if they are keen to do so, because they face a range of constraints that prevent them from benefitting from the transfer.
Developing country firms are often constrained by low managerial capability, find it difficult to import the necessary technology, to contract or hire trained workers and engineers, or draw on the new organizational techniques needed to maximize the potential of innovation. Moreover, they are often inhibited by a weak business climate. For example, small and medium enterprises (SMEs) are constantly in a situation where they are putting out fires, they don’t have a five-year plan, they don’t have somebody keeping track of what new technology has come out of some place that they could bring to the firm.
The rates of return to investments and innovation of various kinds appear to be extremely high, yet we see a much smaller effort in these areas. In the developing countries, we need to think not only about barriers to accumulating knowledge capital, we have to think about all the barriers to accumulating all of the complementary factors—the physical capital. So, if I have a lousy education system, it doesn’t matter if I get a high-tech firm because there won’t be any workers to staff it.
Innovation requires competitive and undistorted economies, adequate levels of human capital, functioning capital markets, a dynamic and capable business sector, reliable regulation and property rights. Richer countries tend to have more of these conditions. This is at the root of Paradox. Even though follower countries have much to gain from adopting existing technologies from the advanced countries, in practice, missing and distorted markets, weak management capabilities and human capital prevent them from taking advantage of these opportunities.
In 2017, Foreign Direct Investment (FDI) into Sri Lanka grew to over $1,710 billion including foreign loans received by companies registered with the BOI, more than doubling from the $801 million achieved the previous year.
What is foreign direct investment and why does Sri Lanka need it?
Very simply, foreign direct investment (or FDI) is an investment made by a company or an individual in a foreign country. Such investments can take the form of establishing a business in Sri Lanka, building a new facility, reinvesting profits earned from Sri Lanka operations or intra-company loans to subsidiaries in Sri Lanka.
The hope is that these investment inflows will bring good jobs and higher wages for Sri Lankan workers, increase productivity, and make the economy more competitive.
First, India’s long-term economic growth has steadily accelerated over a fifty-year period, without any prolonged reversals. Thus, while growth averaged 4.4 percent a year during the 1970s and 1980s, it accelerated to 5.5 percent during the 1990s-early 2000s, and further to 7.1 percent in the past one decade. The acceleration of growth is evident not just for aggregate GDP, but even more strongly for per capita GDP. The average pace of per capita growth was 5.5 percent a year in the last decade. Interestingly, when compared with some of the world’s largest emerging economies, this steady acceleration of growth stands out as being unique to India.
Second, India’s rate of growth has become more stable. This is partly due to the stabilization of growth within each sector – agriculture, industry and services – and partly to the transition of the economy toward the services sector, where growth is more stable. Particularly interesting is the sharp increase in the stability of GDP growth since 1991. Before this, growth accelerated episodically, was punctuated by large annual variations, and often failed to sustain. Thus, growth has not just accelerated post liberalisation, it has also become more stable.
Finally, growth has been broadly resilient to shocks, both domestic and external. The resilience of India’s growth can be attributed to the country’s large and spatially diversified economy, as well as to its diversified production structure that is not dependent on a few products, commodities, or natural resources. It can also be attributed to India’s diversified trade basket and broad range of trading partners, wherein a slowdown in any one part of the world will not result in a large impact on India.
The resilience of India’s growth process was on display in recent years when the country recovered quickly from the impacts of two major policy events – demonetization and the implementation of the Goods and Services Tax (GST), an important indirect tax reform. We argue that the deceleration to growth rates below 7 percent between Q3 2016–17 and Q2 2017–18 was an aberration, attributed to temporary disruptions in economic activity as the economy adjusted to demonetization and businesses prepared for the implementation of GST. At present, there are indications that the economy has bottomed out and, in the coming quarters, economic activity should revert to the trend growth rate of about 7.5 percent. We project GDP growth to be 6.7 percent in 2017-18 and accelerate to 7.3 percent and 7.5 percent respectively in 2018-19 and 2019-20.
The country’s social indicators, a measure of the well-being of individuals and communities, rank among the highest in South Asia and compare favorably with those in middle-income countries. In the last half-century, better healthcare for mothers and their children has reduced maternal and infant mortality to very low levels.
Sri Lanka’s achievements in education have also been impressive. Close to 95 percent of children now complete primary school with an equal proportion of girls and boys enrolled in primary education and a slightly higher number of girls than boys in secondary education.
The World Bank has been supporting Sri Lanka’s development for more than six decades. In 1954, our first project, Aberdeen-Laxapana Power Project, which financed the construction of a dam, a power station, and transmissions lines, was instrumental in helping the young nation meet its growing energy demands, boost its trade and develop light industries in Colombo, and provide much-needed power to tea factories and rubber plantations. In post-colonial Sri Lanka, this extensive electrical transmission and distribution project aimed to serve new and existing markets and improve a still fragile national economy.
As outlined in its Vision 2025, the current government has kickstarted an ambitious reform agenda to help the country move from a public investment to a more private investment growth model to enhance competitiveness and lift all Sri Lankans’ standards of living.
Case in point: while we may have data on vaccines given or babies born, we don’t know much about the roads that lead to the clinic. Similarly, we may get data on school attendance and passing rates of students, but we don’t know how long it takes for students to reach their schools.
بانک جهانی در ماه می سال ۲۰۱۷، از پانزدهمین سالگرد از سرگیری فعالیت هایش در افغانستان تجليل نمود. این در حالیست که طی این ۱۵ سال گذشته بانک جهانی حمایت لازم را برای دولت افغانستان غرض فراهم آوری خدمات عامه به افغانها فراهم نموده است. در اين فرایند، مشترکاً با دولت افغانستان ما توانستیم معلومات و آمار بسیاری را در بخش های صحت، معارف و هم چنان زیربنا ها جمع آوری نمايیم.
با آنکه معلومات در عرصه های مختلف بصورت پراگنده و غیر هماهنگ در دسترس عام قرار دارد اما این معلومات هنوز هم کافی نیست تا افغانها و همکاران انکشافی را در طرح ریزی برنامه ها و تدوین پاليسی ها که نقش کلیدی دارند، کمک نماید. به طور مثال ما در حاليکه آمار تطبيق واکسين و اطفال نوزاد را داريم، اما در مورد سرک ها ییکه به مراکز صحی منتهی میشوند آگاهی نداریم. به همین ترتیب، ممکن است در رابطه به میزان حاضری شاگردان در مکاتب و شاگردانيکه در امتحانات کامياب ميشوند بدانیم، اما در مورد اینکه آیا چه زمانی را در برمیگیرد، تا شاگردان به مکتب برسند، معلومات کافی در دست نداريم.