Syndicate content


Should South Asia Emulate the East Asian Tigers?

Joe Qian's picture

When thinking about development, I always look for opportunities for cross learning between regions. Having lived in and traveled extensively in East Asia and having worked in the South Asia Region for over a year, I often compare and think about prospects between the two regions. One question in particular is whether South Asia should aim to emulate East Asia’s manufacturing and export driven development model. Japan began using this model starting in the 1950’s and most East Asian countries particularly, South Korea, Malaysia, Taiwan, and most recently China have used manufacturing as a catalyst for growth.

According to the World Development Indicators, manufacturing accounted for over 30% of GDP in East Asia and Pacific while it is around 15% in South Asia. Bangladesh’s ready-made garment (RMG’s) industry is one example of manufacturing success as it has proven to be exceptionally competitive in the global market. However, holistically, I found that South Asia has distinctive characteristics and quickly moving towards an East Asian export-led model may not be most effective.

Back to the Future

Eliana Cardoso's picture

Imagine if, in 1799 – the year in which Napoleon seized power – a research institute had published its global forecasts for the next 20 years. Its researchers would have known about the tremendous changes that took place over the previous two decades: from the United States’ declaration of independence, through the French Revolution and the execution of Louis XVI, up to Napoleon’s victory over Austria in his Italy Campaign.

Even so, the chances of the researchers accurately predicting the events that came to pass over the subsequent 20 years, including their impact on the 19th century’s world order, would have been infinitesimal. No one could have anticipated that Napoleon would have plunged Europe into non-stop war for a decade until being overcome at Waterloo, or that, by the time of his defeat, he would already have swept away the foundations of traditional structures and initiated an unstoppable wave of reforms.

Because of its industrial might, this Europe would dominate the rest of the world during the 19th century. When European rivalries exploded into World War One, the face of the earth had already changed considerably compared to the previous century. And, having changed the world, Europe set the conditions for the demise of its own empire. Even before World War One, Teddy Roosevelt had heralded the start of the United States’ ascension to its current hegemony.

Involving Afghans for Success

Nancy Dupree's picture

Current rehabilitation and development rhetoric calls for listening to the Afghans and giving them the lead. Sadly, actions too often defy these wise words. The challenge is to make way for genuine in depth Afghan involvement at a time when the problems inherent in a lackluster government beset with corruption are so complex, and, particularly, when the aid-dispensing agencies so often disregard coordination and cooperation.

Politics within the prevailing environment of conflict imposes a sense of great urgency, no doubt, but many basic development principles are being set aside when they are most needed. Plans that rest on massive projects designed by outsiders lavishing too much money and demanding instant implementation are bound to be ineffective. Quick fixes never have worked. Throwing around money indiscriminately just compounds problems and raises new dilemmas. Sustained development, as has been established for decades, requires patient on the ground interactions over time.

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.

Conflict and Development: Where is Conflict Concentrated in South Asia?

Ejaz Ghani's picture

After Iraq, South Asia is the second most violent place on earth. Conflict has increased in South Asia during the last decade. Where is conflict concentrated? What can be done about it?

Conflict is a very broad term, which is often defined differently in different contexts and data sets. We can, however, consider two broad classes of conflict. The first category includes conflict against the State. Examples of this include civil war or terrorism, which is an extreme manifestation of conflict, and it reflects a certain degree of organization of conflict. It is carried out by a relatively organized group of non-state actors, and directed against the State. Some researchers choose to focus on terrorism as a measure of conflict, because it has implications for the overall stability of the state itself, and therefore its ability to implement any developmental policy. The second category includes people-to-people conflict, rather than directed against the State. Examples of this include localized land conflicts, religious riots, homicides or other crimes. They too have adverse implications for development, but are probably less severe, compared to terrorism.

Results’ Agenda and Economists

Eliana Cardoso's picture

In the book, The Idea of Justice, Amartya Sen motivates the discussion on the importance of processes and responsibilities by relying on an example. In the Gita (part of the Mahabharata), on the eve of the crucial battle episode in the epic, Arjuna expresses his doubts about leading the fight which will result in so much killing. Lord Krishna, tells him that he, Arjuna, must perform his duty, that is, to fight. And to fight, irrespective of the consequences.

Krishna’s blessing of the demands of duty is meant to win the argument from a religious perspective. But most of us would share Arjuna’s concerns about the fact that, if the war were to occur, with him leading the charge on the side of justice and propriety, many people would get killed. He himself would be doing a lot of the killing, often of people for whom he had affection.

Financial Reform and Fiscal Discipline

Eliana Cardoso's picture

It was in 1714 that Bernard de Mandeville defended his view of the economic world in a long poem with pretensions to uncovering the moral basis of modern society – The Fable of the Bees: Private Vices, Public Benefits. According to him, industrialists, businessmen and politicians are like pimps, quacks, pickpockets and forgers: tireless professionals who, through their cunning, use the work of others for their own purposes. Mandeville claims that it matters little if every trade and place is tainted by trickery and every profession, by chicanery. What does matter is that everyone, whether saint or sinner, contributes to producing the comforts progress provides, by looking after their own interests.

But you and I believe that where people live off ill-gotten gains the community will suffer and, thus, we reject the poem’s cynical view of the world. Yet, the lesson of The Fable of the Bees (that civilization advances in the measure that individuals seek to satisfy their needs and desires) is still alive and kicking.

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).

Food Prices and the Inflation Tax

Eliana Cardoso's picture

Oscar Wilde, suspecting that the relationship between price and value hides reasons that reason itself ignores, observes in the Lady Windermere’s Fan that a cynic is “a man who knows the price of everything and the value of nothing”. The economist will laugh at Wilde’s one-liner. But after a brief moment, she would protest. Theory tells her that value and price is one and the same thing. And she will insist that what matters for South Asians today is the difference between an increase in the price level and an increase in the inflation rate.

The price level increases when there is a supply shock, such as an increase in food and fuel prices. The initial increase in the price level tends to transmit itself to other prices when the economy operates close to capacity. If the price increase is accommodated by monetary policy, the supply shock transforms itself in a spiral of prices and wages and inflation goes up. Monetary authorities do right by not tightening monetary policy in response to the primary impact of supply shocks, but have to be attentive in case the increase in food prices begins to encourage secondary inflationary effects.

The Dutch Disease has not Infected Bangladesh, not yet any way

Zahid Hussain's picture

The Netherlands’ discovery of large natural gas deposits in the North Sea in the 1960s had serious repercussions on important segments of its economy, as the Dutch guilder became stronger, making Dutch non-oil exports less competitive. This has come to be known as "Dutch disease" or “resource curse.” Although generally associated with a natural resource discovery, it can arise from any large inflow of foreign currency--foreign assistance, foreign direct investment and remittances, among others. A surge in remittances can be expected to result in appreciation of the currency in the receiving country with all its attendant consequences of crowding out exports, crowding in imports, and induce movement of resources into the production of non-traded goods.

Bangladesh has experienced a remittance boom since FY01—with annual flows rising from $1.9 billion to $9.7 billion in FY09—growing at a compounded annual rate of 22.6 percent for eight years and still counting! As a result, remittance has now reached nearly 11 percent of GDP and is now the single largest source of foreign exchange earnings.