Tax revenue growth in Bangladesh this year has been one of the lowest in recent years. There is now demand for a cut in corporate income tax rate with the forthcoming FY15 budget. Is this a good idea from a fiscal point of view?
Whether or not a tax-cut will increase or lower tax revenues depend on the tax rates and the tax system in place. If tax rates are in the prohibitive range, a tax cut will result in increased tax revenues. Arthur Laffer distinguished between the arithmetic effect and the economic effect of tax cuts. The arithmetic effect means that a lowering of the tax rate will result in lower tax revenues by the amount of the decrease in the rate. The economic effect identifies a positive impact of lower tax rates on work, output and employment which expand the tax base. If tax rates that are currently in the prohibitive range are lowered, the economic effect of a tax cut will outweigh the arithmetic effect and revenue collection will increase with tax cut.
When it comes to primary education, there are many reasons to be optimistic. Enrollment has jumped across the world, and more children are in school than ever before. In the last decade, the number of out-of-school children has fallen by half, from 102 million in 2000 to 57 million in 2011.
But is showing up to school enough?
According to UNESCO’s Education for All Global Monitoring Report, almost one quarter of the youth in the developing world cannot read a sentence. In countries with large youth populations, this can leave behind a crippling ‘legacy of illiteracy’. Despite almost universal primary enrollment in India – 97 percent – half of second grade students cannot read a full sentence, and almost a quarter cannot even recognize letters.
Reading is a foundational skill. Children who do not learn to read in the primary grades are less likely to benefit from further schooling. Poor readers struggle to develop writing skills and absorb content in other areas. More worryingly, learning gaps hit disadvantaged populations the hardest, limiting their economic opportunities. In Bangladesh, only one in three of the poorest quartile is literate, compared to almost nine out of ten in the richest.
A colleague of mine once told me that professionals who were responsible for designing public transport policies never used public transport themselves. This thought has been entrenched in my mind ever since. As a transport professional myself, I always try to use public transport whichever part of the world I visit, be it London, Delhi, Accra, Helsinki, or Colombo. It is one of the best ways to get a sense of how the public transport system operates in a particular city.
I joined the World Bank Nepal office some three years ago. I booked my temporary residence in a hotel through one of my friends. I had no idea how far the hotel was from my office so I took a taxi on my first day. Then I discovered that my hotel was close to a public transport route so I started using microbuses to commute to the office. On my way to work the microbus would never be full, so I could travel comfortably. But I hated my return journey as the microbuses would already be filled up at Shahid Gate and I would never get seats. Often I had to change buses and sometimes, if I stayed at work late, I had to take taxis as there were no buses after dark.
A lot of my Nepali colleagues also shared their experiences with me. A male colleague told me how he was mugged once. I also heard many unpleasant stories from my female colleagues on the experience of using public transport. I have to admit after this, I used public transport less frequently.
"1700 people Sir!” Satya said. “Everybody is fine.” Satya had just shown me the equipment of the multi-purpose cyclone shelter in Ganjam District, where Cyclone Phailin made landfall. The equipment had looked exactly the same as what I had been shown during the briefing the day before at the Odisha Disaster Management Agency in Bubaneshwar.
That had surprised me because the shelter where we were was almost ten years old, being one of the first ones to be built after the super cyclone of 1999. “I am the Secretary of the Shelter Management Committee Sir; I am in charge of maintenance.” Satya had said when I asked him how come everything looked in such good shape. “I have done this for seven years.” He added proudly. I was amazed. It is not often that a field visit highlights a facility that is close to ten years old. Even new facilities rarely look this good…
From the outset, I was interested and intrigued by research on gender issues in public transport in Kathmandu. Familiar with the chaotic, noisy, and smelly traffic of Kathmandu, the everyday challenges people face in their commutes to work and school were as well known to me as regular excuses for colleagues being late to meetings; buses were ‘full’, ‘late’, ‘broke down’, ‘did not come’. But I was also aware that women in Kathmandu are often quite tough, feisty and assertive especially compared to those in cities of neighbouring countries I had experienced. What were the issues going to be?
My team of a dozen researchers comprised eight women and four men, all in their twenties and thirties. Most, but not all, had long abandoned using public transport themselves, preferring the reliability, control, comfort and safety of riding scooters or borrowing the family car. So, my first task was to get them all to experience public transport again. They spent a whole day travelling on different forms of transport all over the Kathmandu area, between them covering from day break until the last bus plied in the evening. As they travelled they chatted to fellow commuters. The following day the team re-convened and shared their public transport experiences. We worked through simulations of commuter behaviour - dramatizing what happens when waiting for, getting on, traveling on and getting off public transport. We noted the contortions required to avoid touching people in crowded and cramped spaces. We talked through what was acceptable and unacceptable.
All of this helped us draft a short questionnaire to capture the issues which emerged as important. We were very conscious that we would have to administer these in situ as people were commuting and that they needed to be simple. When we came to undertake the study, riding on transport ourselves and conducting approximately 500 interviews, we did not anticipate the enthusiasm with which people wanted to engage. Commuters, women and men, wanted to pour out their frustrations to the researchers and felt that the questions being asked went straight to the heart of the issues which concerned them. ‘Putting up’ with uncomfortable, overcrowded, unreliable, dirty, unhygienic, unsafe travel and the reckless driving, offensive banter between drivers and conductors, pickpockets and harassment had become normalized. Enough was enough.
Foreign aid in its modern form originated in the early 1940s. Following the Second World War, Europe faced a critical shortage of capital for physical reconstruction. The response was the commonly known Marshall Plan under which the USA transferred some 2-3% of its national income during the peak years to help reconstruct Europe. The achievements under the Marshall Plan spawned hope about the effectiveness of foreign aid in other contexts. The attention of rich nations turned to the emerging independent developing nations in the 1960s. The multilateralism of aid at the time was seen as more efficient and less political than bilateral aid leading to considerable expansion of the activities of the UN, World Bank, and other multilateral agencies.
Historically there have been many who claim that not enough aid is given. The immediate post-War period witnessed large-scale funding through the Marshall Plan and growing aid to developing countries, focusing on technical assistance. In 1951 a UN commission recommended an increase of aid, to about $5 billion a year, to help countries increase economic growth to 2%. The most commonly quoted Partners in Development report argued for an increase in aid to 0.7% percent of Gross National Income of donors and to increase the efficiency of aid.
Conditions changed abruptly towards the end of the 1970s with the second oil shock, leading to the international debt crisis. Macroeconomic imbalances became widespread among developing countries. Focus in development strategy and policy shifted to internal policy failure. Achieving external and internal balance was widely perceived as an essential prerequisite for renewed development. Trade, not aid, became the dominant slogan among many leaders and economists. The optimism around 1970 was followed by ‘structural adjustment’ and stabilization of economies, and ‘aid fatigue’. Nevertheless, throughout the 1980s there were calls for increasing aid. The 1990s witnessed sharp reductions in Overseas Development Assistance (ODA) with the end of Cold War and tightening budget constraints in donor countries.
A major convergence of economic and political factors around the early 1990s led to a widespread feeling of there being a problem in the field of aid-promoted development policy. Policymakers at a global level faced a new set of problems in the context of a shift arising from the end of the Cold War. Aid could move away from being regarded largely as a geopolitical strategic tool. In addition, the Asian economic crisis and the lackluster performance of sub-Saharan Africa posed serious challenges.
Just before participating in the mid-term review mission of Higher Education for the Twenty-First Century (HETC) project in Sri Lanka in mid-February, 2014, I went to Galle, a southern fort city in Sri Lanka, for a day. Galle has been used as a trading port around the 14th century and later occupied by the Portuguese, Dutch, and British who developed Galle as a fort city. Walking around the city, I witnessed various relics from the colonial age, which made me want to learn more about their histories. Since there was no audio guide available, I wished there was a smart phone application explaining these historical buildings.
Unexpectedly, during the mission, I found such a mobile application being developed by University of Colombo School of Computing (UCSC)’s modeling and simulation group through a research and commercialization grant awarded by the HETC project. I became really excited about their project as my little wish in Galle just became true in less than a week.