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South Asia Rebounds

Eliana Cardoso's picture

The future is unpredictable and yet, from time to time, we must take stock of what we accomplished and where we are heading. Over the past decade, better policies and rising integration with the global economy have pushed growth in South Asia upwards. By 2007, the peak year just before the global financial crisis, the region’s GDP growth had reached nearly 9 percent a year (just slightly behind East Asia’s). This growth acceleration extended to all the countries of the region.

The global financial crisis took South Asia’s growth down by about 3 percentage points (from 8.6% in 2007 to 5.6% in 2009). This was the smallest growth decline among all regions of the world and the prospective recovery is already underway. The World Bank expects GDP growth to recover to nearly 7 percent per annum on average in 2010-2011.

Dipak Dasgupta, a Lead Economist at the World Bank, points to four key factors that have cushioned South Asia’s growth decline during the crisis and are helping in the strong recovery.

(1) Remittances held up much stronger in South Asia than in other regions. In Nepal, the reliance on remittances is the highest, and without these flows, growth in consumption would have collapsed.

(2) The resilience of some key export-oriented sectors also helped. Garments in Bangladesh and IT software exports from India, for instance, have held up relatively well.

Closing that Equality Gap in Sri Lanka

Chulie De Silva's picture
Conflict affected young girl in a resettled village supported by the NEIAP project, Vavuniya, Sri Lanka

So Australia is huffed that they have fallen behind South Africa and Sri Lanka, not in cricket ICC rankings but in the annual Global Gender Gap Index released a month or so ago. How ignominious to fall behind their cricketing rival, Sri Lanka, who in terms of development is a minion—far behind Australia.

The Australian Council of Trade Unions wailed “Australian employers must do more to encourage women’s participation in the workforce and close the gender pay gap.“

The Global Gender Gap report hardly made any waves here. This year, Sri Lanka has slipped 4 places to 16th place. However, the report says Lanka’s overall performance in 2008 has improved relative to 2007. “Sri Lanka continues to hold a privileged position of having the best performance in the region regarding political empowerment,” said the report. Sri Lanka was ahead of Spain (17), France (18), Australia (20) and U.S.A. (31).

So are we Sri Lankan women more prosperous and hold more equal position at the workplace than the Sheila’s in Oz?

Did You Kill Somebody Tonight?

Eliana Cardoso's picture

“Did you kill somebody tonight?” Durga Pokkherel asks the police officer while in police custody in Nepal, after hearing terrified screams. As told in her memoir, Shadow over Shangri-la, the police officer replies: “You always imagine something big. He is not killed. As a routine treatment he was enclosed in a sack and beaten. But he would not speak a word, so some other police friends put a couple pins in his fingers. That is all.”

The dialogue took place in late 1990s, when both Maoists and the state committed human rights abuses in Nepal, a country on the top of the world, where caste, ethnicity, gender status and regional disparities have largely determined inequality. Social exclusion fostered state fragility, a Maoist rebellion, and a civil war that lasted for ten years (1996-2006).

After an unpopular royal coup in February 2005, the international community put pressure on the government to accept international monitoring under the UN Office of the High Commissioner for Human Rights. The monitoring created the space for peaceful political protest and, in April 2006, the King restored Parliament. Civil war came to an end with elections and the declaration of the Federal Republic of Nepal in May 2008.

An Inclusive Approach to Safeguarding the Basic Needs of the Poor

Mark Ellery's picture

If it were possible to separate public services into a public good aspect and a private good aspect, then government could probably ensure better outcomes for the poor by focusing primarily on the public good aspect.

A public good is both non-rival (the consumption of a unit does not reduce the units available for others) and non-excludable (it is not possible to include some while excluding others from this good). For example an illiteracy free community is a pure public good that demonstrates both non excludable and non rival qualities. It is non-excludable as it is not possible to exclude someone from the benefits of an illiteracy free jurisdiction while including others; and non-rival as one person consuming an illiteracy free jurisdiction does not reduce the stores for others. The private good have both rival and excludable characteristics (the consumption of a unit reduces the availability for others and it is possible to include some while excluding others during consumption). Alternatively a school is a private good - it is rival (there are only a certain number of children you can fit in a classroom) and excludable (you can be excluded if you do not meet certain socio-economic standards).

Assuming that all public services have rival and non-rival, excludable and non-excludable characteristics, it should be conceptually possible to separate the public good aspect and the private good aspect.

First Month on the Job in Bhutan: Trial by Earthquake

Mark LaPrairie's picture

As the newly appointed (and first) World Bank Representative to Bhutan, my first month on the job has been challenging. A magnitude 6.3 earthquake with an epicenter in eastern Bhutan struck on September 21. There were 12 fatalities, including a mother breast-feeding her infant daughter by the hearth in their stone-walled kitchen. While there was fortunately relatively little loss of life, there was considerable damage to houses, schools, health clinics, temples, religious monuments and roads. In Bhutan's mountainous terrain, many affected villages are several hours walk away, so the provision of relief supplies and carrying out reconstruction is difficult.

In collaboration with the Office of the UN Resident Coordinator in Bhutan, Claire Van der Vaeren, who took up her assignment in Bhutan in June, the World Bank fielded a team of disaster experts. Claire and I accompanied the team of six (four from the UN, two from the Bank) to the eastern districts ("dzongkhags") of Mongar and Tashigang. The drive from Thimphu -- Bhutan's capital city of 100,000 people -- to the affected villages in Mongar takes two days.

First Month on the Job in Bhutan: Trial by Fire

Mark LaPrairie's picture

After our rest at the Home Minister, Lyonpo Minjur’s rural ancestral home, the team embarked on the long journey back to Thimphu the next day -- only a couple hundred miles as the crow flies (if even that), yet a two day adventure across high mountain passes and along narrow endlessly winding roads with precipitous drops below. We reached the Swiss Guest House in Bumthang around 7pm, looking forward to hot showers and a meal.

Upon pulling up to the lodge, I received a call on my mobile from my friend Tashi, who was recently appointed by His Majesty to serve on the National Council (senate). Tashi was in eastern Bhutan to support earthquake relief efforts on the part of the National Council. Tashi called to inform me that, Wamrong, the town I lived in 21 years ago when I first came to Bhutan as a volunteer teacher, had mostly burned to the ground that afternoon.

Does South Asia Run the Risk of Rising Inflation?

Eliana Cardoso's picture

I am old enough to remember the days when Latin America was the land of inflation. Hyperinflation in Bolivia, Brazil and Argentina made the news in the 1980s and early 1990s. At that time, Asia was seen as immune to the Latin disease. Since then, much water has gone under the bridge. Inflation came under control in the majority of Latin American countries. Today the median inflation rate in South Asia is more than twice the size of the median inflation rate in Latin America and the Caribbean. (See chart below)

Should South Asia’s policymakers look at this information and wonder whether they are doing something wrong?

In general, the recipe for hyperinflation is the monetization of budget deficits in countries afflicted by political instability or conflict. Even if the threat of mega inflation is far removed from the South Asia scenarios, the combination of big budget deficits and loose monetary policy seems to be present in some countries of the region.

Gross Domestic Product Not Sole Indicator of Progress

Joe Qian's picture

What is Happiness? Many of us equate it with money. However, since 1972, the kingdom of Bhutan under the leadership of its former King, Jigme Singye Wangchuck has measured its developmental success not solely through the economic lens of Gross Domestic Product (GDP) but also through a more complete approach known as Gross National Happiness (GNH). Its laurels were based upon the original four pillars of sustainable development, preservation and promotion of cultural values, conservation of the natural environment, and good governance.

These indicators have become increasingly important over the last three decades as it became apparent that blindly pursuing economic expansion has created growing pains in a number of countries. GNH has appeared to be very successful in Bhutan, a nation the size of Switzerland with a population of around 700,000. With initiatives such as maintaining at least 60% (currently 72%) of the land for forests and conservation, while maintaining 165 indigenous mammal species such as the rare snow leopard, Bhutan also has a fast growing economy.

Government spending on health and education is the highest in the region at 18% and Bhutan boasts a GDP growth rate of 21.4% and a per capita income level that is almost twice as much as much as India’s, although it was much poorer as recently as the 1980’s. Independent sources also seem to echo these sentiments as Business Week magazine rated Bhutan the world’s 8th happiest country.

Incentives and Values in Conflict-Prone Countries

Eliana Cardoso's picture

One of the most extraordinary examples of the use of economic principles comes from the beginning of the 19th century, when England used to send a huge number of prisoners to Australia. The government originally paid the ship captain a pre-determined amount for each prisoner that boarded the ship, but half of them would die during the journey. In 1862, Edwin Chadwik, knowing that people respond to incentives, told the U.K. government to pay captains according to the number of prisoners that actually disembarked in Australia. With this adjustment, the survival rate increased from 50% to 98.5%.

This example illustrates how incentives can do wonders in some circumstances. Yet, human actions are not always guided by the same calculations made by a profit maximizing ship captain. Behavioral economists have emphasized that we respond to a deep ingrained sense of fairness. Culture and values are crucial in understanding human behavior and promoting healthy and stable societies.

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.

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