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How to diversify Bhutan’s economy?

Yoichiro Ishihara's picture
Bhutan has made tremdendous progress in reducing poverty. But it needs to do a better job at diversifying its economy by improving its physical and human capital by using resource rents from hydropower.
Bhutan has made tremendous progress in reducing poverty. But it needs to do a better job at diversifying its economy by improving its physical and human capital by using resource rents from hydropower.

Will diversifying its economy help Bhutan address its youth unemployment, let alone its macroeconomic volatility and vulnerability?

With the right approach, yes.

And to that end, the latest World Bank Bhutan Development Report: A Path to Inclusive and Sustainable Development proposes solutions relevant to Bhutan’s context.

For more than ten years, developing the private sector through greater economic diversification has been Bhutan’s top policy as described in the 10th and 11th five-year plans.

Yet, youth unemployment, especially for educated Bhutanese, has remained high: 67 percent of bachelor’s degrees holders were jobless in 2016.

Diversifying the economy is touted as a standard prescription to cure such development ailments as joblessness, low productivity, and macroeconomic volatility.

However, international experience shows that this prescription does not always work.

Case in point: A World Bank’s analysis Diversified Development concludes that in resource-rich countries, investing in physical capital, human capital and economic institution are the best ways to sustain growth in the private sector.

Further to that, the development of specific sectors, which is often a common ingredient of diversification strategies in certain countries, is neither necessary nor sufficient for private-sector-led growth.

The main driver of Bhutan’s high growth and poverty reduction, hydropower has led the country’s development and will remain the backbone of its economy.

However, Bhutan needs to do a better job at diversifying its economy by improving its physical and human capital by using resource rents from hydropower.

Bhutan ranks 149 out of 160 countries on the 2018 Logistics Performance Index and 121 out of 176 countries on the 2017 ICT index.

Bhutan falls in the bottom half of the Human Capital Project rankings on critical indicators such as expected years of schooling.

In Pakistan, music meets public debt management

Andrew Lee's picture
Recently on mission in Pakistan to unveil a new tool to help the Punjab government better manage its public debt, the blog author, Andrew Lee, interacted and shared a few selfies with youth in the Shalimar Gardens in Lahore.
Recently on mission in Pakistan to unveil a new tool to help the Punjab government better manage its public debt, the blog author, Andrew Lee, interacted and shared a few selfies with youth in the Shalimar Gardens in Lahore.


“Sí, sabes que ya llevo un rato mirándote
Tengo que bailar contigo hoy” 
 
The Despacito tune blared in the bus, and my fellow riders kept tempo to the rhythm.
 
I was recently on mission in the Punjab province, Pakistan, on my way to the Shalimar Gardens for some sightseeing on my day off.

The last thing I expected to hear was the top song of 2017 on a bus in Lahore but in hindsight, this shouldn’t have surprised me.

We live in a global community, and across the world, individuals are getting more connected every day.  Music perfectly exemplifies this – a universal language which we can all understand.  With this increased connection comes higher expectations.

In addition to roads and clean water, citizens now demand that their government provide reliable digital connectivity. And when taxes and other revenues are not sufficient to cover this and other public services, governments must borrow to pay for it.
 
As with music, debt transcends borders, and the basics are almost the same. The key elements of music – rhythm, harmony, and melody – as with the critical components of debt – interest payments, maturity, cash flow, and risk – remain the same no matter where you are.

Managing public debt was precisely my reason to be in Lahore where I introduced a cash flow tool the World Bank helped design.

South Asia: A bright spot in darkening economic skies?

Hartwig Schafer's picture
South Asia is set to remain relatively insulated from some of the rising uncertainties that are looming large on the global economic horizon. The region will retain its top spot as the world’s fastest-growing region. The Siddhirganj Power Project in Bangladesh. Credit: Ismail Ferdous/World Bank

If, like me, you’re a firm believer in New Year’s resolutions, early January ushers in the prospect of renewed energy and exciting opportunities. And as tradition has it, it’s also a time to enter the prediction game.
 
Sadly, when it comes to the global economy, this year’s outlook is taking a somber turn.
 
In the aptly titled Darkening Skies, the World Bank’s new edition of its twice-a-year Global Economic Prospects report shows that risks are looming large on the economic horizon.
 
To sum up:  In emerging market and developing economies, the lingering effects of recent financial market stress on several large economies, a further deceleration in commodity exporters are likely to stall growth at a weaker-than-expected 4.2 percent this year.
 
On a positive note, South Asia is set to remain relatively insulated from some of these rising global uncertainties and will retain its top spot as the world’s fastest-growing region.
 
Bucking the global decelerating trend, growth in South Asia is expected to accelerate to 7.1 percent in 2019 from 6.9 percent in the year just ended, bolstered in part by stronger investments and robust consumption.  

Among the region’s largest economies, India is forecast to grow at 7.5 percent in fiscal year 2019-20 while Bangladesh is expected to moderate to 7 percent in fiscal year 2018-19. Sri Lanka is seen speeding up slightly to 4 percent in 2019.
 
Notably, and despite increasing conflicts and growing fragility, Afghanistan is expected to increase its growth to  2.7 percent rate this year.

In this otherwise positive outlook, Pakistan’s growth is projected to slow to 3.7 percent in fiscal year 2018-19 as the country is tightening its financial conditions to help counter rising inflation and external vulnerabilities.

However, activity is projected to rebound and average 4.6 percent over the medium term.

Game-changing technology empowers India’s women farmers

Paramveer Singh's picture
 World Bank
Since it started a decade ago, JEEVIKA, a World Bank program that supports Bihar’s rural communities, has mobilized more than nine million women into self-help and producers groups. Joining forces has helped lower costs and boost agricultural production. Credit: World Bank

It’s a dusty September morning, and Kiran Devi is finishing her chores at lightning speed.

 “Wouldn’t it be nice to keep 5,000 women waiting, especially when it’s a celebration,” she says with a touch of gushing pride and makes her way to the annual general meeting of the women-owned Aaranyak Agri producer company.

Located in Purnea district in Bihar—one of India’s poorest states—the company is made up of small local women small farmers and producers and lies in the most fertile corn regions in eastern India.

But until recently, small farmers did not fully reap the benefits of this productive land.

Local traders and intermediaries dominated the unregulated market. Archaic and unfair trading practices like manual weighing, unscientific quality testing, and irregular payments made it difficult for small farmers to get the best value for their produce.

 “The trader would come, put some grains under his teeth and pronounce the quality and pricing. For every quintal of maize [corn], 5-10 kilos additional grains were taken, sometimes through faulty scales and sometimes simply by brazenly asking for it,” says Lal Devi, one member of the company. “We had the choice between getting less or getting nothing.”
 

Kanchan Rani Devi bringing her corn to Sameli
Kanchan Rani Devi bringing her corn to Sameli. Credit: World Bank

Such practices stirred local women farmers into action, and they formed the Aaranyak Agri Producer Company Limited (AAPC) to access markets directly and improve their bargaining power.  

The company established a farmer-centric model and received funding and technical assistance through JEEViKA (livelihoods in Hindi), a World Bank program that supports the Government of Bihar and has achieved life-changing results for Bihar’s rural communities.

Since it started a decade ago, JEEVIKA has mobilized more than nine million women into self-help and producers groups. Joining forces helped lower costs and boost production. Together, the groups saved $120 million and leveraged more than $800 million in bank loans.

Further, digital technologies have been introduced as an innovative way to improve the production, marketing, and sale of small-farmers’ produce.

For example, women farmers receive regular periodic updates on their mobile phones to learn best practices to grow corn as well as weather information to inform farming decisions.

During harvest season, farmers receive daily pricing information from major nearby markets to help them stay abreast of the latest variations in prices.

An update on Bhutan’s economy

Tenzin Lhaden's picture
Accelerating the reform momentum after the 2018 elections is key to consolidating and furthering Bhutan’s development
Accelerating the reform momentum after the 2018 elections is key to consolidating and furthering Bhutan’s development. Credit: World Bank

Bhutan is one of the smallest, but fastest-growing economies in the world.
 
Its annual average economic growth of 7.6 percent between 2007 and 2017 far exceeds the average global growth rate of 3.2 percent.
 
This high growth has contributed to reducing poverty: Extreme poverty was mostly eradicated and dwindled from 8 percent in 2007 to 1.5 percent in 2017, based on the international poverty line of $1.90 a day (at purchasing power parity).
 
Access to basic services such as health, education and asset ownership has also improved significantly.
 
The country has a total of 32 hospitals and 208 basic health units, with each district hospital including almost always three doctors.
 
The current national literacy rate is 71 percent and the youth literacy rate is 93 percent.
 
The recent statistics on lending, inflation, exchange rates and international reserves (Sources: RMA, NSB) confirm that Bhutan maintained robust growth and macroeconomic stability in the first half of 2018.  

Gross foreign reserves have been increasing since 2012 when the country experienced an Indian rupee shortage.
 
Reserves exceeded $1.1 billion, equivalent to 11 months of imports of goods and services, which makes the country more resilient to potential shocks.
 
The nominal exchange rate has been depreciating since early 2018 (with ngultrum reaching Nu. 73 against the US dollar in early November).

Doing better business to fight poverty

Duvindi Illankoon's picture
The new Doing Business ranking places Sri Lanka at 100 out of 190 economies, compared with 111 last year. This year Sri Lanka made it easier for businesses to register property, obtain permits, enforce contracts and pay taxes. Credit: World Bank

End Poverty Day fell on the 17th of October. Two weeks later, the new Doing Business rankings come out for this year.

If you’re wondering what the link is, here’s a quick summary: business-friendly regulations can be instrumental in lowering poverty at the national level.

This is one of those happy instances where economics, common sense and the data align.

A better regulatory environment encourages more businesses to register and expand, bringing more employers to the economy.

Then the market responds- not only do these employers create more jobs, but also going to offer better jobs to attract capable workers to their companies.

Ultimately, a reliable source of income is the catalyst to moving out of poverty.

Sounds too simple? Trust the numbers.

Commitment to reforms improves business climate in South Asia

Hartwig Schafer's picture
 
Rikweda, an Afghan fruit processing company in the Kabul Province is well on its way to restoring Afghanistan as a raisin exporting powerhouse—a status the country held until the 1970s when it claimed about 20 percent of the global market. Credit World Bank


Imagine a state-of-the-art processing plant that harnesses laser-sorting technology to produce a whopping 15,000 tons of raisins a year, linking up thousands of local farmers to international markets and providing job opportunities to women.
 
To find such a world-class facility, look no further than Rikweda, an Afghan fruit processing company in the Kabul Province that’s well on its way to restoring Afghanistan as a raisin exporting powerhouse—a status the country held until the 1970s when it claimed about 20 percent of the global market.
 
In Afghanistan’s volatile business environment, let alone its deteriorating security, Rikweda’s story is an inspiration for budding entrepreneurs and investors.
 
It also is an illustration of the government’s reform efforts to create more opportunities for Afghan businesses to open and grow, which were reflected in the country’s record advancement in the Doing Business 2019 index, launched today by the World Bank.
 
Despite the increasing conflicts and growing fragility, and thanks to a record five reforms that have moved Afghanistan up to the rank of 167th from 183rd last year, the country became a top improver for the first time in the report’s history.
 
And Afghanistan is not the only South Asian country this year that took a prominent place among top 10 improvers globally.
 
India – which holds the title for the second consecutive year – is a striking example of how persistence pays off, and the high-level ownership and championship of reforms are critical for success. Its ranking has improved by 23 places this year and puts India ahead of all other countries in South Asia. This year, India is ranked 77th, up from 100th last year. 

Boosting entrepreneurship in rural Afghanistan

Miki Terasawa's picture
Also available in: دری | پښتو
The Afghanistan Rural Enterprise Development Project has linked rural producers, inlcuding saffron farmers with markets to create businesses and provide employment opportunities to many Afghan women and men.
The Afghanistan Rural Enterprise Development Project has linked rural producers, including saffron farmers with markets to create businesses and provide employment opportunities to many Afghan women and men. Photo Credit: AREDP/ World Bank.

Meet Mohammad Naim, a saffron farmer in Afghanistan’s Herat province.  In 2013, Naim launched a new business, the Taban Enterprise Group after he and his partners received training and attended agriculture fairs nationwide.

Taban cultivates, processes, and markets saffron, and since its founding, it has steadily improved the quality of its saffron and expanded operations. Today, the company employs 120 women annually for seasonal work to harvest and process the valuable crop.
 
This business success story started with small savings pooled together by rural men and women like Naim.
 
Since 2010, the Afghanistan Rural Enterprise Development Project (AREDP) has linked rural producers with markets and helped villagers form savings and credit groups to create businesses or expand their small enterprises.

تقویت تشبثات خصوصی و ایجاد فرصت های کار در روستاهای افغانستان

Miki Terasawa's picture
Also available in: English | پښتو
The Afghanistan Rural Enterprise Development Project has linked rural producers, inlcuding saffron farmers with markets to create businesses and provide employment opportunities to many Afghan women and men.
پروژه انکشاف صنایع روستایی افغانستان  ازتولید کنندگان روستایی، به خصوص کسانیکه در عرصه تولید زعفران مشغول کاراند حمایت مینماید، تا نه تنها محصولات شانرا به بازار ها عرضه نمایند، بلکه خود قادر به ایجاد تشبثات و تجارت های کوچک گردند وزمینه های اشتغال زایی بیشتر را برای زنان و مردان فراهم نمایند. عکس: پروژه انکشاف صنایع روستایی افغانستان/ بانک جهانی

با نعیم یکتن از متشبثین محلی در ولایت هرات، که  در عرصه تولید زعفران مصروف کار است، آشنا شوید. در سال ۲۰۱۳ میلادی، نعیم و چند تن از شرکای او پس از اشتراک در یک سلسله برنامه های آموزشی در بخش زراعت و همچنان اشتراک در چندین نمایشگاه داخلی، تصمیم گرفتند یک شرکت تجارتی را بنام تابان تاسیس نمایند. شرکت متذکره که در بخش های کشت، پروسس و فروش محصول زعفران فعالیت را آغاز نمود، در مدت کم توانست با بهبود کیفیت تولید زعفران و گسترش فعالیت های تجارتی فراتر از مرز های افغانستان شهرت کسب نماید. بطور اوسط سالانه ۱۲۰ زن در این شرکت به منظور انجام کار های فصلی زعفران استخدام گردیده، تا در عرصه جمع آوری حاصلات و پروسس این نبات ارزشمند کار نمایند.
 
موفقیت این سرمایه گذاری با سهمگیری و اختصاص هزینه های کوچک پس انداز و قرضه از سوی چند زن و مرد روستایی مانند نعیم آغاز گردیده است.
 
از سال ۲۰۱۰ بدینسو پروژه انکشاف صنابع روستایی افغانستان تولید کنندگان روستایی را با بازار ها وصل ساخته و همزمان با آن از طریق گروپ های پس انداز و گروپ های قرضه قریه، روستاییان را کمک نموده، تا برایشان تجارت های کوچک ایجاد نموده و یا تشبثات کوچک شان را توسعه دهند.

د افغانستان په کلیوالو سیمو کې د خصوصی تشبثاتو او د کارموندنی د فرصتونو پیاوړتیا

Miki Terasawa's picture
Also available in: English | دری
The Afghanistan Rural Enterprise Development Project has linked rural producers, inlcuding saffron farmers with markets to create businesses and provide employment opportunities to many Afghan women and men.
د افغانستان د کلیوالي صنایعو د پراختیا پروژه له ټولو کلیوالو تولید کوونکو، بالخصوص له هغو بزګرانو څخه چې د زعفرانو د کښټ او پروسس په برخه کې کار کوي، مالي  او تخنیکي ملاتړ برابروي. په دې توګه نه یوازې، چې بزګران به وتوانیږي څو خپل محصولات بازارونو ته عرضه کړي، بلکه خپله به کوچني تجارتونه او تشبثات پرانیزي او د ښځو او نارینه وو لپاره به د کارموندنې فرصتونه برابر شي. انځور: د افغانستان د کلیوالي صنایعو د پراختیا پروژه/ نړیوال بانک

د زعفرانو د کښت چارو کې د هرات ولایت د یوه بریالي متشبث نعیم سره وپیژنئ. په ۲۰۱۳ کال کې نعیم او څو نورو شریکانو یې وروسته له دې چې د کرني په څو ښونیزو برنامو، او کورنیو نندارتونونو کې ګډون وکړ نو د تابان په نامه د یوه سوداګریز شرکت په جوړولو یې پیل وکړ. نوموړی شرکت چې د زعفرانو د کښت، پروسس او خرڅلاو په برخه کې فعالیت کوي، په ډیر کم وخت کې وتوانید د زعفرانو د کیفیت په لوړولو سره  د خپل سوداګریز فعالیتونو شهرت د افغانستان تر پولو واړوي. اوس مهال په منځنۍ توګه دغه شرکت په کال کې ۱۲۰ ښخې د زعفرانو د فصلی چارو لپاره ګوماري، تر څو د دغه ارزښتناک بوټي  د حاصلاتو د راټولولو او پروسس چارې پر مخ بوزي.
 
د دغه پانګه اچونې د بریالیتوب کیسه د سپما او پورونو لپاره د کوچنیو نغدي ونډه اخیستنو  په وسیله د نعیم په شان دڅو نارینه وو او ښخو له خوا پیل شوه.
 
د ۲۰۱۰ کال نه را پدیخوا د افغانستان د کلیوالي صنایعو د پراختیا پروژې، کلیوال تولید کوونکي له بازار سره وصل کړل او همدارنګه د کلي سپما او پورونو د ګروپونو په واسطه یې  له کليوالي خلکو سره مرسته وکړه تر څو ورته کوچني تجارتونه جوړ او کوچني تشبثاتو ته وده ورکړي.

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