Renu Pokharna

Archive for April, 2011|Monthly archive page

Scientists don’t want more tests, back ‘limited release’

In Agriculture on April 30, 2011 at 11:06 am

In the first official meeting of scientists after an indefinite moratorium was placed on the commercialisation of genetically-modified brinjal in February 2010, a number of experts on Wednesday argued against the need for carrying out any further tests and favoured a ‘limited and partial release’ of Bt brinjal under strict regulatory conditions.

This meeting of scientists was suggested by Environment Minister Jairam Ramesh in his February 9, 2010 order putting an indefinite hold on the release of Bt brinjal for cultivation, even after the top regulatory authority, Genetic Engineering Approval Committee (GEAC), had given its go-ahead.

The majority of about 25 scientists present at Wednesday’s meeting, including some members of GEAC, agreed that the safety of Bt gene in brinjal had been established by the tests that had already been done and that more time must not be lost in conducting more tests and field trials. Some of them were of the opinion that in case additional tests are indeed to be done, then they should be done in parallel with a limited release of the crop for cultivation, some scientists who were present at the meeting said.

“The idea is that further delays must be avoided. Every test that needed to be done has already been done. But the controversy surrounding Bt brinjal appears to have left some lingering doubt among the public about the safety of this crop. If carrying out more tests, as suggested by some, is the only way to address these concerns, then let these tests be done in parallel with a limited release,” said a scientist, who did not wish to be named. However, Dr P M Bhargava, who has been demanding further tests, mainly relating to the long-term impacts of Bt brinjal on human health, said there was nothing such as a ‘limited release’.

“A limited release is just not possible. How is it to be controlled? How do you pull it back if something goes wrong? People are talking about a regulatory supervision? But who is going to act as the regulator? In any case, the minister (Jairam) had ruled out a limited release in his order,” Bhargava said.

The experts who attended the meeting will now send their opinion in writing to the GEAC chairman who is likely to call another such meeting in the next couple of months.

Indian Express, 29 Apr 2011

The MPs you don’t see

In Parliamentary Reforms on April 27, 2011 at 11:54 am

The introduction of direct telecast of parliamentary proceedings has probably had a major, and hitherto unexplored, impact upon the public psyche. While some MPs imagine that their antics in obstructing the work of Parliament, for instance preventing the Women’s Reservation Bill or demanding the formation of some JPC, may endear them to their constituents, I believe that the conduct of some parliamentarians has actually exposed the entire system to public obloquy.

News reports which blazon headlines about how the entire Union budget was passed in one minute without any discussion, after Parliament had been stalled for days, or about how important legislation was pushed through amidst a din of slogan-shouting, further add to the impression that Parliament has degenerated into complete chaos.

However, the truth of the matter is that while drama and political theatrics are a colourful part of our parliamentary system, our Parliament and our MPs actually conduct a great deal of serious work during discussions in various committees of Parliament where legislation, demands for grants and major issues of policy are discussed in great detail. The greatest asset of the committee system in our Parliament is the general atmosphere of harmony in which the committees function, usually in a spirit of serious thought and considered consensus. It’s a great pity that the Indian public is mostly unaware of the commendable work that is actually being carried out by the various committees of Parliament.

As chair of the standing committee on law, justice, personnel and public grievances, it was my privilege to submit the report on the controversial Women’s Reservation Bill. In our committee, we had heated discussions, but the discussions always shed more light than heat. We heard the evidence of a large cross-section of stakeholders, and ultimately presented a report to Parliament, strongly recommending the passage of the bill, but two of our members added notes of dissent. The point was, our committee succeeded in achieving what Parliament as a larger body could not do, namely to rationally discuss the issue and arrive at a conclusion (which included contrary points of view).

On issues like the appointment of judges or judicial accountability, or the filling up of vacancies of SC posts in government service, the degree of unanimity in the committee is quite spectacular. Therefore, in this general atmosphere of gloom about the nature of our parliamentary system, the public needs to understand a little about the largely successful functioning of the committee system in Parliament.

The work done by Parliament is not only varied in nature, but considerable in volume. The time at its disposal is limited. It cannot, therefore, give close consideration to all the legislative and other matters that come up before it. A good deal of its business is, therefore, transacted by what are called parliamentary committees. Parliamentary committees are of two kinds: ad hoc committees and standing committees. Ad hoc committees are appointed for a specific purpose and they cease to exist when they finish the task assigned to them and submit a report. Core committees which keep Parliament functioning are, naturally, the Business Advisory Committees of both Houses, which decide the work to be transacted by Parliament, and other House committees which play a crucial role in monitoring the functioning of the executive, notably the Public Accounts Committee and the Committee on Public Undertakings, among others.

A full-fledged system of departmentally related standing committees (originally 17, now increased to 24) came into being in April 1993. These committees cover under their jurisdiction all the ministries/ departments of the Government of India and their functions are: consideration of demands for grants; examination of bills referred to them by the chairman of Rajya Sabha or the speaker of Lok Sabha; consideration of annual reports; consideration of national, basic, long-term policy documents presented to the House and referred to the committee by the chairman, Rajya Sabha, or the speaker, Lok Sabha, as the case may be. These committees do not consider matters of day-to-day administration of the concerned ministries/ departments.

The standing committee system is a path-breaking endeavour for parliamentary surveillance over administration. The committees are also expected to provide necessary direction, guidance and inputs for broad policy formulations and in achievement of the long-term national perspective by the government. They sit during, and between recesses of, Parliament, and examine in detail the functioning of ministries. Their reports are tabled, and while not binding upon government, they have immense value in terms of their recommendations. The most fundamental benefit of these committees is that while they consist of MPs from both Houses and all parties, they do not generally function on party lines, and there is no voting, only provisions for notes of dissent. There is therefore immense scope in these committees for individual members to make contributions in terms of policy and legislation.

Generally, MPs make an honest effort to ensure that the working of the ministry be as effective as possible. In most cases, the working of the committees is a heartening feature of our parliamentary system, because MPs do hold shared views, irrespective of party affiliation, and do tend to achieve consensus on a wide variety of issues. The standing committees should, and do in fact, look upon the executive government in the light of a partner in ensuring accountability, transparency and effective implementation of policy and legislation. However, it is my considered opinion that the bureaucracy is a determined roadblock in the collection and free flow of information. Since ministers are not generally summoned before committees, it is usually senior bureaucrats who present the views and working of the ministry to the committee, and more often than not the information provided is obfuscatory and dense in nature, mostly tending to be a defensive and supercilious presentation on the topic at hand. In other words, a presentation of the annual report of the ministry.

In these circumstances, it becomes difficult for MPs to sift through the chaff, and many MPs have felt that it would be useful to have outside experts available. In fact, experts are sometimes invited to give their views. However, the final problem lies in the fact that the vast majority of the recommendations are not implemented by any government, thereby rendering the valuable work done by the committee rather pointless. A triumph of red tape and bureaucracy over elective and participatory democracy.

Indian Express, 26 April 2011

Putting schooling to the test

In Education, Progressive Panchayat on April 27, 2011 at 11:52 am

Amendments to the Indian Constitution are not unusual, but a change in the Fundamental Rights section is a rare, momentous occasion. In August 2002, the basic character of the Constitution was amended to make free and compulsory education a fundamental right of every child. It took seven long years after that for the Parliament to adopt the Right to Education (RTE) legislation, and the law became operational little over a year ago.

RTE expects every school to maintain a teacher-pupil ratio of 1:30. For this to happen, the country needs to appoint more than a million teachers in the next couple of years. Where do we find so many of them? Further, this shortage of qualified teachers is a problem mainly in eight states. As a human resource development ministry report identifies, these states not only have a high percentage of untrained teachers but also a low capacity for teacher preparation. Further, the Act demands that the teacher-pupil ratio be maintained by every school, implying that mere state-level and district-level averages will not suffice. Irrational deployment is a problem in almost all states, but it is not an easy issue to tackle, as transfers and postings are highly politicised in most states.

RTE expects that every school be equipped with certain minimum infrastructure. As the specifications are so basic, that should not create any issue. But there are simply too many government schools that currently fail to meet the benchmark, despite enormous investments made in recent years under the Sarva Shiksha Abhiyan. This clause is also likely to pose a challenge to non-governmental organisations and small private schools which invariably function with subminimal facilities using scarce resources from charity or relatively small school fees. Can we afford to push them out altogether? What would happen to children attending these schools? Should the government provide supplementary resources? While many NGOs are agitated over this question, state governments appear barely concerned.

The Act envisages major de-centralisation of school management by mandating the constitution of a school management committee in every school with a significant representation of parents. In addition, the monitoring of the Act’s implementation at the local level is vested with panchayati raj bodies. This demands high levels of involvement from parents and teachers as well as the local political leadership.

But unfortunately not much has been done to develop awareness and capabilities among teachers, headmasters and school management committee members or panchayati raj representatives. As of now, most of these people are unaware of the implications of RTE to their work. The task is staggering, with around 1.3 million schools and around 6 million teachers. There is yet no established mechanism to reach out on such a large scale within the state system. This can be done only through mass mobilisation, possibly with civil society support. It is urgent that civil society agencies as well as the government (state and Central) engage in an exercise of re-drawing their roles in the implementation of the Act.

Despite the regulatory framework, teacher preparation in the country is in total chaos. It should be recognised that all external measures for implementing the Act come unstuck if the teacher in the classroom fails to protect the interests of the children. The Act has several specifications on what should happen in the schools and the classrooms. Though notifications have been issued by many states banning corporal punishment, no detention policy, continuous and comprehensive evaluation and so on, serious attention has not been paid to ensuring the rights of the children in the school. This should include the right of every child to be treated properly without discrimination and facilitated to learn as per the curriculum. Without protecting these rights, large assurances will lead us nowhere, and teachers are the prime actors in this regard. The country must invest more in ensuring that teachers are better prepared not only in terms of pedagogy, but also the values that must be upheld .

Recently, the government of India released a report on the progress made. Clearly, consequential action has begun to gather pace in most states. However, very little is known about how the law takes tangible shape at the ground level, in schools and classrooms.

RTE is the only Central legislation in school education that continues to be controlled and supervised by the states. The Centre and various states have yet to agree on their respective roles, with sensitive federal questions at stake. Though many state governments have vouched for their commitment to RTE, they seem to be still gauging the level of their direct responsibility for implementing a Central Act. And without the full ownership and active interest of state governments, the law is unlikely to get implemented at all.

Much has been written about the issue of 25 per cent seats for economically weaker sections in private schools. Considering that the issue concerns only around 5 per cent of the high-end private schools, this is not likely to significantly impact the implementation and the achievement of the goal of universalisation. Nevertheless, it is a crucial clause for making our schools more inclusive places. There is mounting empirical evidence on the long-term benefits of diverse classrooms .

Many scholars consider inadequate financial allocations a major constraint for the implementation of the Act. It is true that the current levels of resource allocation would not suffice to effectively achieve the RTEgoals. But the immediate challenge is not so much that of inadequate finances; it is about the effective use of the existing resources and monitoring of the implementation of the provisions of the Act. One should assume that with faster growth and increased availability of resources, finances will not be the real hurdle. Further, one should hope that with the Census figures indicating drastic reduction in the population growth rate, the demand for school places will begin to shrink faster, giving greater scope to focus on quality.

The RTE Act gives a five-year window to achieve all these components of the law, and one is already behind us. If we are to keep to the 2015 deadline for full implementation, we must see a far greater sense of urgency on the parts of both the Centre and the state governments.

The writer is vice-chancellor of the National University for Educational Planning and Administration and a member of the national advisory committee on the right to education

Indian Express, 26 April 2010

World’s Richest Man: ‘Charity Doesn’t Solve Anything’

In Foreign Aid, Poverty Eradication on April 27, 2011 at 5:38 am

Carlos Slim has always had a complicated relationship with philanthropy.

he Mexican billionaire, who Forbes still lists as the world’s richest man, said in 2007 that he could do more to help fight poverty by building businesses than by “being a Santa Claus.”

Mr. Slim’s signature also has been noticeably absent from the Gates-Buffett Giving Pledge. At a conference in Syndey last month, Mr. Slim said that charity accomplishes little.

“The only way to fight poverty is with employment,” he said. “Trillions of dollars have been given to charity in the last 50 years, and they don’t solve anything.”

As for the Giving Pledge, he said: “To give 50%, 40%, that does nothing,” Slim said. “There is a saying that we should leave a better country to our children. But it’s more important to leave better children to our country.”

In a speech in Mexico City Thursday, he reiterated his point that the best way to fight poverty is to create jobs.

Now Mr. Slim isn’t un-charitable. He has contributed hundreds of millions of dollars to his foundation and has funded millions of dollars in joint-venture projects with the Bill and Melinda Gates Foundation.

So he clearly isn’t against charity entirely. His point seems to be that society would benefit more if the wealthy channeled their creative energies and talents toward building job-creating businesses rather than doling out cash. It is the 21st century billionaire version of the old adage, “give a man a fish and he eats for a day, teach him to fish and he eats for a lifetime.”

In these populist times, some might argue that Mr. Slim is being a selfish billionaire who’s simply justifying his own wealth accumulation. But he raises two good questions–ones I have heard from an increasing number of wealthy entrepreneurs:

Would Bill Gates and Warren Buffett be doing more for society by putting their time and money into new businesses rather than funding philanthropy?

Has philanthropy solved any major social problems in the past 50 years?

WSJ, 15 Oct 2010

Disease and intelligence

In Malnutrition, Public Health on April 27, 2011 at 5:35 am

HUMAN intelligence is puzzling. It is higher, on average, in some places than in others. And it seems to have been rising in recent decades. Why these two things should be true is controversial. This week, though, a group of researchers at the University of New Mexico propose the same explanation for both: the effect of infectious disease. If they are right, it suggests that the control of such diseases is crucial to a country’s development in a way that had not been appreciated before. Places that harbour a lot of parasites and pathogens not only suffer the debilitating effects of disease on their workforces, but also have their human capital eroded, child by child, from birth. Christopher Eppig and his colleagues make their suggestion in the Proceedings of the Royal Society. They note that the brains of newly born children require 87% of those children’s metabolic energy. In five-year-olds the figure is still 44% and even in adults the brain—a mere 2% of the body’s weight—consumes about a quarter of the body’s energy. Any competition for this energy is likely to damage the brain’s development, and parasites and pathogens compete for it in several ways. Some feed on the host’s tissue directly, or hijack its molecular machinery to reproduce. Some, particularly those that live in the gut, stop their host absorbing food. And all provoke the host’s immune system into activity, which diverts resources from other things.

The inverse correlation that the group calculated between a country’s disease burden and the average intelligence of its people is impressive. They estimated the disease burden from World Health Organisation data on DALYs (disability-adjusted life years) lost caused by 28 infectious diseases. These data exist for 192 countries. The intelligence scores came from work carried out earlier this decade by Richard Lynn, a British psychologist, and Tatu Vanhanen, a Finnish political scientist, who analysed IQ studies from 113 countries, and from subsequent work by Jelte Wicherts, a Dutch psychologist.

At the bottom of the average-intelligence list is Equatorial Guinea, followed by St Lucia. Cameroon, Mozambique and Gabon tie at third from bottom. These countries also have among the highest burden of infectious diseases. At the top of the list of countries with the highest average intelligence is Singapore, followed by South Korea. China and Japan tie in third place. These countries all have relatively low levels of disease. America, Britain and a number of European countries, follow behind the leaders. A list of the countries included in the study can be found here.

The consequence of illness

The correlation is about 67%, and the chance that it might have come about at random is less than one in 10,000. But correlation is not causation, so Mr Eppig and his colleagues tried to eliminate other possible explanations. Previous work has offered income, education, low levels of agricultural labour (which is replaced by more mentally stimulating jobs), climate (the challenge of surviving cold weather might provoke the evolution of intelligence) and even distance from humanity’s African homeland (novel environments could encourage greater intelligence) as explanations for national differences in IQ. However, all of these, except perhaps the last, are also likely to be linked to disease and, by careful statistical analysis, Mr Eppig and his colleagues show that all of them either disappear or are reduced to a small effect when the consequences of disease are taken into account.

There is, moreover, direct evidence that infections and parasites affect cognition. Intestinal worms have been shown to do so on many occasions. Malaria, too, is bad for the brain. A study of children in Kenya who survived the cerebral version of the disease suggests that an eighth of them suffer long-term cognitive damage. In the view of Mr Eppig and his colleagues, however, it is the various bugs that cause diarrhoea which are the biggest threat. Diarrhoea strikes children hard. It accounts for a sixth of infant deaths, and even in those it does not kill it prevents the absorption of food at a time when the brain is growing and developing rapidly.

The researchers predict that one type of health problem will increase with rising intelligence. Asthma and other allergies are thought by many experts to be rising in frequency because infantile immune systems, unchallenged by infection, are turning against the cells of the body they are supposed to protect. Some studies already suggest a correlation between a country’s allergy levels and its average IQ. Mr Eppig and his colleagues predict that future work will confirm this relationship.

The other prediction, of course, is that as countries conquer disease, the intelligence of their citizens will rise. A rise in intelligence over the decades has already been noticed in rich countries. It is called the Flynn effect after James Flynn, who discovered it. Its cause, however, has been mysterious—until now. If Mr Eppig is right, the near-abolition of serious infections in these countries, by vaccination, clean water and proper sewerage, may explain much if not all of the Flynn effect.

When Dr Lynn and Dr Vanhanen originally published their IQ data, they used them to advance the theory that national differences in intelligence were the main reason for different levels of economic development. This study turns that reasoning on its head. It is lack of development, and the many health problems this brings, which explains the difference in levels of intelligence. No doubt, in a vicious circle, those differences help keep poor countries poor. But the new theory offers a way to break the circle. If further work by researchers supports the ideas of Mr Eppig and his colleagues, they will have done the world a good turn by providing policymakers with yet another reason why the elimination of disease should be one of the main aims of development, rather than a desirable afterthought.

Economist, 1 July 2010

Let a million flowers bloom

In International Relations on April 13, 2011 at 10:22 am

IT IS Sunday January 2nd, a national holiday, in a medium-sized Chinese city, just north of the Taiwan Strait. The temperature is well below freezing. There is no heating in the factory, which makes components for electrical tools. This probably reflects frugality rather than a ban, imposed by Mao Zedong, covering every building south of the Yangzi river. A thin haze of winter light comes through the windows. The only other sources of illumination are flickering cathode-ray computer terminals, which make silhouettes of the heavily clad workers sitting at them.

Down the corridor, in a huge office even colder than the main floor, the company’s president sits at the head of a low table surrounded by friends. His hands are too busy to shiver, plucking tiny cups out of boiling water and making tea with a jumble of strainers and clay kettles. The cups are passed around, returned, and passed again, providing little jolts of warmth.

The friend to his left has his own company, also making tools: the two of them are links in China’s vast, fast-expanding production line. Another man, possibly an official, is just leaving, having concluded discussions about a new factory. A fourth, who runs a private investment firm, explains why work goes on even during a holiday by citing the title of an American film: “Money Never Sleeps.”

Each of the three businessmen at the table grew up in families which struggled even to afford food; each now owns at least four luxury cars. The results of similar stories can be seen outside other factories, where work also seems to be going on: in the car parks are BMWs, Jaguars, Land Rovers, Mercedes and Porsches. The prices of nearby flats equal those in the richest Western cities. And Chinese money is buying not only cars and property, but also the tractors and backhoes that are preparing the ground for a new lot of buildings.

The twilight zone

Luxury goods notwithstanding, wealth is created quietly in Zhejiang’s cities and other places that not long ago were wretchedly poor. None of the people interviewed for this story wanted to be named. Their companies tend to be small and privately owned. They make ordinary (but increasingly good) products under their own names, or sophisticated ones under the strictest anonymity for well-known foreign companies which demand silence as a condition of doing business.

Of the foreigners’ many demands, this is likely to be the most welcome. The right of China’s private companies to exist is by no means clear. Private companies with more than eight employees began to emerge only in 1981 and were not officially sanctioned until 1988 (the number was drawn from an essay by Karl Marx on an inflection point for the creation of a rentier class); and China has a brutal history of ideological retreats. Today’s entrepreneur can become tomorrow’s convict. Best, therefore, to avoid too much attention.

Not all China’s private businessmen are as reticent as the quiet men of Zhejiang. A handful of private entrepreneurs, it is true, have won the backing of the state in the form of finance or legal forbearance—and with it a bit of fame. This reinforces the common belief that China’s economic success is an object lesson in state capitalism. The government owns the biggest companies: as the economy grows at double-digit rates year after year, vast state-owned enterprises are climbing the world’s league tables in every industry from oil to banking. Yet alongside the mighty state engine myriad smaller ones are whirring—and probably more efficiently.

China’s state-controlled entities are not particularly profitable. A study by Qiao Liu, a professor at the University of Hong Kong, concludes that the average return on equity for companies wholly or partly owned by the state is barely 4%, despite the benefit of cheap leverage provided by government-controlled banks. According to a recently published paper by Mr Liu and a colleague, Alan Siu, the returns of unlisted private firms are no less than ten percentage points higher.

Another sign of the economic energy of the private sector can be found in its rate of growth. According to China Macro Finance, a research firm in New York, the number of registered private businesses grew by more than 30% a year between 2000 and 2009 (see chart 1). The gross figure (ie, before netting off firms that closed) was at least seven percentage points higher, estimates Ronald Schramm, China Macro Finance’s managing director.

These figures exclude unregistered businesses, among them the country’s ubiquitous tiny offices and manufacturers. Millions of people trade through electronic platforms like Taobao, which is intended as a site for individuals but has listings for transactions involving volumes that could not possibly be for personal consumption. At a conference in November Zheng Yumin, the Communist Party secretary for Zhejiang’s commerce department, said that there were 43m companies in China, 93% of them private, employing 92% of the country’s workers.

No one knows quite how much private companies contribute to China’s fast-growing economy. Chinese firms fall into a bewildering variety of legal categories and their respective contributions to GDP are not reported in official statistics. However, enterprises that are not majority-owned by the state account for two-thirds of industrial output, according to the latest figures from the National Bureau of Statistics. And according to Eva Yi of Keywise Capital Management, a hedge fund, such firms account for about 75-80% of profit in Chinese industry (see chart 2) and 90% in non-financial services. Jun Yeop Lee of Inha University, in South Korea, calculates that enterprises not majority-owned by the state contribute about 70% of GDP, assuming that they account for all agricultural output and two-thirds of services.

The significance of the private sector, though, lies in its vibrancy rather than in precise measures. For a state-directed country, much of China’s success comes from businesses that thrive in large part because they operate outside state control.

From nothing

It is commonly said that Zhejiang’s greatest contribution to its citizens—and ultimately to China’s economic resurgence—was to provide them with nothing and to cut them off from outside help. The province’s topography comprises mostly mountains and rivers. Until fast trains, highways and airports were built over the past 15 years, access was poor from everywhere except Taiwan. That made it, viewed from Beijing, the wrong place for public investment. As a result, what business did exist was largely private, and meagre in the extreme.

Zhejiang’s first successes came in the collection and recycling of four unlikely commodities, says Raymond Ma, who grew up in Wenzhou, the province’s best-known city, and now heads China research for Fidelity, an international fund-management company. These were used packaging, plucked chicken feathers, tattered cotton and spent toothpaste tubes. The cotton, for example, would be picked apart and “refreshed” into new garments. This trade eventually spread beyond the province’s borders and laid the foundations for other, more dynamic businesses. Governors sent from Beijing would invariably begin by attempting to impose state control, but gradually accepted private enterprise as the only way to eke out growth.

As China came out of its Maoist gloom, Zhejiang’s scrappy entrepreneurs had already acquired, in the least auspicious circumstances, a culture of opportunity and a belief that anyone could become successful. These would prove to be extremely useful assets.

The anecdotes are almost endless. A Wenzhou businessman who is now ensconced in an office with an elegant address (but no heating) in Shanghai dropped out of high school in the 1980s. A relative lent him 30 yuan (then less than $10) which he paid to an agent for a job in a shoe factory at less than 300 yuan a month. From shoes he went on to electronics, from electronics to selling building materials, from selling building materials to manufacturing them. Today he employs 1,300 people.

Another native of Wenzhou, also now in Shanghai (but who chose to meet in a heated coffee shop), left school at 16 and borrowed 360 yuan. That bought two noodle-making machines and a ticket for a 30-hour rail journey to a remote area of China, rumoured to be untapped territory. He sold the machines for 480 yuan. More orders followed. The business grew for six months, and then competition entered: it was time to start again. Selling buttons came next; then trading in scrap that could be used to make them; then factories to produce plastics for buttonmaking (and later for watchmaking). Now he is searching the world for machinery to create the high-grade plastics used in LED screens.

The focus on business often came at a high personal cost. A woman who began as a primary-school teacher in Wenzhou on 30 yuan a month moved to a slightly better-paid job in a textile factory. She then became a printer, clothing exporter, property developer and, most recently, wine importer. She is by any measure a tycoon. Along the way she sent her children to Europe when the elder one was ten, to live with a sister who handles overseas sales. The means to support them were in China; their lives would be better in France.

China’s entrepreneurs were quick to shift into exports. State-approved trade fairs, notably one in Guangzhou, used to be rare opportunities to meet foreign customers. Now there are many more chances. In 1982 Yiwu, a city on Zhejiang’s northern border, opened a permanent trade centre that in the past dozen years has become popular with foreign buyers. It is one of the largest indoor markets in the world, claiming 140,000 outlets. They line the sides of narrow corridors, their doorways overflowing with bales of wire, crockery, wrenches, lights, cutlery, pens, toys, tools, ornaments for the world’s holidaymakers and even newly manufactured Middle Eastern “antiques”. Across the street are halal restaurants for the many Arab customers.

A family multinational

The foreigners in Yiwu come to buy; increasingly, the Chinese are going abroad to sell. At the forefront are families like Natasha’s. Natasha lives in southern China with her child and husband, a petroleum engineer. Her sister graduated from a Chinese university and found herself, like many students, jobless but ambitious.

In 2004 a Yiwu-like market was opening in Dubai. With Natasha’s help the sister found on the internet a local marble producer, with an annual turnover of 1m yuan, who wanted a Dubai representative. Off the sister went; a younger sister followed later. The family outlet in Dubai added a finishing factory and Natasha’s sisters donned headscarves and whatever other conservative garments were required to make sales calls to Iran, Lebanon, Syria and elsewhere. Recently, in response to clients’ requests, marble slabs from Italy have been added to the product line. Another client needed bathrooms and kitchens, 200 units at a time: sourcing those in China became Natasha’s job. Turnover for the Dubai office rose above 100m yuan, fell by half during the financial crisis but then rebounded to a higher level. Within seven years, therefore, a few young Chinese women have created a small, diversified, multinational company.

They would not consider themselves unusual. There are now more than 4,000 Chinese enterprises selling through the Dubai Dragon Mart; many of them have expanded their operations to Africa and Latin America.

The capital mystery

Like any growing venture, China’s private businesses need capital, and in much bigger amounts than 30 yuan for a job agent or 360 yuan for a couple of noodle machines. Its sources are a bit of a mystery: largely unofficial, even secretive. Very little seems to come from the big, state-owned banks, although China’s government has made increasingly loud noises about small firms’ need for finance. Loans to small and medium-sized enterprises comprise 4% or less of the total made by three of the country’s four largest banks, according to company reports.

A few other smaller institutions have begun to emerge. Zhejiang Tailong Commercial Bank, a privately owned lender, has grown at a rate of more than 40% a year making smallish loans (averaging 500,000 yuan, or $76,000). It has imbibed the same entrepreneurial spirit as its clientele, employing workers in two shifts to maintain office hours of 7.30am to 7.30pm, seven days a week. But it is an exception.

That leaves a huge gap, which has been filled by an unofficial system that is discerning, vibrant and (depending on the authorities’ sentiment of the moment) even illegal. According to research by China’s central bank cited by China Daily, a state-run, English language newspaper, 89% of Wenzhou’s population and 57% of its enterprises have borrowed outside the banking system, paying interest rates of 10% for 30 days or 214% for a year. (Established businesses say rates of 1.5-2% a month are common.) Although the scope of this form of finance is not known, a Wenzhou businessman reckons that there are 100,000 people in his city who could each raise up to 1 billion yuan within 48 hours. So liquid is the system that, unlike private-equity groups in the West, Chinese partnerships often do not raise money before seeking prospective investments; investments are found and then partnerships are formed in short order.

A Westerner with family ties in Fujian province, to the south of Zhejiang, says he is constantly presented with opportunities. He rejects many of them, most recently one in importing second-hand women’s handbags (because criminals may have been involved) and another in exporting hair extensions to Japan (too complicated), but he has embraced others, notably in coal (which doubled his money in a year). The system is entirely informal. Records, he says, are minimal and all investments are in cash. A by-product is a proliferation of vast steel safes in homes and offices.

This freedom from financial bureaucracy should not be underestimated. Transactions can unfold at breathtaking speed. Within three months, this Westerner said, his relatives had been involved in the purchase of one steel mill and, in a separate deal, the sale of another. Businesses can be created or liquidated overnight. Rather than pay taxes, he adds, many companies make nominal payments to the local government. This is particularly true of Chinese based abroad, who move quickly from one country to another as opportunities, often tied to Chinese exports, arise.

Nevertheless, this form of business has inherent limits. To the extent that firms operate outside the law, they are vulnerable to shakedowns from local officials and mood-swings in Beijing. Although success brings praise, too much of it can invite envy and scrutiny. Each new list compiled of China’s greatest tycoons is often accompanied by stories about those on earlier lists who later fell foul of the law. In his remarks last year Mr Zheng, the provincial party official, said that the significance of private business was not understood: businessmen were often criticised (perhaps a veiled reference to being jailed) without good reason and if continually squeezed, would emigrate, sapping China’s vitality. The prospect of expropriation undermines the willingness of these entrepreneurs to make the long-term investment needed to develop brands, novel products and capable middle-management.

One method used to bring private companies into the mainstream appears to be the sale of shares in a public offering. In the West, offerings of shares on a stock exchange are used to raise capital, to provide cash to the initial investors, to create a currency to buy other companies and perhaps to provide independent valuations and external discipline. All this may be true in China too. But share offerings play another essential role: they legitimise a company.

Before an offering, it is not uncommon for a company to fail on any number of legal standards. It may not have full title to the land on which its factories sit. It has almost certainly avoided taxes. The process begins with bringing accounts into conventional forms, repaying taxes or paying for the land. The money for this, says an experienced banker, often comes from a “pre-IPO” offering to a small group of investors. These are perceived to be hugely lucrative to financial institutions, but vital to issuers. The resulting company is then deemed clean enough to pass a rigorous government inspection. Share sales usually happen only once: secondary offers, though common in other countries, are rare.

According to Mr Liu and Mr Siu, listed private companies continue to be more profitable than listed state-owned enterprises. However, their returns on equity are nothing like as good as those of unlisted private firms. This not only underscores the importance of China’s upstart businessmen, but also raises questions about how Chinese enterprise will evolve. It is possible that returns dip simply because companies use share issues to load up on capital, and hence overcapitalise themselves and depress returns on equity, at least in the short term. It is also possible that they go public only when their best days are past. Another, more pessimistic, possibility is that as the Chinese private sector grows, comes under scrutiny and adopts commonly accepted structures, its vitality will diminish.

It is often said in China that a new economic era has recently begun, described as guo jin min tui: state advances, private retreats. The government has reasons for such a change: it is tightening laws, building infrastructure and providing strategic guidance it considers necessary for the country’s next steps. Many in the West applaud the expansion of the government’s sway, believing in the wisdom of the state in pushing China’s economy forward. But behind China’s remarkable success has been an odd and often unappreciated experiment in laissez-faire capitalism.

 

Economist, 10 Mar 2011

Quality, not quantity

In Malnutrition on April 13, 2011 at 10:16 am

AT THE depths of the Great Depression, George Orwell wrote of the English working classes: “The basis of their diet is white bread and margarine, corned beef, sugared tea and potato—an appalling diet. Would it not be better if they spent more money on wholesome things like oranges and wholemeal bread?…Yes it would, but the point is, no human being would ever do such a thing.…A millionaire may enjoy breakfasting off orange juice and Ryvita biscuits; an unemployed man does not…When you are underfed, harassed, bored, and miserable, you don’t want to eat dull wholesome food. You want to eat something a little bit tasty.”

Orwell was describing something that has become one of the world’s neglected scourges: the bad diet of the poor. When people think of malnutrition, they usually picture its most acute form—listless infants with bloated bellies, the little victims of famine. But there is a chronic manifestation of hunger, too, milder but more widespread. It affects those with enough calories to eat but too few micronutrients (vitamins, minerals and so on). They suffer the diseases of poor nutrition.

These diseases are stunningly widespread. Over half of women in India and two-fifths of those in Indonesia are anaemic—deficient in iron. Lack of vitamin A causes membranes around the organs to shrivel, leaving them vulnerable. The first to go are the eyes: half a million children become blind each year. Then, the other organs: half of those children will die within 12 months. In Malawi a third of the population do not have enough calories; two-thirds lack vitamin A.

Such deficiencies do long-term damage to societies as well as to individuals. Compared with their better-fed peers, nutrition-deficient children have more diseases and lower educational standards (perhaps because they cannot concentrate in class). Nutrition-deficient adults earn less and are more likely to die early (see article). Famines lay waste to countries; bad diets cripple them silently.

Governments often try to deal with the problems of nutrition in the same breath as the problems of starvation: by dishing out cheap food. India gives subsidised food to over 400m poor people. Egypt spends over $2 billion a year on cheap bread. These policies do almost nothing to get micronutrients to those who lack them.

What is needed are little interventions: adding iodine to salt here, doling out vitamin A supplements there. Even relatively small doses work. Yet they also raise one of the great puzzles of development. These are, by some measures, the best investments you could make. When the Copenhagen Business School asked some Nobel-winning economists the best way to spend money to help the world, nutritional projects topped the poll. Vitamin A supplements cost just a dollar or two. Their benefits—preservation from fatal diseases, higher lifetime earnings—so massively outweigh the tiny costs that poor people ought to snap them up. Yet they don’t. Orwell put his finger on why. The poor want something tasty. They may not believe nutritional experts who promote special diets (rich Westerners have been known not to stick to diets, too). Or food itself may not be their priority. As Orwell said, “There is always some cheaply pleasant thing to tempt you.”

Good food by stealth

The implication is that there should be a rethink of poor countries’ food policies. Top-down efforts fail. But governments, companies and international institutions can do good by stealth. Firms like Nestlé and Kraft are busy stuffing packaged foods with extra nutrients. People buy them because they like the taste. “Biofortified” foods (crops with extra vitamins bred into them) work, too. Public money should be concentrated not on supplying cheap food but on providing for those who do not control what they eat: babies and children. The most important period in anyone’s nutritional life is the first 1,000 days. Improving infant diets does a lifetime of good. But this depends on education and policy “nudges”, not cheap rice.

 

Economist, 24 Mar 2011

Cash or work: What do people want?

In NREGA on April 8, 2011 at 5:25 am

n analysing the mandate of the 2009 elections, and acknowledging the importance of the “aam aadmi” agenda, the National Rural Employment Guarantee Act (NREGA) is becoming a common focal point, with even the Left and the BJP attributing the UPA’s electoral success to the NREGA effect. Although, the campaign across the country saw very few instances of direct attacks on the legislation, the electoral promises made by the Telugu Desam in Andhra Pradesh to provide monthly cash transfers did introduce an important ideological debate, offering an alternative approach to fighting poverty.

In AP, both the Assembly and Lok Sabha elections coincided. The TDP promised that every family would get free colour television sets and a monthly cash dole. Chandrababu Naidu attributed unqualified success to cash transfer schemes in various Latin American countries, without going into the details of the conditionalities attached to these transfers. A rhetorical choice was placed before the voter: do you want to put in the effort of slogging for a wage, or would you rather just have money coming into your account every month?

The issue is part of a larger international debate related to fighting poverty. It has powerful international proponents and is unlikely to fade away. What is this debate?

‘Conditional Cash Transfer’ has been used and propagated in different versions by the World Bank, as a method of providing a social safety net to the poor as well as improving efficiency of social sector services in large parts of South America and South Africa. With the passage of the NREGA in India a new empowerment based (rights based) approach to fighting poverty has emerged, in sharp contrast to the condition-based handout.

Different approaches

These two paradigms are at the core of a fast-growing debate among economists, activists, academics, policy-makers and politicians in different parts of the world. For us in India, it is crucial that we begin to understand the implications of the cash transfer scheme and analytically compare it to the merits and demerits of the entitlements approach of the NREGA. It is interesting to note that at a recent international meeting on NREGA convened in Delhi, many countries espousing CCT, expressed their preference for NREGA.

According to the World Bank, a powerful supporter of CCTs, conditional cash transfers provide money directly to poor families via a “social contract” with the beneficiaries — for example, sending children to school regularly or bringing them to health centres. For extremely poor families, cash provides emergency assistance, while the conditionalities promote longer-term investments in human capital. Conditional cash transfers also exist in countries such as Brazil, Chile, Mexico, Nicaragua and Zambia.

In a panel meeting convened by the World Bank in February 2009, many economists noted mixed results. While CCT programmes did correlate with a reduction in extreme poverty rates, they did not appear to demonstrate higher academic achievement and improved health among children whose families were receiving CCT grants.

In fact, in a paper “Conditional cash transfer programmes: Are they really magic bullets?” by Alain de Janvry and Elisabeth Sadoulet from the Department of Agricultural and Resource Economics, University of California at Berkeley, June 2004, some important and interesting conclusions were drawn by the authors, who analysed the CCT in Mexico.

They felt that CCT could only work with conditionalities. The tighter the programme’s budget constraint in selection of beneficiaries, the larger the potential efficiency gains from selection of beneficiaries and calibration of transfers. Given India’s experience with selecting families for the BPL and other “targeted” beneficiary schemes, this is a charter for disaster.

Corruption, exploitation

The vulnerability of the programme to corruption and the beneficiary to exploitation is also evident. In Mexico, for instance, the CCT called “Progresa” and recently renamed “Oportunidades” was introduced in 1997 to offer cash transfers to poor mothers in marginal rural communities, conditional on their using health facilities regularly, ensuring children’s attendance in schools in primary and secondary grades.

Children with more than three days absence from school, or non-visit to a health centre per month will not receive their cash due. A recent interaction with a researcher who works with women in rural Guerrero, Mexico, revealed alarming facts about leakages in the CCT. Rural women who accessed the health services were expected to pay illegal “user fees” for what should be free primary public health services; under threat of removal from the CCT (most primary health care at rural clinics in marginalised communities should be free by law).

Women complained that more than 50 per cent of the CCT money received was spent on illegal “user fees” paid to public health systems, and to bribe doctors. In schools, 30 per cent received was paid to teachers to get certificates to ensure that they stay on the transfer list.

In stark contrast, the NREGA passed by Parliament in 2005, is a legal entitlement to 100 days of labour-employment for all rural families. Any adult member of a family can demand work from the government any time, with a guarantee of an allowance on failure to provide work. It empowers public monitoring, transparency and access to government records — project details, muster rolls on the details of expenditure related to labour payment, work and payment records — to anyone who asks, within seven days of receipt of application.

Monitoring the system

Gram Sabhas are empowered to conduct mandatory social audit periodically in the villages to ensure compliance with transparency and accountability that the Act mandates. Andhra Pradesh has demonstrated dramatic results in NREGA social audits with large-scale recoveries and action against erring officials. The NREGA has taught people to use and monitor the system.

The selection of beneficiaries for this scheme would expose our Achilles heel. Introducing a selection criterion will itself be difficult, if seen in the context of the BPL debate and its implementation. The scheme would also fundamentally undermine the act of seeking transparency and accountability by the most vulnerable — something the NREGA has succeeded in fostering — even in areas where implementation has been weak.

The offer of monthly cash handouts is a seductive electoral promise. Elections are the wrong time to debate an issue such as CCTs superficially, without fully understanding the details. In the light of the issue of a variant of the Cash Transfer Scheme being raised in States such as Bihar too, the CCT needs to be debated, in the public domain, with the beneficiaries for its possible implications for their participation in development.

Commentators who have been consistently critical of the NREGA have begun to suggest the alternative of CCTs. While the entitlement approach of NREGA will no longer face the frontal assault it has since its inception, it could well be undermined by such alternatives. Do people want the right to work, or a cash dole? There is an ideological basis to this debate, and it merits threadbare analysis that will reach the people themselves.

 

The Hindu, 30 May 2009

Do schemes that guarantee work for the poor pay off?

In NREGA on April 8, 2011 at 5:19 am

Recent posts on the Poverty Matters blog have explored cash transfer schemes and microfinance. But these are not the only social policy programmes being implemented in the developing world.

In India, a different approach is being tried: rather than guarantee the poor an income, the government guarantees them paid work, via the National Rural Employment Guarantee Act (NREGA), which came into being in 2005.

Under the terms of NREGA, every rural Indian has the right to 100 days of paid work within 15 days of requesting it, and without having to travel more than three miles outside their village. In many ways, proponents’ arguments for the NREGA mirror those of advocates of cash transfers in other countries: it acts as a safety net, contributes to nutrition and education, and puts resources in the hands of the poor.

But many supporters of the NREGA go further, arguing that it is superior to cash transfers. Firstly, it gets the poor working on projects which, in theory, will leave behind durable assets that contribute to further rural development. Secondly, the NREGA virtually guarantees that funds will be “targeted” at the poor, on the grounds that wealthier individuals have little incentive to do the kind of manual, minimum wage labour that is available. Thirdly, guaranteed employment can potentially cause rural wages to rise, giving workers more bargaining power to negotiate with their employers.

On the other hand, the NREGA appears to be partly based, implicitly or otherwise, on the common middle-class/elite assumption that “handouts” will just “make the poor lazy”. This assumption is often taken as a given, although as Hanlon, Hulme and Barrientos point out in their book, Just give money to the poor, evidence often suggests otherwise. Unlike cash transfers, the NREGA requires the poor to temporarily leave whatever existing activity they are engaged in to take part in work. In some ways, this makes sense. In India, the rural poor often find themselves dependent on subsistence agriculture, in exploitatively low paid work, or “distress migration”. When compared to these, work with the NREGA is clearly desirable. However, the fact that these activities are inadequate does not mean that they have no value at all, and giving them up in order to receive assistance means the net transfer of resources to the poor will be lower than if they were just given the money.

In fact, studies by the likes of Imai and Ravallion and Datt on a longstanding employment guarantee scheme in the state of Maharashtra have shown that simply distributing the budget of the schemes directly to the poor would have led to stronger poverty reductions than the guaranteed employment.

Arguably, this could be justified if the workfare projects themselves have further positive effects, such as contributing to rural development, or even climate change adaptation and mitigation projects, as suggested in one Climate and Development Knowledge Network paper (pdf). At the same time, the fact that the legal mandate of the NREGA is to supply work quickly to anyone who asks for it might encourage policymakers to sacrifice the quality of projects in favour of their ability to absorb demand for labour. Even supporters of the NREGA, such as Indira Hirway, recognise that many of the projects implemented under the workfare programme in Maharashtra were poorly planned, badly maintained and had limited positive impacts on rural development. And even if the projects are well implemented, who will benefit from them?

A policy could hardly be described as “pro-poor” if it just mobilises the poor to work in projects that only help wealthier farmers. In response, NREGA supporters like activist Aruna Roy argue that the scheme will only succeed in contributing to pro-poor rural development if the participants have a strong voice in the type of projects their labour is used for.

Ultimately, the different approaches to social policy derive from fundamentally different ideas (invariably developed by the non-poor) about “what the poor really need”. Moreover, they stem from very different concepts of what social policies should try to achieve: should they just be a safety net, give the poor assets, encourage certain types of behaviour, or even promote rural development?

The NREGA appears far more attractive in that it promises to address multiple issues under one framework, but this level of ambition could also obscure its primary objectives and limit its positive impact. These debates are unlikely to be resolved anytime soon, and external commentators would be well advised to respect the diversity of approaches towards social policy that exist in the developing world.

In the meantime, the onus will be on civil society, researchers and policymakers to scrutinise social policies, challenging assumptions and ensuring that they really do achieve the gains they are supposed to.

The Guardian, Nov 2010

Improving NREGA

In NREGA on April 8, 2011 at 5:13 am

The Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) has been hailed as a landmark initiative to alleviate poverty and generate productive wage employment, even if for only 100 days, for unskilled rural labour. Given its historic features, it is a pity that the rollout of the programme in many states has been less than satisfactory, and leakage of funds has become rampant. More worryingly, it has begun to have an adverse impact on rural labour markets and the wage structure. Mindful of the impact of NREGA on farm wages, the Union rural development ministry had specified a cap of Rs 100 per day. This had predictably evoked protests from labour activists for being lower than the mandatory minimum wages in many states. Interestingly, these critics now have the backing of the National Advisory Council (NAC) which wants NREGA wage rates to be linked with minimum wages. However, the rural development ministry’s reluctance to concede this plea is understandable because the purpose of fixing the NREGA wage below even the minimum wage was to make the programme self-targeting. That is, only the really needy would offer themselves for work. Moreover, the idea of a national minimum wage is faulty in a diverse economy like India’s. State governments ought to have the freedom to also shape a statutorily defined minimum wage.

The harsh truth that is often lost sight of is that the mandated minimum wage does not have much sanctity in rural areas where the actual wages are determined by demand-supply equilibrium which varies with cropping season. Aligning wages under NREGA with minimum wages would distort the rural labour market further. Besides, it would pose difficulties for the Centre to strike a balance in allocating NREGA funds to different states. A better bet would, perhaps, be to fix a reasonable central wage rate and let the state governments augment it from their own resources if they so wish. This apart, the guaranteed employment under NREGA has restrained the usual seasonal labour migration, which had become the mainstay of farming in agriculturally progressive, but labour-starved, states. This has caused acute shortage of labour for agriculture. Particularly hit are plantations in the southern states, notably Kerala, and the cultivation of labour-intensive crops like rice, wheat and sugarcane. The farmers are forced to incur additional expenses for using machines and energy for doing farm operations which were earlier performed manually by migratory labour at far lower costs. Sales of tractors and crop sowing and harvesting machines are reported to have risen sharply as a result. Farmers’ organisations have come out with a sensible suggestion that the mandatory 100 days employment in a year should be provided only during agriculturally lean seasons. This will be a win-win situation for both farmers and farm labour. While the farmers will get labour when they need it the most, the labourers will be able to remain employed for a longer period in a year.

 

Business Standard,  31 Dec 2010