Renu Pokharna

Archive for the ‘Bureaucratic Delays’ Category

India’s love affair with public-private partnerships faces a stern test

In Bureaucratic Delays on December 19, 2012 at 3:35 pm

THERE is still time for free-market types to enjoy the journey in India that will make them feel the smuggest—that from Delhi to Chennai, the southern city of 9m people once called Madras. You leave a gleaming airport terminal in the capital, built and run by a private firm and opened in 2009. You land at an airport run by the government and are taken by bus to a building that should have been retired along with Leonid Brezhnev. When it comes to creating the infrastructure India needs, the lesson seems clear: private sector good, public sector bad.

The contrast will end when Chennai’s new airport terminal opens, which is due to happen in 2013. Work started in 2008. Yet even if the opening ceremony is delayed forever, the triumphalist view of the private sector’s role in infrastructure has begun to look hollow. Nothing illustrates this better than the woes of several trophy public-private partnerships (PPPs)—defined here broadly, as deals for private firms to build or run public infrastructure that fall short of outright privatisation.

That smart new airport in Delhi is losing money. Related property deals were criticised by an anti-graft agency in August. The new express-train link connecting it to Delhi has been shut as a result of engineering faults. The service’s operator, Reliance Group, says it is financially ruinous. In India’s far west a giant new power plant, one of the biggest investments being made in India, is in trouble, due to soaring coal costs. Its owner, Tata, has taken a write-off.

As with America’s 19th-century railways boom, some worry that investors are doomed. Even sober voices admit there are problems. Deepak Parekh, the boss of a financial firm and an adviser to the government, says: “In some ways we’ve been successful. In others we have not.”

The boom was quite something. In the 1990s the political class agreed that PPPs were a panacea. After all, India’s public sector, unlike China’s, is skint and often seems to struggle to tie its shoelaces. In Latin America in the 1990s existing, or “brownfield”, assets were privatised. In India it was all about “greenfield”, or new projects, from roads to power stations.

Between 2007 and 2012, $225 billion was invested by the private sector in infrastructure, equivalent to 12% of GDP in 2012, much of it through PPPs. Official figures suggest 758 PPP projects are under way or complete, worth $70 billion. Roads, ports and electricity projects account for the lion’s share. These are contracted at both the federal and state level and often involve multiple public bodies. A lot of improvisation took place, with perhaps only 40% of projects using the standard contract framework that the central government recommends. Firms range from big listed outfits to provincial builders on the make.

The condition of these projects is murky, partly because most have their finances ring-fenced and do not reveal them in public. Gajendra Haldea, an official who helped design India’s PPP framework, says that outside the power sector “there is no systemic problem”. But even he worries there are signs of strain, particularly at projects with badly designed contracts. The banking system is grappling with dud loans related to PPP projects. Big infrastructure firms have seen their debts soar and share prices fall. Many have subsidiaries—often individual projects—that are lossmaking. A.M. Naik, the boss of Larsen & Toubro, an engineering conglomerate, fears that a long trail of unlisted small firms are in particularly poor shape.

Fresh activity has stalled. Vinayak Chatterjee of Feedback Infra, a consulting firm, compares the industry to a boa constrictor after a meal. The value of the pipeline of new projects fell by 52% last fiscal year, according to the central bank. The government’s hope that investment will rise smoothly to Chinese levels seems wildly unrealistic (see chart).

What went wrong? Lots of super roads have been built but during the bubble firms bid too much for the right to build and levy tolls on new projects, says Mahesh Nandurkar of CLSA, a broker. Plenty of contracts won in 2007-10 will not make a profit. In electricity generation many firms wrongly assumed they could get cheap coal from the state-run coal monopoly, or gas from sputtering offshore energy fields (which are themselves largely operated under PPP-style contracts). Delays due to red tape and problems acquiring land are endemic. Only a quarter of all projects are on or ahead of schedule. High debts mean many lack the flexibility to cope when things veer off plan.

Fans of government-run projects are cock-a-hoop. They argue the state can cope better with financially marginal projects and with red tape. Delhi’s metro, built and run by a state body, is the shining example. It loses money but was built quickly and it works. Chennai’s metro, due to arrive in 2015, is following the same model. A public body is in charge and subcontracts construction to private firms, including foreign ones. Down a big hole in the city centre, Muscovites in hard hats can be found directing earth-boring machines. Its boss, K. Rajaraman, considered inviting private firms to run the completed project but reckons the state can do it more cheaply.

Even some fans of PPP say that India has got things the wrong way round. Shailesh Pathak of Shrei Infrastructure Finance, a financial firm, argues that the state should build things (using private contractors). It should then sell the right to operate completed, and thus lower-risk, projects to the private sector, raising funds to pay for more construction. Kamran Khan of the World Bank agrees. There is “an inherent disconnect” between what investors want and the wildly unpredictable business of getting a big greenfield project done.

Yet India’s rickety public finances, its need for infrastructure and the stately pace with which its policy moves mean that greenfield PPP will remain essential. In the short term the government will try to revive things through some smelly compromises. Contracts for unfinished projects may be tweaked to benefit private firms, even though this will draw accusations of cronyism. State banks will be encouraged to roll over dodgy loans, even though this means taxpayers subsidise business folk.

Beyond this there is only one solution: to reduce the risks projects face, from red tape and land-acquisition problems to meddling politicians. Making India predictable is impossible but conditions on the ground can be improved. That should cut the cost of capital and see cash, including from abroad, flood back in to what should be one of the great investment opportunities of the century.

 

15 De 2012,  Economist

RTI shows long delays, rising costs in irrigation projects

In Bureaucratic Delays on December 19, 2012 at 3:27 pm

While the charges against then NCP minister Ajit Pawar may have forced the Maharashtra government to release a white paper on its delayed irrigation projects, an RTI reply shows that 120 of the 159 projects cleared under the central Accelerated Irrigation Benefit Programme (AIBP) across the country are running behind their original schedule. In case of 91 of them, costs have escalated — in some cases, going up 10 times.

The programme fixes four years as the deadline to complete a project, with every delay needing an explanation to the Planning Commission, following which it releases funds.

In response to an RTI application filed by The Indian Express, the Ministry of Water Resources informed that the original estimated cost of the 91 delayed AIBP projects was Rs 23,674 crore, which is now up to Rs 83,306 crore. All these costs are the AIBP share in the project. Besides, the state governments concerned put in money.

Maharashtra tops the list of 91 delayed projects that have seen a sharp cost escalation (17), while Madhya Pradesh has 12 such projects and Orissa 10.

Though the delay in the Northeast and Jammu-Kashmir projects is frequent due to insurgency-related problems, it is common in other states too.

Most of the districts affected because of the delay are drought-affected or poorly irrigated areas across 20 states where farmers are already facing multiple problems.

The white paper on irrigation in Maharashtra itself has turned out to be a damp squib. Expected to expose alleged irregularities and fix responsibility, the report has instead highlighted the fact that projects entailed lower costs and contract rates when compared to those in Andhra Pradesh, Karnataka and Gujarat.

Ajit Pawar had resigned in September over allegations of irregularities in irrigation projects when he was the Maharashtra water resources and finance minister.

 

Climbing costs

* Waghur project, Jalgaon, Maharashtra: Cost revised from Rs 12.28 crore to Rs 1,155 crore.

* Upper Manar project, Nanded, Maharashtra: Cost up from Rs 26 crore to Rs 338 crore.

* Subarnarekha project, Mayurbhanj, Orissa: Cost up from Rs 57 crore to Rs 2,869 crore.

 

12 Dec 2012, Indian Express

Between govt rates and purchase ceiling, there’s plenty for officials and middlemen

In Bureaucratic Delays, Corruption, Dalits, Poverty Eradication on June 15, 2012 at 6:38 am

Sajivan Manjhi stands in a field and holds his radio set, a gift from the state government, to his ear to listen to the news. One of 70 Mahadalit “beneficiaries” given plots to raise houses in a pond in Pachlova village of Nalanda, he is angry with the government for the very scheme he had once praised.

“Government officials live in bungalows and plan swimming pools and they want us to live in ponds,” says Sajivan, a matriculate who reads newspapers besides listening to the news on the “government radio”, wondering where he will wash with the pond making way for houses.

The Mahadalit Vikas Yojana, launched in 2009-10, was an innovation in social engineering that clubbed 21 Scheduled Castes into a single vote-bank for the first time — 1.20 crore people representing 11 per cent of the population. They went on to help the Nitish Kumar return with a five-sixths majority, sending the caste calculations of Lalu Prasad’s RJD haywire and leaving Dalit leader Ram Vilas Paswan’s LJP almost redundant. The RJD had banked on the 31 per cent Muslim-Yadav vote but Nitish had schemes for minorities, too, besides many for Mahadalits who till then were dismissed as pachpaniyas — people who have some houses here and there.

Today, the flagship scheme is under the scanner, the houses in the pond being one of a number of reasons. There have been Dalits allotted land only on paper. And, as The Indian Express reported, the larger scam involves officials who have bought land cheap and sold it to the government at many times the price.

Scheme and scam

Every Mahadalit family was to get three decimals, or 1306.8 sq ft. Following a survey, the land reforms department shortlisted 2,18,180 families, mostly in Nalanda, Araria, Madhepura, Supaul, Khagaria, Gaya and Aurangabad. Land has so far been distributed land to 1,53,866.

The allotment is made in any of four possible ways, of which three — under the gairmajarua aam and gairmajarua khas schemes and the Privileged Persons Homestead Tenancy Act — involves government land.

The fourth way involves land bought from farmers and given to beneficiaries. It is here that things have not gone as they should have.

The government put a ceiling of Rs 20,000 for every three decimals bought, but it still left plenty of scope for corruption in a state where the government rate for two-crop land, the kind most commonly bought, is only between Rs 1,000 and Rs 3,000 per decimal.

The government has given such land to 29,920 families, and targeted another 27,603.

Circle officers in charge of purchase have engaged middlemen, often small-time real estate agents, in buying land of any kind — low-lying or elevated, near rivers — though the instruction was that it should near areas of habitation and with an approach road. In fact, the state has a dedicated follow-up, Mahadalit Basti Sampark Yojana, for Mahadalit Vikas Yojana beneficiaries.

The middlemen would look for farmers from whom they could buy at government rates or lower, convincing them that it could not fetch a better price as it was of little use with no source of irrigation to draw from.

Cases in point are at Kajra and Bistoria in Araria where, records show, the Raniganj circle officer bought 2.64 acres at Rs 3.63 lakh and 3.56 acres at Rs 4.90 lakh, paying middlemen a total Rs 8.53 lakh, then organised the government purchase days later at Rs 17.60 lakh and Rs 23.60 lakh, a total of Rs 41.20 lakh. The difference of Rs 32.47 lakh works out to 78.81 per cent of the amount the government paid.

There have also been allegations of circle officers conniving with farmers to “share the benefits”. Residents of Malpa, Mahuain and Barma under Guraru block of Gaya have alleged this but admitted there is no way it can be proved.

Point, counterpoint

Revenue and land reforms secretary Hukum Singh Mina has called all this an “eye-opener” but JD(U) national spokesperson Shivanand Tiwari has said there isn’t “any scam”. “It is not easy to run a government. There can be some slip-ups here and there,” Tiwari says.

The Opposition, so far starved of issues, has finally found the opportunity it was looking for. “I have been critical of this three-decimal scheme from the day it started. Why can’t the government give them Rs 20,000 rather than allowing misappropriation?” Paswan says.

Lalu mentions The Indian Express exposé while attacking the government. “How much proof does the government need now? Rather than trying to correct things, they are going for a coverup,” he says. “There is deep-rooted corruption everywhere. Many more scams will come out in the days to come.”

The scheme is one of about a dozen the government has taken up for Dalits, with three departments to take care of them — revenue and land reforms, SC/ST welfare and health. The SC/ST welfare department is in charge of the Bihar Mahadalit Vikas Mission to ensure all schemes are properly implemented (see box).

HOW MUCH INVOLVED

3 decimals

Or 1306.8 sq ft. what each family gets under Mahadalit Vikas Yojana

2.18 lakh

Families shortlisted

1.54 lakh

Lakh families get land

29,920

Of these families get land under the system that involves purchase from farmers, which brings middlemen into the process

27,603

More families to get such land

Rs 20,000/3 decimals

Ceiling for purchase from farmers

Rs 3,000/decimal

Maximum Govt rate for two-crop land, range starts at Rs 1,000

More for mahadalits

Mahadalit Basti Sampark Yojana. To link villages to a main road.

Dasrath Manjhi Kaushal Vikas Yojana. For vocational training.

Mukhyamantri Mahadalit Poshak Yojana. Rs 500 a year to each student of classes I -V for uniforms, shoes.

Vikas Mitras. 10,000 Mahadalits, appointed at Rs 3,000 a month, to coordinate with government on schemes.

Mahadalit Shauchalaya Nirman Yojana. Rs 300 to each family to build a toilet. Funds for 2,33,333 toilets disbursed so far.

Mukhyamantri Jivan Drishti Yojana. Rs 400 to each family to buy a transistor set.

Mahadalit Heath Card Scheme. Mahadalit families to get such cards for routine checkups.

12 June 2012,  Indian Express

Mixed Metaphors

In Bureaucratic Delays, Corruption, International Relations on June 12, 2012 at 6:59 am

What’s worse: declaring war against a social problem or calling for a Marshall Plan to solve it? Both are enduring and popular metaphors. Unfortunately, both lead to bad government decisions. Public policies shaped by such thinking more often than not result in waste, blind spots, and Manichaean mindsets that limit the search for more effective approaches. Think of the long-running wars on drugs, terrorism, and cancer. The results, all too predictably, have been more confusing than the problems.

In fact, no imitation of the Marshall Plan has ever worked, and no war on a big social problem has ever ended in defeat for the enemy (save, perhaps, cigarettes). But the allure of these spurious comparisons remains as strong as ever. Without any apparent effect, Marshall Plans have been proposed to help Africa, the Middle East, New Orleans, Iraq, and even Wallonia, Belgium’s least prosperous region. Bill Gates wants a Marshall Plan to broaden access to technology, French President Nicolas Sarkozy urges one for his country’s poor suburbs, and the AFL-CIO thinks the U.S. auto industry deserves its own Marshall Plan.

Advocates of war against big problems are just as plentiful. We have been asked to go to war against poverty, drunk driving, email spam, and teen pregnancy, just to name a few. In the United States, liberals denounce the Bush-era “war on science” while conservatives each year mobilize against the “war on Christmas.” And of course, there’s the favorite war of the global chattering class — the war against global warming. “This is World War III,” Barbara Young, then head of Britain’s Environment Agency, declared in 2007. “This is the biggest challenge to face the globe for many, many years. We need the sorts of concerted, fast, integrated, and above all huge efforts that went into many actions in times of war.”

There are many good reasons why declaring war on a social problem or launching a Marshall Plan to help a country or region are such attractive metaphors for politicians. Wars unite countries and stifle internal dissent. Wag the Dog is not just the title of a movie in which a war is manufactured to rally support for a government, but also an age-old political tactic. The war metaphor is also attractive because real wars — those between nation-states as opposed to those against concepts or bad socioeconomic trends — are finite. University of Notre Dame scholar Daniel Lindley has found that the average length of a war is 308 days when the country that starts it wins and 660 days when initiators lose. No surprise, then, that the war metaphor keeps getting deployed: It boosts expectations that in a few years a major scourge — cancer, terrorism, poverty — will be eliminated. “War” also holds the seductive promise of an open checkbook for the politicians who so liberally apply the term; after all, budgetary constraints tend to disappear during war along with all those pesky rules. Wars are for heroes, not for accountants who limit the resources needed for victory.

The Marshall Plan metaphor has been similarly irresistible, with its implications of massive funding and unquestioning public support. But the original Marshall Plan launched by the United States to help Europe after World War II was neither as financially sizable nor as uncontroversial as proponents commonly assume. (Economist Tyler Cowen estimated U.S. aid, which peaked at around $90 billion in today’s dollars, was no more than 5 percent of the gross national product of the recipient nations.) Still, the plan has come to epitomize a bold, massive — and successful — governmental mobilization.

Alas, these good metaphors yield bad policies. The war on drugs, for example, has been more successful in spawning immense bureaucracies and winning big budgets and partisan political fights than in ending drug use. Decriminalizing marijuana for medical purposes is becoming a popular reform in the United States, and 14 states have already adopted it, with more sure to follow. But do we know if marijuana does indeed have the medical benefits claimed by reformers? No. As a result of the mindset — and the policies — nurtured by the war on drugs, medical researchers have been blocked from access to marijuana and unable to scientifically test the claims. Only now, after four painful and futile decades, is the war on drugs losing support.

The same perils apply to the “war on terror.” As former U.S. National Security Advisor Zbigniew Brzezinski famously noted: “The damage these three words have done — a classic self-inflicted wound — is infinitely greater than any wild dreams entertained by the fanatical perpetrators of the 9/11 attacks when they were plotting against us in distant Afghan caves. The phrase itself is meaningless. It defines neither a geographic context nor our presumed enemies. Terrorism is not an enemy but a technique of warfare.” Indeed, the war on terror was even more spectacularly successful than the war on drugs in securing political, legal, military, and financial blank checks for those waging it. But that, too, is changing as anti-terrorism efforts are now more carefully scrutinized, checks are written with more strings attached, and alternative approaches are tested. Recognizing that language is power, U.S. President Barack Obama took a key first step in banning the bad metaphor. At his insistence, the Pentagon was forced to lose its precious GWOT (global war on terror) acronym and the GWOT mentality that went with it. But as many of his predecessors learned, Obama is finding that wars are hard to exit. Once a war against poverty, crime, or terrorism is launched, announcing a unilateral truce is usually political suicide. Instead, presidents get boxed into absolutist policies in which compromise is impossible and victory is the only acceptable outcome.

But no matter the complications, these wars aren’t going away — they’re just too politically convenient. It took only a few hours after Haiti’s terrible Jan. 12 earthquake for pundits to call for a Marshall Plan. One thing by now is certain, however: Although aid will materialize, a Marshall Plan will not. As we all know but the metaphor users routinely and conveniently ignore, the Marshall Plan’s success was driven by the hard-to-replicate conditions in Europe after World War II, with its highly educated populations, well-developed private sector, and relatively efficient public bureaucracies.

So: Beware the metaphor. All these wars and Marshall Plans are getting the world nowhere. But their frequent use does have a silver lining: At least you’ll know that whenever they are proposed, bad policies will soon follow.

 

Apr 2010,  Foreign Policy

 

Harmful Regulations Hit Close to Home

In Bizarre Laws, Bureaucratic Delays, Business, Corruption on June 4, 2012 at 12:35 pm

I returned home last night to a disturbing scene. Someone was moving his things into one of the vacant flats downstairs. “Are you moving in?” I asked. “No. MCD guys were here. They kicked us out of our flat and demolished it.” I quickly went up to see. Their place looked like it had been hit by a bomb. Half of their ceiling—a giant concrete slab, one foot thick and 11 feet long—hung ominously in the centre of the room; above it, a gaping hole opening to the sky. Chunks of rubble and dust covered the floor and furniture that remained in the room. “What happened?” I  said, thinking that it looked like a war zone. “We heard a knock and opened the door to see who was there. MCD guys said, ‘move your stuff into other rooms!’ and then broke down the roof.”

Next I learned that my friends, families who live in the other two flats upstairs from me, must also vacate as soon as they can to avoid a similar fate.  Fortunately, none of them had been there when MCD (Municipal Corporation of Delhi) came.  If they had been, they would have been made immediately homeless without sufficient warning to make alternate arrangements.

What struck me so palpably is that these three perfectly good apartments, a whole bundle of valuable goods, were to be obliterated from existence. The action seemed completely tragic from an economic point of view. It pierces the heart when we understand that wealth comes not from creating scarcity of goods but by their abundance. There are many homeless people in the city and many many others who live in make-shift shacks. Yet, perfectly good apartments are being destroyed reducing the supply of housing.

Why has this happened? Apparently, the building has been deemed to have one more floor than was authorized. The landlord had not acquired sufficient licenses for what he had built. It is clear that some form of regulation (either market or governmental) is needed to be sure that some peoples’ actions do not bring harm to others.  This is certainly relevant in Delhi, where there is a moderate risk that earthquakes could cause problems to structurally unprepared, tall buildings.

But rather than blaming the landlord outright, it is important to understand how hard and costly it is to stay on the right side of the law in this matter. The World Bank Doing Business Index ranks India 181 out of 183 in ease of dealing with construction permits. (Delhi is ranked joined-fourth within India.) People generally have little expectation that such formalities have been followed.

Think about the waste and loss of resources being cause by this mis-coordination: all the concrete, steel, labour effort, copper wire, ceiling fans, etc., that had gone into the construction, not to mention the resources being used to demolish this wealth and to retrofit the remaining floors that could otherwise have gone to more productive purposes. Wealth and value is being turned to dust—literally. Moreover, the tenants must also pay the expense of finding new places to live, time searching, money spent paying brokers, effort to move all of their goods. This excludes the stress and anguish they must feel.

(The interest of the MCD officers seems not to be the height of the building, per se, which constitutes the danger to others, but instead with destroying the economic viability of the flats. It remains to be seen what will have to happen with the top floor.)

It might be different if this were a one-off occasion, the consequence of breaking a hard and fast law. But this is not the case. The biggest problem, it appears to me, is the absence of the rule of law, a clear set of rules consistently applied to all.

There is little security of property rights or a low-cost way of coordinating productive activity with the rights of others. Without this rule of law, it is difficult for everyone involved to know what the rules are and what will be enforced. The landlord was unclear, the tenants were unclear. (Tenants of the building had all received official police verification that they were living on these premises.) What remains is not the rule of law but the arbitrary rule of men. This lack of clarity makes the “Warrant to Demolish Fourth Floor” issued by the court a warrant for the authorities to intimidate and extort. (Rumour has it that the bribe for leaving the three flats on the top floor was an absurd Rs. 25 Lac!)

In addition to the sheer loss of resources due to past error and mis-coordination is the increased uncertainty investors face when making decisions for the future. This principle applies from the smallest to the largest scale. The people whose flat was destroyed had recently invested in carpet for their apartment, which is now ruined. My friends invested in a new key, which is now useless. These are trivial examples, but the principle is significant when generalized. Why make numerous minor improvements when it all might come to nought? (Having lived in the US and UK extensively, the striking thing about the quality of life in Delhi is not that anything is absolutely absent, but how the quality of almost every material thing and service seems to be lower quality.  It is these little things, like straws on a camel’s back, that lead to a rougher overall quality of existence for the average person here.)

The same principle applies to the supply of housing. Increased voluntary investment would lead to higher availability and quality of housing and to lower prices. But heavy construction licence requirements, tenancy laws, rent controls, and unclear rules and arbitrary enforcement makes people choose to restrict their investments in construction (especially in non-”luxury” housing). The landlord in my building, instead of investing in more such buildings, may choose not to take up as many opportunities to produce more housing. Others surely have had or have seen similar experiences leading them to restrict their investments, too. These all reduce the supply.

Reducing the supply or restricting its growth, of course, means that the demand causes a higher price than there would otherwise have been. My friends must now move elsewhere, increasing the demand for other apartments, pushing up their prices, ultimately displacing those of lower income and connections. People must live in more cramped, low-quality conditions, or be homeless.

Thankfully, the Delhi Development Authority has proposed that height restrictions on buildings, per se, should be removed in 2021 because of growing demand and the costs of growing horizontally.

While contemplating the lunacy and injustice of these events, I recall that these problems are faced to a much greater extent by the very poorest who operate far more in the “informal,” unlicensed sector. They cannot afford to make themselves formal and benefit as fully from cooperation in the formal market. They are more open to harassment. It is even harder for them to invest and build wealth with the resources they have. Burdensome and arbitrary regulations like these cause wealth destruction, stagnation, and remove the bottom rungs of the ladder of economic self-advancement.

 

1 Mar 2012,  Spontaneous Order

Tales of the unexpected

In Bizarre Laws, Bureaucratic Delays, Civil Services Reforms, Macroeconomic Policy, Red Tape on June 3, 2012 at 6:17 am

IN 1985, the year Mikhail Gorbachev took over as head of the Communist Party of the Soviet Union, India published its seventh economic plan. Its preface said planning was a “precious gift” from Jawaharlal Nehru, India’s first prime minister, who had been an admirer of Soviet economics. Inevitably, the goals of the document, which included ending poverty by 2000, were missed by a country mile as India slipped towards a crisis that prompted it to open up its economy in 1991.

Yet some things about the report have the capacity to surprise today. The preface’s author, Manmohan Singh, went on to lead the 1991 reforms and is now prime minister. The body behind it, the Planning Commission, is still alive and will soon launch its 12th plan for the five years beginning in April. It is the most powerful organ in India that would not be invented if it did not already exist. It is run by a bureaucratic rock star and, weirdly, is a bastion of liberal views in a government that has fallen out of love with reform.

By rights, India’s Planning Commission should be toast. Since 1991 the private sector has boomed, taking more responsibility for things such things as telecoms and infrastructure. The proportion of state spending that is judged to be “planned” (a category which used to denote capital investment but has become fuzzy) has fallen too. Meanwhile, the ability of technocrats to control the public sector has withered, as fractious coalition politics in the central government have become the norm, while the states have come under the sway of parties with their own agendas.

That the Planning Commission endures reflects several things. The desk-breakers it publishes, ruminating on everything from the number of power stations to water quality five years hence, are exercises in wish fulfilment as much as anything. But in a chaotic land they represent the best-available repository of data and long-term priorities. It is a think-tank with punch, because it has money at its disposal, allocating most of the bits of ministries’ budgets that are still “planned”. Finally, its boss since 2004 has been Montek Singh Ahluwalia, perhaps the most name-dropped man in India.

Economists and bureaucrats have a collective crush on “Montek”, who is undoubtedly brainy, and also “brilliant” at running committees and getting people to agree, one former colleague gushes. Investors often say he is the only man in the government who speaks their language. He has two things all technocrats need: the ability to pick his fights, and the ear of the boss. He served in the finance ministry under Mr Singh in the early 1990s, when, says a veteran of that era, he gave him “courage”. Today, on economic matters, he is the prime minister’s right-hand man.

Mr Ahluwalia says the commission cannot overrule ministers but has “the power to put things on the agenda; to push and persuade”. It usually supports liberal reforms, such as allowing foreign supermarkets into India, and wants less government profligacy.

Yet its aura cannot entirely hide its vulnerabilities. It may lose its power to set budgets in a looming shake-up of public finances that could end the odd distinction between planned and unplanned spending. And Mr Ahluwalia will have to retire at some point—though, by the standards of India’s politicians, at 68 he is more Justin Bieber than Mick Jagger. But even if he stays for a while, his patron, Mr Singh, probably will not. And as the new 12th plan is finalised at a time of stalled reforms and economic concerns, a question persists: what difference has the Planning Commission actually made?

This is not about the country missing some targets, most of which are entirely beyond the commission’s control. Instead, it is about the policy climate. On reform, public borrowing and bureaucratic problem-solving, the government has lost its way over the past five years. The prime minister answers to Sonia Gandhi, the head of the Congress Party, who has her own counsel. Things reached a head at the end of 2011, when Mr Singh’s government said India would welcome foreign supermarkets, but promptly backtracked after widespread protest, not least from small parties it relies on to rule.

Perhaps the Planning Commission should twist the government’s arm more. The draft of the new plan published last year was largely upbeat (the central bank has been much franker). Yet the reality may be that the technocratic advice that politicians get is sound, but they choose not to follow it because they fear it will make them unpopular. India, many believe, only knows how to reform after a crisis, as in 1991.

Being heard but politely ignored is an occupational hazard for technocrats, but over time it can be fatal. Arun Maira, a former businessman who sits on the commission, is trying to rethink its role. He argues that it must make the case for change more directly than just by whispering in important ears. “We have to talk to the people,” he says, calling for a popular debate about the dire need for reform if people’s lives are to improve. Such evangelism would be tricky if the government disagreed with the vision, and it is hard to imagine the Planning Commission’s finest on the stump across the country advocating fiscal rectitude. Still, when it comes to central planning in India, the unexpected can always happen.

 

18 Feb 2012,  Economist

UP adopts e-tendering for mining

In Bureaucratic Delays, Corruption, Red Tape on May 31, 2012 at 7:44 am

LUCKNOW: Nearly a month after having approved the e-tendering mechanism for allotting contracts in the mining sector, the UP government, on Wednesday, ordered the immediate implementation of e-tendering for awarding all new mining leases in the state.

Under the fresh system, lease holders will need an environment clearance for mining if the land area is more than five hectares for mining activities on under 5 hectares of land, no environment clearance will be necessary. The government also said that in cases where mining contracts that are still valid, the lease holder or contractors will need to obtain environment clearances by August 2012.

Uttar Pradesh Electronics Corporation Ltd will be the implementing agency for this process, which will include the entire tendering process of registration, submission, opening and evaluation of bids and finally awarding of contract. Corporation is equipped with necessary software and experience as it is already implementing e-tendering in many other state government departments.

Infrastructure and industrial development commissioner (IIDC) Anil Kumar Gupta said e-tendering would make the contract process transparent and error-free. Though provisions for e-tendering already existed, they had not been implemented in the mining department. The changes will also reflect in the state’s new mining policy.

Till now, tendering for the mining licences was being done manually in UP, with mining contracts being awarded on a ‘first-come-first-serve’ basis by district magistrates. There sector was also riddled with complaints of corruption and domination by mining mafia.

Under the new system, the entire bidding process, including registration, coding, bid opening, evaluation and awarding of contract, will be done online.

Hardware support will be provided by Uttar Pradesh Electronics Corporation Limited, while software inputs will be lent by the state technical unit of the National Informatics Centre (NIC). This will leave little scope for allowing fake bids, or last minute entry of bidders based on political or bureaucratic will.

Though the new e-tendering mechanism has been made effective immediately, it will only govern minor minerals — sand, stone chips and Yamuna sand (maurang), among others. Mining licences for major minerals like iron-ore, gold, rare earth elements, zinc and other minerals will continue to be allotted on a first-come-first-serve basis since they are governed by the Mines and Mineral Development Regulation Act of 1957, which is currently under review in the Lok Sabha.

An order to implement the online tendering system was also issued earlier by the Allahabad High Court. In addition, the World Bank had also said it would not grant a development policy loan to UP unless a transparent e-procurement process was put in place.

Following these orders, former chief minister Mayawati had introduced the e-procurement system in January 2008, but the practice was quietly dropped in 2010 without citing any reasons. In 2008, as a pilot project, e-procurement was introduced in seven departments, including PWD, and family welfare, which was plagued by the National Rural Health Mission scam. Later, it was also extended to four more departments in 2009 but dropped hurriedly in January 2010 because it was “too transparent”. This happened even though the same ministers had earlier approved the system after hearing of the project’s successful implementation in Maharashtra and Karnataka. In Andhra Pradesh, Rs 2,000 crore was saved between 2003 and 2006 by taking the e-procurement route.

31 May 2012,  The Times of India

Washington’s I.T. Guy

In Bureaucratic Delays, Civil Services Reforms, Corruption, Electoral Reform on May 30, 2012 at 7:23 am

Shortly after Barack Obama’s election, as progressive activists and Democratic operatives were jockeying for positions large and small within the new administration, Carl Malamud launched a quixotic campaign for an appointment as the director of the U.S. Government Printing Office. The public printer’s task, historically, has been to compile and distribute to the American people the considerable amount of information produced each day by the federal government.

Malamud, who has made a career of exploring and developing the transformative technology of the latter 20th and early 21st centuries, was eager to convert the job of public printer, which traces its roots to Benjamin Franklin, into an Internet-age publisher. He started a campaign for an appointment under the slogan “Yes We Scan.” Rep. Ed Markey, highly regarded in the tech world, wrote a glowing letter to President Obama that described Malamud as “the best qualified individual” for the post. And members of Congress received full-color books that collected supportive “tweets.”

Although Malamud says he went on three White House interviews for the post, he was unable to win the support of the leaders of the congressional committees who oversee the GPO. But lack of an official title hasn’t stopped Malamud from pursuing his open-government goals. “If called, I will certainly serve. But if not called, I will probably serve anyway,” he told The New York Times last February.

Malamud has taken it upon himself to see that all public information — from court decisions to financial disclosures to Army training tapes — is actually, well, public. Malamud, 51, has worked as a network administrator, run technology startups, and taught at Massachusetts Institute of Technology’s Media Lab and in Japan. He has written for Wired and Computerworld, and on one memorable day in the early 1990s, he hooked up the first White House Internet connection. Since 2007 he has devoted himself — and his bank account — to using technology to open the government to the people. He’s the sole employee of an organization, Public.Resource.org, dedicated to that purpose.

These days Malamud lives just outside of Sebastopol, a small town near San Francisco. When I met him in January, he was in New York City to make a presentation at Princeton’s Center for Information Technology Policy about his latest project, a proposed government-run online platform that would allow anyone to easily access all of the laws in the United States, from towns and cities all the way up to the federal level. Nearly everyone I’d talked to in Washington described Malamud as tireless, and he quickly proved them right. We talked nonstop for two hours.

The work of freeing government information often carries the connotation of exposing secrets about nefarious policies or officials’ bad behavior. Malamud, a technologist through and through, approaches it from a different angle, one that can be more palatable to the political class. His art is in figuring out how to free documents that aren’t restricted by secrecy but by the fact that the government has failed to put them online. The conventional wisdom about making all such information publicly available is that it would be too difficult, too invasive, too expensive. Malamud has made it his monumental task to disprove that. It’s a simple idea: If those materials affect people’s lives, they can and should be easily and freely accessible. Citizens must be empowered to see how the government machine works, and especially in the Internet era, there’s no excuse for keeping them in the dark.

Given Obama’s reputation as a our most tech-savvy president to date, and one whose election was due, in part, to online organizing, Malamud is betting that he can get this administration to see the wisdom in open-source government. His success or failure will speak volumes about whether Washington will reap the benefits of the Internet age — or whether the current celebration of technology culture will simply fade away.

***

Malamud’s battle to get government information online is almost as old as the Internet itself. In the early days of the World Wide Web, he ran the nonprofit Internet Multicasting Service (“the first radio station on the Internet”). From his office in the National Press Building in Washington, D.C., he broadcast everything from House and Senate floor debates to United Nations ceremonies, along with the occasional reading of the works of T.S. Eliot. At the time, Congress was pushing the Securities and Exchange Commission to publish online the financial disclosure forms required from corporations so that everyone had access to the information. The documents weren’t secret; Wall Street had easy access to them through paid services. But the SEC complained that putting the corporate disclosures online would cost $40 million and that too few Americans on the budding Internet would be interested in the data.

In 1994, Malamud received a grant from the National Science Foundation and put the financial information online himself for a fraction of what the SEC claimed it would cost. After 18 months, the online service, known as EDGAR, had skyrocketed in popularity, and Malamud seized the moment. He challenged the SEC to take over the site, putting up a note that read “This Service Will Terminate in 60 Days.” The SEC balked, citing a lack of computers and in-house expertise. So Malamud and allies loaned the commission some basic servers, tape drives, and monitors. “We put the computers in the station wagon and drove down to the SEC,” Malamud says. “We configured their T1 line and got them up and running.” The SEC’s EDGAR database is still online and remains an invaluable resource for everyone from high-rollers and journalists to students and senior-citizen investment clubs.

One top Democratic Hill staffer describes Malamud as having “a lot of ’80s punk in him mixed with DIY.” Indeed, his do-it-yourself style often doesn’t look very D.C. His website features a “Seal of Approval” — as in, a smiling cartoon seal. He likes to have friends and colleagues take their picture with a cardboard version of the seal. A program for recycling court records features an animated trash can. His joint project with the Commerce Department — in which he converts VHS tapes of old government movies to digital and posts a copy on YouTube — is called FedFlix, a reference to the movies-by-mail service NetFlix (“Carl likes to name things,” says one Democratic leadership staffer). Many of the 1,900 films Malamud has freed are, well, deeply weird. One Army training film features a female officer lecturing an underling on what a smart fashion choice miniskirts can be.

Other projects include taking several thousand photographs that the Smithsonian claimed copyright on, determining that they were in the public domain, and posting them on the photo-sharing site Flickr. He wrangled with the heavily subsidized broadcaster C-SPAN to put congressional proceedings online without copyright restrictions. His work is imbued with a spirit of whimsy and a history buff’s appreciation for all things government. But of his reputation as a gadfly, he says, “I hate that label. I take a thousand DVDs and rip them and put them online. That’s not a gadfly thing.”

“People are very confused when they first encounter Carl. They try to figure out what his angle is. They think he’s trying to get funding,” says Andrew McLaughlin, the deputy chief technology officer at the White House and a former Google exec. “Instead, he says, ‘Give me a terabyte of data.'” If you think of politics as transactional, the Malmudian equation doesn’t make a lot of sense. For one thing, freelance liberation of government information isn’t exactly lucrative. When Malamud delivered a keynote speech to several hundred people at the Grand Hyatt in Washington this past September, Public.Resource.org had only $180 left in the bank.

Donations from friends in the tech realm keep his organization afloat. Google has given Malamud what he calls pity money. “They knew I was literally going bankrupt,” he says. “I’d maxed out my credit cards.” In 2007, the Omidyar Network, a philanthropic investment firm established by eBay founder Pierre Omidyar and his wife Pam, made a sizable contribution to the cause. Malamud quickly spent $600,000 of it buying court records from the Federal Judiciary and putting them up online for anyone to use. It may seem crazy to execute such a feat for no electoral or financial gain, but it’s the sort of thing people do pretty regularly online — make things and give them away, hoping that other people will do cool things with them. Examples include everything from Lostpedia, the fan-written Wikipedia-style compendium on the ABC show, to Linux, the free, user-created computer operating system. Malamud just happens to think the same philosophy should apply to the federal record.

Malamud’s views on technology and information were shaped by the Internet wars of the late 1980s and early 1990s, when a pitched political battle erupted between governments, international technical bodies, and technologists over whether the development standards behind the nascent Internet would be available, for free, to anyone who wanted to help build the new network — or whether they would only be accessible to a select few experts and at a considerable cost. For a time, it looked like the forces pushing a closed approach were winning. “It just seemed wrong,” Malamud says. For one thing, he couldn’t get his hands on the standards he needed for the technical guides he was writing at the time.

What emerged was a universe of simple, open, universal rules. And you know the rest of the story: an innovation revolution followed. “The open standards won,” he says, “because any kid could download the rules of the game, understand how they work, and make a contribution.” Technologists had fought bureaucracies all over the world — and won. “It taught us,” Malamud says, “that we can make government heel.”

One way Malamud has sought to do that is with his technical expertise. When he pushed C-SPAN to post its government-video archives on the Internet, unburdened by copyright restrictions, his ability to describe concrete solutions to video — conversion and streaming-quality challenges won over C-SPAN Co-President Rob Kennedy. “Our conversations with Carl,” Kennedy says with appreciation, “are often very technical.” But Malamud’s technological orientation can also make bureaucratic obstacles enormously frustrating. “I’ll use the word ‘pure,'” Kennedy says. “He’s kind of a purist about government domain,” referring to the idea that the public should be able to easily see, read, and copy information that has to do with the workings of its government.

“We hold our priests to a higher standard,” Malamud says. A former congressional staffer myself, I suggest to Malamud that, given Congress’ limited resources, progress might be slow going. What are the options in the short term? He replies, “If they can’t afford to put all the hearings online, then they should have less of them.”

***

Malamud was born at the intersection of technology and government. He spent the first five years of his life in Switzerland while his father, noted physicist Ernest Malamud, worked at the famed European Organization for Nuclear Research, better known as CERN. (Malamud the younger returned to CERN in the 1990s while writing his travelogue Exploring the Internet. He was taken to see a young engineer working on an exciting project. “Interesting,” Malamud recalls thinking to himself, “but it won’t scale.” The engineer was Tim Berners-Lee, and his invention, the World Wide Web.) In the late 1960s, Malamud’s father moved the family to Illinois for a job at the Department of Energy’s Fermilab. Malamud earned a bachelor’s in business at Indiana University and dropped out of graduate school there with a gentleman’s MBA before finishing his dissertation in order to build IU’s computer lab, or as Malamud puts it, “do computers again.” Three years later, after working as a computer systems analyst at the Federal Reserve Board, he enrolled at Georgetown Law, but left to start his own computer consulting practice.

Years of consulting, writing, and teaching as well as some run-ins with the current and former staff of Democratic administrations followed. While running the Internet Multicasting Service in the mid 1990s, he was called in to wire the White House. In 2005, when former Clinton Chief of Staff John Podesta founded a new progressive think tank, Malamud came on as chief technology officer. He was not impressed with what he found at the Center for American Progress. “It was an all-Microsoft shop,” he says. “It was crawling with consultants. And it sucked.” Malamud spent two years converting Podesta’s think tank to open-source software built by its community of users, needling the Smithsonian for making exclusive deals with cable broadcasters, and setting up better computers.

In 2007, Malamud filed papers to incorporate Public.Resource.org. His goal was simple: to do whatever possible, from the outside, to make copies of laws, court documents, and other government materials available for free. It’s a ripe field. For example, PACER, the federal court’s online document service, charges 8 cents per page for access to public information. The money goes to a good cause, funding much-needed technology for district and appellate courts. In 2006, PACER generated $58 million in revenue, according to the Federal Judiciary. “I know they need the money,” Malamud says. “I’m sympathetic to that. But that doesn’t give them the right to claim something that’s not theirs.” Malamud has been working diligently to both post PACER documents that people have already paid for and get the courts to do away with the fee. In addition, he has targeted WestLaw and LexisNexis, which charge thousands of dollars for access to annotated legal proceedings.

He’s also focused his attention on the state of Oregon, which has claimed copyright on its statutes, selling copies for hundreds of dollars a pop. The claim of copyright on public law is dubious, especially considering that the constitutional justification for copyright is to spur creativity and innovation. There’s little threat that states are going to stop passing laws just because they can’t sell copies of them. Malamud’s latest victory has been buying and posting copies of building and other safety codes from all 50 states, even though very often they are marked with a copyright from one of the vendors that produces model safety codes. Justifying the gamble is a 2002 decision, Veeck v. Southern Building Code Congress Int’l Inc., that found that once something has the effect of law, it can no longer claim copyright.

Malamud is certainly willing to provoke but prefers to be sure the law is on his side. In response to his call to open PACER, a young activist, entrepreneur, and programmer named Aaron Swartz used a bit of code and a trial program at his local library to download nearly 20 million pages of files, which caught the attention of the FBI. Malamud ended up in an interrogation room with two armed agents. “Unlike my good friend Aaron Swartz and others who are willing to stick it to the man,” Malamud says, “I look very carefully at what we’re doing to see if it’s legal or not.”

In 2010 Malamud is shifting his focus somewhat. In the past, he’s often been a lone operator. Now he wants to evolve into a leader of a large-scale movement to change the relationship between people and the law. Malamud hopes that Obama’s election has created an opportunity to go beyond the decision in the Veeck case and firmly establish as an American principle that laws are accessible to anyone. The movement is centered around a simple idea known as Law.gov: an online platform that will allow anyone to easily and freely access federal, state, and local law; judicial rulings and briefs; congressional hearing transcripts; regulations; and other government materials. Malamud estimates that running something like Law.gov would cost $50 million a year, and he plans to spend the next year convening meetings about it at the nation’s top law schools, tapping into the vibrant movement for free access to law, getting judges on board, and figuring out how to build such a system.

“When I started this, I understood that I might crash and burn,” he says. “The whole point is that even if we crash and burn, the dialogue will be useful.” Indeed, the Law.gov concept is already running into the buzz saw of jurisdictions. Roberta Shaffer, head of the Law Library of Congress, surprised many when her holiday letter to her staff announced that the law library had already applied to direct the Law.gov domain. Shaffer wouldn’t speak with me for this article, but the Law Library of Congress’ Facebook page did post a pointed message: “The Law Library of Congress is a government entity, and has no formal or official relationship with Carl Malamud,” it reads. “However, the Law Library is always interested in working with and receiving feedback from concerned citizens and the organizations with which they are affiliated.” It doesn’t stop there. “Therefore, we welcome and consider input from Carl and many, many others on our public-facing initiatives.” It’s at that second “many” that you begin to think that the Law Library might not be all that welcoming to Malamud’s views on public information.

Still, Malamud believes that if he can appeal directly to the president, he can convince him that opening up access to the nation’s law archives is a worthy and achievable goal. Obama is a former constitutional law professor, after all, and a bit of a technocrat. “We really want to take this football, hand it over to the president, and say ‘go for it,'” he says. But Malamud is not convinced that the Obama White House is populated with true believers. Obama “would do his job a lot better if he did improve that infrastructure,” Malamud says. “But I don’t think that’s something that he gets. I don’t think that’s something that Rahm Emanuel gets. If you look at the [chief information officer] and [chief technology officer] of the United States sitting there with a Dell computer and a 15-inch monitor, you think to yourself, ‘Why in the hell does our CIO not have, like, three 30-inch monitors?'”

It’s time for the government to catch up to technology. Creating free and easy access to court records, congressional hearings, and C-SPAN archives isn’t a partisan issue. But open access is a populist politics all its own, a challenge to the pay-to-play mentality that has allowed the financial world to leap so far ahead when it comes to information-sharing technologies. “You see what they did with it,” Malamud says. “They drove our economy down. They stole all our money. This stuff can very much be used for evil, and it has been, often. The opportunity here is that it can now be used for different things.”

 

13  June 2010,  The American Prospect

How to get children out of jobs and into school

In Bureaucratic Delays, Corruption, Poverty Eradication on May 30, 2012 at 7:08 am

THREE generations of the Teixeira family live in three tiny rooms in Eldorado, one of the poorest favelas (slums) of Greater São Paulo, the largest city in the Americas. The matriarch of the family, Maria, has six children; her eldest daughter, Marina, has a toddler and a baby. Like many other households in the favela, the family has been plagued by domestic violence. But a few years ago, helped in part by Bolsa Família (family grant)—which pays mothers a small sum so long as their children stay in education and get medical check-ups—Maria took her children out of child labour and sent them to school.

The programme allows the children to miss about 15% of classes. But if a child gets caught missing more than that, payment is suspended for the whole family. The Teixeiras’ grant has been suspended and restarted several times as boy after boy skipped classes. And now the eldest, João, aged 16, is out earning a bit of money by cleaning cars or distributing leaflets, taking his younger brothers with him. Marina’s pregnancies have added to the pressure. She gets no money for her children because she lives with her mother and the family has reached Bolsa Família’s upper limit. After rallying for a while, the Teixeira family is sliding backwards, struggling more than it did a couple of years ago.

Their experience does not mean Bolsa Família has been a failure. On the contrary. By common consent the conditional cash-transfer programme (CCT) has been a stunning success and is wildly popular. It was expanded in 2003, the year Luiz Inácio Lula da Silva became Brazil’s president, and several times since; 12.4m households are now enrolled. Candidates for the presidency (the election is on October 3rd) are competing to say who will expand it more. The opposition’s José Serra says he will increase coverage to 15m households. The ruling party’s Dilma Rousseff, who was Lula’s chief of staff, says she is the programme’s true guardian. It is, in the words of a former World Bank president, a “model of effective social policy” and has been exported round the world. New York’s Opportunity NYC is partly based on it.

Much of this acclamation is justified. Brazil has made huge strides in poverty reduction and the programme has played a big part. According to the Fundaçao Getulio Vargas (FGV), a university, the number of Brazilians with incomes below 800 reais ($440) a month has fallen more than 8% every year since 2003. The Gini index, a measure of income inequality, fell from 0.58 to 0.54, a large fall by this measure. The main reason for the improvement is the rise in bottom-level wages. But according to FGV, about one-sixth of the poverty reduction can be attributed to Bolsa Família, the same share as attributed to the increase in state pensions—but at far lower cost. Bolsa Família payments are tiny, around 22 reais ($12) per month per child, with a maximum payment of 200 reais. The programme costs just 0.5% of gdp.

But the story of the Teixeiras and others like them should sound a warning to those who see Bolsa Família as a panacea. There is some evidence the programme is not working as well in cities as in rural areas—and the giant conurbations of developing countries are where the problems of poverty will grow in future.

This concern differs from the usual complaints about the programme in Brazil. There, critics think it erodes incentives to work and sometimes goes to the wrong people. On the whole, though, studies have not borne out these complaints. A recent report for the United Nations Development Programme found the programme did not lead to dependence and that its impact on the labour market was slight. According to World Bank researchers, Bolsa Família’s record in reaching its target audience is better than most CCTs.

Worries about the imbalance between rural and urban benefits may be harder to brush away. Bolsa Família does seem to have a rural bias. Rural poverty is great in Brazil but even so, the programme’s incidence in rural areas is high: 41% of rural households were enrolled in 2006, against 17% of urban ones. In the two largest cities, São Paulo and Rio de Janeiro, fewer than 10% of households are in the programme. Yet these cities contain some of the worst poverty in the country.

Brazil’s success in cutting poverty seems to have been greater in rural areas than in urban ones. Bolsa Família does not publish figures on urban and rural poverty but the official report on the United Nations’ millennium development goals does. The most recent progress report, published in March, said that rural poverty fell by 15 points in 2003-08, much more than the urban rate (see chart 1).

Impressive though they are, these figures, based on household survey data, may understate the fall. Income and spending figures suggest poverty as a whole is lower (they show almost 8m fewer people in absolute poverty). Rafael Osório of the Institute for Applied Economic Research (IPEA) thinks rural poverty rates may well be lower than 12%. If so, Bolsa Família has done an even more splendid job in the countryside than it seems.

Other evidence supports this. Rural malnutrition among children under five in the arid parts of the north-east (one of Brazil’s poorest regions) has fallen from 16% to under 5% since 1996. And since 1992 the proportion of rural children in primary education has caught up with that of city children, while rural enrolment in secondary schools has increased faster than the urban rise (see chart 2).

Because poverty in rural Brazil used to be higher than urban poverty, a larger reduction is both natural and desirable. In the 1990s there were fewer social benefits in rural regions so a nationwide programme was bound to help them more. Moreover, as the ministry of social development, which administers Bolsa Família, points out, the programme was never designed to be run in a uniform way. Local areas use different methods so some variation is inevitable.

Despite all this, the cities remain a problem. In absolute terms there are as many poor people in urban areas of Brazil as there are in rural (because the country in general is largely urban). And there are three reasons for thinking Bolsa Família works less well in the towns.

The first is that, in urban areas, the introduction of the programme has left some people worse off. When Bolsa Família was expanded in 2003, it subsumed an array of other benefits, such as a programme against child malnutrition, subsidies for cooking fuel, stipends for youngsters between 15 and 16, and so on. Though hard to prove (national figures are not available), anecdotal evidence suggests that the family grant can be worth less than the former array of benefits.

Jonathan Hannay, the British secretary-general of the Association for the Support of Children at Risk, a charity in Eldorado, reckons that in his favela households like the Teixeiras used to be able to get the equivalent of two minimum wages (for a family of six) from the old benefit system. The average Bolsa Família grant is a fifth of the minimum wage. One city, Recife, even decided to top up benefits to former welfare recipients when the programme started. More generally, the cost of living in cities is higher than in the countryside, so the family grant (which is the same size across the country) is worth less.

Second, the programme seems to have had little success in reducing child labour in cities. In fact, its record on child labour in general has been rather disappointing, but the urban problem seems more intractable. In rural areas parents take children out of school to help with the harvest. This is, in part, a cultural phenomenon: children learn farming by working the fields. They are often not paid. But their work is temporary and, since children are allowed to miss 15% of school days without penalty, rural kids may be able both to work and stay in the programme.

Child labour in cities is different. Children earn money selling trinkets, working as maids and so on, and their earnings are often greater than the modest benefits from Bolsa Família. So there is an economic incentive to cut school and leave the programme. Of the 13,000 households who lost their grant because of school truancy in July, almost half were in São Paulo alone. The real damage done by child labour happens when the children have no education at all—and that is more likely to happen in cities.

Third, Bolsa Família may affect the structure of households in favelas more than in the countryside. Family benefit goes to the head of a household (almost always the mother). But in densely populated favelas, where—surprising as it may seem—housing is expensive, and where a young woman is likely to stay with her mother after she has her own child, the new benefit still goes to the head of the household, ie, the new child’s grandmother. This is what happened to the Teixeiras. It may, some observers fear, produce a sort of double dependency, on family grant and on family matriarch.

None of this means that Bolsa Família is, on balance, a waste of money in urban areas. As the FGV’s Marcelo Neri points out, the programme shows the state in a new and better light in favelas: as a provider of benefits in places where it has either been absent or present only in the form of brutal police squads.

In addition, the elaborate bureaucracy built up by the programme—every household gets a debit card and the ministry of social protection runs a giant database with every transaction—should make it easier to be more precise in targeting the needy. More important, it should make it possible to use the Bolsa network to do new things, such as helping teenagers of 16 and 17 who are products of the system train and look for work. It should also be possible for cities to top up the family grant. Rio de Janeiro is designing a new programme, called Bolsa Carioca, to do exactly that.

Still, there has been a tendency to treat Bolsa Família as magic bullet—in Brazil and beyond. Once a country has a Bolsa Família-type programme, it thinks it has dealt with the problems of poverty. It has not. Rômulo Paes de Sousa, the executive secretary of Brazil’s social-development ministry, talks about “old” and “new” poverty—old being lack of food and basic services; new being drug addiction, violence, family breakdown and environmental degradation. These “new” problems are more complex. Where they are being overcome, it is taking the combined efforts of the police (to reclaim the streets), new shops and commerce (to make life more bearable), Pentecostal churches (which give people hope)—and Bolsa Família.

Rural Brazil, with its malnutrition and absence of clean water and clinics, is an area of old poverty and Bolsa Família has been wonderfully effective in fighting it. But many of the problems of fast-growing cities, particularly in developing countries, are those of new poverty. And nobody, including the designers of Bolsa Família, has a magic bullet for those.

 

29 July 2010,  Economist

The Poverty Solution: Cash

In Bureaucratic Delays, Corruption, Poverty Eradication on May 30, 2012 at 6:57 am

Who’s responsible for the poor?

Back in the reign of the first Queen Elizabeth, English lawmakers said it was the government and taxpayers. They introduced the compulsory “poor tax” of 1572 to provide peasants with cash and a “parish loaf.” The world’s first-ever public relief system did more than feed the poor: It helped fuel economic growth because peasants could risk leaving the land to look for work in town.

By the early 19th century, though, a backlash had set in. English spending on the poor was slashed from 2 percent to 1 percent of national income, and indigent families were locked up in parish workhouses. In 1839, the fictional hero of Oliver Twist, a child laborer who became a symbol of the neglect and exploitation of the times, famously raised his bowl of gruel and said, “Please, sir, I want some more.”

Today, child benefits, winter fuel payments, housing support and guaranteed minimum pensions for the elderly are common practice in Britain and other industrialized countries. But it’s only recently that the right to an “adequate” standard of living has begun to be extended to the poor of the developing world.

In an urgent new book, Just Give Money to the Poor: The Development Revolution from the Global South, three British scholars show how the developing countries are reducing poverty by making cash payments to the poor from their national budgets. At least 45 developing nations now provide social pensions or grants to 110 million impoverished families — not in the form of charitable donations or emergency handouts or temporary safety nets but as a kind of social security. Often, there are no strings attached.

It’s a direct challenge to a foreign aid industry that, in the view of the authors, “thrives on complexity and mystification, with highly paid consultants designing ever more complicated projects for ‘the poor’” even as it imposes free-market policies that marginalize the poor.

“A quiet revolution is taking place based on the realization that you cannot pull yourself up by your bootstraps if you have no boots,” the book says. “And giving ‘boots’ to people with little money does not make them lazy or reluctant to work; rather, just the opposite happens. A small guaranteed income provides a foundation that enables people to transform their own lives.”

There are plenty of skeptics of the cash transfer approach. For more than half a century, the foreign aid industry has been built on the belief that international agencies, and not the citizens of poor countries or the poor among them, are best equipped to eradicate poverty. Critics concede that foreign aid may have failed, but they say it’s because poor countries are misusing the money. In their view, the best prescription for the developing world is a dose of discipline in the form of strict “good governance” conditions on aid.

Joseph Hanlon, a senior lecturer in development at the Open University in Milton Keynes, and Armando Barrientos and David Hulme, professors of poverty and development studies, respectively, at the University of Manchester, England, and directors of the Brooks World Poverty Institute there, back up their conclusions in Just Give Money with a wealth of studies on cash transfer programs, many of them conducted by the skeptical foreign aid community, including such global micromanagers as the World Bank and International Monetary Fund.

According to the World Bank, nearly half the world’s population lives below the international poverty line of $2 per day. As the authors of Just Give Money point out, that’s despite decades of top-down, neo-liberal, extreme free-trade policies that were supposed to “lift all boats.” In Africa, South Asia and other regions of the developing “South,” the situation remains dire. Every year, according to the United Nations, more than 9 million children die before they reach the age of 5, and malnutrition is the cause of a third of these early deaths.

Just Give Money argues that cash transfers can solve three problems because they enable families to eat better, send their children to school and put a little money into their farms and small businesses. The programs work best, the authors say, if they are offered broadly to the poor and not exclusively to the most destitute.

“The key is to trust poor people and directly give them cash — not vouchers or projects or temporary welfare, but money they can invest and use and be sure of,” the authors say. “Cash transfers are a key part of the ladder that equips people to climb out of the poverty trap.”

Brazil, a leader of this growing movement, provides pensions and grants to 74 million poor people, or 39 percent of its population. The cost is $31 billion, or about 1.5 percent of Brazil’s gross domestic product. Eligibility for the family grant is linked to the minimum wage, and the poorest receive $31 monthly. As a result, Brazil has seen its poverty rate drop from 28 percent in 2000 to 17 percent in 2008. In northeastern Brazil, the poorest region of the country, child malnutrition was reduced by nearly half, and school registration increased.

South Africa, one of the world’s biggest spenders on the poor, allocates $9 billion, or 3.5 percent of its GDP, to provide a pension to 85 percent of its older people, plus a $27 monthly cash benefit to 55 percent of its children. Studies show that South African children born after the benefits became available are significantly taller, on average, than children who were born before.

“None of this is because an NGO worker came to the village and told people how to eat better or that they should go to a clinic when they were ill,” the book says. “People in the community already knew that, but they never had enough money to buy adequate food or pay the clinic fee.”

In Mexico, an average grant of $38 monthly goes to 22 percent of the population. The cost is $4 billion, or 0.3 percent of Mexico’s GDP. Part of the money is for children who stay in school: The longer they stay, the larger the grant. Studies show that the families receiving these benefits eat more fruit, vegetables and meat, and get sick less often. In rural Mexico, high school enrollment has doubled, and more girls are attending.

India guarantees 100 days of wages to rural households for unskilled labor, paying at least $1.25 per day. If no work is available, applicants are still guaranteed the minimum. This modified “workfare” program helps small farmers survive during the slack season.

Far from being unproductive, the book says, money spent on the poor stimulates the economy “because local people sell more, earn more and buy more from their neighbors, creating the rising spiral.”

Pensioner households in South Africa, many of them covering three generations, have more working people than households without a pension. A grandmother with a pension can take care of a grandchild while the mother looks for work.

Ethiopia pays $1 per day for five days of work on public works projects per month to people in poor districts between January and June, when farm jobs are scarcer. By 2008, the program was reaching more than 7 million people per year, making it the second largest in sub-Saharan Africa, after South Africa. Ethiopian recipients of cash transfers buy more fertilizer and use higher-yielding seeds.

“In other words,” the book says, “without any advice from aid agencies, government, or nongovernmental organizations, poor people already knew how to make profitable investments. They simply did not have the cash and could not borrow the small amounts of money they needed.”

Just Give Money is lucidly written, but it bogs down when it explores the complex ins and outs of designing cash-transfer programs. In effect, the authors are combining a book for general readers with a book for policymakers. But there are helpful summaries for the layman at the end of every chapter, and some of the debates are fascinating.

For example, there’s the question of whether mothers who receive grants should be required to attend health talks and perform community work, as they are in Mexico and Brazil. On one hand, these rules could be viewed as reinforcing the view that mothers must sacrifice themselves for their children. On the other, studies show that many of the women had been confined at home by their husbands and welcomed the chance to get out.

Just Give Money does not put much stock in micro-credit programs that loan money to the poor in developing countries. Many people are too poor to take on the risk of paying back a loan, the authors say. They find fault with the U.N.’s Millennium Development Goals, too, saying these have “kept governments at arm’s length from the economy.”

A better way for donor countries to help, the authors suggest, is to give aid as “general budget support,” funneling cash for the poor directly into government coffers.

Cash transfers are not a magic bullet. Just Give Money notes that 70 percent of the 12 million South Africans who receive social grants are still living below the poverty line. In Brazil, the grants do not increase vaccinations or prenatal care because the poor don’t have access to health care. A scarcity of jobs in Mexico has forced millions of people to emigrate to the U.S. to find work. Just Give Money emphasizes that to truly lift the poor out of poverty, governments also must tackle discrimination and invest in health, education and infrastructure.

The notion that the poor are to blame for their poverty persists in affluent nations today and has been especially strong in the United States. Studies by the World Values Survey between 1995 and 2000 showed that 61 percent of Americans believed the poor were lazy and lacked willpower. Only 13 percent said an unfair society was to blame.

But what would Americans say now, in the wake of the housing market collapse and the bailout of the banks? The jobs-creating stimulus bill, the expansion of food stamp programs and unemployment benefits — these are all forms of cash transfers to the needy.

 

2 July 2010,  Pacific Standard