Posted by Shanta on
Fri, 11/04/2008
First the good news. The Indian government has agreed to sell the originally-agreed 400,000 tons of non-basmati rice to the Government of Bangladesh at a price of $430 per ton. On March 30th, the Government of Bangladesh’s Purchase Committee approved the Indian offer of procuring the 400,000 tons of rice at $430 per ton by ship. The estimated time for the rice to reach Chittagong port is 75 days.
Now the rest. India still has an export ban on non-basmati rice. So do Vietnam, Cambodia, and Egypt. Argentina has a ban on beef exports. The Economist has criticized these policies from the viewpoint that they are self-defeating: “they de-motivate farmers, push them into growing the wrong crops and jeopardize their future access to markets.” A recent BBC report had farmers in Rajasthan complaining about the export bans. And the benefits of export bans don’t necessarily go to poor people, because the domestic price is lower for everybody. So export bans not only hurt your neighbors (or more generally global trade), but also your own people.
What can we do? Arvind Subramanian suggests that we need a multilateral agreement not to impose export bans, along the lines of the WTO.
Posted by Shanta on
Wed, 19/03/2008
Rising--and even accelerating--world food prices are causing serious problems to South Asia’s net food importers such as Bangladesh. To make matters worse, the country lost about 2 million metric tons of rice (7.3 percent of domestic production) in the twin floods of July-August and cyclone of November. To make up for the shortfall, Bangladesh is importing rice from its immediate neighbors. However, one of its neighbors, India, has chosen to impose either a ban on rice exports or to raise the export price above the contracted price. Every time this happens, the price of rice in Dhaka spikes (see graph). While this shows that economics works, it is troubling that a large country like India, which has a greater ability to absorb food price shocks, is imposing costs on its poorer and smaller neighbor to the east.
Posted by Maitreyi on
Fri, 07/03/2008
 Shanta has been writing about Bangladesh and its paradoxes. I guess you can’t call this a paradox, yet it blows me away how despite its so-called governance failures, alleged increase in conservatism and its low per capita income, Bangladesh is far from the “basket case” Kissinger infamously predicted. We have just completed a report to be launched in Dhaka on March 13th on gender and social transformation in Bangladesh which Aniqah Khan named “Whispers to Voices”.
Once the favorite citation for neo-Malthusians predicting a demographic catastrophe, Bangladesh actually halved its fertility rates between 1971 and 2004. Today, girls’ secondary school attendance exceeds that of boys. The gender gap in infant mortality has been closed. In each of these areas, India and Pakistan pale in comparison, as they do in the area of sanitation, immunization and diarrhea control. The micro-credit revolution continues to boost women’s solidarity groups and earning potential. And vast numbers of young women leave their villages to work in garment factories in a culture where ostensibly purdah had kept them from moving out of the house.
Posted by Praful on
Tue, 04/03/2008
 Four hundred million people--if it were a country, it would be the third largest in the world--rely on the Ganges River and its tributaries for their livelihood. Six thousand rivers provide a perennial source of irrigation and power to one of the world’s most densely populated and poorest areas. The Himalayas, “the water tower of the Ganges,” provide 45 percent of the annual flow. These facts represent the potential payoffs to the populations of Bangladesh, India and Nepal as well as the threat that climate change poses to poor and already vulnerable people of these countries.
Posted by Shanta on
Wed, 13/02/2008
In discussing how to end poverty in South Asia, we often get so caught up in the statistics and policy discussions that we forget that we are talking about the lives of real people. But a magnificent photography exhibit by my colleague Michael Foley displayed in the hall outside my office, serves as a constant reminder of whom we are working for.
Posted by Shanta on
Mon, 04/02/2008
 How is the quest to end poverty in South Asia going? Parts of the subcontinent, such as the Maldives, the Western Province of Sri Lanka or some Indian states have already “eliminated” abject poverty (in the sense of having poverty rates below 10 percent). Other parts of South Asia such as Afghanistan or northern Sri Lanka are so mired in violent and escalating conflict that ending poverty seems a remote dream; providing basic security seems much more important.
The reality is that South Asia is a heterogeneous region. The per capita income of the richest part is ten times that of the poorest part (see Table). Sustained economic growth and increasing globalization is propelling several Indian states, Bhutan, Maldives, and parts of Sri Lanka into middle-income environments.
Posted by Shanta on
Fri, 01/02/2008
Baburam Bhattarai and I are very different. He studied Marxist analysis at Jawarhalal Nehru University; I studied neoclassical economics at the University of California at Berkeley. He founded Nepal’s United People’s Front and went underground during the Maoist rebellion; I taught at Harvard and now work at the World Bank. He has a picture of Che Guevara on his car’s gas cap; mine has the logo of my daughter’s soccer team.
Nevertheless, based on our speeches and writings as well as an afternoon together in Kathmandu recently, we found much common ground. We are both concerned about the high and rising inequality in South Asia in general, and Nepal in particular. We agreed that among the causes of this inequality are: (i) slow growth in agriculture; and (ii) lack of employment growth, especially in manufactured exports. I then pushed the envelope a bit by suggesting that the reasons for both (i) and (ii) were government policies which, although introduced with the best of intentions, are backfiring and hurting the poor. For instance, in Sri Lanka, government policy forces farmers to grow rice, a highly vulnerable and not very profitable crop. And the lack of manufactured-export-led employment growth in South Asia in general is associated with extremely restrictive labor regulations in the subcontinent.
Posted by Shanta on
Wed, 30/01/2008
South Asian countries have been experiencing macroeconomic problems during the past year: inflation in Sri Lanka is over 17 percent, in Bangladesh 11 percent; Pakistan’s current account deficit is at 5 percent of GDP; the Maldives’ fiscal deficit is likely to be about 12 percent of GDP; and the Indian economy showed signs of overheating in mid-2007, with inflation rising above 6 percent. Although the rate has come down since then, capital flows remain buoyant, posing challenges for macroeconomic management. India’s trade deficit is forecast to be 8 percent of GDP.
Meanwhile, the sub-prime mortgage crisis in the U.S. is threatening to lead to a global credit crunch and a recession in the country. Will these global developments exacerbate South Asia’s macroeconomic problems and reduce its chances of ending poverty in a generation?
The short answer is “No.”
Posted by Praful on
Wed, 16/01/2008
Thursday, December 13 was a clear crisp day as I flew from Dhaka to Kalapara, a little town in southern Bangladesh, the upazilla (sub-district) headquarters of Patuakhali district, the region that had been battered by cyclone ‘Sidr’ the night of November 15. Seeing firsthand the devastation caused by Cyclone Sidr was shocking.
 At Alipara, about five miles further downstream from Kalapara and reached by boat, a motley crowd had gathered on an earthen embankment which had been breached. A chest-high surge of water swept through the gap washing away their assets – houses, livestock, crops and all. The villagers now survive on relief provided by various agencies.
Some of the storm survivors recounted that the Thursday night four weeks ago was possibly the worst day of their lives. “I have lost everything – my house and all that I had, my crops, my stored food-grains, and now I wait for help to rebuild my life”, said a 70 year-old man.
Taking off from Kalapara in a Bangladesh Air Force helicopter, we flew low over the cyclone-affected region. For almost an hour, over Kuakata, a tourist town on the Bay of Bengal, along the coastline, and over the affected areas of Patharghata, Southkhali, Sarankhola, Morelganj and the Sundarbans mangrove forest, a World Heritage site, we viewed the widespread destruction. It was a sad picture of huge swathes of land with destroyed standing crops, with virtually nothing left on the ground for thousands of acres. I have never seen such widespread destruction.
Posted by Shanta on
Thu, 10/01/2008
My colleague Apurva Sanghi organized a fascinating discussion on the implications of climate change for the world's poor. The keynote speaker, Rob Mendelsohn of Yale University highlighted the fact that the biggest effects of climate change will be felt in the "low latitude" regions where most of the world's poor live (see picture). Inasmuch as these people are already very vulnerable to shocks, the case for adaptation policies is that much stronger. But the other side of this finding, that the effect on rich countries will be milder, raises the question of whether these countries will engage in mitigation policies. One of the discussants, Homi Kharas (an old friend and former colleague), pointed out that a successful mitigation program will require rich countries to keep their side of the bargain, especially if they want the fast-growing poor countries (such as China and India) to curtail their carbon emissions. But these same rich countries appear not to be keeping their promise made in 2002 to double foreign aid by 2010 (last year the total amount of official development assistance fell in nominal terms). If you add the fact that agriculture in northern countries may actually benefit from low levels of climate change, the political impetus for mitigation may be quite limited.
Posted by Shanta on
Tue, 08/01/2008
While we received several, mostly supportive, comments on the post on "The World Bank and poverty reduction in South Asia", one of them hoisted me on my own petard:
Why do you guys give loans when you know the policies [pursued] by these governments are - by your own assertions -...simply wrong? why do you go about subsidising wrong policies, by...financing over-staffed, over-spending, governments? especially budget support?
The comment highlights an important aspect of foreign aid in the current era. Traditionally, foreign aid was aimed at correcting market failures--building public goods, such as bridges (like the Jamuna Bridge in Bangladesh pictured on the left) and dams, or subsidizing goods with positive externalities, such as primary education or immunization.
There was an alignment between the wishes of government and those of the aid donors: both wanted to correct market failures.
Posted by Shanta on
Mon, 31/12/2007
Posted by Shanta on
Thu, 13/12/2007
Several of the comments around my seminar “Can South Asia End Poverty in a Generation?” were critical of the World Bank’s role in the subcontinent’s development. One commentator asked: “As the first step towards eradicating poverty in South Asia, how about closing the World Bank?” This theme was echoed by the Independent People’s Tribunal on the World Bank (this site was down at the time of posting) as summarized in a recent article in SAMAR.
Broadly, these critics are making two points. One is that the World Bank has “pressured” South Asian countries into adopting policies that it thought would foster economic development. The second is that these policies were misguided, that they didn’t lead to poverty reduction. These points are worth separating because we can discuss each of them individually.
Posted by Shanta on
Thu, 06/12/2007
At independence, Bangladesh inherited a highly-protected, import-substituting trade regime. The economy neither grew rapidly nor developed its industry. Starting in the 1990s, the government started dismantling the protectionist trade regime. Exports surged, growth accelerated and poverty fell rapidly. Here’s the paradox: Despite fairly compelling evidence that trade liberalization helped to reduce poverty in Bangladesh, no one in the country seems to be advocating further trade reform. Every argument against trade liberalization can be found, but none that appeals to the fact that reducing protection has helped the poor. In a recent paper for the Golden Jubilee celebration of the Bangladesh Institute of Development Studies, Zaidi Sattar and I try to explain this paradox. After reviewing various possibilities (highly vocal losers from trade liberalization, left-leaning economists, strong labor unions), we suggest that one reason could be that all the trade reform episodes in Bangladesh were supported by external partners, especially the World Bank. Supporting trade liberalization, therefore, is associated with supporting external agents--even if the policy itself may help reduce poverty.
Posted by Shanta on
Wed, 14/11/2007
We received a number of comments on this blog post. Feel free to continue posting your comments and questions for my discussion tomorrow (November 15th) with young people about ending poverty in South Asia. Participants will be from India, Bangladesh, Sri Lanka, Pakistan, and the United States. You can watch the live discussions here via webcast. What: Let's End Poverty in South Asia - live webcast discussion
When: November 15th, 2007
Time: US:7:00am, Eastern time; GMT:12:00
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Ignacio Mas
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