Food Crisis Mekong Toward Could Media Eco-Friendly Come Back Makeover Tourism

A Publication of the Asian Development Bank No. 2 December 2008 Tackling Asia’s Inequality Creating Opportunities for the Poor 2 CONTENTS l

No. 2 December 2008

38 Toward Eco-friendly COVER STORies l Tourism Hosting visitors in villages brings benefits and 12 iNclusive Growth: challenges Why it is Important Striving for equal access to opportunity is 40 cAN the Food Crisis Return? essential By John Berthelsen Any of a number of factors could reignite 13 Toward an Equal Future: “agflation” Making Gender Equality a Reality 45 News From the Bottom Up Women lack voice in all aspects By Red Batario of decision making Community media for addressing social 28 humble but Gifted issues A mathematics wizard gives poor students a chance 29 shifting Role of SMEs In Indonesia, focus needs to shift to productivity, not jobs 31 lAND of Opportunity By Philip Bowring Tax or spending policies in Hong Kong, China can reduce inequality 14 coping With the Crisis By Philip Bowring 33 The Great Divide Asia’s remedy to the end of US By Donald Greenlees consumption excess In Republic of Korea, the gap widens between export sector and the rest 16 Asi a’s Delicate Balancing Act DEPARTMENTS l By Daniel Altman Low or moderate levels 6 rouNDUP of inequality may be healthiest 8 ASIA BY NUMBERS 20 Pilgrims of Progress 9 ON RECORD India’s growth is creating jobs despite structural inequalities 10 OUTLOOK Asia’s Anti-Graft Center 22 fEw Options For Youth Despite growth, the Philippines’ joblessness 42 IN FOCUS remains high Viet Nam 24 New Entries Outstrip jobs 47 CALENDAR Interview with Philippines’ Finance 47 NEW PROJECTS Secretary Margarito Teves FEATURES l 49 INNOVATION 25 Power to the Poor Engineers Without Borders Training in self-empowerment is sustainable 34 mEKong Media Makeover 50 NEW PUBLICATIONS 27 Poor Often Can’t Help Market pressures are enlivening State- Pros and Cons of Nanotechnology Themselves controlled media Nature and Causes of Inequality By Abhijit V. Banerjee and Esther Duflo 36 fortune at the Bottom 52 FROM THE FIELD Motivation of the disadvantaged is not fully Business can profit while benefiting the poor Helping AIDS Orphans understood How Much Should Inequality Matter?

www.development.asia © 2008 Asian Development Bank R ichie Abrina ISSN 1998-7528

ASIAN DEVELOPMENT BANK PUBLISHER Ann Quon EDITORIAL AND CREATIVE DIRECTOR Carolyn Dedolph Cabrera ne worrisome trend in Asia is growing inequality—the rich are getting richer EDITOR AT LARGE Ian Gill much faster than the poor. The issue was brought into sharp focus with the EDITOR Chay F. Hofileña current financial turmoil, which is having a much greater impact on the poor Editorial Advisors than the rich. Juzhong Zhuang and Rana Hasan OHow much should inequality be a cause for alarm, if at all? What are the implications CONTRIBUTING EDITOR Jose R. Dalisay, Jr. of a widening social divide? Should governments do something—or nothing? Our stories COPY EDITOR Ma. Priscila del Rosario on this cover theme look at many aspects of a complex issue. Our guest economists ART DIRECTOR Anthony Victoria present the case for and against interventions toward social inclusion, though they tend GRAPHICS to support policies that promote equal opportunity and access to good education and Gerry Castro, Ronnie Elefaño, Rommel Marilla basic health services. PRESSGROUP HOLDINGS One of our main stories looks at the role of globalization in increasing well-being at EUROPE S.A. all levels of society, but it also notes that the well-to-do are better placed than the poor PUBLISHER Angus McGovern to take advantage of the opportunities that globalization offers. PRODUCTION COORDINATOR We provide contrasting profiles of India and the Philippines. One shows how strong Richard Forster growth can create jobs for the poor despite structural inequalities. The other illustrates Development Asia features development issues important how even robust growth can fail to provide enough jobs because of structural inequalities. to the Asia and Pacific region. It is published twice a year by the Asian Development Bank and Pressgroup Holdings We also show how inequality is becoming more divisive in developed economies such as Europe S.A. The views expressed in this magazine are the Republic of Korea and Hong Kong, China. those of the authors and do not reflect the views and policies of the Asian Development Bank. Use of the term What can the poor do to help themselves? We show how, with dedication and patience, “country” does not imply any judgment by the authors the poor can be empowered to choose and implement village-level projects. However, or the Asian Development Bank as to the legal or other status of any territorial entity. another view argues that the poor are often too focused on the struggle for survival to take adequate advantage of assistance. Comments Send your feedback to the editor at We show how small enterprises in Indonesia, which provide the vast majority of jobs [email protected] for the poor, need to switch their focus on increasing productivity. We also report on how Advertising big business can benefit if they pay closer attention to the needs of the poor. To advertise in Development Asia, inquire at We also look at how Asia should cope with the financial turmoil and economic reces- [email protected]. sion in large parts of the West. The slowdown in Asia may increase poverty with likely Subscriptions knock-on effects, such as loss of jobs, especially in the export sector, and falling remit- Contact [email protected]. tances from overseas. But it may also reduce inequality if the better-off are harder hit by Reprints Reprinted and translated articles should be credited the stock market crashes and drops in property values, as happened in some countries “Reprinted from Development Asia.” Reprinted articles during the Asian crisis in the late 1990s. with bylines must have the author’s name. Photographs In another report, we show how, although “agflation”—the massive and sudden jump not owned by ADB require permission from the copyright holder for reprinting. Send a copy of the in food prices—has been overshadowed by financial crisis, it could be sparked off again by reprinted article to the editor. any number of factors, leading many to the brink of starvation. Development Asia We also examine the growing role of “community journalism” in giving more voice to Department of External Relations the poor as well as how state-controlled media in the Mekong region are changing as their Asian Development Bank 6 ADB Avenue, Mandaluyong City economies become more market-oriented. 1550 Metro Manila, Philippines We hope this issue, which spotlights several other development challenges, is provoca- [email protected] www.adb.org tive as well as interesting. We welcome your views on Development Asia and what you would like to see in future issues. Address your letters to the editor or e-mail editor@ Pressgroup Holdings Europe S.A. San Vicente, 16-6-1 development.asia. 46002 Valencia, Spain Tel +34 96 303 1000 Fax +34 96 303 1234 [email protected] Cover: Ann Quon Note: In this publication, “$” refers to US dollars. Publisher

4 Development Asia l December 2008

Letters to the Editor l Biofuels Can Be a Long-Term Solution Water Level our article, biofuels. Issues that can render biofuels a Doesn’t Rise When Miracle or menace can be effectively addressed if the Ice Cap Melts YMenace, was biofuels program is selectively and strategi- a little disappointing cally applied, such as no deforestation, food he first issue of Development Asia is as it focused more on security, and land rights issues if only non- well written and touches on many the “menace” aspect forested, non-fertile lands are used; and, Timportant issues. Unfortunately, of biofuels—in terms if relevant, indigenous peoples’ rights are I came across a mistake reflected by the of being a threat to observed. On the emission side, whatever headline: “Disappearing Arctic Ice Cap food security, land the source, biofuels or not, mitigating mea- May Flood Asia.” The Arctic ice cap is rights issues, defor- sures will be put in place anyway. A country largely submerged under water. Like an estation, greenhouse has to be clear on its biofuels vision-mission ice cube in a glass of water, the water level gas emissions, and as a temporary solution. to effectively set its scope and areas and does not rise when the ice cube is melt- The positive side was not presented suf- mechanics of implementation. ing. This is physics. The sea level may be ficiently, thus giving the impression that Biofuels can be an acceptable alternative, rising for other reasons, such as melting biofuels cannot be a rational, ecological especially in the island provinces that cannot glaciers, but nobody expects a rise by one choice to replace fossil fuels. Biofuels can be be connected to the national grid and whose meter as stated in your article. According a long-term solution to our energy situation. only hope is to develop indigenous resources to figures in the latest report of the Inter- Considering that the Philippines is almost within their financial capacity. An example governmental Panel for Climate Change, completely dependent on imported fuels is the Calamianes island group in northwest which appears to be the most authorita- for transportation and power generation and Palawan where power plant generators run tive source, a rise of only 38.5 centimeters that the international price of fossil fuels at a loss and for only a few hours a day as they can be expected. Even this is bad enough, remains high, biofuels are not so much a do not have funds to buy diesel. However, as pointed out by Rajendra Pachauri in “menace” as they are a “miracle” with the with vast hectares of non-fertile, mountain- the excellent interview published in the potential of increasing our self-sufficiency ous, and open public lands, the potential of, same issue, since the impact on low-lying in energy and contributing to energy secu- say, jatropha-based fuel for power generation countries in Asia and the Pacific would be rity. Their development is not so much a is realizable. tremendous. question of fossil fuel replacement but of complementation. The Philippine Energy Plan continues Eriberto Garcia Gunther Schulz to explore for fossil fuel while aggressively Vice-President of the Biofuels Association ADB Vice President from 1983–1995, promoting research and development of of the Philippines Bonn, Germany

l Philip Bowring is a columnist for the Lala Rimando is business editor and writer Contributors International Herald Tribune, former editor of the for the Philippine news magazine, Newsbreak. Far Eastern Economic Review, and Southeast Asia Daniel Altman is president of North is a Kolkata-based columnist for correspondent for the Financial Times. Barun Roy Yard Economics, a consulting firm focused Business Standard, an Indian business daily. on developing countries. He is also global Ron Corben is a Bangkok-based freelance He is also a former editor of Asian Finance, a economics columnist of the International Herald journalist, who is formerly an economics and financial monthly regional financial magazine based in Tribune and author of Connected: 24 Hours in markets reporter for Australian Associated Press. Hong Kong, China. the Global Economy. Jet Damazo is deputy chief subeditor of the Johanna Son is the Bangkok-based head Abhijit Banerjee is the Ford Foundation Jakarta Globe, a daily newspaper in Indonesia. She of the Asia and Pacific region for Inter Professor of Economics at the Massachusetts is a former staffer of Newsbreak magazine in the Press Service, an agency that focuses on Institute of Technology. Philippines. development news. She has edited seven books on Asian subjects. Richa Bansal is a former correspondent with Esther Duflo is the Abdul Latif Jameel Professor The Times of India who is pursuing further of Poverty Alleviation and Development Diao Ying is a business reporter for China studies at Cambridge University. Economics at the Massachusetts Institute of Daily, a national English-language newspaper, Technology. and freelancer for Newsweek (Chinese Red Batario heads the Center for edition). Community Journalism and Development in Donald Greenlees is a former Seoul-based the Philippines and is Asia-Pacific coordinator correspondent for the Far Eastern Economic for the International News Safety Institute, a Review. He has also written for The Australian and Brussels-based coalition for the protection of the International Herald Tribune. journalists. Rahul Kumar is an associate copy editor with John Berthelsen is editor of the Hong Kong, the weekly news magazine India Today. Clarification China–based Asia Sentinel, the regional internet The photo credit for the article, Genetically Emma-Kate Kunth-Symons is a Manila-based Modified Foods Gain Ground, published in the magazine. He came to Asia to cover the Viet June 2008 issue should go to Getty Images rather Nam conflict for Newsweek. freelance journalist and former Paris correspondent for The Australian newspaper. than Mervin Malonzo.

5 Department

ROUNDUP l Village Approach Advocated to Protect Coral Triangle Triangle from overexploitation and destruc- October. It is expected to be formally ad- tive fishing practices. opted during the World Oceans Conference “If we want to protect coral reefs and in Manado, Sulawesi, in May 2009. l rehabilitate fisheries, it is not by plant- ing new corals; it is by educating people and changing their mind-sets,” says Eko The Coral Triangle Numbers Rudianto, overall coordinator for the Coral Triangle Initiative in Jakarta. A strategy that has proven effective is to establish 6 million km2 area village-level marine-protected areas of 20–80 hectares each. “This is more sustain- of the world’s able because people have a sense of owner- 75% coral species ship,” he says. The second step, he notes, is to give people in coastal areas alternative of the world’s sources of income. 6 7 marine turtle species Barend Frielink The Coral Triangle is a 6 million square kilometer triangle in the Indo-Pacific Sea Sustains that contains over one third of known coral species; over half the world’s coral reefs; 120 million people over 3,000 fish species; and the greatest GOOD CATCH Healthy coral reefs in the extent of mangrove forests of any region. It $12 billion Trobriand Islands, Papua New Guinea assure this is also the spawning ground for the largest nature-based tourism industry tuna fishery in the world. For its biodiver- (yearly) nabling coastal villages to better look sity importance, it has been dubbed the Over after their marine resources has been “Amazon of the Seas.” 3,000 fish species Ea tried and proven approach in Indo- A final draft plan of action to protect nesia, the Philippines, and elsewhere—and the area, developed under the initiative, Source: World Wild Life Fund is the core of a strategy to protect the Coral was presented at a meeting in Manila in

PRC Leads World in Tree Planting

he People’s Republic of China In addition are several major na- (PRC) may attract adverse pub- tional ecological projects, including those Tlicity for its polluted cities and around the Yangtze River and the Three rivers, but it is leading the world in one North Shelterbelt Program, which aim environment field—tree planting. Its to plant trees over an area of 3.56 mil- citizens are playing a major role in this. lion square meters (m2) in 13 provinces Last year alone, over 500 million by 2050. people—over a third of the PRC’s popu- The PRC government adopted fores- lation—planted an astonishing 2.27 billion tation as a national policy after people trees on a voluntary basis. Since a tree- cut trees to clear areas for agriculture. planting exercise began in 1981, over In the summer of 1981, several provinces 51.5 billion trees had been planted by in the western PRC, including Sichuan the end of 2007. and Shannxi, experienced severe flooding.

The World’s Forests Forested areas are shrinking in Latin America and sub-Saharan Africa—recovering in East Asia 10

8 ) 2 6

4

2 40,653,110 39,765,750 39,399,500 9,833,620 9,384,540 9,147,420 8,807,990 8,826,710 8,830,270

Forested Area (km Area Forested 0 World Latin America & Caribbean Europe & Central Asia

6 Development Asia l December 2008

Secret Weapon of Are Embankments Answer to Flooding? Viet Nam’s Tourism n the wake of the Kosi River’s perennial floods, made much worse this year by the unexpected elatively inexpensive Viet Nam is breach of artificial embankments, water experts hoping that its tourism sector may I benefit from the global downturn— in India propose that governments look beyond A F P R engineering solutions to deal more effectively with or least suffer less than other holiday spots—for Villagers wade through this cross-border phenomenon. DISRUPTED LIVES vacationers seeking better value. floodwaters in the northern state of Bihar The Kosi River, a turbulent and unpredictable Increasingly, the government is also river that carries large amounts of silt, breached lead to drainage problems in large parts of focusing on the Viet Kieu—overseas its embankments in Nepal, where it originates, the flood-affected areas,” says Sudhirendra Vietnamese—whom it calls its “secret and flooded huge areas of the country and down- Sharma, a member of a fact-finding mission weapon.” stream India. to the Kosi River. He proposes that more The Viet Kieu are having a noticeable The floods displaced at least 70,000 Nepalis, attention be paid to floodplain rehabilita- impact in niche tourism areas, including many of whom are still in relief camps, and affected tion. This means allowing overflows to run upmarket restaurants and bars targeting over 3 million people in India. their course, recognizing that floods fertil- foreign tourists and well-to-do Vietnamese Now experts are wondering if the govern- ize the soil as well as damage crops, and in Hanoi and Ho Chi Minh City. ment is taking the correct remedial measures. focus on managing the silt they leave behind. Thanh Do, a French Viet Kieu and The Indian government set up a High Level Expert Constructing embankments is often not owner of Bun Ta “Everything is Bun Team to suggest measures to deal with flooding, very useful, he contends, as it is difficult to (noodle)” rice vermicelli bars in Ha Noi while the Bihar state government established the foretell where the river is likely to overflow, and Ho Chi Minh City has seen an explo- Kosi Breach Closure Advisory Team to mend the he says. sion of sophistication. breaches. After discussion with the Nepal govern- Gopal Krishna, another expert on the “The growth of savoir-faire among the ment, India plans to construct two massive—and fact-finding mission, agrees. If the river is Vietnamese in the past five years is incred- costly—dams to control the river. allowed to flow freely, “the water level will ible,” he notes. “The Viet Kieu from all “But if the embankments are repaired, it would rise slowly and people have ample time to continents who return as investors, work- not enable water to run its course which could move away.” l ers or travelers does not stop increasing. It is a very good sign for the country.” l

This prompted PRC leaders, including of 2007, compared to only 12% (1.15 mil- then Premier Deng Xiaoping, to review lion m2) in 1981. In sharp contrast, global the causes of the floods. He urged people forest cover decreased by about a million to plant trees. square meters over 15 years. As a result of such efforts, notes a Moreover, the PRC is providing incen- report by the PRC’s State Forestry Ad- tives that may further increase forest cover. ministration, the PRC provides more than The government recently introduced re- half of the new trees planted worldwide forms in the management and ownership each year. The PRC now has 533,000 m2 of of forests. Under the old system, forests man-made forests, one third of the world’s were collectively owned, and people had to man-made forests. seek approval from authorities before cut- The PRC’s target is to have one fifth ting down trees. Under the new system, of its land area forested by 2010, says Lei the forests are still publicly owned but a A F P Jiafu, vice director of the State Forestry farmer can earn the right to use the land Administration. This is a credible goal, for as long as 70 years. This may encourage considering that the PRC had already for- PLANTING TREES Volunteers and soldiers re- small farmers to make money by planting ested 18.2% (1.75 million m2) by the end forest a barren hill in the northern part of the PRC more trees. l

1990 2000 2005 788,600 806,930 801,060 6,894,090 6,450,900 6,246,930 4,580,890 4,461,400 4,506,830 200,020 208,100 211,220

Sub-Saharan Africa East Asia & Pacific South Asia Middle East & North Africa Source: World Bank Development Indicators 7 Department

ASIA BY NUMBERS l Poverty and Inequality Economic development has been accompanied by rising inequality and uneven access to growth opportunities

World and Regional Estimates of Employment World and Regional Estimates of Rates by Sector Unemployment Rates

Agriculture

1996 2006 World 41.9 36.1 East Asia 48.5 40.9 Southeast Asia and the Pacific 51.0 45.4 South Asia 59.7 49.4 1996 2006 Industry World 6.2 6.3 1996 2006 East Asia 3.8 3.7 World 21.1 21.9 Southeast Asia and East Asia 24.3 25.6 the Pacific 3.7 6.2 Southeast Asia and South Asia 4.6 5.1 the Pacific 16.5 18.6 South Asia 15.2 21.0

Services 1996 2006 Overall, unemployment worldwide is rising, World 37.0 42.0 especially in Southeast Asia and the Pacific. East Asia 27.2 33.5 Among sectors, services is employing Southeast Asia and the most number of people, followed by the Pacific 32.5 36.0 agriculture and industry. South Asia 25.1 29.6

Source: International Labour Organization. 2007. Key Indicators of the Source: International Labour Organization. 2007. Key Indicators of the Labour Market. Geneva (Fifth Labour Market. Geneva (Fifth edition). Available: http://www.ilo.org/ edition). Available: http://www.ilo.org/public/english/employment/strat/kilm/download/kilm04.pdf public/english/employment/strat/kilm/download/kilm08.pdf

Total Expenditure on Health as Percentage of GDP (2006) Republic of Australia Viet Nam Korea Cambodia Nepal 8.7 6.6 6.5 6.0 5.7

People’s Republic Lao People’s India of China Malaysia Sri Lanka Democratic Republic 4.9 4.5 4.3 4.2 3.6

Thailand Philippines Bangladesh Myanmar Indonesia 3.5 3.3 3.1 2.3 2.2

Source: WHO Statistical Information System. World Health Organization website. Accessed November 2008. Available: http://www.who.int/whosis/en/index.html

8 Development Asia l December 2008

ON RECORD l Number of Poor Based on the Share of Rural Poverty in (%) Asian Poverty Line Total Poverty winner (Millions of people) Joseph Stiglitz, of the Nobel Prize in Sri Lanka (2002) 95.6 Economics, 2001, on the 5.1 A F P 2.9 14.8 Wall Street Crisis: 13.4 25.4 54.4 Viet Nam (2004) 95.5 65.8 621.9 Nepal (2004) 95.0 “At the center of blame must be the Lao PDR (2003) 91.7 financial institutions themselves. They— and even more their executives—had Pakistan (2005) 87.7 incentives that were not well aligned Bangladesh (2005) 86.3 with the needs of our economy and our India (2005) 85.9 society... They did what their incentive structures were designed to do: focusing Indonesia (2005) 80.8 on short-term profits and encouraging Philippines (2003) 71.0 excessive risk taking.”

(As measured by the Asian Poverty Line [2005 Poverty Survey Purchasing Power Parities]) India Nepal

L ao PD R Indonesia Viet Nam Cambodia Philippines Bangladesh Bill Gates, founder ($1.35 per day, 2005 Poverty Survey of Microsoft, on Purchasing Power Parities)

helping the poor: A F P

Source: ADB Key Indicators for Source: ADB Key Indicators for “We need a creative capitalism Asia and the Pacific 2008 Asia and the Pacific 2008 where business and nongovernmental organizations work together to create a market system that eases the world’s Public Expenditure on Education as Percentage inequities.” of Total Government Expenditure Thailand 25.0

Indonesia Lee Kuan Yew, Minister 17.2 Mentor, Singapore, on

the PURA (Providing A F P Philippines Urban Amenities in 15.2 Rural Areas) model advocated by former Indian President A.P.J. Abdul Kalam: Nepal 14.9 “…if you study very carefully how other countries have industrialized and become knowledge economies—Korea, Japan, Cambodia China, and Eastern Europe—you will 14.6 realize you cannot bring urban amenities to rural areas.” Lao People's Democratic Republic 14.0 People's Republic of China 13.0 Warren Buffet, 2008 India richest man in the 10.7 world, on buying: A F P “A simple rule dictates my buying: Viet Nam Be fearful when others are greedy, and 9.7 be greedy when others are fearful.” Source: UNESCO Institute for Statistics website. Accessed November 2007. Available: http://stats.uis.unesco.org/unesco/TableViewer/document.aspx?ReportId=143&IF_Language=eng

9 Department

Outlook l

Asia’s Anti-Graft Center A regional integrity center to open in Manila

By Emma-Kate Kunth-Symons

orruption undermines the questionable role of money in politics, Starting next year, at a new regional rule of law, exacerbates pov- amid foreign bribery scandals, “indicates anti-graft institute, Asian public servants erty, and can even end lives. a broader failure by the world’s wealthi- on the frontline of the “corruption wars” Its deadlier results can be est countries to live up to the promise of will be trained to identify and tackle cor- seen in the recent tainted mutual accountability in the fight against rupt systems. Cmilk scandal that affected dairy consum- corruption,” says the Transparency Inter- The Center for Asian Integrity, based in ers across the People’s Republic of China national report. Manila, will be a first for Asia, promoting “in- and worldwide—a disaster that many are The Asia and Pacific region has tegrity and accountability building of public blaming on local graft and poorly enforced countries like Singapore—with the best personnel and anticorruption advocates.” food safety standards. ratings—trading and interacting with Courses are due to begin in early 2009, Developed nations are far from im- countries that are perceived to be among with Philippines bureaucrats and their coun- mune from poor governance. Transparency the most corrupt. Can integrity be taught terparts in Asia invited to enroll. International chided advanced economies, effectively, and transparency and account- According to the center’s director, Alex notably in Europe, for their “double stan- ability learned in such a diverse region? Brillantes, dean of the University of the dards” and sliding ratings in its report on A group of academics and public Philippines National College of Public the 2008 international anticorruption scale administration experts from around the Administration and Governance, corrup- or Corruption Perceptions Index. The region believes the answer is “yes.” tion courses will be strongly linked to the Eric S ales DirectoR Alex Brillantes It is widely accepted that corruption leads to poverty

10 Development Asia l December 2008

United Nations’ Millennium Development 2008 Corruption Perceptions Index for Selected Asian Countries Goals. “It is widely accepted that corruption leads to poverty. When you put public money in the pockets of the few, it deprives the rest of the people of basic needs such as health care, education, and infrastructure, including public transport and roads,” says Brillantes. “With the new Center for Asian Integrity, we will be developing and imple- menting new anticorruption strategies for the region.” The initiative is being driven by Aus- tralia’s Institute for Governance, Ethics and Law, based at Griffith University, the Queensland University of Technology, and the United Nations University. Some funding is coming from the United States Agency for International Development and the Australian Agency for International De- velopment, with support from the World Bank and the backing of the Association of Southeast Asian Nations. In Manila, the office of the Philippines Ombudsman is behind the project, which will be run out of the University of the Philippines National College of Public Administration and Governance. Why base the center in the Philip- pines, birthplace of the late President Ferdinand Marcos? Almost 20 years after his death, this archipelagic nation still struggles more than many of its neigh- bors to beat institutionalized corruption. Recent scandals include allegations of millions of dollars in kickbacks as part of the awarding of a government broadband *10=Highly clean; 0=Highly corrupt contract to a state-owned company of the Source: Transparency International People’s Republic of China. Brillantes retorts: “Why not in the Phil- ippines? It is not like we can pretend that Can integrity be Sampford cites the case of the Austra- there isn’t corruption. Whether we are high lian state of Queensland in the 1980s, when or low on the corruption scale, corruption taught effectively, graft was on a par with the more corrupt has been here since well before Marcos’s regimes in Asia. time. And it is a problem across Asia.” and transparency Despite becoming a national and in- In Singapore, authorities tackled cor- and accountability ternational “ethical and governance joke,” ruption in the bureaucracy and the execu- Queensland rebuilt its reputation with a tive ranks by significantly increasing the learned in such a groundbreaking judicial inquiry. The lengthy salaries of public servants and politicians, diverse region? Fitzgerald inquiry researched and uncovered reducing the incentive to accept bribes. a wholesale system of corruption from the But such an approach is impractical for bribery could be drastically reduced. lowliest police office up to the premier. The poorer and vastly more populous nations Although the focus of the new center graft system was “so exposed that it was such as the Philippines, Viet Nam, Indo- will be on developing countries, Professor shattered and couldn’t be reconstituted,” nesia, or India. Charles Sampford, head of the Institute says Sampford. An alternative advocated by Brillantes for Ethics, Governance and Law, says that He is adamant that placing the new is the wholesale smashing of the politi- developed nations such as Australia, Singa- Center for Asian Integrity in Manila is cized bureaucracy. pore, and Japan have little cause for com- not “picking on the Philippines.” He says, This can be done only through systemic placency when it comes to governance. “The history of the center’s origins do change. In the Philippines, for example, the “The problems of corruption are simi- not involve either an empirical or value President can directly appoint thousands of lar everywhere,” he says. “It is about abuse judgment about whether the Philippines bureaucrats, giving the head of state more of power for non-authorized purposes for rates lowly on the perceptions index. The direct power than many counterparts in private gain or for political party gain. In integrity center could have been placed in larger nations such as the United States. If tackling corruption, it is not just prosecut- any one of a number of cities. Willingness the number of political appointments were ing individuals that matters. The goal is to do something is the most important far lower, the resulting pressure for “favors” to smash the system so that it is no longer attribute—as we saw with the example of and “sweetheart deals” as well as outright intact and is incapable of functioning.” Queensland.” l 11 Cover Story l Tackling Inequality

Opinion l Many economists would therefore see the situation in the People’s Republic of China (PRC), where measured inequalities have risen significantly over the last two de- cades or so, reflecting at least partly the type of processes Lewis talked about. In fact, as these economists also like to point out, de- spite the sharp rise of income inequality, the PRC has also been able to achieve a stellar record in reducing poverty. Another argument for inaction on the policy front is that designing and implement- ing policies that are effective in combating inequality are extremely difficult and could even be counterproductive. An editorial piece in the Wall Street Journal is a good example of this type of thinking: “Why are booming Asian countries so worried about income inequality? Such talk is hardly cheap. If these fears spur bad economic policies, it could end up costing Asia dearly…The danger is that all this talk I an Gill of ‘inequality’ will lead to policies that, in On the street Developing social safety nets to prevent extreme poverty should be part of the name of redistributing income, reduce inclusive growth policies economic growth and thus make it harder for Asia’s poor to join the middle class. The Asian ‘pie’ is growing for everyone. The chal- lenge is to keep it that way, instead of quar- Inclusive Growth: reling over the relative size of the pieces.” Both arguments have merits. So where does this leave us? One answer, we would argue, is that policy interventions aimed Why It Is Important at tackling inequality need to distinguish between two types of inequality. One is Striving for equal access to opportunity is driven by unequal access to opportunities and circumstances beyond the control of essential for helping lift the poor individuals—sometimes referred to as “bad inequality.” The other is driven by effort By Juzhong Zhuang and Rana Hasan and reflects the rewards and incentives that a market economy provides for citizens who any countries in developing cohesion and the quality of institutions and work harder, look for opportunities, and Asia have experienced impres- policies, which, in turn, slow growth. take risks in seizing them; this is sometimes sive rates of economic growth On the other hand, many analysts agree called “good inequality.” over the last two decades. that economic development is likely to entail It is the unequal access to opportunities However, various data—from processes that increase inequality. For ex- that must form a nonnegotiable target of householdM income and expenditure sur- ample, Nobel Laureate Arthur Lewis’s point public policy. The provision of basic health veys, labor force surveys, tax returns, and about inequality and the development process care and education to empower the poor and corporations—suggest that growth has not is a powerful one. As he eloquently argued in disadvantaged is fundamental. Concerns with been inclusive; that is, the fruits of growth the 1950s: “Development must be inegalitar- poor delivery of these services—unfortunately have not been widely shared. The richer are ian because it does not start in every part of an still a reality in large swathes of developing getting richer much faster than the poor. economy at the same time. Somebody devel- Asia—cannot be used as an excuse for not How should developing Asia’s policy ops a mine, and employs a thousand people. Or doing enough. It is also essential to improve makers view the increases in income in- farmers in one province start planting cocoa, access to markets and basic productive assets equality? There is no simple answer. which grows in only 10% of the country. Or by putting in place good policies and sound On the one hand, there are reasons for the Green Revolution arrives to benefit those institutions, and leveling the playing field. concern about growing inequality—and farmers who have plenty of rain or access to And developing social safety nets to prevent thus calls for action. Increasing inequali- irrigation, while offering nothing to the other extreme poverty should also be an important ties could imply a slower pace of poverty 50% in the drier regions.” part of policies for inclusive growth. reduction. As is now widely recognized, for a At the same time, it is critical that poli- given growth rate, a growth process in which cies aim to provide more jobs for the poor inequalities are increasing sharply will lower The danger would be and to as wide a segment of the population as poverty reduction. There are also compelling redistributive policies possible. In attacking poverty and inequality, reasons why high levels of inequality could we must be clear that success entails gener- dampen growth prospects. High inequality that reduce economic ating productive, well-paying, and decent could lead to adverse consequences for social growth job opportunities for the workforce. l 12 Development Asia l December 2008

Opinion l

have put in place a new Gender Equality Action Plan that seeks to ensure these is- Toward an Equal sues are integrated in all aspects of our work from education to financial services, from HIV and AIDS to conflict resolution, Future: Making and from maternal health to boosting the political participation of women. Our aim is to put issues of gender equality and Gender Equality women’s rights at the heart of our work. We are working with civil society and governments in partner developing coun- a Reality tries to increase the focus on these issues By Michael Foster in their own poverty reduction strategies. The reason is that, in the end, only national governments, with civil society, can make s well as going against our sense education. Another $42 billion–$47 billion the scale of the changes needed to lead to of fairness and justice, inequal- per year is lost because of restrictions to significant and lasting changes. ity brings with it significant so- women’s access to employment opportuni- DFID is ready to assist with programs cial and economic costs. Since ties. Can Asia and the Pacific rise to the that countries want to implement. We are joining the United Kingdom’s challenge of tackling gender inequality? contributing £100 million ($160.2 million) ADepartment for International Develop- That is the $77 billion question. over 5 years to Bangladesh’s £2.2 billion health ment (DFID) a few weeks ago, I have been Gender discrimination is evident in low program. In Pakistan, DFID committed £90 struck by how important it is to tackle access of women to education, health care, million over 5 years for a new National Ma- inequality—particularly gender inequali- and economic and political participation. ternal, Neonatal and Child Health Program ty—if we are to reach our shared goals of In Pakistan and India, for example, girls be- that will expand maternal and newborn care, achieving sustained poverty reduction and tween the ages of 1 and 5 are 30%–50% more and support family planning services. DFID the Millennium Development Goals. likely to die than boys. An important factor is also involved in activities that promote the As a father of two daughters and a son, that hinders overcoming these inequalities is access to microfinance to entrepreneurial I have a strong personal interest and com- women’s lack of voice in all aspects of decision women in Pakistan and Afghanistan. mitment in ensuring they all have the best making. And if we don’t act soon to address Beyond our bilateral programs, DFID opportunities for a fulfilled and happy life, these severe disparities, we will threaten the works closely with local and international and grow up in a world that is a more pros- future long-run growth of the region. organizations in the fight to promote gen- perous, safe, and just place for its citizens. In DFID, we have recognized that we der equality. We know that tackling inequalities is im- have not given gender issues the promi- DFID will seek to improve the way in portant for growth. Speaking at the launch of nence that we should have, and that we which it helps developing countries achieve Growing Unequal?, Angel Gurría, Secretary need to do more. To help us do that, we gender equality and women’s empower- General of the Organisation for Economic Co- ment. This has to be a joint effort between operation and Development, said: “Growing donors, multilateral agencies, and develop- inequality is divisive. It polarizes societies… We must move ing countries themselves. And we must and it carves up the world between rich and move quickly: without improving the poor poor… Ignoring increasing inequality is not quickly: Without economic, social, and political situation of an option.” Countries where inequality is improving the women and girls in many countries, we can- lower are able to translate growth into lift- not hope to reach our development goals. l ing people out of poverty more quickly than situation for women, countries where inequality is high. we cannot reach our Michael Foster is a Member of Parliament and Tackling gender inequality is an essen- Parliamentary Under-Secretary of State for tial part of this. The World Bank estimates development goals International Development in the United Kingdom. that eliminating the wage and employment differences between men and women could lead to a 6% increase in gross domestic product. And not only women benefit from tackling gender inequality; it is widely rec- ognized that women use additional income to feed, clothe, and educate their families. The Asia and Pacific region is an impor- tant battleground in the global fight against gender inequality. The region has enjoyed a successful period of sustained economic growth and poverty reduction, and some countries have made significant progress in certain areas, such as increasing the number of girls in school. But significant challenges remain. The region is still losing between $16 billion and ADB Photo L ibrary $30 billion a year because of gender gaps in Bridging Gender Gap Schoolgirls learn technical skills in a science class

13 Cover Story l Tackling Inequality

Coping With the Crisis Asia’s remedy to the end of US consumption excess

By Philip Bowring

in many parts of developing and developed Asia The financial crisis has brought the world, and especially Asia, face to face with the economic reality that had been too long delayed—the end of the consump- tion excess of the United States (US). The condition, which had been prolonged by easy credit and asset price inflation, was suddenly reversed. The global slowdown and recession in the West have curbed

A F P not only exports but also remittances that are especially important for South Asia, Philippines, and Viet Nam. There is a very real danger that the recession—which is certain in the US and probable in Europe—will lead to a surge of he financial crisis in the West protectionist sentiment in the West. This presents Asia with many chal- would follow 50 years of the West mostly— lenges, but also some opportu- with the big exception of agriculture— nities. It opens a door for the pushing for freer trade and movement of region to take a lead in ensuring capital, a process of which East Asia has Tthat this crisis does not lead to a retreat been the major beneficiary. However, a toward global protectionism. resurgence of the kind of protectionism It is a chance to reaffirm that the seen in the 1930s is not inevitable if Asian financial sector exists to serve the real countries, which have enjoyed large trade sector, not be the tail that wags the dog. surpluses for most of the past decade, It presented an opportunity for the region recognize that the process must now go to demonstrate how much it had learned into reverse. from its own crisis a decade ago. In their At the time of the Asian crisis, a surge different ways, all these opportunities are in protectionist sentiment in the region also ways to curtail the growth of the in- would have been a natural, if dangerous, come and wealth gaps that have emerged reaction to sharp falls in output. But this

14 Development Asia l December 2008

did not occur, partly because of the influ- of private sector debt. It should not be ing the status quo at the World Trade ences of multilateral institutions, such as forgotten that several countries hit by the Organization from being undermined. the Asian Development Bank, the World Asian crisis were running fiscal surpluses Revival of Doha may be very difficult un- Bank, and the International Monetary while allowing credit to explode. Likewise, der present circumstances, but the region Fund, which linked new funding to reform the US fiscal deficit is a minor problem should make every effort both to keep and liberalization. Trade barriers actually compared with excessive credit growth discussions going and avoid any measures fell and the Association of Southeast Asian combined with increasing leverage in the that could be considered backsliding. It is Nations brought forward its free-trade financial system. particularly important that farm product timetable. All this was helped along by the Apart from the chaos they can create, markets do not become more distorted stimulus provided by devalued currencies financial and asset price bubbles redistrib- than they are already. Southeast Asia, that spurred exports and curbed imports. ute income in mostly undesirable ways. PRC, and India all need to ensure that the Unfortunately, Asia’s economies are And they mostly benefit the few at the food price spike earlier this year does not not in a position to pressure the US and expense of the many. The many pay for lead to restrictions and costly attempts at the European Union in the way they did them in public sector bailouts and higher self-sufficiency that result in high prices then. As the only reserve currency econo- taxes, and in the heightened inflation that for consumers without benefiting farmers mies, barring the minor role of the yen, accompanies them. It is not coincidental at large. they can in theory print their way out of that the US crisis has followed a sustained Overall, Asia must escape from the financial problems. However, Asia must do period of negative real interest rates that temptation to see the current crisis as a certain things if it were to help moderate undermined the incentive to save, and failure of free trade and free movement pressures for a new protectionism. benefited stock market punters at the of capital. Like the Asian crisis, it has These include: First, Asia must continue expense of small savers. showed on an even bigger scale the need moves toward currency flexibility. In most Asian countries, long takers rather for financial regulation and sound money cases, this will likely lead to appreciation than makers of international trade policy, policies. There is little to suggest that free against the currencies of the recession-hit may well need to take the lead in protect- trade is part of the problem or that flows West. Reliance on currency undervaluation of nonfinancial capital are to blame. to boost exports in a beggar-thy-neighbor That may be a hard case to argue, given fashion will only invite protectionism in the extent to which the US has simultane- the West. In most cases, too, currency Asia must escape from ously pushed free trade and open, deregu- appreciation would boost real incomes the temptation to see lated financial markets onto the world. of workers at the expense of corporate But trade in goods (which are tangible) profits, which in most of East Asia have the crisis as a failure and trade in money (which is based on been gaining increasing shares of national trust) are conceptually different and need income. of free trade and free to be treated differently. Keeping a grip on Second, fiscal measures must be used movement of capital that distinction is vital for Asia. l to boost spending, whether on consump- tion or investment. Some countries need consumption rather than investment and export-led growth. The People’s Republic China (PRC), in particular, has huge scope to increase the consumption share of gross domestic product. Others, particularly in ASEAN, need a pickup in investment. Fiscal stimulus and currency apprecia- tion, together with export stagnation, will cause some substantial trade deficits to reemerge. But, with reserves high almost everywhere in Asia, room for deficits is ample. Lots of room exist for the big surplus countries of Northeast Asia to buy the local currency public-sector debt of countries needing to borrow to finance infrastructure requirements. This would help cement regional cooperation and pro- vide new avenues for surplus countries to invest in growing Asian economies rather than stagnant western ones. Several formerly crisis-stricken coun- tries are now in a position to sustain larger fiscal deficits. Others have room for more effective tax collection that would enable more spending on education, health, and infrastructure, which in turn would tend

to reduce inequalities in standards of A F P living. Fiscal deficits are also less likely to run out of control than an excessive easing of monetary policy and the buildup Market Crash A danger exists that recession will lead to a source of protectionist sentiment

15 Cover Story l Tackling Inequality M ervin M alonzo

16 Development Asia l December 2008

Asia’s Delicate Balancing Act High levels of inequality can threaten stability and growth, but low or moderate levels may be healthiest

By Daniel Altman

lobalization offers a tremen- forward-looking governments have helped targeted niche markets in wealthy countries, dous opportunity to increase Asian economies grow from within as well. such as apparel manufactured under high well-being at all levels of soci- But two thirds of the world’s product markets labor standards and organic rice. ety, especially in highly entre- lie outside of Asia. Growth in Cambodia has averaged over preneurial areas such as South Cambodia presents an excellent example 10% in the last several years. Exports rose andG East Asia. Yet that opportunity could be of this situation, and of the phenomenon of from about $700 million in 1997 to over wasted in many countries because inequality inequality. The government of Hun Sen, who $4 billion in 2007. The average purchasing is rising. It’s a trend that could lead to seri- was recently reelected Prime Minister after power of Cambodian families has more than ous economic and political problems in the 23 years with at least a share of power, has doubled. Yet inequality is growing at both future, despite strong growth in the present. gradually encouraged Cambodians to diversify ends of the income spectrum—as the rich Can it be controlled or even reversed? their economy and to pursue export markets. become fabulously richer, many poor Cam- In light of Asia’s recent economic history, Tourism has flourished, as has a nascent bodians are getting poorer. this is a new and unwelcome development. textile industry. With help from experienced Why is this happening? In Cambodia, Up until the 1990s, Asian economies— advisors, business people, and consultants— as in the majority of developing countries such as the Republic of Korea; Japan; and including hundreds of formerly exiled or across Asia and the world, it’s easier to take Taipei,China—were known for a surprising expatriated Cambodians—the country has advantage of the opportunities offered by absence of high inequality during periods of globalization if you’re already well-to-do. rapid growth. Yet for Asia’s new emerging Wealthier people tend to be more educated powers, the story line has changed. At the Political stability and more informed about markets abroad. root of that change are the unmistakable They can detect the opportunities to export patterns of globalization. and forward-looking or attract foreign investment, and they Asia has lately been enjoying some of governments have the money and know-how to follow the fastest economic growth in the world, through. largely because globalization has helped it to have helped Asian “Global markets are bigger, deeper, richer, be connected with other regions as a supplier and they do provide more opportunities of raw materials, manufactures, services, and economies grow for people that already have some assets,” finance. To be sure, political stability and from within says Nancy Birdsall, founding president 17 Cover Story l Tackling Inequality

Gini Coefficient for Developing Asia

0.49 0.47 0.47 0.43 0.42 0.42 0.41 0.37 0.35 0.34 0.34 0.33 0.32 0.31 s re ysia India China Nepal a re Ko eople's Pakista n Mala P Thailand Republic Indonesia Viet Nam Singapo Cambodia Kazakhstan Republic of Republic of Democratic ople’ Lao Pe urkmenistan T The Gini coefficient is a measure of inequality. It is a number between 0 and 1, where 0 corresponds with perfect equality (where everyone has the same income) and 1 corresponds with perfect inequality (where one person has all the income, and everyone else has zero income). The Gini index is the Gini coefficient expressed in percentage form, and is equal to the Gini coefficient multiplied by 100. Source: World Bank 2007 via UNDP of the Center for Global Development in sands of Cambodian families—with the Hundreds of millions of people have Washington. “It can be financial wealth, but approval of the government—but many indeed been lifted out of poverty in the the key assets in the global economy are Cambodians have already lost their homes People’s Republic of China (PRC), India, education and skills.” and livelihoods. and other fast-growing nations. At the same Wealthy, educated people also tend to be This story is not unique across Asia. time, many citizens of those countries have better connected with government. Though Even in a democracy such as India, villages become incredibly rich. They, too, have it is now a democracy, Cambodia has an im- and slums have been summarily cleared to profited from the enormous opportunities mature regulatory system and a fragmented make way for new infrastructure, like roads created by globalization, and sometimes by tax-and-transfer system. Entrepreneurs can and train links. The situation came to a head the lack of checks on their ambition in their easily get tangled in red tape; Cambodia most recently in West Bengal, where the gov- home countries. ranks 145th out of 178 countries in the World ernment bought land from farmers to make This trend is creating vulnerability in Bank’s annual survey on the ease of doing room for a Tata auto plant. After Tata took Asia. High levels of inequality can be toxic business. If you have money, though, these possession, the farmers began to protest, for stability and growth. Research by econo- apparent problems are an advantage. You claiming that they had been compelled to mists at the Massachusetts Institute of can use your money to cut through red tape sell at cut-rate prices. Finally, in September, Technology suggests that a low to moderate and skirt regulations, and you won’t have to the farmers blocked access to the plant and level of inequality is the healthiest situation; surrender much to the government as long construction stopped. The irony was that zero inequality suggests a socialist system, as you stay in its good graces. In addition, the plant was supposed to produce the Tata with little incentive for entrepreneurs, while Birdsall says, you’re likely to have access to Nano, the world’s least-expensive car and high inequality concentrates wealth and op- economic opportunities controlled by the potentially a poverty-reduction mechanism portunity in too few hands and opens the government, such as building contracts and in itself. door to civil conflict. import licenses. The backlash can occur even among “Inequality can cause a lot of social How does this situation look on the middle-class people. In Bangkok, thou- disorder and political instability, which will ground? In Cambodia, dozens of poor vil- sands took to the streets in September to affect investment,” says Guanghua Wan, se- lages in Phnom Penh and Sihanoukville, the rally against perceived corruption in the nior poverty reduction specialist at the Asian capital and the principal port city, have been Thai government. These people were not Development Bank in Manila. “The macro bulldozed to make way for new ventures. indigents asking for a handout. Rather, environment is not conducive for investment, Land on the outskirts of Phnom Penh has they were ordinary workers who felt that and investment, of course, is important for been turned into manufacturing corridors, their economic opportunities were being growth.” and beachfront property near Sihanoukville impinged and subverted by their nation’s Education is another channel through is being converted into resorts and shipping wealthy elite. which inequality can affect long-term growth. facilities. “Inequality is not good for human capital for- Even in rural areas, wealthy business mation,” Wan says. Even if children of poor people are managing to take land from families have the talent to finish school and under the feet of families who have farmed Inequality can cause go to university, he says, their parents might it for generations. Because those families a sort of feedback not be able to pay the fees. Moreover, poor never had official titles, a little bit of legal families tend to have more children, while expertise and a friend in the government loop that leads to rich families concentrate their spending on can often be enough to turf them out. The one or two kids. World Bank and other donors are working worsening economic The education example can be extended feverishly to create titles for tens of thou- outcomes over time to economic opportunities in general, whether 18 Development Asia l December 2008

in an educational or an entrepreneurial set- to water; and encouraging industries that equality are present today, governments may ting. “The distribution of ability in a popula- might normally locate in existing urban hubs also want to consider shorter-term solutions. tion is presumably not correlated with the to base themselves in less-developed areas. Birdsall says governments could do much to distribution of current wealth,” Birdsall says. “You can certainly do something about improve the economic frameworks affecting “You have a lot of poor people who never are promoting industries that would not ordinar- income distribution. able to exploit their ability.” ily go there,” he says, either through public First, she notes, much of the difference According to her research, inequality can investment or subsidies. in inequality between the United States and cause a sort of feedback loop that leads to That kind of solution might work in Europe comes from the tax-and-transfer sys- worsening economic outcomes over time. India, but Wan argues that in the PRC it tem, which can be changed relatively quickly. That danger seems to arise when countries would be part of a losing battle against the “Governments should look at their tax re- pass a level of 0.42 in the Gini coefficient, rural-to-urban wave. gimes,” she says. “There’s probably room a popular measure of income distribution. A “PRC’s rural economy accounts for about for them to become a little more progressive Gini coefficient of 0 implies a perfectly equal 12% of national income, and you have about without becoming completely inefficient and distribution of income; a Gini coefficient of 60% to 65% of people living in rural areas,” over-burdensome on businesses.” 1 implies that all the income in an economy he explains. “How can you bridge that gap? Second, she says, capital markets in Asia goes to one person. It’s too large to bridge through transfers. The have a long way to go. Banking regulations in These numbers are set to rise, if they only solution is to move these people from particular could be changed to give poor people haven’t already. “Most countries are increas- rural areas to get a piece of the urban pie.” more access to finance for entrepreneurial en- ing inequality,” says Dipak Mazumdar, a senior Rather than trying to transfer rural areas deavors. “Governments should look carefully fellow at the Munk Center of International into employment centers, Wan suggests that at the prudential arrangements and banking Studies at the University of Toronto. “The the government should work to accelerate supervision. It’s much more than microfinance single most important thing is high rates of the process of migration. He proposes a com- in the Muhammad Yunus variety. It’s develop- return to education in developing countries. plete about-face in the PRC’s treatment of ing mechanisms that give banks more of an Most of the best jobs are for educated migrant workers, who have fewer rights than incentive to lend to people who may not have people. I’m not even talking about higher longtime residents of the cities where they as much collateral.” Clarifying property rights education, I’m talking about secondary.” work. Wan says that they should instead be and giving titled land to poor people would Education and training are crucial for given privileged status, to encourage more help provide that collateral, she adds. the high-skilled manufacturing jobs that are rural people to move to cities. Birdsall’s main recommendation, how- contributing to growth across Asia, as well In cities, he adds, the government will ever, is a lesson from history. The poorest as for the service sector. The service sector find it easier to reach people with other countries in Asia, she says, “should follow presents an additional challenge, Mazumdar kinds of benefits, like education. “I’m not the model that Taipei,China and Korea set says, because it is extremely heterogeneous; saying it’s going to be without problems,” he in the 60s, which was very major invest- jobs range from finance positions with sky- says. “It’s going to be one of the huge human ments in education and in roads that reach high salaries to low-paying cleaning shifts in development projects in human history. But rural areas. Roads and schools, because those tourist hotels. As the sector grows, inequal- I think it’s doable.” investments—which in that context were ity rises almost automatically. Given the scale of these changes, a done because of the fear of Communism— This sectoral shift in incomes is be- generation may pass before they significantly that’s what made it possible for them to ing accompanied by geographical shifts affect inequality. But because the risks of in- grow without inequality.” l as well. According to Mazumdar, much of the inequality that is developing now has a regional element. “Some regions benefit much more than others,” he says. “This is particularly important in China. There will be huge regional inequalities.” The situa- tion is similar, however, in India, Indonesia, and Thailand. “Even in a smaller country, you have this,” Mazumdar said. In the PRC, the regional divide is a product not just of economic happenstance but also of explicit policy. Wan says: “Urban residents have tremendous preference in gaining university entry. It’s not only the quality of schools. Apart from that, they have a different entrance requirement for urban residents and rural residents. It’s a political thing.” To avoid the risks of inequality, new policies may have to take these sectoral and regional elements into account. “The educational system is clearly necessary, but it will not reverse the regional inequality,” Mazumdar says. “Educated people will al- ways go where the better jobs are.” He proposes a two-pronged strategy— enhancing the productivity of agriculture in Eric S ales rural regions, primarily through better access Affecting Investment Inequality can cause social disorder and political instability 19 Cover Story l Tackling Inequality I an Gill

Working Hard The sheer force of economic growth is creating earning opportunities in this Kolkata slum Pilgrims of Progress India’s economic growth is creating earning opportunities for the poor and the middle class

By Barun Roy s he drives tourists around That was 30 years ago. Eventually, his Delhi, showing historical monu- mother returned to her native village, but ments, Sakti Das likes to tell the Sakti stayed. He worked hard, moved from story of his early life. He is a tall, houseboy to shop assistant, and, while work- well-built man in his early 40s, ing as a garage hand, decided to learn driving. neatlyA dressed, with a composed manner of That was a quantum leap for him. He drove speaking. taxis, private cars, and rental tourist vehicles— “In my village home in Lakshmikan- and discovered a path to his future. tapur, in West Bengal’s South 24-Parganas Five years ago, he left working for oth- district, on the fringes of the Sunderbans, ers and started working for himself. Out of my parents were very poor and there were his savings and some loans from friends, he days when I would have nothing to eat,” he bought a car, a secondhand Maruti Esteem, says. “Sometimes, my father would take me to drive tourists around. Today, Sakti nets to people’s homes and beg them to give me over Rs15,000 ($357) a month, thanks to work. But I never got a steady job.” robust growth in India’s travel and tourism One day, his father left home, never to markets. He has paid off his loans and is able be seen again. In desperation, with the help to maintain his family back home and send of a neighbor, Sakti and his mother—he his two sons to school. was the only child—left for Delhi, where Sakti’s life highlights a significant new other fortune seekers had gone from their aspect of the Indian development story. The neighborhood. He found a low-paying job as sheer force of India’s economic growth, creat- a houseboy that added to what his mother ing new demands and earning opportunities, earned working as a maid. is having an impact on the lives not only of its

20 Development Asia l December 2008

upper and middle classes but also of its poor. refrigerators, bicycles, scooters, cell phones, workers, especially women; create jobs and While inequalities have widened in relative TVs, and other electronic gadgets, which occupations; help raise loans from banks, terms—a result of the furious rate of capital give them a sense of empowerment and donors, and other institutions; and, more accumulation at higher levels—the poor, a degree of self-respect. If this element, importantly, act as lobbyists and watchdogs when measured against themselves, are not a kind of happiness index, is factored in, on behalf of the poor. necessarily getting poorer and a softening of India’s poverty picture is sure to appear in Third, more and more workers are hard-core poverty is already quite visible. a different light. seeking fortunes away from home, either Take Biswajit Mukherjee. In his mid- Several other things have combined abroad or in other parts of the country, for 30s, he can’t even read or write, but through with a strong economy to help India mount higher salaries and wages. About 5.5 million hard work and a little foresight, he has built a meaningful fight against poverty. poor and illiterate Indians are working in up a moderately successful plant nursery on First, the emergence of microcredit has the Middle East as cooks, drivers, security an acre of farmland he inherited from his fa- widened access to loans and the scope for guards, mechanics, or building workers, and ther. The yield from the farmland was barely self-employment, especially for the rural their remittances have enhanced the lives enough to feed his family of four year-round. poor. Some 1,000 microfinance institutions of their families in states like Tamil Nadu, Now he cannot cope with the growing de- of varying sizes and strength exist across the Andhra Pradesh, and Kerala. mand for flowers and plants from Kolkata’s country. Fourth, the outreach of government-spon- new housing estates. He borrows from the lo- Second, nongovernment organizations sored initiatives such as the National Rural cal bank to replenish his stocks and employs (NGOs) and self-help groups are playing Employment Guarantee Scheme, promising a a couple of gardeners, paying them Rs78 an increasingly important role as agents of minimum 100 days of work for every farmer in (about $1.80) a day each. At a minimum, he change. Over a million NGOs of varying the country, is now much wider. makes Rs300–Rs400 a day ($7–$9.50) net. sizes and about 2.92 million self-help groups India still has a long way to go in terms Usually, it’s more like Rs1,500 (about $36) are spread across the country, and the num- of social justice and inclusive growth. Access a day. His wife helps him with the business ber keeps growing. These entities run social to education and health services remains and his two children—a boy and a girl—go projects; provide welfare services; organize inadequate. Over 7 million children are out to school. of school. Some 6.5 million children still Das and Mukherjee are India’s new drop out before the 10th year of schooling. pilgrims of progress, and they are not alone. Thirty-five percent of the population still Thousands of once-marginal people now The poor do not can’t read or write. Maternal mortality is have, for the first time, opportunities to high and some 2.1 million children die every break through the hard shell of poverty. hesitate to march on year before they see their fifth birthday. With the government spending more on the streets to protest But, as India waits for its social policies infrastructure, private investments getting to take hold, the combined effect of robust a bigger play in the economy, massive new abuses and demand economic growth and pressures generated special economic zones appearing on the by catalysts already on the ground could scene, consumerism growing, and chang- justice alter the situation much sooner than social ing lifestyles demanding newer products scientists generally believe. Once economic and services, the scope for paid jobs and empowerment takes place, social empower- self-employment is expanding for people ment has to follow, despite administrative at the bottom of the social ladder. Even in corruption, bias at various levels, and the slums and poor urban neighborhoods, men vested interest of political parties in keeping and women, especially women, are at work the poor in perpetual poverty. processing food, packing spices, making There are two added reasons. First, even handicrafts, or sewing garments that fill among the poor, education remains a mat- shelves at supermarkets and department ter of high value. As the burden of poverty stores. Boutiques and fashion designers em- eases, the need for child labor will diminish ploy women’s groups in villages to get their and the urge to see children through school expensive saris and dresses embroidered and college will grow. A rickshaw puller’s and sewn. son getting admitted in a higher technical The booming automobile market has institute or a vegetable seller’s daughter spawned a runaway demand for drivers. New becoming a doctor no longer sounds like an hotels, shopping malls, offices, apartment improbable fairy tale. blocks, and gated compounds have opened Second, the poor are no longer willing to up a massive market for janitors, maids, clean- accept their fate lying down. They do not ers, attendants, and security guards. The hesitate to march on the streets to protest demand for land is at an all-time high and abuses and demand justice. At the same land sales have helped even marginal farm- time, coverage of their cause in 24-hour ers open bank accounts, build brick homes, electronic news media—a very interesting or start new businesses. recent development—obliges the authori- Of course, India still has the world’s ties to take quick remedial action and instills biggest concentration of people in abso- in the viewer a sense of guilt and shame. One lute poverty—240 million or 450 million, might say it’s a benign cycle: media atten- depending on who’s estimating, the Indian tion encourages more protests and protests Government or the World Bank—but the aired in public make the government more proportion of poor has shrunk and keeps Barun R oy accountable. In the process, through this shrinking. People are earning more and are Nursery Business Biswajit Mukherjee, with constant beating on its conscience, society able to acquire things such as electric fans, wife Ila, was once a marginal farmer gets changed, too. l 21 Cover Story l Tackling Inequality Few Options For Youth Despite growth, structural inequality is a major cause of the Philippines’ chronic job shortage

By Chay F. Hofileña

espite completing high school, younger siblings as well as save a little each Philippines is already a market leader, with Russell Goleña says he would month. India and the People’s Republic of China, in likely have remained at home Goleña is one of 400,000 Filipinos work- providing global offshoring and outsourcing in Bulacan province doing me- ing in the business process outsourcing services. nial work in a grocery store for (BPO) sector that is expected to remain Unfortunately, the BPO sector is one of Dless than the minimum daily wage of P350 resilient in the face of an international eco- the few bright spots in a worsening outlook ($8). nomic slowdown. for a narrowly based economy. But an elder brother directed him to a The BPO sector—which includes The electronics industry, a major driver training facility in the nearby Philippine medical and legal transcriptions, finance of the economy that accounts for over 60% capital of Manila that offered free training and accounting, animation, as well as call of export revenues, slowed considerably, for employment in a call center. Two years centers—grew 49% annually between along with other exports, in the second half later, Goleña, 19, is earning a monthly salary 2004 and 2006. The industry continues to of 2008. Even the growth in remittances— of nearly P15,000 ($330) at a call center, expand and is targeting 1 million jobs and another stalwart of the economy—was with the possibility of bonuses to boost his $13 billion in revenues by 2010. This could expected to level off toward the end of income by another third. see the BPO sector accounting for an 8% the year. Reflecting this, GDP growth fell He is still rather bemused that he share of gross domestic product (GDP), and sharply to 4.6% for the first half of 2008 from can help finance the education of his two even a 10% share of the global market. The a robust 7.6% in the same period of 2007.

AFP A F P

A Call Center One of the few bright spots in a worsening outlook

22 Development Asia l December 2008

However, the fundamental problems of Philippine IT-Business Process Outsourcing Industry the Philippines run deeper than the current international crisis and explain why the Revenues Direct Employment country has chronically high unemployment ($ billions) (Number of full-time employees) rates even during times of strong growth. In April 2008, the total unemployment and un- deremployment rate stood at 27.8%, higher 100,500 than the previous year’s 26.3%. 2004 One cause is a continuing high population 4.9 growth rate of about 2%, one of the highest in Asia. This largely explains why many more job seekers come onto the market each year than available jobs. This is not an easy problem to solve as the Roman Catholic Church, which 1.5 resists population management, strongly 299,168 influences government policy. On the other side of the coin, another 2007 major cause of unequal opportunity is the domination of the economy by an oligarchy of 30 or so families that stifles competition 2004 2007 and brakes growth and job creation. The control of these families—described as “regulatory capture on investment” by Source: Business Processing Association Philippines University of the Philippines economist Emmanuel de Dios—extends to major areas What can be done to encourage more such as utilities, aviation, shipping, and port The fundamental equitable growth in the Philippines? operations. Cross-ownerships by the same problems of the A 2007 report on critical development families are also common, resulting in a constraints for the Philippines by the Asian playing field that has benefited only the big Philippines run deeper Development Bank provides three major players to the exclusion of others. than the current imperatives: expansion of fiscal space for “The popular suspicion cannot be avoid- better infrastructure, human capital, and ed that regulatory agencies tend to treat international crisis social programs; good governance for im- dominant firms in their industry depending proved investor confidence, economic and on the political accommodation these have social justice, and better public service; and reached with the appointing powers,” De expansion and diversification of the indus- Dios wrote in a paper on governance, insti- generally grow up with only one parent. trial base to create more productive jobs. tutions, and political economy. Dysfunctional families often split up. OFWs If job generation and poverty reduction In the 1990s, the government took steps endure loneliness and homesickness as they are the goals, the agriculture and related to liberalize sectors such as telecommunica- work long hours to send money back home. sectors should be prioritized, says economist tions and banking, but others such as utili- Apart from the lack of jobs, the poor also Fernando Aldaba of the Ateneo de Manila ties and media remain either off-limits, or suffer from a lack of access to education and University, “because many of the poor are carry severe restrictions, for foreign owners. health services. Although enrollment in pri- still in the rural areas.” The relative low levels of new invest- mary school is near universal, the proportion These efforts should be complemented ments and job opportunities at home are of enrolled students drops significantly at by an improvement in the investment the reason 10% of the population has to go the high school level. Only 28% of students climate through reforms in governance— abroad to work. The number of overseas advance to tertiary education. “property rights, the rule of law, transpar- Filipino workers (OFWs) was 8.7 million by A wide disparity also exists in standards ency, anticorruption activities”—as well as the end of 2007. of, and access to, health care services be- the construction of ports, roads, and power Ironically, these Filipinos who were driv- tween regions and income groups. The rich facilities to disperse growth and job oppor- en overseas by the lack of job opportunities use private health facilities while many of tunities, he adds. at home are now being courted as the new the poor die without having seen a doctor. Looking ahead, Aldaba sees some hope not middle class by the real estate and banking Reflecting such disparity, the infant just in the BPO sector but also in an emerging sectors, for example. mortality rate in the more developed Na- retirement industry. Plans to develop retire- Many OFWs have bought real estate tional Capital Region is not far from that of ment villages for a million retirees from Asia, at home, which has fueled a boom—now developed countries; but in the less devel- the United States, Canada, and Europe, as slowing—in the real estate market for the oped South, the rate tumbles to the level of well as returning Filipinos could generate 4 past 2 years. least developed countries. million jobs and $40 billion in annual revenues Their remittances have also spawned The poor also have unequal access to fi- by 2015. The retirement sector should also small enterprises and provided employment nance and credit. Even microfinance providers help stimulate the construction sector. in their villages. The average income of a tend to discriminate against poor agricultural But he emphasizes that such gains will family that is receiving remittances is nearly households that need credit the most. be relatively small. Aldaba says that long- double that of other families. A lack of governance is another struc- term, sustained growth can happen only with But while the large number of overseas tural barrier for the poor. It can mean extra more leveling of the playing field to allow for Filipinos provides valuable revenues for the direct costs as well as increasing the costs competition and job creation, accompanied Philippines, they do so at a high social and and unpredictability for new investments, by more investment in education, health, personal cost. The children of OFW families which impact job creation. and social welfare services. l 23 Cover Story l Tackling Inequality New Entries Outstrip Jobs Philippines’ Finance Secretary Margarito Teves speaks out on challenges in creating a more level playing field

By Ian Gill

Although the Philippines’ economy has incandescent lights. The Department of been growing quite strongly in recent Energy spent P500 million ($11.1 million) years, this doesn’t seem to have much for that purpose. And we provided help to impact on chronically high unemploy- farmers affected by the several typhoons ment or underemployment. Why? we have had. Much of the reason lies in our population growth rate. Our population is 89 million Don’t you also need much more in- people and if you multiply that by a 2% vestment in infrastructure to attract birth rate, you get an additional 1.8 mil- the foreign investment to create lion potential entries to the labor force more jobs? every year. Our economy has to grow at Yes, we want to spend more on infrastruc- between 7% and 9% a year to absorb the ture, especially roads and power, precisely new entries to the labor force. We have to because of the need to promote jobs and find ways of sustaining 7% and a key factor be competitive. We also need to improve is population management, but the (Ro- our absorptive capacity to implement man Catholic) Church has a very strong physical infrastructure projects. We are influence on policy makers. monitoring this and have a lot of room for improvement in this area. As a proportion Isn’t one of the major problems a struc- of gross domestic product, we are spend- tural inequality, with the Philippines’ ing only 2.7%, compared to around 5% by economy dominated by a few dozen our Southeast Asian neighbors. ruling families who tend to stifle com- I an Gill petition from within and without? Margarito Teves Emergency assistance for To create a more level playing field, We are trying to provide a more competi- the poor included food and power subsidies don’t you also need big investments tive environment, but it’s taking time be- in health and education? cause the structure of our economy—and tage of supply opportunities in countries That’s important and we need to con- income—is still tilted in favor of very few with large populations like the People’s tinuously improve in these areas. With families. We need to find ways of improv- Republic of China and India. benefit from an overall increase in revenue ing the incomes of the poor as well as of the collection—as of July, both the Bureau of middle class. At the same time, the laws The recent food and fuel price hikes Internal Revenue and the Bureau of Cus- and policies will have to be oriented and widened the gap between rich and toms were on track with revenue targets— implemented to provide more competi- poor. What measures did you take to this has provided us the fiscal space to tion. Part of it is constrained by law. In the help the poor? implement education- and health-related Constitution, for example, Filipinos have In the Philippines, we are sensitive to the projects. But, like most countries, we want to be the dominant player in a number of price of rice. For those below the poverty to expand our investment in these areas. industries such as public utilities. Foreign- line, 60% to 65% of their income is spent ers cannot own more than 40%. So if we are on food. We had to maintain the price of The lack of job opportunities at home able to make adjustments in some of these subsidized rice at P18.25 ($0.40 a kilo) has driven some 10% of the population laws, we can invite investors to compete. when commercial rice was fetching over to seek work abroad. Has the financial It will take time because some of these are P40 a kilo. We made use of additional crisis in the West affected the remit- enshrined in our Constitution. revenues that we obtained from higher oil tances these workers send home? prices to channel to the poor, like subsi- There is a cultural consideration here. What are the bright spots in terms of dizing the very poor who are consuming Filipinos tend to remit the same amount jobs? electricity at less than 100 kilowatt hours of money in pesos to their families so they Our call center/business process outsourc- per month. Then we provided money can buy the same goods and services. For ing sector is growing well and we think for poor, but deserving, students under example, when the peso was strong, Filipi- it will employ a million people in a few a scholarship program. We also provided nos had to remit more dollars. Every year, years. Our minerals sector is performing some senior citizens who are not covered there is an increase in Filipinos turning to well, especially now that prices are high, by the usual programs under the Govern- overseas opportunities as we cannot absorb and we should take advantage of this. Cer- ment Service Insurance System and the all of them here. A number of overseas tain types of manufactured goods, such as Social Security System. In the case of Filipinos are investing in property, so they high-end garments, have good prospects. electricity, we provided fluorescent bulbs, are remitting not just for their families but With food, the Philippines can take advan- which consume less power, in exchange for for the future. l 24 Cover Story l Tackling Inequality Power to the Poor Enabling villagers to choose and implement improvement schemes is a sustainable way of reducing social inequality

By Ian Gill

arshika, 26, is a Sri Lankan homemaker who used to fetch drinking water for her family from an unprotected well 150 meters from home. Now, as aD result of a water supply system installed and run by her village, Darshika has clean water on tap, her children have fewer stom- ach upsets, and she has more time to sew clothes to sell in the market. Li Zuoping, 52, is a rice farmer in the People’s Republic of China (PRC) who has land but couldn’t cultivate much of it because of lack of water. Now, his village plans to repair a dilapidated irrigation sys- tem that should enable him and his family to boost production and raise his income, which is well below the poverty line. Darshika and Li Zuoping live in poor and remote areas, but they are benefiting from community empowerment projects that enable villagers to form organizations, raise funds, and select and implement village- improvement schemes. The projects do involve initial gov- ernment intervention. They have been kick-started with help from multilateral aid agencies, local governments, and non- government organizations (NGOs). But the goal is for villagers to become more increasingly self-reliant while improving their lives. This not only increases em- powerment and reduces inequality, but eases the government’s administrative and financial burden. Despite initial setbacks, such a partici- patory approach has proved a solid success in Sri Lanka and elsewhere and it is at an experimental stage in countries like the PRC. Darshika lives in Kitulgala, in the moun- tains of Kegalle district, some 65 kilometers (km) east of Sri Lanka’s capital, Colombo. I an Gill A problem arose after the village’s major Homemaker Darshika Her village built and maintains a clean water supply system water sources became polluted with waste and animal refuse. project proposed by villagers, with funds cost through cash or labor, and build and Not long ago, the National Water Board that would also be supplemented by the maintain the new facility. approached Kitulgala—as it did around 150 Asian Development Bank and the govern- At first, villagers were shocked, and villages in the district—with an innovative ments of Norway and France. But there most resisted the idea. “They couldn’t un- proposal. The government agency offered was a condition—the village would have derstand why, on the one hand, the govern- to finance 80% of any new water supply to identify its project, finance 20% of its ment would be spending millions of rupees

25 Development Asia l December 2008

on this project and, on the other hand, poverty relief office, the State Council Lead- advisor noted that local people don’t drink was asking villagers to contribute,” says ing Group Office of Poverty Alleviation and milk and that the product would turn sour Mathota Somadasa, who became secretary Development in Beijing. by the time it reached the city. Another of Kitulgala’s water users’ association. This novel venture to promote social resident asked about raising crabs but was After seeing how the project was harmony—reducing tensions caused by told that such a project needs water, a working in neighboring villages, Kitulgala a widening income gap between rich and pump, and other basic technology, and that changed its mind and decided to join the poor—is supported with CNY8 million the cost of transporting crabs to markets scheme. After missing one deadline for ($1.12 million) from the government and would be high. its contribution, villagers finally stumped $1 million in technical assistance from the Evaluation of such projects shows that up their share of the funds, with a Dutch Asian Development Bank. villagers are much more receptive to schemes NGO providing SLRs100,000 ($906) for involving a high degree of participation and the poorest who could not pay. ownership and they are much more likely Kitulgala opted to divert water from a People-centered to succeed than traditional projects imple- river above the village. With basic training development can mented with a top-down approach. in skills such as masonry and pipe laying However, training the very poor, who provided by a local NGO, villagers, many of provide win-win often lack confidence as well as capital and them farmers, took 18 months to construct outcomes for all know-how, requires a great deal of time, pa- a system that includes a small dam, storage tience, and understanding—qualities often tanks, a chlorinator, and 18 km of pipes. stakeholders found more often in grassroots NGOs than Since then, the water users’ associa- local governments. The approach also re- tion—which was also trained in financial quires flexibility as it is tailored to villages’ management and technical maintenance by individual needs. the NGO—has been operating the system The approach is far from easy to imple- with regular funds from metered tariffs ment. Even identifying the poor can be and a staff that includes a manager and a difficult. In the hills around Daheng, Song technician, who carries out simple repairs. recalls: “Sometimes, we rode on motorbikes Kitulgala’s degree of self-reliance has to the foot of the mountain and walked for surprised even Rohan Wijesooriya, the 4 hours to reach some people. When we water board’s district manager for Kegalle. find them, no one wants to admit they’re “We are always available for consultation poor so we have to find out about them or services like water testing, but Kitulgala from other villagers.” has not approached us since they took over Sometimes, too, the poor can be wary the project,” he says. of outsiders. “People didn’t trust us in the In fact, says Wijesooriya, “Around 95% beginning,” says Song. “But after people of the villages that took part in the project found out we were staying and that we were manage their own facilities and rarely go to paying for our accommodation and meals— the NGOs or water board for assistance. though some residents refused to accept The other 5% of water users’ associations money from us—they began to realize we are not functioning well, mostly because I an Gill were here to provide a service.” they are not collecting money, so repairs Farmer Li Zuoping Repairing irrigation There is little question that such dedi- are not done and the water system dete- systems is among many village projects cation can pay off. “In the beginning, when riorates.” we asked villagers why they were poor, all In the PRC, meanwhile, sturdily built Daheng is one of the hybrid villages, they could say was that they lacked money. Li lives in Daheng, a community at the and an NGO, Kunming Earthwatch Insti- It never occurred to them that they could end of a road in Xingguo County, Jiangxi tute for Sustainable Development of Natu- do something about it. They had left all province. Daheng is one of 16 villages tak- ral Resources, is implementing projects decisions to the village leader and so any ing part in a pilot project to tackle poverty funded by the local government. village improvements were usually about at the village level. The PRC has already As a result of discussions and training, infrastructure,” says a woman representing reduced the number of rural poor from 250 Daheng’s villagers are helping carry out a an NGO in another part of the province. million in 1978 to 21.5 million in 2006, number of projects apart from repairing “Villagers have changed enormously in largely through macro level reforms. It is irrigation systems, says Dingshan Song, their attitude and are now specifying what now targeting poverty reduction in 148,000 of the Kunming NGO. Two of the bigger they want.” villages, about a fifth of its total villages. schemes involve roads—flattening one and Such examples show that people- The PRC is proceeding cautiously in its concreting another. Other projects include centered development can provide win- project, adopting a mix of approaches in the surfacing a playground, and providing a win outcomes for all stakeholders. The villages—traditional government-admin- basketball hoop and ping-pong table. An- disadvantaged are empowered and benefit istered programs, hybrid government-led other is replacing 70 rotting wooden power from a project’s practical benefits. The but NGO-implemented programs, and poles after one toppled over in a wet field, government achieves its development goal NGO-led and implemented programs. electrocuting a farmer. more effectively and sustainably—and at a “The government was the main force Villagers in Daheng have been encour- lower cost if the community contributes when we tackled poverty alleviation on a aged to come up with ideas to generate cash and labor to a project’s construction, large scale, but now our objectives are more income. Some villagers wanted to plant or- operation, and maintenance. Governments detailed and we need to mobilize civil society, ange trees and the NGO provided seeds to increasingly recognize that empowering including NGOs, to improve our efficiency,” nine households under a grant. One villager poor communities is an effective way of says Wu Zhong, director general of the top wanted to produce milk from cows, but an promoting social equity. l 26 Development Asia l December 2008

Indeed educational reform is another area where the current strategy involves transferring a lot of the responsibility to the poor. Governments across the devel- oping world are being confronted with evidence of rampant absenteeism on the part of both teachers and students. When Harvard University and the World Bank sent observers unannounced on three occasions to 3,700 public and private schools in India, the scholars found that 25% of teachers were absent on any given day. Moreover, only 45% of the teachers present were teaching when the observ- ers arrived. The rest were drinking tea, talking to other teachers, or reading the newspaper. Similar numbers were also

ervin M alonzo M ervin found in Bangladesh, Uganda, and, to a lesser extent, Peru. Not surprisingly, students in these school systems are not learning much. A recent nationally representative survey in India found that only 43% of fifth graders could do simple subtraction and division and only 60% could read at the second- grade level. The World Bank’s World Development Poor Often Cannot Report 2004, Making Services Work for Poor People urged more community control to address this problem in the belief that the Help Themselves families of children can see better than others what is wrong with the school. Motivation of the disadvantaged is not The trouble is that a recent survey to assess the role of communities in fully understood overseeing education showed widespread ignorance or apathy among parents. One question in the survey, carried out among By Abhijit V. Banerjee and Esther Duflo households in Jaunpur district, Uttar Pradesh, asked if villagers had any com- t’s tempting to assume that, because Are the poor always well placed to mittee to deal with education issues. the poor need help, they will grasp take advantage of the opportunities this Although every village in Uttar Pradesh opportunities with both hands to creates? Thought leaders, such as mi- is required by law to have a village educa- improve their lives. It’s easy to think crocredit pioneer Dr. Muhammad Yunus tion committee, and all those we surveyed that, with microcredit, they will be- and business guru C. K. Prahalad, have had one, a startling 92% of parents with Icome entrepreneurs; and with more access expressed faith in the latent power of the children in the government schools said to education, parents will become more poor as “natural entrepreneurs.” Indeed, they did not know of any such commit- engaged in their children’s schooling. data show that a substantial fraction of tee. Of those who said yes, only 2% could But our studies show that antipov- the poor can act in an entrepreneurial name members of the committee. erty strategies that rely on the poor doing manner. But is this because the poor have Why is community action not more much of the work to help themselves may no better alternatives? If the poor do not effective? One possibility is that people fall short of the mark. run their own farm or business, they often are not aware of the benefits of educa- The poor obviously ought to have end up as casual laborers. tion. A recent experiment in the Domini- greater control over their lives, and social One danger is that governments may can Republic showed that teenagers, for policy must help. But, in practice, their encourage the poor to be entrepreneurs example, substantially underestimate the control is severely limited. The poor still for the wrong reasons—because the elite benefits of education—but telling them can’t access quality health care, nor can like it, or because more traditional ways that an educated person can earn more they send their children to really good of helping the poor, such as providing a money than a less educated person sub- schools, nor set up factories. good education or helping create jobs, are stantially affects their remaining years in The current fashion in poverty re- more difficult and expensive. school. duction conforms to the idea expressed The general point is that we cannot by John Hatch, founder of the Latin Governments may assume that the poor will take care of it American microcredit institution FINCA: all. Too many things can go wrong partly “Give poor communities the opportunity, encourage the poor to because we do not fully understand what then get out of the way!” The current motivates the poor and partly because we emphasis on microcredit fits particularly be entrepreneurs for often do not understand the institutional well with this view. the wrong reasons constraints they face. l 27 Cover Story l Tackling Inequality Humble but Gifted A mathematics wizard enables poor students to join India’s technological elite

By Rahul Kumar

ankaj Kapadia, 20, is the son of Not surprisingly, Kumar is also from Kumar moves around with one or two a shopkeeper in the village of a modest background and was unable to armed policemen, keeps a dog at his gate, Nasriganj, deep in Bihar, the north- take up a course at Cambridge University and has firearms for personal safety. “Ex- ern Indian state that is home to 90 for financial reasons. He says he got the tortionists and rival coaching center own- million people, most of whom are idea for Super 30 after observing that many ers have made threatening phone calls,” Ppoor and illiterate. well-to-do-students leave India whereas he explains. Kapadia is a chemical engineering student poorer students tend to stay home. His students also face challenges in at the prestigious Indian Institute of Tech- A local deputy police chief, Abhyanand, Bihar, where the educational system is not nology (IIT) in Delhi. When he completes who taught physics, helped Kumar in very strong. Krishan Kumar, 52, a watch his course, he will not only be Nasriganj’s his work until last year. Kumar’s brother, repairer with a tiny shop, can barely feed first college graduate, but he will also have Pranav, helps run the program and their his family. His son Priyanshu joined a Su- a chance to join his country’s technological mother cooks for the students. per 30 batch and is now studying metals elite. Bihar was once a center for learning and metallurgy at the IIT in Kharagpur. Kapadia, like dozens of others, owes and culture in ancient India, but now Now Krishan and his wife Devi want much of his success to being a member lags behind other states in human and their daughter Preeti Bharti to follow her of a “Super 30” batch at the Ramanujan economic indicators, with residents of the brother to the IIT. She is attending coach- Academy in the state capital of Patna. state sometimes encountering prejudice. ing classes—though not with the Super The academy, founded by mathemat- Kumar offers his students an opportunity 30—but Krishan fears sending her to ics wizard Anand Kumar in 2003, each year to overcome the barriers of poverty, caste, evening classes for security reasons. Bihar offers 30 gifted students free board and and discrimination. is known as India’s “Wild West” and for its lodging, and an intensive 7-month coach- Ironically, a man who has helped so caste-based killings. ing course to prepare them for the stiff many young people also has his share Anand Kumar’s success has bred many entrance examinations of the IIT. of enemies. Last year, he complained imitators; some teachers are coaching “Super 30 built tremendous self- publicly that rival coaching schools had classes of several hundred students using confidence in us. After the coaching, we poached some of his successful students. microphones. realized we could do it,” says Kapadia. Kumar regrets, yet also understands, “Growing up in my village, I knew what that many of his students leave Bihar. “None an engineer was, but did not know how to of the first batch of Super 30 students who become one.” Students come from graduated from the IIT is working in Patna. Like Kapadia, most of Kumar’s “gradu- a state where many The state does not have enough opportuni- ates” get into one of the IITs across India. ties to offer them,” he says. “But at least In 2008, the entire Super 30 group earned are from low-caste they are all still in India.” More importantly, places in the IIT. In 2007 and 2006, 28 out backgrounds they have gone beyond the boundary of of the 30 were admitted to the IIT. Gain- poverty. l ing a place in the IIT is a transforming ex- perience, opening the doors to becoming an engineer or management expert. What makes the program more re- markable is that the students come from a state where many are also from low-caste backgrounds that can put them at a severe disadvantage in India. Alumni of a Super 30 batch who made it to the IIT include children of auto-rickshaw drivers, watch repairers, sidewalk vendors, landless farm- ers, and brick-kiln laborers. Those who make the Super 30 group are selected from around 3,000 candidates after competitive examinations. Students must not only be academically gifted but also have the drive and resourcefulness to carry them through the focused training R ahul Kumar that includes highly interactive sessions NEW TECHNOCRATS Students from poor villages sharpen their skills to prepare them to enter the in mathematics, physics, and chemistry. Indian Institute of Technology

28 Cover Story l Tackling Inequality

hen Indonesia’s National Development Planning Agency, known as Bap- penas, asked economist Tulus T.H. Tambunan Wfor his input for the new Medium-Term Development Plan, he said that small and medium-sized enterprises (SMEs) need to be more economic-oriented with less emphasis on social goals. While the social objective of SME devel- opment was to create jobs, this did not pro- mote productivity and efficiency—and, for that reason, did not much improve people’s overall welfare or reduce the gap between rich and poor. Shifting Role “SMEs have to be more competitive,” says the former director of the Indonesian Chamber of Commerce. “There should be no protection or discrimination.” In 2000, for instance, 38.9 million small of SMEs enterprises, or those employing from 5 to 19 people (this figure excludes medium-sized In Indonesia, the focus needs to be more ones)—a whopping 99.85% of all enter- prises in Indonesia—employed 66.8 million on productivity than jobs people out of the total 74.7 million workers employed. But 19.1% of the population remained poor and unable to afford basic By Jet Damazo necessities. Even today, when unemployment is just under 10% and SMEs are still the main provider of employment, around half of the country’s 225 million population lives on less than $2 a day. “Although they are absorbed by the economy, they are still poor,” notes Tambu- nan. For years, government policies supported the development of SMEs in their role as job providers. Under the three-decade rule of the late President Suharto, the growth of SMEs was measured by the number of regis- tered companies and the number of people they employed, says Tambunan. According to Haryo Aswicahyono of the Center for Strategic and International Stud- ies (CSIS) in Jakarta, the 1980s and early 1990s under Suharto were characterized by a boom in labor-intensive companies, many of which were small and medium in scale. “Industries such as textile, garment, footwear, and wood products grew very fast,” he says. “Labor absorption was high.” This lowered unemployment rates, Tambunan says. “But no one looked at the real incomes of those employed by SMEs.” In 2000, after minimum wages were increased by an average of 25%, they still covered only about 80% of the estimated subsistence level in Jakarta. The current Astra Foundation minimum wage averages around $100 (roughly 930,000 Indonesian rupiahs) a month—yet SME owners still say they find this too steep. “We can only afford to pay about 500,000 to 600,000 rupiah a month for More Efficiency Higher productivity, not just jobs, is needed to improve overall welfare entry-level workers,” says a shop owner in

29 Development Asia l December 2008

Depok, a city just outside of Jakarta. Neither did SMEs contribute much to the economy. Compared to more developed econo- mies of the Asia-Pacific Economic Coop- eration, Indonesian SMEs have yet to prove that they have contributed significantly to the country’s economy, asserts Tambunan in a book on the development of SMEs in Indonesia. In 2000, the 99.85% of registered enterprises that were categorized as small (excluding medium-sized ones) contributed only 39.74% of the gross domestic product. Astra Foundation Labor productivity, or the value added per worker, within SMEs was also low, says A F P Tambunan, adding that the labor productiv- ity gap between SMEs and large enterprises is one of the widest in developing coun- Labor Productivity The gap between SMEs and large enterprises is wide tries. “If you have low productivity, you have Small enterprises ited access to markets and raw materials. low economic growth, and low overall wel- Aswicahyono says that, if the government fare,” explains CSIS’s Aswicahyono. may yet save promoted policies to improve productivity, Instead of focusing on job creation and job creation may suffer and workers might supporting SMEs with access to credit, the Indonesia from the even be laid off—but, in the longer term, government should do more to increase financial meltdown the result would be higher rates of economic SMEs’ access to raw materials and markets, growth and improved overall welfare. according to Tambunan. Such change may not come about “The government pushed for coopera- which observed that only 35% of SMEs said quickly, however. SMEs played a crucial tives, infused credit, and guaranteed loans that capital was their main problem, while role as job suppliers when the country was to SMEs,” he says, noting that this was not 31% pointed to marketing and 21% listed hit hard by the 1997 Asian financial crisis, accompanied by support for skills and pro- raw materials as their biggest obstacles. absorbing a lot of the surplus labor from ductivity improvements. As a result, SMEs Artist Iskandar Suryaputra, for one, man- large companies that closed shop. With a took the “easy money” offered—and often aged to secure financing in 2003 for a textile slowdown as a result of the western financial misused it. paint-making business in Bogor, a regency crisis, SMEs may be called upon once again This seems to be confirmed in a 2003 2 hours outside of Jakarta, but says he has to be job saviors as the big companies shed survey by the National Statistics Bureau, had a hard time expanding because of lim- jobs for thousands. l

Making SMEs More Competitive “SMEs [small and medium-sized enterprises] can SMEs—for training, finance, linkages—with the Astra classifies as small a company with less than be frontrunners of Indonesian competitiveness, needs of the companies they supply—quality, low 50 employees or a capitalization of Rp1 billion especially if they subcontract for large companies,” cost, and efficiency,” says Soepardi, the foundation’s to 5 billion ($90,065.7 to $450,450.5). The says Tulus Tambunan, former director of the general manager. foundation also supports smaller SMEs through Indonesian Chamber of Commerce. One company, for instance, that used to different channels. One good example of this is PT Astra Inter- generate 800 million rupiah (Rp) ($84,000) in Farmers, for example, can borrow 1-year-old national, one of Indonesia’s largest diversified annual revenues joined the foundation in 2005. palm trees from which they can harvest lucrative conglomerates. Set up in 1980 to help SMEs, the They now make around Rp1.5 billion a year. palm oil. Astra’s crude palm oil production group’s Dharma Bhakti Astra Foundation has Around two thirds of the parts Astra needs company also lends the land, provides the fertilizer, under its wing 560 SMEs, which employ over for their Daihatsu and Toyota plants now come and buys the harvest from the farmers. 36,000 workers, that supply parts such as nuts from SMEs. For the Honda motorcycles, SMEs “We also provide microbanking services to and bolts and heavy equipment to Astra Motors produce 98% of the parts. help them manage their money,” says Soepardi. and other automotive manufacturing companies “This business model is unique to Astra,” says The initiative not only provides jobs but also eases abroad. Tonny Sumartono, an advisor for the foundation. overpopulation in the main island of Java. By providing management and technology He says such a model does not make Astra less Each farmer, Soepardi says, can earn Rp2.5 mil- training and counseling, and facilitating access to efficient as it does not tie up company resources. lion to Rp5 million ($225.16 to $450.33) a month, finance sources and markets, the foundation, fully And, Soepardi says, their suppliers’ annual more than double the $100 average minimum funded by Astra, has helped grow hundreds of revenues range from Rp5 billion to Rp25 billion wage across the country. small businesses and provided jobs to thousands. ($450,450.5 to $2,252,252.5). “In fact, the joke among farmers in the palm Importantly, the foundation addresses com- Admittedly, the companies making auto- oil plantations owned by Astra is that they have mon problems associated with SMEs—higher motive parts for Astra are larger than the money to buy refrigerators, but they use them as prices and inconsistency of quality and efficiency. average SME. The government classifies a small wardrobe closets because their town does not “Our job is to balance the needs of the company as having less than five employees, but have electricity,” Sumartono says. l

30 Cover Story l Tackling Inequality

Land of Opportunity In Hong Kong, China, more can be done to reduce growing inequality through tax or spending policies

By Philip Bowring

ong Kong, China is still a land America than to developed Asia or Europe. median wage. They also add to inequal- of opportunity for many peo- It now stands at 0.53 compared with 0.52 ity indirectly. Households that can afford ple from the People’s Repub- in 1996 and levels of 0.31 in Republic them are better able to have two income lic of China and elsewhere. of Korea, 0.40 in the United States, and earners while raising children. But that does not mean that 0.57 in Brazil. When adjusted for actual or The need for two incomes is part of the itH does not have plenty of worries about implicit government subsidies for health, explanation for the fact that Hong Kong, an apparently ever-widening income gap education, and housing, the situation is China­ has the world’s lowest fertility rate— among its citizens. Much of the headline not so bad but it has deteriorated—rising now at less than half that needed for economic growth of recent years has not from 0.47 to 0.48 in the same period. replacement. Low-income earners may get trickled down to the lower 60% or so of But in other ways, the figures under- cheap housing but still need two incomes. income earners. Recent very sharp rises state inequality by not taking account of The better-off often face huge mortgage in food prices and fuel have added to the the fact that 15% of households employ payments because of the high cost of prop- problem and forced the government to re- foreign domestic helpers who are paid erty, a result of government policies to keep spond with temporary subsidies, including (if they are lucky enough to get a little- land prices high to benefit its revenues, a for domestic power use. enforced minimum) about one third of the significant proportion of which are from Hong Kong, China is far from unique in land sales and property taxes. experiencing rising inequality. Most advanced The government has been aware of economies have experienced similar trends. the income gap problem for some time However, many of them—including Asian and on various occasions promised to try to neighbors Taipei,China; Republic of Korea; address it. However, there is little agree- and Japan—had much greater income The trends of recent ment on how to do so. The government equality. Thus, Hong Kong, China’s situation knows it has no control on relative wages today is much worse than that of its peers. years have pushed other than those of civil servants who are The numbers of people in the top Hong Kong, China’s extremely well paid by both local and inter- three and bottom three income brackets national standards. But it also recognizes, in Hong Kong, China have increased inequality to levels in principle at least, that in a well-ordered sharply in the past decade while numbers more familiar to Latin and harmonious society, some minimum of those earning close to the median wage standards for all citizens are essential. have fallen. Thus, the trends of recent America than to Although Hong Kong, China has always years have pushed Hong Kong, China’s had a reputation for being a low-tax, laissez inequality—as measured by the Gini co- developed Asia faire economy, since the early 1960s when efficient—to levels more familiar to Latin or Europe it embarked on a massive public housing 31 Development Asia l December 2008 A F P

Big Tax Cuts Mainly high-income earners and companies benefited scheme, it has accepted that government But some of these now run up against back as the number of old-age claimants subsidies for housing as well as provision the government-announced determina- rose. of free schooling and health facilities were tion to continue to reduce the level of Hong Kong, China’s Mandatory Provi- necessary. public spending relative to the gross dent Fund scheme to ensure the buildup domestic product. That has fallen from of pensions for all is less than a decade old a high of 22% in 2003/04 to a budgeted and so will have little impact on retirees’ Hong Kong, China’s Gini Coefficient 19% this year and a target of 16% by 2012. incomes for another generation. Inevitably An increased proportion of spending is the government will have to pay more for Basic also going to capital works such as roads, pensions out of recurrent revenue or set which many argue have low returns and aside a large chunk of its HK$1.1 trillion 1996 0.518 add to pollution, rather than to recurrent ($142 billion) in fiscal and exchange fund 2001 0.525 spending on transfers to help low-income reserves into a fund to meet future pen- 2006 0.533 families. sion and health needs. The importance of subsidized public The government made a start in this Adjusted for tax rental flats, which now house about 30% direction in its last budget, allocating a 1996 0.508 of the population, has declined with small part of its huge surplus into a new 2001 0.515 the growth of home ownership. But the health fund. However, for all its talk of ad- 2006 0.521 demands for education and health have dressing inequality issues, the budget in- continued to rise, and health will become cluded big tax cuts that mainly benefited Adjusted for tax an increasingly important issue as the higher-income earners and companies. and social provisions population is aging rapidly. The elderly Another possible approach to reducing already constitute a high proportion of the inequality is to legislate for a minimum 1996 0.466 very poor. Even those lower-income people wage, set at perhaps half the median wage, 2001 0.470 who saved assiduously have mostly seen for full-time work. However, under pres- 2006 0.475 the value of savings eroded by many years sure from the business community, which when inflation has exceeded returns on claims this will simply create unemploy- deposits. Meanwhile the higher-income ment, the government has dragged its earners have mostly benefited from own- feet. A government attempt at a voluntary ing shares or property. Yet in the face of scheme to cover certain low-paid catego- this reality and huge reserves, the govern- ries met with scant success as companies

Source: Hong Kong Census and ment warned in its last budget that social either declined to join or subcontracted Statistics Department security payments would have to be cut the work. l 32 Cover Story l Tackling Inequality

n most days of this city’s that started to emerge in the mid-1990s and steamy summer, Jang Byeong accelerated with the economic crisis at the Gwan can be seen astride his end of the decade. motorcycle, weaving in and Kim says the split between the level of out of the traffic and, to save wages and the availability of work for skilled Otime, occasionally mounting the footpaths and unskilled workers has been growing, in a test of nerves with pedestrians. For driven partly by factors such as the relocation 10,000 won (W) ($9) a trip, the 41-year-old of manufacturing capacity to the People’s Jang delivers small and large packages across Republic of China and domestic labor rules Seoul as one of its ubiquitous motorcycle that make it hard to lay off workers and thus couriers. discourage hiring full-time workers. As a freelancer, Jang has to cover his own “Job growth is the most important fac- costs, but he can earn W120,000 ($90.27) a tor,” he says. “The people at the bottom day. The trouble is that the demand for cou- of income distribution are only part-time, rier services has plummeted in recent times, casual workers, or not working at all.” halving Jang’s takings, just as the costs of Kim says another significant problem petrol and food have been going up. is the inability of the Republic of Korea to While Jang cruises streets filled with Getty I mages create the level of skilled work to meet the a growing number of imported European aspirations of a better-educated workforce. luxury cars and famous brand-name bou- About 80% of Korean high school graduates tiques, he says many Koreans are missing out go on to higher education. on the benefits of the country’s export-led “A lot of them end up pouring coffee in economic success. He has been forced to Starbucks,” he says. give up his apartment and move in with his But other researchers say one of the sister to save money. biggest causes of inequality is a weak system The Great Divide The gap between those in the Republic of Korea’s strong export sector and the rest of the economy is growing

By Donald Greenlees

“It’s not really revealed on the surface, of public welfare, especially for assisting the but a lot of people are hurting,” he says. One of the biggest most vulnerable in society like the elderly. “I used to make good money doing quick- causes of inequality A study on private income transfers to service delivery. I’d have 25 orders in a day. the elderly carried out by Kim Hisam, a re- Now half of them are gone.” is a weak system of searcher at Korea Development Institute, a Despite economic growth forecast to hit public welfare government think tank, found the average 4.8% in 2008, after several years of solid ex- monthly income of Koreans over the age of pansion, growing numbers of South Korean wealth was considered improper. 75 was the “staggering” sum of W450,000 workers share Jang’s complaints over falling The Korea National Statistical Office ($338.50) a month, which indicated that or stagnating income and rising prices of (NSO) earlier this year released data show- “the elderly in Korea are at high risk of household staples. ing that in 2007 the top 10% of households poverty.” The evidence of a divide between in urban areas, including Seoul, earned 9.2 “The majority of people in absolute those who have access to the strong export times the bottom 10%. This had increased poverty are the elderly people,” he says. economy of electronics, cars, and shipbuild- from 8.9 times a year earlier, the NSO says. “The public income transfers are insuf- ing and those stuck in declining low-end The average annual income of the top 10% ficient. To be eligible for assistance, an service or manufacturing jobs is growing. was W72.6 million in 2000, rose to W80 mil- elderly person has to have an income below The phenomenon can be seen in the rapid lion in 2002, hit W97.9 million in 2006, and W400,000 ($300.88) a month and then construction of lavish apartments for Seoul’s by last year was more than W100 million. they are only entitled to W80,000 ($60.17) new wealthy. The new housing is replacing An NSO survey conducted in 2007 in assistance.” old uniform dormitory blocks that were an showed that nearly eight in 10 Koreans felt the With government policies now targeting emblem of Korea’s commitment to egalitar- country’s income distribution was “unfair.” growth rather than redistribution, Kim has ian nation building in the 1960s, 1970s, Professor Kim Dae Il of Seoul National a poor prognosis for the problem: “Income and 1980s, an era when flaunting personal University says the statistics reflect a trend inequality will grow.” l 33 FEATURE l Explosion of New Media Mekong Media Makeover State-controlled media are becoming more lively in an increasingly market-oriented region

By Johanna Son A F P

Taste Matters Programs with poor ratings get the ax on China Central Television

ot so long ago, adjectives like The explosion in the number of media in circulation. Even on CCTV, programs “staid” and “predictable” products—in print, television, and radio— with poor ratings get the ax. were used to describe the means governments can no longer afford In the Lao PDR, the government cov- state-controlled media of the to fund all of them. This results in heavier ers the staff of media organizations but the People’s Republic of China reliance on advertising, which raises the organizations have to look to the private N(PRC), Lao People’s Democratic Republic need to increase circulation, which in turn sector to fund other expenses. The role of (Lao PDR), and Viet Nam. impacts on content, allowing journalists to the private sector, which can deliver more But as these countries—part of the develop their craft. As circulations—and efficiently and at lower cost, has increased Greater Mekong Subregion that also revenues—have risen, so has media clout. within a state-controlled media environ- includes Cambodia, Myanmar, and Thai- The PRC had 42 newspapers in 1968. A ment. In recent years, private companies land—have significantly shifted toward few years ago, one tally estimated more than have been producing entertainment pro- more market-oriented economies over the 2,200 newspapers and 9,000 magazines. grams and buying airtime on government past decade, so have the media reflected In broadcasting, state-run China Central TV channels. International agencies also such changes. Television (CCTV) has more than doubled work with private production houses to Moves toward closer integration, in- the number of stations from 7 in 1995 to produce material aired on Lao TV. terconnecting economic corridors, and an 18 today. “There’s too much to read and The Lao PDR used to have only one increased flow of people and goods across watch,” says Zhu Yan, news editor of the channel, Lao National TV, which began borders have increased connectivity to the CCTV English channel. “When you have a in 1983 and was limited to 3 hours a day. outside world. Cable television and the booming economy, the audiences’ demand Now there is another station, the popular internet have raised awareness of other for information is unfathomable.” entertainment-based Lao Star Channel. lifestyles—as well as expectations. Public taste is now a major determi- “In the past, media worked based upon Although media continue to be under nant of a newspaper’s reach. In the PRC, the government’s policy and did not care government control, such changes are evi- while new and more daring newspapers, how much it lost or earned, because all dent not only in a proliferating mainstream especially those farther away from Beijing, production costs were subsidized by the media but also in increasing blogging and have soared in popularity, the Communist government,” recalls a senior Lao journal- “citizen journalism.” Party’s organ, People’s Daily, drastically fell ist. Now it is quite different.

34 Development Asia l December 2008

“Economic opening up has created The state-owned media have allowed There is even concern that the media more openness in the media environment,” more leeway for discussing topics that were are heading too much toward consumerism says Vannaphone Sitthirath, a journalist once considered taboo, such as HIV/AIDS and commercialization instead of focusing who worked for Lao National TV for 6 years and sex-related issues. on serious issues such as poverty. and codirected a series on social issues with In the PRC, journalists have written about “I’m afraid that too much economic younger audiences. “Audiences complain environmental pollution—once a no-no— pressure (through advertising) will reduce about the old programs in terms of visual- and corruption in the securities market. the press’ credibility just like political pres- ization and content,” she says. One paper questioned the efficacy of the sure,” says Zhu Yan. Ordinary Lao homes today have access government’s use of vaccination in its cam- But Lao journalist Vannaphone says, to cable television. Middle-class families paign against avian flu, which earned the ire “Commercial stuff is good if you know how to can choose from more than 30 cable chan- of health officials. manage it and use it to improve other areas.” nels, watching shows uncensored. In Viet Nam, journalists aired a story In the Lao PDR, she says, many problems Such exposure and wider access to on the smuggling of chickens at the border and issues—such as unemployment, child overseas news have produced more critical with the PRC. In the Lao PDR, the media abuse, domestic violence, a poor educational and probing reporting, says a senior Lao have reported on young women getting system—are waiting to be written about and journalist. This is as true of radio as of pregnant before marriage. the media should not worry too much about print. Since November 2007, the late-night All this is far from saying that the media government influence. “I wouldn’t be able “Talk of the News” program discusses cur- have the same freedom for critical report- to do anything if I were concerned about rent issues and includes, for the first time ing as in the West. political pressure,” she says. in the Lao PDR, a callback feature that Taboo topics, particularly relating to A Vietnamese journalist says she was allows listeners to call in at the end of the political leadership, still prevail. Mekong warned that she would be frustrated after program, raising issues from bad roads to journalists know they cannot delve into getting a master’s degree overseas. But this impolite traffic cops. matters concerning the Communist Party. is not the case. Vietnamese would like to In Viet Nam, the media have mush- Governments have intervened when they be able to write more freely about religion roomed. There are 713 publications today believe media have crossed the line. But or politics, she says. “But there is also a with a combined circulation of 600 million, this has also happened in supposedly wide range of other issues that needs to be according to government estimates. This freer countries like Thailand, notes Rosa- exposed in media—poverty, the effects of compares with 563 publications 5 years lia Sciortino, a professor who teaches on natural calamities, and disease are all press- earlier. Mekong development issues. However, ing issues for my people.” In Viet Nam, too, the media have be- she says, discussion on social and develop- Such nuanced shifts in the media pic- come more public oriented, says one Viet- ment issues has greatly increased. ture in the PRC, Lao PDR, and Viet Nam namese journalist, attributing this to more do not often make the news outside. For international integration and globalization. one thing, media are usually gauged through Also in Viet Nam, the internet has Media are usually the headline-grabbing yardstick of freedom created a forum for news, discussions, and ratings of western watchdog groups. In blogs not seen or heard in the official media. gauged through the addition, some of the best reporting in the “Citizen journalism has opened another headline-grabbing Mekong countries is in the local language, door for all sorts of people, particularly local which outsiders may not easily understand. journalists and novelists, to criticize the yardstick of freedom Despite restrictions on some areas of po- government, which they are not allowed to litical reporting, journalists are increasingly do in the public media,” says the Vietnam- ratings of western writing on important issues and are making ese journalist, who is studying overseas. watchdog groups a difference in their societies. l “Bloggers dare to speak out on what they are unhappy about—issues like democracy, the (one-party) political system, freedom of speech, or government decisions and regulations on the economy.” The result is that stories exposing corruption or other scandals, though these are in line with the government’s priori- ties, have appeared. In the PRC, all media are affiliated with some state organization but this does not re- strict critical material. For instance, the news- paper Global Times has acquired a reputation for serious material, has become popular, and has attracted a lot of advertisements—but it is affiliated with the People’s Daily. In Viet Nam, there is no private owner- ship of the media. The more hard-hitting newspapers like Thanh Nien or Tuoi Tre are often assumed to be privately owned, but are owned by the city government’s Youth Union or similar organizations under the Communist Party. In the Lao PDR, all A F P media are under the state. Mushrooming Media Stories exposing corruption are in line with government priorities in Viet Nam

35 FEATURE l Fortune at the Bottom Fortune at the Bottom Business can profit while benefiting the poor

By Lala Rimando

llac Diaz has found a way to make money while helping the underprivileged. He watched Filipino seamen hanging around the backstreets near Manila’s Luneta Park for days and even weeks whileI waiting for their next job. Many would run out of savings before their papers were and recovered it within 14 months. “If this processed or before their next sail date. project is not earning, how can I sustain it?” Some would squat in shanties or sleep rough he asks. in the park. The project shows that by pricing goods M alonzo M ervin To meet the needs of these “urban or services at the low end but gaining volume refugees,” as he calls them, Diaz established in return, an entrepreneur can make handy in 2000 the Pier One Seafarers’ Dormitory, profits while helping the poor. where seamen can stay for P100 ($2.20) a This is essentially the message of C. K. night. The facility also provides, through Prahalad’s bestselling book, Fortune at the partner agencies, job-matching programs, Bottom of the Pyramid, in which the author seminars, and counseling. Since then, Diaz’s targets the 4 billion in the world who live on or subsidies. His idea of reducing poverty enterprise has grown to three branches with less than $2 a day and who occupy the “base through a market-based approach is not new. more than 1,500 beds. Pier One has become of the pyramid.” But his book may have made an impact be- the largest migrant shelter in the Philip- By asserting that business can help the cause it includes official data, in addition to pines. poor and make a profit, Prahalad is offering anecdotes, to support his argument. Diaz is also gaining from his project. He an alternative to the long-held view that the The bulk of the 4 billion people at the invested an initial P2.5 million ($50,000), poor can only be served through handouts base of the pyramid, who account for 75% of

36 Development Asia l December 2008

the world’s population, live in Asia. Accord- this bottom-up and multi-stakeholder ap- Bottom of the Pyramid Income ing to the World Resources Institute, Asia’s proach. base of the pyramid market is a whopping Companies can better understand the Asia 2007 $3.47 trillion, far above that of Eastern needs of the local base of the pyramid Base of the Pyramid Europe ($458 billion), Africa ($429 billion), market by partnering with NGOs that have Country Income ($ millions) and combined Latin America and the Carib- grassroots connections with the poor. French Purchasing Power Parities bean ($509 billion). yogurt maker Groupe Danone knows this People’s Prahalad translated such data into a well. In Bangladesh, it teamed up with the Republic of language that capitalists understand: profits Grameen Group, whose pioneer microfi- China 161,127.6 and markets. He popularized the notion nancing earned a Nobel Peace Prize for its that businesses can profit by working with founder, Muhammad Yunus, in 2006. Bangladesh 142,293.9 the poor in expanding markets and building The partners, through Grameen Danone new business units. Foods, began offering Sakti Dai (Power India 93,710.1 Converts seem to be increasing. Ac- Yogurt)—fortified with iron, zinc, vitamin A, cording to a 2007 survey of the 100-plus and iodine—to low-income and nutritionally member-countries of the World Business deprived people. Key to its buoyant sales Viet Nam 84,582.8 Council for Sustainable Development, was that it was priced at $0.07 a cup, lower almost 90% of respondents believed that than other similar products. Thailand 79,632.7 business can be profitable while serving the For success, economies of scale are criti- needs of the poor. Two of the world’s richest cal. But keeping the product cost low enough Philippines 56,023.7 men, Microsoft founder and now full-time to generate sales volume needs “co-creation.” philanthropist Bill Gates and investor guru The partnership involves other Grameen Malaysia 38,072.3 Warren Buffet support the concept. units for raw materials, distribution, market- Prahalad’s book is instructive as to why ing, and sales. The factories get milk from Indonesia 24,035.8 some business approaches succeed more than Grameen microborrowers who used loans others. to buy cows. Grameen microvendors sell Annapurna Salt, a branded product of the yogurt door-to-door and Grameen’s 6.6 Nepal 22,981.7 Hindustan Lever Ltd, a unit of multinational million members buy it for their kids. Thus, Unilever, seemed to have all the ingredients directly or indirectly, the yogurt provides Sri Lanka 21,788.9 for success. Hindustan reformulated its income for almost 2,000 individuals within Total 724,250.5 product to ride the Indian government’s a 20-mile radius of the plant. Source: World Resources Institute campaign to combat the iodine deficiency In another example of “co-creation,” that affected an estimated 70 million people. Globe Telecoms looked for someone like It targeted poor mothers between 25 and Alice Elesio in the fishing village of Oslog Globe is using people like Elesio—who 40 years old, who bought the food and did in central Philippines when they wanted to is persuasive in getting people to switch to the cooking. Yet Annapurna Salt remains a increase their penetration of the cell phone Globe cell phones—as community “gate- distant second in India’s iodized salt market market. Elesio is neither tech-savvy nor is keepers” to open up new markets at the and its penetration among the poor is minis- she a premium mobile phone customer. But base of the pyramid, says Jeffrey Tarayao, cule. Its price of 7.5 rupees (Re) per sachet the housewife-cum-soap entrepreneur has the firm’s community relations head. The (or $0.85 per kilogram) is almost the same become one of the company’s marketing payback for community projects, he says, is as that of iodized salt pioneer and market tools. that the use of their cell sites is quick to rise leader Tata Salt. But it is way above that of Globe engaged Elesio in a “Bridging when livelihood projects start. small regional producers who sell iodized Community” social project to develop re- In another example, Reuters, which salt at Re2 per kilo. lationships with local communities where offers news and financial information to “Annapurna Salt may be a good product Globe has a base or business center. In bankers and investors, made a smart de- embodying a valuable technology, but it is Oslog, the company provided skills train- parture from tradition when it offered a not an example supporting the base of the ing seminars for livelihood projects, includ- text message service for poor Indian farm- pyramid proposition,” says Aneel Karnani, ing a soap- and candle-making business. ers last year. The service, called Reuters an associate professor of Strategy at the These projects were always in partnership Media Light, allows rural farmers to check Ross School of Business at the University of with a microfinance institution, which weather reports over a 50-mile radius, Michigan. An executive of competitor Tata provided the capital, and a client, such as obtain crop-spraying information, and find Salt was more specific in a speech to inves- a nearby beach resort, that buys most of out how much crops are fetching at local tors: Annapurna Salt had not “co-created” a their products. markets within a 5-hour journey. All this market around the needs of the poor. information is available on the farmers’ This “co-creation,” as Prahalad puts it, mobile phone for Re175 ($5.50) a quarter. involves engaging the base of the pyramid As of April 2008, about 250,000 farmers had community in a company’s decision-making subscribed to this service and if enough of process. Businesses need to take consumers “Co-creation” India’s millions of farmers sign up, it will and their community into account when spell big profit. making strategic decisions. involves engaging the These experiences show that business “For this concept to work, there needs base of the pyramid models can thrive at the bottom of the pyra- to be strong collaboration between firms, mid if they also improve education for the governments, nongovernment organizations community in a poor, create jobs for them, or unlock their (NGOs), and social entrepreneurs,” says entrepreneurial potential. In other words, it Francois Perrot, base of the pyramid project company’s decision- works best when both business and the poor manager of the Lafarge group, emphasizing making process benefit. l 37 FEATURE l Toward Eco-Friendly Tourism Toward Eco-Friendly Tourism Hosting visitors in villages of southern Thailand offers sustainable benefits but also poses several challenges

By Ron Corben

n the northern Thai village of Baan Jalae, other positive effects, such as strengthening 2007, international arrivals to the GMS rose 30 kilometers from Chiang Rai, men in a sense of ethnic identity, protecting land by an annual average of 8.12%, more than traditional costume dance before appre- rights, and reducing deforestation. twice the world average. ciative tourists. This is ordinary enough, In southern Thailand, too, the Muslim Tourism is also a key contributor to but what is unusual is that the women village of Ban Tale Nok, set between coral growth. In Cambodia it accounts for 15% areI preparing meals and sleeping quarters— reefs and a rainforest on the Andaman Sea, of gross domestic product; in the Lao for visitors who will stay at their homes. has turned to home-stay tourism to help People’s Democratic Republic, 7.5%; in The ethnic Lahu people, an indepen- recover from the devastation wrought by the Thailand, 6.5%; and in Viet Nam, 4%. dent and close community, are opening their 2004 tsunami. Such growth has spurred debate on its homes to the more curious and adventurous Beyond Thailand, other countries in the impact—both positive and negative—on tourists. In doing so, they are increasing Greater Mekong Subregion (GMS) are look- communities and the environment. incomes, helping preserve their culture, and ing more toward eco-friendly and sustainable The aim is to support responsible learning from visitors. ways of riding the tourism boom. operators and projects while reducing nega- The emergence of “home-stay pro- International tourist arrivals in GMS tive impacts, says Christine Jacquemin, a grams” in rural communities is emerging as countries rose 11.2% to 25.6 million in 2007, sustainable tourism development officer a way to attract tourists as well as to preserve according to the World Travel and Tourism with the Mekong Tourism Coordination culture and the environment, says Somsak Council. Income from tourism generated Office. Too often, according to Jacquemin, the Malee, manager of the Mirror Foundation, a $18.85 billion and employed 3.74 million tourism industry focuses on visitor numbers nongovernment organization that runs such people across the GMS. Between 1995 and rather than the wider impact. Governments, programs. she adds, also need to look beyond financial Significantly, the extra income can help goals to environmental and social impact. families stay together and deter the young Reinforcing this view is Polladach from leaving for city lights and becoming in- Governments need to Theerapappisit of the University of Western volved with traffickers, a common problem Sydney’s School of Social Sciences, who says here, says Natee Lafu, a Baan Jalae mother. look beyond financial in a 2007 paper that those who do business The home-stay program, which is also with ethnic communities should have an running in the nearby Akha and Karen vil- goals to environmental “inbuilt poverty reduction/community de- lages of Baan Yafu and Baan Arpha, can have and social impact velopment plan.” North Andaman Community Tourism Network Tourism Andaman Community North

Home-Stay Tourism Visitors dock at the Ban Talee Nok village in the Andaman Sea in Thailand

38 Development Asia l December 2008

In Viet Nam, a sustainable tourism pro- gram set out in March 2008 by the Ministry of Culture, Sports and Tourism focuses on local communities in the central provinces of Quang Binh, Quang Tri, Thua Tien Hua, and the far northern regions of Cao Bang and Bac Kan.

Viet Nam, especially in the coastal region, North Andaman Community Tourism Network is expected to attract up to 7.5 million visitors by 2010 with annual revenues of over $2 bil- lion, according to its Institute for Aquaculture Economics and Planning. The institute sees coastal tourism accounting for 80% of all tour- ists and 70% of tourism revenue. But dealing with the negative aspects is the challenge. The famed Ha Long Bay, its treasures recognized by the United Nations Educational, Scientific and Cultural Organi- zation, is already under pressure from rising tourism and environmental damage. To combat this, there is a need to widen Handicraft Demonstration Hands-on activities give visitors an appreciation of southern Thai art the network of marine-protected areas for sustainable livelihood in coastal regions, says and threats of tourism. The Peam Krasop of achieving sustainable tourism. Political Nguyen Giang Thu, a director of the Minis- Wildlife Sanctuary is the only nationally will and the commitment from the tourist try of Agriculture and Rural Development. protected area in Cambodia that includes industry, as well as recognition of the rights A network already exists to provide a pristine mangrove forest. United Nations and needs of local communities, are among alternative income sources to fishing—the agencies and the Cambodian government the main challenges. goal being to reduce pressure on local fish are working with the community of Peam Trying to adapt and change is itself a chal- stocks while pursuing sustainable tourism. Krasop, which attracts 15,000 visitors a year, lenge for many in tourism, says Pacific Asia For example, in 2001, the government chose to manage the region for sustainable tourism Travel Association communications manager the southern region of Nha Trang Bay as a development. John Koldowski. While individual operators marine-protected area site, along with the The IUCN study highlights a range of are taking sustainable tourism to heart, “it’s Cham Islands and Phu Quoc. benefits, including the increase in jobs and been a slow slog across the broader travel The number of visitors to Nha Trang incomes through boat, bird-watching, and and tourism industry,” he says. Bay almost doubled to 400,000 by 2006 from fishing tours, and sales of food and handi- Economic realities and business models 2001, according to the International Union crafts to tourists. are slow to adapt. For many tourism busi- for the Conservation of Nature (IUCN), But the study also notes the need to de- ness operators, according to Koldowski, the partly as a result of investments for the man- velop a zoning plan, improve infrastructure, difficult business climate means the priority agement and upkeep of the area. and provide tourist services such as food is financial survival. But public pressure is In other areas, such as the Cham Islands and boat rentals. It anticipates challenges increasing. A heightened awareness about in central Viet Nam, tourism has yet to take relating to the proper disposal of solid waste environmental protection and global warm- off but villagers have been trained to make and sewerage, illegal activities by outsiders, ing is pushing more tour operators “to realize fish sauces and to market and distribute rising competition from other tourist sites, that they have to do more than say they are these products. and the exodus of youth from the village. ecologically friendly—they have to prove it,” In Cambodia, where seaside tourism Across the GMS there are no simple ways he says. l is exploding, safeguard measures are also needed. Cambodia still does not have “the Projected Visitor Arrivals to the GMS (thousands) institutional framework for the management of tourism within protected areas,” says the Mekong Tourism Coordination Office in 50,000 a recent conference paper. However, this 45,000 may be soon addressed as the GMS core 40,000 environment program selected Cambodia 35,000 as a pilot site “for the development of a strategic environmental assessment of the 30,000 tourism sector.” 25,000 The seaside province of Koh Kong is an 20,000 example. It is well known for its beaches, forests, mountains—and casinos. Improved 15,000 roads to Koh Kong from Phnom Penh and 10,000 Thailand have raised concerns about the 5,000 ecological impact of development on people 2004 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 and wildlife. Legend: A 2008 IUCN study on the mangrove/ Thailand Other GMS Countries wetland village of Boeng Kayak in Peam Kra- Source: Greater Mekong Subregion Tourism Sector Strategy. June 2005 sop Commune, Koh Kong, notes the benefits

39 Feature l Can the Food Crisis Return? A F P

Specter of Hunger Any one of a number of factors could spark a return to high food prices Can the Food Crisis Return? Recession has overshadowed “agflation,” but prices could spike again By John Berthelsen

he world has seen wild gyrations of rice, so I buy rice and we eat that with on food production. The second began in in food prices over the last year. tempeh or tahu [types of soybean], but no November 2007 when Tropical Cyclone The price of rice, the staple meat,” he says. Sidr not only killed nearly 3,500 people in food for half the world, rose by Today, because recession has lowered Bangladesh but also forced the government nearly 90% from the start of the price of oil and basic commodities, to import 3.5 million metric tons of rice to 2008T and then fell 17% over the 3 months Renung’s hardship has eased somewhat and, make up for a greatly reduced harvest. until mid-October, according to the Com- elsewhere, the memory of the food riots in That proved the catalyst that triggered a modity Research Bureau Index, a global 30 countries from Pakistan to Mexico and global rice crisis. Such disparate countries as benchmark for measuring commodity price Cameroon is beginning to fade. the United States (US), Bangladesh, Cote movement. But there are deep concerns that the d’Ivoire, and Philippines experienced rice Oil prices, on which food costs largely specter of high food prices could return. The shortages as rice-exporting countries pan- depend, hit a high of $147 per barrel in July world still faces the possibility of starvation icked and shut down supplies. In the early and fell to half of that by October. that could be triggered by any one of a num- part of 2008, 14 countries—including India, For Renung, a 49-year-old Central Java- ber of factors. Moreover, the world’s capacity People’s Republic of China, Thailand, and nese who peddles a becak (tricycle) in a Ja- to feed its poor may be running out at a time Viet Nam—banned or limited exports. By karta suburb for a living, life has been a roller when incomes are falling everywhere. April 2008, especially after cyclone Nargis coaster. Earlier this year, he never knew how “On nearly every level, we are reaching devastated Myanmar and further increased much money he earned in a month because the end of what may one day be called the demand for rice exports, rice skyrocketed whatever he earned in a day was gone first ‘golden age’ of food, a brief, near-miraculous from $300 a metric ton to as much as $1,100. thing the next morning. period in which the things we ate seemed to It showed how interlocked the world’s food “Since the price of kerosene as well as grow only more plentiful, more secure, more markets are, and how close they are to ca- food prices went up, I turned to burning nutritious, and simply better with each pass- pacity. cordwood for fuel,” he says. The money ing year,” Paul Roberts wrote in his sobering To complicate matters, huge amounts that used to go to kerosene went instead and exhaustive study of the world’s food sup- of corn in the US Midwest breadbasket, for rice. To give school money to the young- ply system, The End of Food, earlier this year. which supplies nearly 65% of world corn est of his four children, he was borrowing Although food prices had been rising exports, were diverted to produce biofuels. from anyone he could. steadily for some time, two factors acceler- This raised the price of corn—it remains “One liter of kerosene, which costs ated the process. One was the sharp rise in 21% above its price last year—and had around Rp10,000 ($1), could buy two liters the oil price, which had a devastating effect other effects such as driving up cotton

40 Development Asia l December 2008

prices (because of the diversion of agricul- Devoting more land to industrial farm- tute in the Philippines, consisting of six to tural land to corn). ing is not the only answer, however. In the eight plastic drums along a central axis Roberts and others point out that the race to feed the world’s poor, it is very much and mounted on wheels, can be pulled by world could easily return to these high prices up to the developed countries to reduce or hand, dropping already-germinated seeds as a result of any number of factors. Crude oil eliminate trade barriers. Given the political in fairly precise rows. Trials of the device prices could rise again if some serious crisis climate, it is questionable when this will in Bangladesh pushed up yields on average occurred in the Mideast. Water is becoming happen though. by 18% and increased returns by 21% over critically short as farmers continue to draw What is certain is that the poor suffer transplantation by hand. Importantly, it down the world’s aquifers. The overuse of disproportionately from trade barriers. The takes only 2 person-days to plant a crop, antibiotics in animal feed could create a race 7-year campaign to pass the Doha Round compared to 50 when farmers, wives, and of superbugs with the potential to wipe out of agricultural trade liberalization bore no children plant seedlings by hand. chickens, pigs, or cattle. Man-caused global fruit. As a result, subsidies for 20,000 cotton Other simple devices can drive up yields warming is also changing the land and affect- producers in the US mean that millions of as well, but the challenge lies in getting ing agricultural fertility, reducing production African cotton farmers from Benin to Chad them into the hands of poor farmers. of wheat, corn, and barley. Adverse weather have no markets for their output. In another Consider how technology changed farm- is another major determinant. For example, example, sugar producers in Brazil, whose ing in the US between 1950 and 2000: Australia, which generally exports a third ethanol is far more efficient than corn-based • The average amount of milk produced of the world’s wheat, has been badly hit by ethanol, have been locked out of American per cow increased from 2,410.4 kg to drought. markets. 8,255.8 kg per year. The bottom line is, whatever the causes, As the economies of the Organisation for • The average yield of corn rose from global cereal stocks fell to 320 million Economic Co-operation and Development 2,457 kg to 9,639 kg per hectare. metric tons by the end of 2007, far below stall, sentiment against freeing up trade is • Each farmer in 2000 produced on aver- the all-time high, according to Worldwatch likely to harden, rather than soften, if the age 12 times the farm output per hour Institute. As a result, world prices for basic past is any guide. The US, which has led as a farmer did in 1950. commodities have risen since 2000 and the crusade for several decades to free up • Between 1948 and 2004, agricultural began to skyrocket from the start of 2006. world trade, will from 2009 be dominated by commodity prices rose at less than This shows that while some temporary relief a Democratic Congress, with close ties to la- half the rate of prices in the wider may be seen, the longer-term trend appears bor unions that find free trade antithetical. economy. to be ominous. Mechanization can also help solve the The fact remains, however, that with the What can be done for Renung and the food problem. Often, this can involve simple increases in the world’s population, farmers 900 million poor worldwide for whom food machines. For example, a seeder developed cannot by themselves produce enough food takes up between 40% and 60% of the fam- by the International Rice Research Insti- to feed everyone, despite technology and ily budget? other advances. Part of the answer lies in Milton Fried- As Joachim von Braun, director general man’s famous dictum that the cure for high With the increases in of the International Food Policy Research prices is higher prices. The vast steppes of Institute, noted in May: “This global food Russia, for instance, largely abandoned after the world’s population, crisis is a complex problem that cannot be the collapse of the Soviet Union, are coming farmers cannot by solved with simplistic approaches. More back under cultivation, not as collectives, effective and coherent action is needed to but as investor-driven industrialized farms. themselves produce help the most vulnerable populations cope The same is true in Poland, Slovakia, and with drastic hikes in food bills and to assist Ukraine. Yields are still far below western enough food to feed developing countries with strategies to standards—but should improve. everyone increase agricultural productivity.” l

Export Price of Rice ($ per ton free on board)

312.00 375.67 463.00 962.60 593.00 Price (US$ per ton) Price (US$ per ton) Price (US$ per ton) Price (US$ per ton) Price (US$ per ton) (Dec 06) (Dec 07) (Feb 08) (May 08) (Nov 08)

Source: Food and Agriculture Organization electronic database White rice, Thai 100% B second grade f.o.b. Bangkok. (www.fao.org/es/esc/prices) Accessed 24 November 2008.

41 Department

In Focus l Viet Nam Mass move to cities creates new challenges

By Emma-Kate Kunth-Symons

hen the West’s financial Standard & Poor’s issued a negative negative outlooks for the three Asian na- crisis impacted on the real outlook on sovereign ratings for Viet Nam, tions. economy, Viet Nam was along with Pakistan and Sri Lanka. The In addition, the World Economic more vulnerable than most. ratings agency cited inflation, national Forum’s (WEF) 2008 Global Competi- OilW prices, on which food costs largely de- politics, and deterioration in external and tiveness Index dropped Viet Nam two pend, hit a high of $147 per barrel in July fiscal indicators as factors influencing the places to 68th out of 131 economies on its and tumbled to half of that by October. annual ranking of countries. The biggest A raft of reports indicated that Asia’s problems for doing business in Viet Nam youngest “tiger” economy—which joined include inflation, poor infrastructure, and the World Trade Organization (WTO) last A key challenge a poorly educated working population, the year and had originally forecast growth of WEF said. 9% for 2008—was, in fact, highly exposed involves land use as Could the global economic tsunami to the global downturn. wipe out years of successful poverty reduc- The Citigroup Vulnerability Index competition among tion and achievement of key Millennium said Viet Nam’s exposure was caused by various sectors grows Development Goals in Viet Nam? the fact that it had little room to move in the event of a sudden stop or reversal in external financing or capital inflows. Sixty-four percent of Viet Nam’s foreign exchange reserves were made up of “ex- ternal financing” (defined as the current account deficit plus debt payments). Global Insight, a United States (US)– based economic research and forecasting group, listed Viet Nam as among emerging market economies with a high banking sector risk, because of its “high potential for instability due to excessive political influence and poor risk assessment and banking practices.” The bloated banking sector, compris- ing more than 40 banks plus unlisted lenders and foreign bank branches, was predicted to experience a rash of failures. However, ANZ, one of the largest interna- tional banks in the Asia and Pacific region, said it was taking a long-term view on Viet Nam’s economy. In October it was granted a license to open the third foreign bank in the country, following HSBC and Standard Chartered. Despite this show of confidence, the scores of smaller banks in Viet Nam were struggling to compete with the size and capital base of large banking players such as Sacombank, Vietcombank, and Asia Commercial Bank. A period of mass consolidation was expected as foreign competition increases while Viet Nam I an Gill complies with its WTO membership. Urban Poor The millions who have flocked to the cities create a host of new development challenges

42 Development Asia l December 2008

World Bank chief Robert Zoellick at a Viet Nam Consumer Price Index (Annual change, %) joint press conference in Washington, DC with International Monetary Fund boss Dominique Strauss-Kahn warned about the international fallout for developing % countries from the panic and uncertainty 10 of the meltdown. “The poorest and most vulnerable 8 groups risk the most serious—and in some cases, permanent—damage,” Zoellick said. 6 “One hundred million have been driven into poverty this year and that number will grow.” 4 On the less gloomy side, inflation, which had reached almost 28% earlier this 2 year, is predicted to drop significantly in 2009 to around 15%. 0 But the recession in Viet Nam’s key ex- port market, the US, and an expected fall -2 2000 2001 2002 2003 2004 2005 2006 2007 in growth in key trading partners such as the People’s Republic of China (PRC) are weighing heavily on the country’s short- to Source: ADB Key Indicators for Asia and the Pacific 2008 medium-term economic prospects. The US is the number one destination Viet Nam has made great strides in unregistered and unaccounted for.” for Viet Nam’s exports such as clothes, reducing absolute poverty in recent years, Viet Nam needs to address the shoes, petroleum, rice, coffee, and fish. but faces a new set of challenges, according role of the state and of state-owned Under such circumstances, it is dif- to Alex Warren-Rodriguez, an economist enterprises to realize its development ficult to forecast the outlook. with the United Nations Development potential, says the economist. Also, Viet “It’s anybody’s guess, isn’t it? People Programme in Ha Noi. The millions of Nam needs to improve in the field of are stabbing around in the dark,” says urban poor who have flocked to Ha Noi education, he says, including the cur- Dominic Scriven, managing director of and Ho Chi Minh City pose a host of new riculum and teaching standards, as well Ho Chi Minh City-based Dragon Capital problems for development goals. as scientific research and publications. A Management company. “We expect growth “There have been rapid changes in third key challenge involves land use as this year to be 6.4%. Next year, the two the dynamics of poverty,” says Warren- competition grows between the agricul- big imponderables are exports and foreign Rodriguez. “The new face of poverty tural, industrial, tourism, and cultural investment and the extent to which they in Viet Nam is more likely to be urban sectors, as well as pressure for housing will change.” than rural. But the urban poor are largely for the urban poor. l Exports are expected to fall after soar- ing to an “astounding” 42% for the first 8 months of 2008, with many businesses moving to Viet Nam from the PRC, says Tips for Investors Scriven. He is certain foreign investment in- Investors can take a bet on Viet Nam at a time of international contraction. flows will slow down. “Some projects will The government projection, made in October, for the growth of gross domestic be put on the backburner, so there will be product (GDP) in 2009 is 7%. This would be the same as 2008 and would be among the some softness,” he says. As for the bank- highest in Asia. ing sector, Scriven says the government To be sure, Viet Nam’s exporters of clothes and shoes are seeing orders fall from the has some room to pump prime to offset United States and Europe, while prices for its coffee are also dropping. An HSBC report in the “possible slowdown in the external October said investors would not see improvements in the stock market before the end sector.” of 2008. Despite the country’s susceptibility, But Dominic Scriven, managing director of Ho Chi Minh City–based Dragon Capital Scriven believes Viet Nam “isn’t a bad Management company, sees plenty of upside for bargain hunters in 2009. place to be” for foreign investors. “A drop “I think the Vietnamese government fixed income looks good,” he says. “The dong is in prices, of course, is good,” he says. “The a well-backed currency, has limited leverage and 15% yields. Also, there are good cash- government can cut interest rates and flow businesses linked to consumption. Regionally and globally, one has to invest with stimulate growth but it is being advised to recession in mind. This means careful currency selection—and the strength of the dollar is wait until the trend is clearly established. ridiculous—some protection with gold, and strict blue-chip acquisition programs.” Perhaps they will cut in the first quarter of Scriven also agrees with HSBC economist Prakriti Sofat who advised in an October 2009 or after.” report that the government should hold firm against pressure to ease rates. “It’s important What are the longer-term economic that the Central Bank keeps the base rate at 14% for some time and for the government prospects for Viet Nam? to maintain tight fiscal policy,” said Sofat. Will it go the way of its richer East The key to stable economic growth in 2009 lies in prudent fiscal policy to rein Asian neighbors such as the PRC, Japan, in growth and inflation, said Benedict Bingham of the International Monetary Fund in and Republic of Korea? Or will it follow October, adding that the country has built up a “very positive profile of an attractive long- the model of its less successful Southeast term investment destination.” l Asian peers?

43 Development Asia l December 2008

Where’s my duvet?

Every day in Asia and the Pacific, 620 million people live on less than $1 a day— that’s less than the price of a pillow case. Economic growth alone is not enough. Growth has to be inclusive. Find out more at www.adb.org/poverty.

FIGHTING POVERTY IN ASIA AND THE PACIFIC 44 Feature l News from the Bottom Up News From the Bottom Up Community media address social issues, but need support from advertisers

By Red Batario

t’s called “community journalism” in tions, academe, and business groups to air Nepal and Thailand, “public journal- views on problems, such as the shortage ism” in the Philippines and Indonesia, of rice, inadequate classrooms, mining is- “development journalism” in India sues, and the lack of jobs. Introduced in and Bangladesh. But the goal is the 2004 when the paper was having a hard Isame—to give ordinary people a chance to time generating revenue, “Tuturan” soon speak on issues affecting their lives. gained a following. One early topic was The results can make a difference. the planned development of vast tracts of Look, for example, at what happened land for palm oil plantations. After public when journalist Leny Escaro wrote about forums facilitated by Bandillo, Palaweños Wilson Salibio, a 42-year-old farmer from voted down the proposal. Importantly, the the village of Sicsican, island of Palawan newspaper saw local advertising revenues in west central Philippines. Escaro made rise by 10%, helping it to continue. five trips to the island over 2 months “to But another community newspaper, in the newspaper had to fold after 5 years engage people in conversation and find the west central province of Iloilo, didn’t because of lack of advertising revenues. out what they think about their future on fare as well. In the upland municipality of “Perhaps advertisers believe that only sex the land they till, but do not own,” she Bingawan, the Visayas Examiner, a weekly, and gore sell, and that’s why they didn’t says. helped institutionalize a citizen-based give us enough,” said the former editor, Her story, when it appeared in Bandillo public audit mechanism through local Ma. Diosa Labiste. ng Palawan, a weekly community newspa- legislation after staying with the story and In India, both community newspapers per, triggered lively debate among farm- providing opportunities to discuss citizen and the mainstream Times of India helped ers, technicians, and local governments on participation in local governance. expose inefficiency in government servic- how to address the plight of such farmers. It began with a project called “Pamang- es. In Bangalore, India’s Silicon Valley, the The story also won Escaro the Bright Leaf kot sang Banwa” (Report to the People) Public Affairs Centre, a nongovernment award for best regional feature on agricul- in which citizens presented important organization, had introduced a citizens’ ture in 2007. issues to candidates running for election, report card system in 1994 through which It is an example of the emergence in and in turn candidates pledged to report people could evaluate the efficiency of lo- Asia of a problem-solving kind of journal- on progress on these issues within 100 cal government service delivery, especially ism. But this new type of journalism requires days. for water, garbage disposal, and sewage journalists to be willing to get deeply in- The newspaper became a debating systems. volved with communities, and communi- chamber for issues such as traffic rerout- Several community newspapers ran ties to support space for the ordinary voice ing, flooding, pollution, lack of classrooms, stories on the report card system and, as a to be heard. environmental protection, and good gov- result of citizens airing their views, several As Kunda Dixit, a Nepali journalist, ernance. Despite a growing subscription, public authorities reviewed their offices’ notes: “Journalism has to be part of the performance. solution, not part of the problem, in try- When the Times of India, with a circu- ing to solve the crisis of global human lation of 2.4 million, adopted the com- survival.” munity newspaper approach by running To be sure, journalists need to Journalists can weekly features on the report card for spotlight many daunting development 2 months, it proved a potent tool for in- issues among poor communities across participate in creasing transparency and accountability Asia, and Palawan in the Philippines is community affairs in governance. no exception. Escaro’s story appeared in The Times reporter assigned to write Bandillo’s special section called “Tuturan,” without losing about the Pacific Affairs Centre’s report which translates roughly as “meaningful card on hospitals extensively investigated message.” It is a forum for citizens, local their tradition of the subject. She talked not only to doc- governments, nongovernment organiza- independence tors, nurses, and senior officials at public 45 Development Asia l December 2008

regular meeting place for people from the two neighborhoods, has begun to include community news, which helps forge a com- mon identity. This example also shows the role of creative strategies when addressing community issues. Community journalists also used radio to good effect after 3,000 families were relocated from the banks of the Mahaweli River in Kothmale, Sri Lanka, when a huge dam project began in 1989. Most had lost their farms and needed help in rebuilding their lives. A handful of community journalists put up a small FM radio station that focused on self- employment, livelihood opportunities, and health issues. Starting with contribu- tions to establish Kothmale Community Radio, they used the internet to source news and other information. The station operated in fits and starts and, by 1991, could go on air only three times a week for 3 hours. Then the United Nations Educational, Scientific and Cultural Or- ganization supported the innovative radio station with a $50,000 grant. By 2001, the Red Batario station was also getting local and national advertising support commercials and had become an information resource center. Schoolchildren use the radio and the sta- Problem Solving Staff members plan another issue of Bandillo ng Palawan in the Philippines tion’s internet facility for class projects. In short, the station has become an im- hospitals but also with patients and their In Indonesia, a community-based portant part of the community’s life. relatives, and residents in the patients’ radio music program has played a role in These examples show how com- neighborhoods. reducing tension between conflicting par- munity journalists, mostly in South and The stories, which ran on the front page, ties. A program called “Dangdut” of Radio Southeast Asia, are crafting innovative re- focused on the message that malpractice Suara Persaudaraan Matraman network sponses to meet development challenges and corruption should not be tolerated in helped bring peace to squatter neighbor- in a rapidly changing social and political public hospitals. Within a few weeks of the hoods in Matraman, East Jakarta, which landscape. However, though many ven- stories being published, some high-ranking had been feuding since 1971, according tures have been planted, many still have nurses in one public hospital were arrested to M. Satiri who started the station 5 to take root. on charges of corruption and negligence. years ago. To be sustainable, one major challenge Even with the advent of online media, Soon after the music began airing, is persuading more advertisers to support radio remains king in many Asian rural young people from both neighborhoods stories that clearly articulate community communities. It is often the lone beacon visited the station to request songs and concerns. Another is the ability of news of hope for people mired in poverty. Some- stories about their home and lives—and organizations to market this brand of times, radio can also act as a mediator in began to understand each other better. journalism as a way of reaching a wider times of conflict. Now the station, which has become a audience and articulating more voices. For example, many have yet to tap the Snapshot of Community Press in Asia economic potential of overseas workers Combined Circulation and migrants who would be interested to 400,000-500,000 790,974 189,775 unknown (Average of 10,000 each) know more about what is happening in their home communities. Most newspapers and radio stations that are developing this community ap- proach are small, but much of their constit- uency—built around towns, villages, and neighborhoods—could be developed into a more solid support base. Philippines Bangladesh Indonesia Nepal But their experience also shows that journalists can participate in community

425 community papers 185 regional weeklies 10 community papers 2,033 newspapers 107 newspapers in 5 regions affairs without losing their tradition of in- dependence. And by enabling the public Sources: Philippine Media Fact Book, The Philippine Community Press by Crispin Maslog, The Community Press Is to learn from the experience of others, Alive in Asia and the Pacificby Shaikh Abdus Salam and Sudhangsu Sekhar Roy, An Old Man and His Newspaper journalists may help many readers bring by Andreas Harsono, the Community Press Is Alive and Well in Asia and the Pacificby Vinaya Kasajoo solutions to their own problems. l 46 Department calendar l NEW PROJECTS l

1–5 December 2008 Regional Workshop on Climate Change Selected development projects across Asia Strategies Venue: Kuala Lumpur, Malaysia www.adb.org/documents/events/2008/Climate- Change-Strategies/ AZERBAIJAN 1–5 December 2008 $795 million project to International Conference on Water Scarcity, Global Changes and Groundwater improve railway services in Management Responses Azerbaijan, supported by the Venue: Irvine, California, United States World Bank and Japan Bank www.waterunifies.com/ for International Cooperation

1–12 December 2008 Fourteenth Conference of the Parties to the UNFCCC and Fourth Meeting of the Parties to the Kyoto Protocol MONGOLIA Venue: Poznan, Poland http://unfccc.int/meetings/unfccc_calendar/ $2 million grant from the items/2655.php?year=2008 Asian Development Bank’s Japan Fund for Poverty 2–3 December 2008 Reduction to provide highly Geothermal Innovation & Investment – insulated blankets to poor Untapping the Potential for Geothermal NEPAL Energy households in the capital of Venue: London, United Kingdom $1.5 million in assistance Mongolia from 2009 to 2010 [email protected] from the US Agency for International Development 6 December 2008 for a 3-year project that aims Forest Day 2 to transform community Venue: Poznan, Poland www.cifor.cgiar.org/Events/CIFOR/forest_day2.htm traditions of child marriage through educational and 25–26 April 2009 behavioral change campaigns 2009 Spring Meetings of the World Bank Group and the International Monetary Fund Venue: Washington, DC www.imf.org/external/am/index.htm INDIA 2–5 May 2009 42nd Annual Meeting of the Board of $150 million in loans from Governors of the Asian Development Bank the Asian Development Venue: Bali, Indonesia Bank to help India revive www.adb.org/Annualmeeting/2009 its khadi industry to boost 11–14 May 2009 employment in rural areas International Labour Organization Tripartite Meeting on Promoting Social Dialogue and Good Industrial Relations from Oil and Gas Exploration and Production to Oil and Gas Distribution BANGLADESH Venue: ILO Headquarters BANGLADESH www.ilo.org/public/english/dialogue/sector/ A $165 million loan sectors/oilgas.htm facility from the Asian $1.3 million in assistance Development Bank to from the US Agency for 12–15 May 2009 help mobilize private International Development Food and Agriculture Organization to increase understanding Expert Meeting on Risk Assessment of sector funds in 15–20 Microbiological Hazards in Food (JEMRA) infrastructure projects on the negative effects of Venue: Geneva, Switzerland mostly in energy violence, early marriage, www.fao.org/ag/agn/agns/meetings_en.asp dowry, and polygamy on development 6–7 October 2009 2009 Annual Meetings of the World Bank Group and the International Monetary Fund Venue: Istanbul, Turkey www.imf.org/external/am/index.htm

47 Development Asia l December 2008

People’s Republic of China People’s Republic A $319 million Jiangxi Shihutang of China Navigation and Hydropower Complex Project to improve use A $100 million multitranche loan of the Gan River for more reliable from the Asian Development Greater Mekong freight transport and for cleaner Bank for the Guangdong energy production, funded by the Provincial Government that will Subregion World Bank use the funds to grant loans to major energy consumers and A $6 million technical fund projects to retrofit plants assistance grant funded by and buildings with energy- Australia and managed by efficient technology the Asian Development Bank to fund HIV prevention programs in infrastructure projects during pre- construction, construction, and post-construction phases in Cambodia, Lao People’s Democratic Republic, and Viet Nam VIET NAM $410.2 million in loans from the Asian Development Bank Business Opportunities to Viet Nam for a 51-kilometer, four-lane Ho Chi Minh–Long Thanh–Dau Giay Expressway; Australian Development Gateway other funds from Japan Bank www.developmentgateway.com.au/jahia/Jahia/ for International Cooperation cache/offonce/pid/338;jsessionid=C4CEE28222 and the Viet Nam Expressway DB3502B99F DBF6E850C46E Corporation dgMarket (from Australian Development Gateway) www.dgmarket.com/ PHILIPPINES Canadian International Development Agency A $250 million loan from the www.acdi-cida.gc.ca/CIDAWEB/acdicida.nsf/En/ Asian Development Bank to JUD-131121921-NBN help the government strengthen policy reform initiatives in fiscal DevEx Asia management, investment climate, www.devex.com/groups/asia and social sectors Devex.com www.devex.com/contracts

United Nations Office at Geneva www.unog.ch/80256EDD006AC19C/ (httpPages)/AC05C88A1449ED7280256EED0 04E71AA?OpenDocument

INDONESIA LAO PEOPLE’S United Nations Procurement Division www.un.org/Depts/ptd/# $9 million World Bank– DEMOCRATIC funded Geothermal Power REPUBLIC US Agency for International Development Generation Development www.usaid.gov/business/business_ Project intended to promote $15 million grant from the opportunities/ the expansion of economic World Bank to support and environment-friendly poverty reduction initiatives World Bank geothermal power generation at the village and district http://web.worldbank.org/WBSITE/EXTERNAL/ and to reduce carbon dioxide levels OPPORTUNITIES/0,,pagePK:95647~theSiteP emissions K:95480,00.html

48 Department

l Innovation developing a solar-powered water purifica- tion unit that will provide some of the most remote Lao communities with a safe and reliable supply of water. Based on the exist- Engineers ing RSD 800 model, Murfin’s unit can purify about 3,600 liters of water a day at a cost of $0.70 per cubic meter. Working alongside Sunlabob, a Lao PDR–based manufacturer of renewable Without Borders technology, Murfin hopes the unit will be simple enough that it can be maintained Student volunteers find creative and technical by locals—and that it can generate income through the sale of bottled water. Now in its solutions to development problems late stage, the project is expected to install its first unit in the remote village of Ban Sor By Richa Bansal and Joe Rowley in the northeastern part of the country. In Africa, another EWB-UK volunteer, oung engineers are using their Although the end product has yet to be Stephen Gerrard, and his team are combat- technical expertise to help finalized, progress has been made to hand- ing high rates of infant mortality by develop- provide livelihood skills, clean tuft the down, collect spun samples, and ing modified nipple shields to prevent the water, and safer breast-feeding knit prototype hats and scarves. Ong plans transmission of the HIV virus during breast practices in places as diverse as to return to Tajikistan for 2 years to test the feeding, though these have yet to be mar- Ythe mountains of Tajikistan, the rain for- reliability and quality of production and look keted. ests of Lao People’s Democratic Republic for partner organizations. The World Health organization (WHO) and the deserts of sub-Saharan Africa. In the Lao PDR in Southeast Asia, an- estimates that 700,000 children are born During the last year, Engineers With- other EWB-UK volunteer has been helping to each year to HIV–positive mothers, mostly out Borders (EWB-UK), a student-led address the lack of potable water, especially in in Africa, and that each year about 50,000 charity founded in the United Kingdom the hilly, rural areas. Many villages lack access babies acquire HIV through breast feed- in 2002 and committed to providing to the national power grid and, with firewood ing. “Although WHO recommends the use engineering solutions for sustainable in short supply, remote communities often of formula feeding as a replacement (for development, has worked on several in- lack the means to purify water. Besides ma- breast-feeding), this can also lead to many novative projects. laria, diseases caused by drinking unpurified deaths from diarrhea and malnutrition in low- For example, Sarah Ong, a manufactur- water have become the greatest cause of resource settings,” says Elizabeth Kneen, a ing engineering graduate from Cambridge infant mortality in the country. The Lao PDR team member. University, has been putting her education has the 23rd highest rate of infant mortality So Gerrard and his team have come up to use in the rugged Pamir mountain range in the world despite a government pledge with an approach that requires minimal chang- of Tajikistan, an impoverished former to reduce by two thirds from 1990 levels the es to breast-feeding practices. This involves member of the Soviet Union that is still mortality rate of under-5-year olds by 2015. adapting a nipple shield to disinfect breast struggling following economic collapse In late 2008, Andrew Murfin, a volun- milk. “We have added a non-woven material and civil war after independence in the teer and qualified engineer, was working on similar to felt, and impregnated the material early 1990s. with a common compound that deactivates With the help of an EWB-UK bursary, HIV without harming the baby,” says Gerrard. Ong spent the spring in the Pamir region Modified nipple shields “This allows mothers to feed the baby rather exploring the feasibility of generating in- are being developed to than having to collect and heat milk, which can come from using fine yak hair. The “Yak be an impractical method of disinfecting the Yak” project, set up by the NGO, Operation prevent transmission HIV virus in developing nations.” Mercy Tajikistan, is using yak down, which The team, which met at the Interna- was usually discarded, to make high-end of the HIV virus during tional Design Development Summit at knit products. breast feeding the Massachusetts Institute of Technol- ogy in August, is looking for laboratories to help test the device, as well as other pos- sible applications, including for pediatric medicine delivery. The cost-effectiveness of the tech- nology is a big advantage. David Sokal, a medical practitioner and another team member, estimates that the device will cost $0.27 a day, which is low compared to baby formula, which costs $3.75 a day. The cost of a filter (non-woven material containing the compound), which has to be changed daily, is around $0.20 and the nipple shield, which lasts for at least a month, is less than $2. “We still have a long way to go but it A F P will make a big difference if it works out,” SAFE WATER Potable water remains a luxury in many Lao PDR villages says Gerrard. l 49 Department

NEW PUBLICATIONs l synthesis, using microbes. But the book asks: “Will the focus on synthetic biology to tackle malaria divert attention and resources from less glamor- ous approaches that are nonetheless sus- tainable and decentralized? Will alterna- tive options for addressing malaria be cast aside in single-minded pursuit of synbio’s silver bullet?” Vivagel is a microbicide, also devel- oped through nanotechnology, that could reduce the transmission of HIV and other sexually transmitted diseases. It is being tested around the world and, while the outlook is promising, there are fears that it will be too expensive for the people who Pros and Cons of Nanotechnology will need it most, and that political pres- sure for its speedy approval might compro- Downsizing could address some of the world’s mise public safety. But the largest impact of nanotechnol- biggest challenges ogy could be in its potential replacement of industrial raw materials that mostly ETC Group. 2008. Downsizing Development: An Introduction to Nano-Scale Technologies come from developing countries. The and the Implication to the Global South. United Nations Non-Governmental Liaison trade in commodities such as rubber or Services. March. 102 pages. copper stands to be significantly affected if developed countries harness their nano- Reviewed by Edward V. Deveza technology capabilities and produce nano- materials as substitutes for their industrial oming at a time when our world is isting materials and designing new ones. raw material needs. faced with a multitude of crises— Acting as a molecular transistor, carbon The question of access to these tech- from climate change to poverty, nanotubes can replace silicon, yielding ul- nologies is also related to the issue of in- hunger, and disease—the appear- tra-fast computers that perform “orders of tellectual property ownership. As in the anceC of Downsizing Development is timely, magnitude” beyond silicon. Nanodevices wild frontier days of biotechnology, the indeed. As the book’s preface reminds for molecular drug delivery can chemically search for nanotechnology patents could us, “history is replete with technological target and penetrate a tumor cell when “lead to sweeping monopoly control over breakthroughs which the scientist-histori- injected in the bloodstream. Nanoparticle both animate and inanimate matter.” ans aptly called ‘disruptive technologies,’ films with embedded sensors can detect New technologies might bring over- causing dramatic changes in our society.” food pathogens and alert the consumer whelmingly positive impacts, but it is From the steam engine to electricity, when food is contaminated or has begun important and prudent to remember the the transistor, and the integrated circuit, to spoil. A nanosensor can measure blood unique risks to human health and the en- we’ve seen how no less than radical (and glucose in diabetic patients and a “quan- vironment whenever and wherever engi- disruptive) technologies are needed to neered nanoparticles are used. move things forward. “Hundreds of products containing un- Microscale (10-6 meters) technologies “Nanotechnologies regulated and unlabeled nanoscale particles proved a boon to the microelectronics are commercially available. And yet no na- and telecommunications industries. They are likely to bring tional government has developed a regula- were also used in many biological applica- tory regime that addresses the nanoscale or tions ranging from drug delivery to DNA huge socioeconomic the societal impacts of the invisibly small,” sequencing. disruptions” notes the book. “We should not allow the Then came nanoscale (10-9 meters) private sector to decide on who will own —ETC Group, United Nations Non-Governmental technologies, the manipulation of matter Liaison Services the technologies and regulate their use.” on the scale of atoms and molecules. Will There have been calls to form an inde- nanotechnologies, which are 1,000 times pendent body to monitor and assess the smaller than microscale technologies, be tum dot” technique can tag cancer cells introduction of new technologies. Civil part of the solution to our global problems? for monitoring and possible cure. society’s proposal for an International The idea is that, with only a reduc- But for all these benefits, can nanote- Convention on the Evaluation of New tion in size (below about 100 nanometers, chnology also do society harm, directly Technologies seems a timely and neces- roughly), and no change in substance, ma- or otherwise? Medical nanotechnology sary idea in this respect. terials can exhibit new properties related to seems to promise wonder drugs and smart Near the end, the book reminds us: electrical conductivity, elasticity, strength, ways of producing them in the laborato- “The immediate and most pressing issue color, and chemical reactivity—character- ry. Artemisinin, for example, is a natural is that nanotechnologies are likely to bring istics that the same substances do not ex- product used in Chinese medicine that huge socioeconomic disruptions for which hibit at the microscale or macroscale. is regarded highly by the World Health society is not prepared.” Be warned. l Using nanoscale technologies to cre- Organization as an anti-malarial drug, and ate nanoparticles and nanomaterials, sci- problems with its supply seem to have Edward Deveza is Technology Licensing Officer entists are dramatically transforming ex- been resolved with a breakthrough in its of the University of the Philippines System 50 Development Asia l December 2008

Nature and Causes of Inequality Understanding the poverty–growth–inequality triangle is crucial to policy makers Guanghua Wan, editor. 2008. Inequality and Growth in Modern China. Oxford University Press.

Reviewed by Aileen S.P. Baviera

nequality and Growth in Modern China, western signature clothes along Nanjing a collection of essays edited by Wan Road—and this is a face that is all too famil- Guanghua, is an ambitious attempt to iar in cities across the developing world. explain the nature and causes of in- Even in terms of examining inequal- Iequality in post-reform People’s Republic ity between coastal areas and the interior, of China (PRC), where inequality contin- more comprehensive and historically con- ues to grow despite significant gains in textualized explanations would have been poverty reduction amid the high growth of helpful. The authors, for instance, could recent decades. have pointed out that Beijing, Tianjin, The book will be most useful to those Shanghai, Guangzhou, and Xiamen, which interested in deconstructing inequality experienced the fastest pace of growth (“decomposing” is the term the book uses) among PRC cities, were not only inciden- in terms of the various factors affecting it, tally coastal. Beijing, being the capital, such as disparities in approaches to devel- received preferential treatment from the opment, advantages arising from regional “Should growth central government; Shanghai, being the location, resource endowments, financial frontrunner in opening up to the West, development, extent of innovation, and or inequality be was far ahead in openness of attitudes; and educational opportunities. Guangzhou and Xiamen/Fujian, being tra- Although the essays cover new ground prioritized in the ditional sources of international migration, and pose interesting observations, the em- design and execution were also more linked to global forces. phasis on quantitative and macrolevel Several essays, in fact, put forward rec- analysis fell short of my hope that the of economic policies?” ommendations that would address location- volume would substantially improve the —Guanghua Wan based disparities, such as calling for the qualitative understanding of nonecono- Senior Research Fellow and Project Director restructuring of existing industries in the mists or general social scientists of the of World Institute for Development Economics provinces to comply with the principle of poverty–growth–inequality nexus as expe- Research, United Nations University comparative advantage; moving to expand rienced by different social sectors in dif- access to capital by poorer regions, especial- ferent parts of the PRC. in resource endowments (leading to a rich ly those in the interior; and promoting inno- The few essays that did provide a his- coastal east, but a poor central region and vation and nurturing high-tech companies torical background and review of the policy an even poorer western region). Then sev- for inland provinces. For the more general framework—those by Justin Yifu Lin and eral other places in the book point out that issues of poverty and inequality, one author Peilin Liu, Kai-yuen Tsui, and Min-dong location itself (spatial convergence) can also recommended expanding the coverage Paul Lee—were more informative in this account for advantages in access to foreign of social security systems for the poor. regard but all too brief. direct investment, financial services, and As Wan Guanghua rightly points out, Among the interesting observations is access to quality education, among others. the impact of growth on inequality (more that even “equalizing” factors, such as ed- True enough, there appeared to be much growth leading to greater inequality in the ucation and social security systems, may more focus on interregional (coastal versus short run), and of inequality on growth have “disequalizing” effects in the short interior) or interprovincial inequality than (greater inequality ultimately suppressing run. Examples are when access to edu- other manifestations of inequality in this growth) in the PRC will have repercussions cation in good institutions is in the first collection of essays, which presents find- for the country’s major trading and invest- place available only to those in more de- ings from a research project. ment partners, to the extent that domes- veloped urban areas, or when low coverage Largely ignored, it seems, were inequal- tic demand and capacity for absorption of social security results in bias against the ity between foreign/multinational and local may be affected. However, the direction rural poor. Kuznet’s hypothesis had indeed industry sectors, between the formal and pursued by this research is undoubtedly long drawn attention to the differences in informal economies, between migrants and vital to understanding not only the PRC the impact of growth on inequality, with hukou (residency permit) holders, between economy or how it will affect other econo- inequality tending to rise with increasing rural and urban property rights, or even in- mies but also in pointing the way forward growth if one looks at the short term, but terethnic and gender inequality insofar as for other developing countries still grap- eventually declining if one uses longer- these may also have been compounded by pling with the issue of whether growth or term growth timelines. reform-era growth and the globalization of redistribution takes precedence, if indeed To some extent, the essays appear to the PRC economy. In Shanghai, the face of the goal is the eradication of poverty. l argue circuitously, such as when a claim is inequality may well be the disheveled rural made that interprovincial or interregional migrant sleeping on a park bench in front of Aileen Baviera is Dean of the Asian Center of the inequality can be attributed to differences grand malls displaying the most exclusive University of the Philippines. 51 Department

From The Field l

Danfeng is among the 140,000 chil- dren who lost one or both parents to AIDS, Helping AIDS Orphans according to a United Nations Children’s Educational Fund estimate. A philanthropic foundation is providing The PRC government reported 700,000 HIV/AIDS cases by the end of 2007 and the scholarships for children who might United Nations predicts this number to reach 10 million by 2010. have dropped out of school Chi Heng, which is now helping 300 stu- dents through college, is an unusual NGO in that it has government approval. On its By Diao Ying website, Chi Heng attributes its govern- ment support to its educational focus and its low profile. In the early days, Chi Heng assisted a proportion of a village’s poor AIDS orphans, but tightened the criteria after discovering that some villagers were merely pretending to be poor. Chi Heng now offers help to any child who has one or both parents diagnosed as HIV positive. “The important thing is to enable ben- eficiaries to have self-respect, not feel like recipients of charity,” To says. To make sure that funds are used solely for education, tuition fees are paid di- rectly to the schools. Fees can run as high as CNY2,000–CNY3,000 ($292–$438) yearly, depending on the level of education. To, who attended Harvard University and Columbia University, is proud of the fact that many Chi Heng–assisted students have made it to college. Some of these college students return to their villages and encourage other families afflicted with HIV-AIDS to send their chil- dren kids to school. “They used to benefit from us, and now they help the other villagers,” says To. Four of the foundation’s staff members are college graduates under the Chi Heng program. To became concerned about the impact of AIDS when his math teacher in high Chi Heng Foundation school died of the disease. Working as a SECURE FUTURE Philanthropist Chung To fills in the education gap part-time volunteer, he learned about AIDS orphans when he went to Henan in 2001. or Danfeng, a 20-year-old woman To make sure that Driven by poverty, some Henan resi- brought up in Henan province, dents sold their blood to earn money in the People’s Republic of China (PRC), funds are used solely 1990s. Some were, however, infected with the summer 4 years ago was a dark the HIV virus. period. Her father died of AIDS for education, tuition Danfeng recalled that when she was a F(acquired immune deficiency syndrome), fees are paid directly girl, some families in her village sold their leaving behind a wife who tested positive blood and were able to build two-story hous- for the human immunodeficiency virus to the schools es. But some contracted a “strange disease” (HIV)—and a trail of unpaid debts. and died, leaving their houses empty. Her father’s treatment had used up the established by philanthropist Chung To in A 2007 Ramon Magsaysay Awardee for family’s savings and, without her father’s in- 1998 that has helped over 7,500 kids affected Emergent Leadership, To quit his job as a come, the family could not afford Danfeng’s by AIDS. banker to work full-time for Chi Heng. Al- tuition fees of 2,000 yuan (CNY) ($292) a Today, Danfeng is studying law and medi- though he returned to banking last year and year at the local high school. cine at a university in Beijing. is working in Hong Kong, China, he goes to Shortly after that summer, however, a Dressed in a white T-shirt and carrying a Beijing and visits the villages regularly. To teacher told Danfeng that her education black bag with a pink “Hello Kitty” logo, the ensure sustainability, the foundation is be- would be funded by the Chi Heng Founda- sophomore has clearly put misfortune behind ing run by professional managers, instead of tion, a nongovernment organization (NGO) her as she pursues her new opportunity. relying overly on an individual. l 52 Development Asia l December 2008

1 billion people potentially affected by climate change

75 percent of the world’s illiterates

620 million people living on less than $1 a day

Reduce poverty in Asia and the Pacific by reducing these numbers

FIGHTING POVERTY IN ASIA AND THE PACIFIC www.adb.org/poverty

53