Shanta Devarajan: (http://endpovertyinsouthasia.worldbank.org/blog/shanta)
Baburam Bhattarai and I are very different. He studied Marxist analysis at Jawarhalal Nehru University; I studied neoclassical economics at the University of California at Berkeley. He founded Nepal’s United People’s Front and went underground during the Maoist rebellion; I taught at Harvard and now work at the World Bank. He has a picture of Che Guevara on his car’s gas cap; mine has the logo of my daughter’s soccer team.
Nevertheless, based on our speeches and writings as well as an afternoon together in Kathmandu recently, we found much common ground. We are both concerned about the high and rising inequality in South Asia in general, and Nepal in particular. We agreed that among the causes of this inequality are: (i) slow growth in agriculture; and (ii) lack of employment growth, especially in manufactured exports. I then pushed the envelope a bit by suggesting that the reasons for both (i) and (ii) were government policies which, although introduced with the best of intentions, are backfiring and hurting the poor. For instance, in Sri Lanka, government policy forces farmers to grow rice, a highly vulnerable and not very profitable crop. And the lack of manufactured-export-led employment growth in South Asia in general is associated with extremely restrictive labor regulations in the subcontinent.
Baburam countered on agriculture by saying that the real reason is the feudal relationships that dominated South Asian agriculture. Unless these relationships are changed, simply integrating with the global economy would not benefit the poor. On labor regulations, without disagreeing with the direction of the effect, he wondered whether the magnitude was so great. He suggested other reasons why there was little manufactured export growth in Nepal, including the small size of the domestic market, low levels of education and health of the workers, and weak infrastructure. I agreed with the last factor, but pointed out that other countries with equally low levels of education and health, such as Bangladesh, have been able to attract sizeable investments in garment exports, employing some 2 million workers. Bangladesh also has the least restrictive labor regulations in South Asia. One of his Maoist colleagues from the Planning Commission put it plainly: “These labor laws protect a few hundred thousand workers at the expense of the millions who are trying to get jobs.”
We then discussed infrastructure, particularly the need for greater investment in hydropower in Nepal. Baburam agreed that Nepal needed this. I gingerly asked why I had been given the impression that the Maoists were opposed to foreign investment in the sector, especially by India. He complained about Nepal’s “excessive” dependence on India (he said 75 percent of exports went to India—the real figure is about 60 percent). When we pushed him on the point, he explained that their real fear was that Indian companies would buy up all the licenses and extract all the profits. We said that we feared the same thing, which was why we were trying to design programs for benefit-sharing by the population living in the river basins. He seemed pleased to learn this, and responded favorably to the proposition that Nepal needed a major effort to harness its enormous hydropower potential.
Finally, Baburam asked a question: “Why does the World Bank say it will give money for education only if schools are transferred to communities?” My colleague, Roshan Bajracharya, pointed out that the Bank has never said this. What we do say is that we would like to give money so that it benefits students. If the government has a benchmark of 40 students per teacher, we will calibrate our assistance accordingly, and make sure that each group of 40 students gets a teacher, and that teacher is actually teaching. Our experience has been that simply funding the teacher doesn’t achieve this. By contrast, school management committees appear to be better at getting teachers to teach. Consequently, we do fund the program of transferring management to school management committees, but the principle is that we would like money to chase the student rather than the teacher. Baburam said that direct conversations such as the one we were having were useful to allay false impressions.
In closing, both Baburam and I confirmed that this had been a useful start, and hoped that we could have a continuing dialogue on economic policy issues.
Endnote: Throughout the meeting, Baburam had been staring quizzically at Roshan. When the meeting ended, Roshan reminded him that they had been at college together (albeit many years apart), and that Baburam’s wife was Roshan’s classmate. This led to another round of handshakes and smiles all around.
Baburam Bhattarai and I are very different. He studied Marxist analysis at Jawarhalal Nehru University; I studied neoclassical economics at the University of California at Berkeley. He founded Nepal’s United People’s Front and went underground during the Maoist rebellion; I taught at Harvard and now work at the World Bank. He has a picture of Che Guevara on his car’s gas cap; mine has the logo of my daughter’s soccer team.
Nevertheless, based on our speeches and writings as well as an afternoon together in Kathmandu recently, we found much common ground. We are both concerned about the high and rising inequality in South Asia in general, and Nepal in particular. We agreed that among the causes of this inequality are: (i) slow growth in agriculture; and (ii) lack of employment growth, especially in manufactured exports. I then pushed the envelope a bit by suggesting that the reasons for both (i) and (ii) were government policies which, although introduced with the best of intentions, are backfiring and hurting the poor. For instance, in Sri Lanka, government policy forces farmers to grow rice, a highly vulnerable and not very profitable crop. And the lack of manufactured-export-led employment growth in South Asia in general is associated with extremely restrictive labor regulations in the subcontinent.
Baburam countered on agriculture by saying that the real reason is the feudal relationships that dominated South Asian agriculture. Unless these relationships are changed, simply integrating with the global economy would not benefit the poor. On labor regulations, without disagreeing with the direction of the effect, he wondered whether the magnitude was so great. He suggested other reasons why there was little manufactured export growth in Nepal, including the small size of the domestic market, low levels of education and health of the workers, and weak infrastructure. I agreed with the last factor, but pointed out that other countries with equally low levels of education and health, such as Bangladesh, have been able to attract sizeable investments in garment exports, employing some 2 million workers. Bangladesh also has the least restrictive labor regulations in South Asia. One of his Maoist colleagues from the Planning Commission put it plainly: “These labor laws protect a few hundred thousand workers at the expense of the millions who are trying to get jobs.”
We then discussed infrastructure, particularly the need for greater investment in hydropower in Nepal. Baburam agreed that Nepal needed this. I gingerly asked why I had been given the impression that the Maoists were opposed to foreign investment in the sector, especially by India. He complained about Nepal’s “excessive” dependence on India (he said 75 percent of exports went to India—the real figure is about 60 percent). When we pushed him on the point, he explained that their real fear was that Indian companies would buy up all the licenses and extract all the profits. We said that we feared the same thing, which was why we were trying to design programs for benefit-sharing by the population living in the river basins. He seemed pleased to learn this, and responded favorably to the proposition that Nepal needed a major effort to harness its enormous hydropower potential.
Finally, Baburam asked a question: “Why does the World Bank say it will give money for education only if schools are transferred to communities?” My colleague, Roshan Bajracharya, pointed out that the Bank has never said this. What we do say is that we would like to give money so that it benefits students. If the government has a benchmark of 40 students per teacher, we will calibrate our assistance accordingly, and make sure that each group of 40 students gets a teacher, and that teacher is actually teaching. Our experience has been that simply funding the teacher doesn’t achieve this. By contrast, school management committees appear to be better at getting teachers to teach. Consequently, we do fund the program of transferring management to school management committees, but the principle is that we would like money to chase the student rather than the teacher. Baburam said that direct conversations such as the one we were having were useful to allay false impressions.
In closing, both Baburam and I confirmed that this had been a useful start, and hoped that we could have a continuing dialogue on economic policy issues.
Endnote: Throughout the meeting, Baburam had been staring quizzically at Roshan. When the meeting ended, Roshan reminded him that they had been at college together (albeit many years apart), and that Baburam’s wife was Roshan’s classmate. This led to another round of handshakes and smiles all around.
