The World Bank has just launched their flagship report on South Asia, “More and Better Jobs in South Asia”. It is estimated that South Asia, which is home to more than 40 percent of the world’s absolute poor, will contribute nearly 40 percent of the growth in the world’s working-age population over the next several decades. Just during the past two decades, South Asia has created close to 800,000 jobs per month. Improvements in the quality of jobs has been linked to strong economic growth in countries like India, Sri Lanka and Bangladesh, whereas in Nepal, it has been linked to massive outmigration, with workers’ remittances accounting for half of the decline in the poverty rate, despite the country showing slow growth.
The region as a whole has done really well in terms of creating and improving jobs. If the region is to continue enjoying such good news, major structural reforms are needed instead of relying only on high growth. As more than a million new entrants join the labor force, absorbing those entrants and providing them jobs of improved quality will be the main challenge.
So what are some of these structural reforms that would benefit the South Asian labor force? The report highlights first and foremost the need for access to reliable electricity supply. Indeed, Afghanistan, Bangladesh and Nepal had some of the highest reported power outages in the world on average during 2000—2010, with Nepal experiencing up to 19 hours of power outage daily during dry winter. Dealing with corruption is also high on the list of reforms. Improving education and nutrition remain top priorities to create a healthy labor force. Without serious structural reforms, South Asia may only be adding to the quantity of jobs, compromising on their quality.
The World Bank’s blog recently had a post “India-Pakistan Trade: Making Borders Irrelevant”, also highlighting the creation of the Attari-Wagah checkpoint as a sign of the two countries making serious efforts of removing trade and movement barriers. See my post for more on Indo-Pak border issues.
It also highlighted some recent developments that also point to the two countries being serious about closer relations:
Pakistan intends to formally give India MFN status by the end of 2012.
India, which formally granted Pakistan MFN status in 1996 (but maintained barriers) has agreed to reduce its sensitive list of 865 items by 30% within four months.
India has also agreed in principle to allow Pakistani foreign direct investment in the country.
Both countries have agreed to allow each other’s central banks – the Reserve Bank of India and the State Bank of Pakistan – to open bank branches across borders to facilitate financial transactions.
The question of closer integration in South Asia remains a crucial topic as South Asia is the least integrated region in the world, despite making significant progress in integrating with the global economy. As Ahmed and Ghani point out, South Asian countries have maintained a higher level of protection within the region than with the rest of the world and the beneficial effects of common cultural affinity, common geography, and potential for trade remain clouded under restrictive policies within the region.
There are people who move from one country to another. Then there are people for whom their country moves.
As borders are drawn, families and markets are split, creating a host of challenges for local livelihoods. This is particularly true of areas where the national border was drawn in a way that ignored the natural and social divisions recognized by local people and which, today, remains porous to movements of people and goods. However, notwithstanding the artificial nature of this border, it is now necessary for border communities to organize their lives around it.
The news of a creation of a new checkpost at Attari reminded me of a news I had read some years earlier (2007), reporting on those living the border challenges daily in the India-Pakistan border. As Muslims rushed to Pakistan, and Hindus and Sikhs to India, hundreds of thousands died on the journey as religious factions fought where their paths crossed. With the creation of the new border, those who owned farms at the border all of a sudden found their land turn into no-man’s land in 1947. Farmers now need a special permit to work on their own land and are allowed to work only at certain times of the day.
Border communities generally lag behind in terms of development relative to those in the center. The interests of border regions typically receive inadequate attention from national governments. Continually being neglected by national policymaking processes in the capital cities may lead to resentment at the borders, as local communities are most directly affected by border policies. Such resentment may be expressed in the form of riots and protests, upsetting regional peace and harmony.
Border zones are particularly vulnerable in periods of instability. While conflicts may not be initiated in these areas, their consequences often manifest there: refugee flows, circulation of armed groups, illicit trafficking of merchandise and resources. As trade zones, they are also havens where fleeing populations are protected and economies of war develop. Reducing conflict and violence is a prerequisite to political stability, which, in turn, is the prerequisite for implementing pro-growth policies.
The situation does not seem to have improved much in the Indo-Pak border region, but efforts are being made to remove hurdles in the way of trade, such as the creation of new checkpost at Attari and issuing of visa on arrival for children and seniors.
Both international migration and remittances, the money sent home by migrants, have become a significant source of income for poor households in developing countries. A study by Adams and Page (2005) found that remittances reduce the level, depth, and severity of poverty significantly in the developing world. Likewise, Yang and Martinez (2005) found that remittances in the Philippines reduce poverty in migrants’ origin households as well as find evidence of spillovers to households without migrant members.
Image source: Gallup
Remittances are now three times the size of official development assistance (ODA). In 2011, remittances to developing countries exceeded $350 billion. In 2010, African migrants sent $40 billion back to their home countries, more than ODA receipts, taking into account only formal flows. Informal flows of remittances are hard to trace and may very well be significantly higher. Nigeria’s central bank reports $20 billion of remittance inflows every year, which is double the World Bank’s estimate.
While several studies have shown that remittances decrease poverty, a significant number of studies examining the effects of remittances on inequality suggest a negative association concluding that remittances tend to increase inequality. Brown and Jimenez (2007) found that remittances increase income inequality in Tonga and Fiji whereas McKenzie and Rapoport (2007) found that remittances increase education inequality among Mexican households. Also, there is disagreement over the effects of remittances on the pattern of household expenditure with some studies finding that remittances significantly affect the pattern of consumption expenditure and others not.
While more research needs to be done to understand the link between remittances, poverty, and inequality, there is no denying that remittances have become a very important income supplement for many poor households in developing countries, and the negative association between inequality and remittances shows the need for policies whereby the distribution of gains can flow through different channels.
Migration is a complex phenomenon that has the potential to transform individuals and societies by affecting employment, development, culture, trade, investment, and environment. At the same time, these factors also influence migration patterns and the lives of migrants. While various theories have been proposed to explain the causes and effects of migration, there is still very limited understanding of migration’s dynamics.
Both international migration and remittances, the money sent home by migrants, have become a significant source of income for poor households in developing countries. Recent studies show that remittances reduce the level, depth, and severity of poverty significantly in the developing world. Remittances are three times the size of official development assistance (ODA). In 2011, remittances to developing countries exceeded $350 billion. In 2010, African migrants sent $40 billion back to their home countries, more than ODA receipts, taking into account only formal flows. Informal flows of remittances are hard to trace and may very well be significantly higher. Nigeria’s central bank reports $20 billion of remittance inflows every year – double the World Bank’s estimates.
While several studies have shown that remittances decrease poverty, a significant number of studies examining the effects of remittances on inequality suggest a negative association concluding that remittances tend to increase inequality. Also, there is disagreement over the effects of remittances on the pattern of household expenditure with some studies finding that remittances significantly affect the pattern of consumption expenditure and others not.
Lwang in the Annapurna region of Nepal is a village that while lying in one of the most visited regions of the country has not quite made it to the tourist list. Instead of lodges, this Gurung village offers visitors, both foreigners and locals, their homes for spending the night and having meals. Home-stays gives its guests a glimpse into the lives of its residents as guests sit in the kitchen while meals are being prepared, try home-made aila (alcohol) and makai-bhatmas (a mix of popcorn-soybeans), and chat with the families.
The home I stayed in Lwang belonged to Devi, a 60-year old woman with four children, two sons and two daughters. Her husband had passed away twelve years ago. One of her sons was in the UK, the other one in Qatar; both her daughters were in Pokhara, one of the largest cities in Nepal. She stayed alone in her house, making and selling alcohol to local residents. She said she was too old to work in the field. Her daughters ask her to move to Pokhara, but she doesn’t want to – she says passing days in Pokhara is deathly boring for her: the pollution, noise, and crowd in Pokhara do not suit her. She does not know how long she can manage to live on her own, and she did not want to think of the time when she may no longer be able to look after herself.
Her story is hardly unique in rural areas of this part of the world where migration from villages to cities and beyond is becoming increasingly common. Lack of fruitful employment opportunities and educational institutions have led many youth to move away from their villages. Most of the migrant workers abroad are working in vulnerable situations without any effective legal protection, and time and again their stories of suffering come out, highlighting the challenges they face away from home.
It’s equally challenging for those who are left behind, particularly in a country like Nepal where the state lacks a comprehensive social security system. People rely on their families and neighbors for help during difficult times; parents rely on their children to take care of them in old age. With migration, families are torn apart, leading to an erosion of social bonds and such a form of social security. The government has a pension plan for senior citizens and widows, which offers them Rs 500 per month (less than USD 8 per month), however, the bureaucracy involved discourage most from making use of this plan.
The Nepalese society is fast changing, with an entire generation uncertain about their future as old age is dawning on them. Without the state’s support for old age facilities, the future looks extremely bleak for the generation of those left behind.
Remittances have become a substantial source of GDP for many developing countries including Nepal. However, there are growing concerns regarding the use of remittances – most of it is used for household consumption, almost 90% in Nepal, and the rest for education and paying back previous loans. The question is how do we channel remittances towards productive use so that we can increase our savings and investment rates instead of simply consuming it? This question goes beyond just concerns from Nepalese central bankers to those in other developing countries as well. In most countries, remittances are used for consumption. In response to this concern, several experts on migration issues have suggested “diaspora bonds”, a debt instrument issued by a country or a private corporation to raise financing from its diaspora.
There are several advantages to harnessing the diaspora through issuance of bonds: members of the diaspora are often patriotic and want to contribute to developing their homelands; they are less impatient and less nervous about investing since they have long-term ties to their home country; and they like seeing their investments go into something concrete rather than simply being consumed. “Because the diaspora savings are held mostly as cash under the mattress or in low-yielding bank accounts in the countries of destination, offering an annual interest rate of 4 or 5 percent on diaspora bonds could be attractive”, Dilip Ratha of the World Bank writes.
Nepal also issued diaspora bonds, under the name “Foreign Employment Bond” in 2010, to raise funds for infrastructure development but only for a very short period of time of about 2 weeks. The bond failed to bring about any significant changes for multiple reasons: 1) it was initiated for too short a period, only about 2-weeks from June 30 to July 12, 2010, 2) it was not advertised broadly, and migrants in India and OECD countries were not allowed to buy diaspora bonds (only those in the Gulf countries and Malaysia were allowed to purchase these bonds), 3) the interest provided on the bond, 9.75%, barely met even the inflation rate, making other commercial assets more attractive, etc.
The size of remittance to Nepal has been rapidly increasing in the past few years, with the number being $3.5 billion in 2010, not including remittances from India. This is almost a quarter of the GDP. Given that remittances are bound to increase over the years and increasingly will play an important role in the country’s economy, the government of Nepal should consider ways of harnessing the diaspora. However, how likely this would be through diaspora bonds is uncertain, given that most people living in or abroad have hardly any faith in the government.
And the distrust towards government is for a good reason: corruption is extremely high in Nepal. There is mistrust amongst the diaspora and those living in the country regarding how the government manages its funds and whether any investments made in government projects would even be completed during their own lifetime. Given such mistrust, it’s hard to imagine that Nepal would be successful in selling diaspora bonds. Unless the Nepalese government can show that it is ready to tackle corruption, diaspora bonds may only look good in paper.
The FutureLab was the first meeting of the oikos community happing with this format. Compared to the Spring or Autumn gatherings the FutureLab news concern its participants, theme and format.
At the FutureLab came students from 22 oikos chapters, oikos fellows and alumni from over 38 companies and 10 research institutes. Thus the participants were not only students, but a great pool of international people being at different stages of their oikos experience: from bachelor students to oikos “dinosaurs” that participated to its foundation in 1987. In this way the FutureLab atteint to gather people from all over sharing the same will of building a more sustainable world together.
The FutureLab red thread is the future, especially the development of a common vision for the coming years. What are the best-case scenarios for 2020 and 2012? And how can we bring these scenarios to reality? Developing a picture of the future we would like to have is essential to positively define what we want to achieve in the future. It is not enough to say, we don’t want to have a world with endless economic, social and environmental crises, we need to define how an alternative world looks like. By choosing the future as common theme of the FutureLab the oikos community identified this need and its potential for developing creative projects from inspiring visions.
The FutureLab is a “Lab” as its format is experimental. The event aims at involving participants to a degree going beyond conventional conferences based on passive listening. But the best way to involve participants in a informing, interactive and constructive way still needs to be identified. In the first FutureLab the combination of five formats was tested: keynote speaker presentations, “fish bowl” discussions, workshops, “elevator pitch” project fair and open spaces. Additionally there was plenty of time for discussing with participants and guests during coffee, lunch and cake breaks.
My favorite input format was the “fish bowl” discussion. We put five chairs in the middle of a large circle of chairs and defined the topic of the”round panel discussion” by asking a question like: “How could sustainable lifestyle look like in 2020?”. The people sitting in the middle could speak out and discuss about the topic. To allow everyone to participate in the discussion, one of the inner chairs was always left empty to allow new people joining. It worked in a wonderful way!
To end this introduction to the FutureLab greatly, listen to the outcomes of the first FutureLab on the interview done with Harriet Jackson, just finishing her term as president of oikos international 2011 and being one of the main organizers of the Future Lab just taken at the end of two restless days.
Student ReporterLaura Burger Chakraborty from the International Environment House in Geneva where two short documentaries were screened, “When the Water Ends” and Carbon for Water, which focus on the subject of health, lack of clean water and climate change in Sub-Saharan Africa, Friday 28 October.
The United Nations launched a large Millennium Campaign in 2000. Eight goals were chosen to improve dramatically the state of the world by the year 2015. Today, increasingly more people have a sceptical view on this campaign. Four years are left, but the chances that any of the goals is met are very low.
The question is: can these goals at all be met if they are considered separate from each other? Can you end poverty without ensuring a healthy environment? Can you ensure child health if you do not provide universal education? The Millennium Development Goals contain per se a conceptual flaw that will stand against the success of the campaign. How easy would it be if the world could be understood in separated concepts. But instead, it is a complex nexus of living beings, natural environments and processes. And all are interlinked. Who fails to consider it as a whole may improve one end but worsen the other end, and ultimately won’t make any change.
The Carbon for Water campaign launched by Vestergaard Frandsen is said to impact four Millennium Development Goals: reduce child mortality, improve maternal health, combat diseases, and ensure environmental sustainability. Health aspects are achieved through the distributed Lifestraw Family filters, that remove 99.99% of bacteria and viruses from the water. Environmental sustainability is achieved through the carbon emission reduction, which is a small contribution to mitigate carbon emissions and combat climate change.
The emission reduction achieved by the campaign and the legitimacy of such a campaign for getting carbon credits are however strongly debated. The main critic raised by Kevin Starr amongst others is that the majority of the Kenyan population actually does not boil the water before drinking it. The emission reductions are therefore not realized. Worse, the project is part of a system that encourages polluters to pollute. According to Shiney Varghese: “Carbon trading has emerged as a response to our refusal to cut down or reduce actual emissions. Instead it is a mechanism to provide emitters with a cheaper option: continue with emissions by buying permits to pollute rather than incur costs to replace the GHG [Greenhouse gas]-emitting technology with better options. ”
Moreover, the production of the filters remains in the hands of the North. There is no intention to shift it to Africa. Mikkel Vestergaard Frandsen, CEO of Vestergaard Frandsen, is convinced that keeping the production local would not add much value to the project, whose impact on the community regarding employment and health is already high. But what about the additional carbon emissions due to the transport of the filters and maintenance pieces? And isn’t it more sustainable to localize the production of a good and transfer the know-how to the people who will eventually be the end users?
Nevertheless, even the opponents to the project acknowledge the fact that water related health issues have to be addressed and that filters can be a solution. “There is no doubt that technologies like LifeStraw may be necessary (and much better than, say, bottled water) in water-stressed situations, or emergencies such as floods” writes Shiney Varghese, while Kevin Starr says that the LifeStraw filter is very effective.
So which goal should be given priority? Better to provide health tools at the cost of the environment or to save the environment while renouncing to distribute the filters? There is no answer, as it is a question of the time scale. In the short-term, health is a priority. Who thinks about the future if one’s days are counted? But in the long-term, African people will be some of the most vulnerable to climate change. Therefore, let us not choose one goal over the others. If we want to bring a change, we must tackle all of them simultaneously.
Student ReporterLaura Burger Chakraborty from the International Environment House in Geneva where two short documentaries were screened, “When the Water Ends” and Carbon for Water, which focus on the subject of health, lack of clean water and climate change in Sub-Saharan Africa, Friday 28 October. Includes an interview with the CEO of Vestergaard Frandsen a venture that states to create life-saving products for the most vulnerable.
“We are the 99%”. This is called out at the major financial hubs around the world – from the Wall Street in New York to the Paradeplatz in Zurich, occupied by people who are concerned about and unsatisfied with our economic system, ruled by institutions that control most of the wealth of the world. But what are the alternatives? How can money, business and profit be re-defined to be more equally shared?
The strategy followed by Vestergaard Frandsen could be an option. Following what it calls as “profit for a purpose” the company donated water filters to 90% of the households in the Western Province of Kenya. Is this charity or an economically sound approach? It is not that clear at a first glance. The use of filter is expected to trigger a behavioural change in the population: instead of boiling the water using wood fuels, Kenyans now will only need to filter it. This change – if it happens – will produce a reduction in carbon emissions of 2million tons carbon per year. Thanks to this reduction, Vestergaard Frandsen will receive carbon credits from the Voluntary Gold Standard, a certification standard for voluntary emission reductions. These credits can then be sold on the carbon market. Vestergaard Frandsen’s whole investment was USD 25million. The return will be defined by the carbon market price.
The company will get its share of profit – else, why should it engage into such a campaign? But through this action, thousands of people have now access of water filters. In spite of the critics raised about the financing of the project, this achievement is not to be underestimated, considering the death toll caused by water-related diseases specially in developing countries.
Malicious gossips might pretend that the project is just a long-term marketing campaign. Indeed, if the project runs successfully, at the time of its end, the filters will be fully implanted in the Kenyan lifestyle. In case Vestergaard Frandsen suddenly charges for the filters, it will look at an even greater profit. To this question during the interview Mikkel Vestergaard Frandsen, CEO of Vestergaard Frandsen is categorical: “hopefully, by the end of the project, the Kenyan government will be able to provide every house with safe water. Else, Vestergaard Frandsen will renew its commitment for another 10 years.” Safe drinking water is a basic human right. Are they in Kenya to charge for it? Certainly not.
