Friday, Nov. 26, 2010

Asia's Challenge 2020: Getting the Basics Right

As Asia marches forward, as some of its nations join the industrial world, and as others, although still young, establish themselves among the globe's economic and political elite, the world watches in bewildering awe the continent which it once had tagged as the Third World. There is no doubt, therefore, that the coming decade will be Asia's. In fact, it might not be an exaggeration to say that this entire century will be Asia's. But amidst all this glory, as is the case with every transition, there are certain obstacles that can severely stymie the continent's progress and must be removed before anything more complex is to be achieved. I am, of course, talking about those problems that the developing part of Asia is still dealing with.

Quite surprisingly, while some nations such as Japan, Singapore and South Korea have been successful in ascending to First World resplendency, there still are nations in the continent that are struggling with dithering political regimes, rampant corruption, poverty, hunger and malnutrition, poor healthcare, illiteracy, and internal instabilities — all the characteristics that are unacceptable if the goal is comprehensive development. There are yet others (such as India) which, despite robust economic growth, stable governments and noble government intentions, still remain unsuccessful in providing basic sustenance to a large part of their population, again perhaps because of the transitory corruption that has permeated the system. Then there is also the issue of energy security in a ruthlessly energy hungry, oil devouring economic environment under the threat of an imminent energy crisis and amidst increasing pressure from nature and the international community to go green.

The challenges, as we can see, are many, and therefore, in my view, to think of the problems in terms of a "one greatest challenge" is to disregard the other equally significant challenges as unimportant. It is also futile to target them one at a time just for the sake of correcting unpleasant statistics, as these problems are, and have invariably been, inherently interconnected. And so, what we need as a continent are not small and superficial remedies but a single holistic solution that incorporates all aspects of all our problems. However romantically promising a holistic solution still eludes our policy makers, perhaps because it is too theoretical and idealistic. To make things easier for our continent's leaders, it is, then, only wise to break down these problems to the most fundamental and come up with the 'most' holistic solution.

Upon doing so, I believe the basic problem because of which most of our progress (especially economic) is hindered is still the problem of governance. Without good governance, all policies, plans or solutions are redundant. The biggest hurdle in the way of good governance is corruption, as it is, undoubtedly, the direct and indirect cause of almost the entire spectrum of our problems such as poverty, terrorism, illiteracy, poor infrastructure and others, which probably, in its absence, could have been solved by now. On the domestic level, therefore, besides increasing the efficiency of our countries' government machinery, our primary aim must be to develop an effective framework for tackling the governmental menace of corruption. Furthermore, on a more bigger and broader scale and in view of a more general and long- term picture of Asia, our leaders must also make efforts to produce a peaceful political environment in Asia by attaining greater political stability in tense regions such as Burma, Afghanistan, Pakistan and the Middle East so as to make these regions economically stable and reliable and capable of a more active participation in our economic environment. Without it, nothing greater can be expected of them and the economic potential of regional integration and cooperation cannot be fully realized. Not only that, we will need all the help we can get from these nations in tackling the harsher challenges that await us.

I admit that in the midst of immensely pressing issues like global warming, energy security, and sustainable development, what I have proposed is a rather dry diagnosis, but alas, as with every task, I believe it is the dull part that ought to be dealt with first, especially in Asia where it can prove to be a huge hindrance in the future. The premise is as simple as it can get: if the foundation is solid, the building will stand.

Consider this story recently featured in an article in the New York Times of an illiterate and poor farmer Ratan Bhuria with a malnourished wife and children in the village of Jhabua, Madhya Pradesh, India. Under a Union Government policy for ensuring nutrition and food security to the poor, as a person below the poverty line, he and his family are entitled monthly to a 77- pound bag of grains, sugar and kerosene. Unfortunately, no matter how much money is allotted to the scheme, they don't receive it. The article also states "Studies show that 70 percent of a roughly $12 billion budget is wasted, stolen or absorbed by bureaucratic and transportation costs." On top of that, the local clerks who are supposed to issue food rations to families such as that of Mr. Bhuria's seldom do their job. In an instance, investigators once, as the report states "discovered 3,500 fake food ration booklets in the district, believed to have been issued by low-level officials for themselves and their friends." The Union Government of India with its noble intentions of ensuring food security to every citizen below the poverty line has a reasonably good policy in place, has considerable funding for the project and even has a widespread Public Distribution system along with an army of bureaucratic workforce in villages to ensure the distribution of food grains at the lowest level — all in vain, unfortunately, because of the unredeemed presence of corruption. To see all efforts evaporate just because of selfish inefficiencies of a few is nauseatingly frustrating and detestable.

Corruption is an economic parasite that debilitates all functioning aspects of a socio- economic system. Nepotism, by reducing competitiveness, severely undermines the principles of a capitalist economic system and destroys the fabric of a democratic government system. So it is not wrong to say that a corrupt democracy is as good as a despotic feudal monarchy. On the macroeconomic scale, by significantly increasing public expenditure on the one hand and by reducing the tax take on the other, bribery, along with other corrupt practices, significantly raises the costs of operating an economy, which eventually leads to financial damage in the form of fiscal deficits and macroeconomic instability. This fact was unequivocally highlighted in the event of the near collapse of the highly corrupt economies of Thailand, Korea, and Indonesia in 1997 during the East Asian Financial Crisis. Philippines, which was once ahead of the South Asian nations such as India in the 1950s in economic terms, also trails behind some of them today, only because of its internal corruption. Furthermore, on a more social and humanitarian level, apart from corroding away the legitimacy and the trust of the State, corruption usually hurts the poor as it ruthlessly and shamelessly sucks out most of the already bare essentials that they have to sustain on. As Mr. Bhuria's example demonstrates, it is one of the single biggest obstacles in the way of eliminating poverty. And in Asia, where most of the countries are still at the developing stages, because it eats away the hard earned resources required for development, corruption, according to me, is absolutely unacceptable.

Upon observing closely the 2009 statistics of Transparency International's Corruption Perceptions Index (CPI), it also does not come as a surprise that the most corrupt nations of Asia are the least developed and the most unstable. According to CPI's 2009 statistics, Afghanistan, Myanmar, and Iraq — all politically turbulent nations — scored 1.3, 1.4, and 1.5 whereas Singapore, Hong Kong and Japan scored 9.2, 8.2 and 7.7 respectively, strictly in accordance with the perceived relationship. What concerns me is that most of the nations in Asia, especially those of South and Southeast Asia, including prosperous ones such as India, scored below 5 in the CPI. This indicates an even greater need for our continent's leaders to eradicate this pestering menace.

Although, various anti-corruption efforts have taken momentum in the past decade, (such as the G-20's commitment towards the ratification and implementation of the UN Convention Against Corruption) not much has been achieved, especially in informing the inaccessible poor and the illiterate — the most in need of this information. Apart from strong political will and an efficient judiciary that would strictly ensure law enforcement, extricating the people from the shackles of a corrupt government requires transparency (in the form of better availability of information) and accountability in the government, along with an active civil society and a free media. Such solutions are well known. The fundamental problem, however, is that corruption is a problem beyond politics and despite the presence of extensive and vigorous anti-corruption laws and policies, the implementation and execution invariably depends on the prevalent government, which can show either nature, depending on the luck of that country. Thus, although this (implementation) does require on part of the public office some degree of patriotism, honesty and selflessness, the hope that such abstract qualities will eventually permeate the bearers of public office cannot be relied upon in the formulation of a scientific economic policy where predictability is often synonymized with certainty and accuracy. This, therefore, calls for the removal of control of the human element from the government machinery and thereby, ironically, increasing the trust by another fairer and more precise method. Utilizing the powers of Information Technology, then, becomes almost inevitable.

In this regard, the views of David Cameron, the British P.M., are particularly interesting. In one of his talks, Mr. Cameron described how the availability of information can dilute the centralized state structure and can take us to a "post bureaucratic age" where, by giving more power and control to the people and by "marrying" this fact with the incredible abundance of information, we can "remake politics, remake government, and remake our public services". He gives an example of how greater transparency can be achieved through this unique marriage of governance with I.T. through "one of his favorite websites" — the Missouri Accountability Portal. It seems only wise to quote him verbatim: "In the old days, only the government could hold the information... Now here, on one website, one state in America, every single dollar spent by that government is searchable, is analyzable, is checkable." It is amply clear that only through such transparency and accountability on the part of the government can we eliminate corruption from our system.

The wonders of IT can help us do exactly that in preventing or at least reducing corruption in the first place and at the lowest level where it matters most. Let's come back to the example of Mr. Bhuria. Because of the patent failures of the PDS system, The Indian Government is already contemplating scrapping the distribution system altogether and is planning to directly give food coupons or cash to families below the poverty line so as to save them the trouble of facing corrupt PDS staff and bureaucrats by giving them the freedom to buy whatever things they wish and from wherever they wish. Such a move is welcome, and it gives policy makers enough ground to speculate and plan further. Thus, for instance, to ensure the delivery of these food coupons to families such as those of Mr. Bhuria, these coupons could be made electronic (say like a credit card) and could be designed to contain, along with other essential identification information, accurate biometric details of every person in the family, associating them with the already proposed Unique Identification Number — an id number along the lines of the social security number in the US. A network of retail stores could then be set up in remote rural areas by private players, replacing the government PDS system. Minimizing government-individual interference, the system would require an entitled person to purchase directly from the private retailer in exchange for his coupon, the coupons being allowed, of course, for later reimbursement. The precise biometric data, along with verification at the time of purchase, would also ascertain that the supplies actually go to the families themselves. This would keep in check the issuing of fake coupons.

Finally, to ensure that big retailers actually set up shops in remote rural areas, the companies could be advised to include this undertaking as a part of their corporate social responsibility. Printing an indicator on the company's products and other advertisings that would project the company's efforts in this area could also be made mandatory for the purpose of reflecting these initiatives in that company's marketing, thereby incentivizing them to open such shops in exchange for a better market image. Additionally, if this entire consumer- supplier transaction data of the central database is made visible or accessible to the public, then policy experts could also pick up critical patterns that could help them improve upon their existing schemes. So basically, with the help of information technology, we can create a transparent and accountable system that will 'accurately' deliver. Similarly, in other areas of governance, the transparency produced by I.T. can be used in substantially reducing corruption. It is, admittedly, radical, but it's still worth a try.

So, in sum, we could say that a healthy government structure is a prerequisite for all other forms of social and economic development. Therefore, just as important as eradicating corruption in the domestic context is also achieving political stability in the larger, much broader, context of the continent. It is worth recalling here what the Minister Mentor of Singapore, Lee Kuan Yew said about the rising instability in Burma: "ASEAN leaders know that if the situation in Myanmar deteriorates and continues to deteriorate, there will come a breaking point where much more brutal force will be used to put a revolt down ... So it is in the best interests of every country in ASEAN to help stabilize Myanmar. An unstable Myanmar is a time bomb for the whole region." Indeed, political instability in a country, besides threatening the general security of the surrounding region, cripples growth in not only that country but also the entire neighborhood. For the nation in particular, the uncertainty associated with an unstable political environment, in addition to detrimentally impacting executive economic decisions such as investment, production and labor supply, reduces foreign and domestic investment and hence the speed of economic development. And, most importantly, the hostile presence of such unstable countries disrupts cooperation between bordering countries, severely undermining the otherwise great economic potential of that area.

Therefore, instability in any region will be detrimental to the entire continent in the future. A stable political region, on the other hand, by providing an atmosphere conducive to regional economic integration and cooperation, will immensely benefit the economic prosperity of different neighborhoods, which will consequently contribute to the overall prosperity of Asia. For example, if the struggling countries in South Asia resolve their conflicts and gain more stability and if trade restrictions are removed, it is expected that intra-regional trade, which is presently at US$5 billion, could jump to US$20billion. Moreover, a peaceful region, especially in and around Afghanistan and the Middle-East, would also solve to a great extent the festering problem of international terrorism. Thus, Asian leaders must make efforts towards brokering peace between belligerent nations to enhance stability in tense regions. Also, for the purpose of manufacturing a harmonious inter-country cooperative economic environment, Asian leaders must make efforts towards enhancing market integration and cooperation as part of their regional strategy. In this regard, organizations such as ASEAN and SAARC, some of which haven't yet delivered successfully, must deliver. Unfortunately, it is true that regional conflicts and instability will prevail for a long time. Nonetheless, as responsible nations of Asia, mature economies must make all possible efforts in assisting their ailing counterparts in coming out of political misery, perhaps through conditional aid and, if necessary, even (peaceful) intervention.

It is also important to mention here that democracy, too, is a vital part of the definition of a 'healthy government structure' majorly because, besides giving the people adequate rights and freedom, it plays an essential role in 'sustainable' stability and growth. Although upon observing it does seem that certain oppressive authoritative regimes such as the highly corrupt military junta of Burma, the Kim Jong-Il led nuclear armed totalitarian government of North Korea, and quite surprisingly, also China, by maintaining a long presence, have stabilized their internal politics, this apparent stability is actually a state of unstable equilibrium where there is a constant possibility of a revolt or an uprising. Spreading the light of democracy in regions with such closed and oppressive governments by encouraging them to resort to more democratic practices will ensure sustainable peace along with sustainability in all other aspects of growth, and so diligent efforts must be made in this direction as well.

This chapter in Asia's history will be all about economic development. We have all the pieces necessary to solve the economic puzzle except those that complete the picture of good governance in the region. On finding those pieces and upon completing this part of the puzzle, economic growth will be smarter, accelerated, more inclusive, more sustainable, and capable of confronting the long unresolved problems of poverty, food security, illiteracy and even terrorism and energy security. It is time, therefore, that we got our basics right for, in the decade after the next and the ones after that, we will have even grimmer challenges to face, and we better be prepared for them.


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