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Profits & Poverty: How the Private Sector is Helping to Change the Fortunes of the Poor

Profits & Poverty: How the Private Sector is Helping to Change the Fortunes of the Poor

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This edition of Development Asia takes a careful look at the role of the private sector in development work and examines innovative strategies being employed in the region.
This edition of Development Asia takes a careful look at the role of the private sector in development work and examines innovative strategies being employed in the region.

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Published by: Asian Development Bank on Apr 25, 2012
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April–June 2012

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A publication of the Asian Development Bank
How the private sector is helping to
change the fortunes of Asia’s poor
3URÀWV
& Poverty
Work for Asia
and the Pacif i c
Work for Asia
and the Pacif i c
The only development bank dedicated to Asia and
the Pacific is hiring individuals dedicated to development.
www.adb.org/Employment/International
www.development.asia April–June 2012 Development Asia 1
WWW.DEVELOPMENT.ASIA
©2012AsianDeve|opmentBank
ISSN1998-7528
ASIANDEVELOPMENTBANK
PUBLISHER
AnnQuon
MANAGING EDITOR
AndrewPerrin
SENIOR EDITOR
F|oydWha|ey
EDITORIAL ADVISOR
JoYamagata
ASSOCIATE EDITOR
MariaLizaSo|ano
COPY EDITOR
Caro|ineAhmad
RESEARCH
Apri|Lee
NgEnna
ShawnPang
SamanthaSeet
JamieTan
ART DIRECTOR
TonyVictoria
Development Asiafeaturesdeve|opmentissues
important to Asia and the Paciñc. It is pub|ished
four times a year by the Asian Deve|opment Bank.
Theviewsexpressedinthismagazinearethoseof
the authors and do not reñect the views and po|icies
oftheAsianDeve|opmentBankandHaymarket
MediaLtd.Useoftheterm“country”doesnot
imp|y any [udgment by the authors or the Asian
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the|ega|orotherstatusofanyterritoria|entity.
Advertising of any speciñc commercia| product,
process, service by trade name, trademark,
manufacturer, or otherwise, in this pub|ication
does not constitute or imp|y ADB's endorsement,
recommendation, or favoring of any of the
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COMMENTS
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|etters@deve|opment.asia
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Note. In this pub|ication, "$" refers to US do||ars
A pub|ication of the Asian Deve|opment Bank,
designed and distributed by Haymarket Media Limited
The Balance of Power
T
he combined budgets of the Asian Development Bank, the World Bank,
and every other development organization in the world make up just
a drop of the economic fuel needed to power billions of people into
greater prosperity. Those who work in development have long known
that the private sector must play a major role in the enormous economic change
needed to lift large numbers of people out of poverty.
But it is not that simple.
Though their motives may be admirable, private sector companies are not
created to help the poor and spur economic development. They are complex
entities that play by a different set of rules than development organizations.
Finding the right partnership between the private sector, the public sector, and
the development community is at the forefront of development work today. In
response, this edition of Development Asia takes a careful look at the role of the
private sector in development work and examines innovative strategies being
employed in the region.
In addition to examining the broad trends in Asia, we look at how Asian
companies have matured to the point that they are investing globally. They now
face the same challenges of economic and social responsibility that western
companies have grappled with for decades.
This edition also looks at the transition taking place from a focus on microlending
to an increase in microsavings programs. We also look at the increasing recognition
that the world’s poor—the Bottom of the Pyramid—are a major market for
consumer goods. But should companies be selling cola, candy, and mobile phones
to people struggling to survive?
In our articles section, we look at the cruel reality that many poor countries
that discover vast mineral or energy resources end up less prosperous as a result.
We also examine the controversial theory of charter cities: setting up enclaves of
good governance in developing countries.
Our Reconnaissance section tries to keep us out on the edge. In this edition, it
looks at the increasing popularity of soap operas as agents for social change.
We hope this edition will give you a new perspective on private sector companies
and the role they play in society. Q
Ann Quon
Publisher
PUBLISHER’S NOTE
Printedonrecyc|edpaper
2DevelopmentAsiaA¡ril–}une2O12 vvv.develo¡menl.asia
CONTENTS
YEAR V, NUMBER XIII, APRIL–JUNE 2012
FOCUS
PRIVATE SECTOR
DEVELOPMENT
6 THE BIG READ
BANKING ON BIG BUSINESS
Can¡rivalecom¡aniesdoabeller|ob
ofreducing¡overlylhangovernmenls`
By John Otis
___________________________________
14 THE BIG PICTURE
BRIDGING THE GAP
Iublic–¡rivale¡arlnershi¡s(IIIs)
offeraneconomicallyviablesolulion
loinfraslruclureneedsvhen¡ublic
fundsarelimiled.Des¡ilesome
failures,IIIsconlinuelos¡readacross
develo¡ingAsia.
By Mark Blackwell
___________________________________
16 THE BIG VOICE
TAKING STOCK
DurreenShahnazlhinksinveslors
villbuyslocksincom¡aniesbasedon
socialim¡acl.Sheshouldknov.
By Floyd Whaley
___________________________________
20 GLOBAL ASIA
Asiancom¡aniesareusinglheir
nev-found hnancial mighl lo invesl
vorldvide,bullheyarenolalvays
velcome.
By John Otis
48 PROFILES IN DEVELOPMENT
A LEG UP
AdoclorinThailandhass¡enldecades
innovaling¡roslheliclimbss¡ecially
designedforlhe¡oor.
By Karen Emmons
___________________________________
50 RECONNAISSANCE
SOAP OPERAS FOR
SOCIAL CHANGE
Serialdramasbroadcaslonradioor
lelevisioncanbeaneffeclivevay
of¡romolingsocialchangeallhe
grassroolslevel.
By Margot Pfeiff
___________________________________
DEPARTMENTS
4 OFF THE PRESS
Iresscli¡¡ingsonglobalaffairsand
develo¡menlissues
___________________________________
5 ON THE WEB
Recommendedsilesonlhe
vorldvideveb
___________________________________
38 OFF THE SHELF
Musl-readbooksoneconomicand
develo¡menllo¡ics
___________________________________
53 ON THE RECORD
Nolablequolesonglobalissues
26 TINY SAVINGS
Aflerlheenlhusiasmandlhen
loveredex¡eclalionsofmicrolending,
advocalesformicrosavingslakeamore
cauliousa¡¡roach.
By Marc Lerner
___________________________________
30 THE TRIPLE BOTTOM LINE
Com¡aniesinAsiaarereinvenling
lheconce¡lofcor¡oralesocial
res¡onsibililyby¡ulling¡eo¡leand
lhe ¡lanel on ¡ar vilh ¡rohls.
By Floyd Whaley
___________________________________
34 POVERTY PROFITS
Thevorld’s¡oorareincreasingly
beingvievedasalucralivemarkelfor
lhe¡rivaleseclor.Isilex¡loilalionor
longoverdue`
By Jade Lee-Duffy
___________________________________
ARTICLES
40 THE RESOURCE CURSE
Asian nalions are hnding billions in
oil,gas,andminerals.ßulvillilmake
lhem¡oorer`
By Floyd Whaley
___________________________________
44 REPLICATING
HONG KONG, CHINA
Charlercilies—smallenclavesofgood
governanceindevelo¡ingcounlries—
aregainingsu¡¡orlers,bulsome
remainske¡lical.
By Shu-Ching Jean Chen
16 INVESTING FOR SOCIAL GOOD 40 WHEN WEALTH BECOMES A CURSE 44 CONSIDERING CHARTER CITIES
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia3
Contributors
Mark Blackwell has more than 20 years of
experience working for news organizations,
including the Hearst Corporation and
Capital Cities/ABC. He specializes in
information graphics.
Jade Lee-Duffy has worked
as a journalist in Hong Kong,
China for more than 10 years.
She is a regular contributor to
the South China Morning Post.
Karen Emmons is a Bangkok-based
journalist who writes on public health and
social issues.
Marc Lerner has been
based in Asia for more than
\HDUVÀUVWDVEXUHDXFKLHI
for The Washington Times
and later as senior editor for
the World Health Organization.
John Otis is the Colombia correspondent
for Time magazine, GlobalPost, and the
BBC/Public Radio International program
The World.
Margo Pfeiff is a Canada-based journalist
who worked as a special correspondent for
Reader’s Digest for 17 years.
Shu-Ching Jean Chen
is a contributing writer of
Forbes Asia. She also writes
news analysis regularly
for the Business Times in
Singapore. She was a managing editor of
CFO, published by The Economist Group.
Floyd Whaley covers the Philippines
for the International Herald Tribune and
The New York Times. He is the senior
editor of Development Asia and operates
Asia Editorial Services.
Letters to the Editor
Iublic¡olicylhalmakesaheallhy
lifeslylechoicelheeasychoicecanhel¡
crealeamoreequilable,heallhy,and
¡ros¡erousregion.
Pilar Lorenzana-Campo, MEP
SeniorAssociale,Ilanningand
Develo¡menl
IublicHeallhLav&Iolicy
California,USA
Holistic Education
While it is wonderful to see the
accessibility of education increasing as
reported [Development Asia, April–June
2011], surely we need to move away
from the model of “educating” to
feed the industrial, mass production
machine. An all-round education of
head, heart and hands, is necessary to
produce “imaginative” thinkers who
can bring the societal change that is
so desperately needed. To paraphrase
Albert Einstein, “to bring change we
cannot use the same type of thinking
that caused the problems in the
first place.”
David Simpson
Teacher
Waldorf School, New Zealand
Email your comments to
lellers©develo¡menl.asia
*Please include your full name and contact
information. Letters may be edited for space
and clarity.
Advocalingfor
IublicHeallh
TheheallhedilionofDevelopment Asia
(}uly–December2O11)lookedalan
un¡recedenledchallenge:lhedouble
burdenofinfecliousandchronic
disease.Risingdiabeles,obesily,and
cancerralesnolonlyhaveveryreal
economiccosls,bul,ifleflunchecked,
lhrealenlheenlireregion’ssocial
equilyandlong-lermslabilily.
Hov¡eo¡lelravel,lhefoodlhey
eal,andlheairandvalerqualily
inourneighborhoodsandhomes
conlribuleimmenselylolhevell-being
ofanycommunily.ßul¡olicymakers
muslim¡lemenlmeasureslhal
im¡rovelhevayciliesfunclionlo
su¡¡orlbellerheallh.
Ònesuccessfulexam¡leoflhis
a¡¡roachislheSlaleofCalifornia’s
TobaccoTaxandHeallhIromolionAcl
of1998(Iro¡99).Sinceilsince¡lionin
1998,Iro¡99haslevieda25-cenllax
oneach¡ackofcigarelles,a¡orlionof
vhichisdevoledlofundinglobacco
conlrolefforlsinlheslale.Theresulls
havebeenremarkable.Lslimales
arelhalIro¡99funded¡rograms
havesavedmorelhanamillion
livesinCalifornia,and$86billionin
heallhcarecosls.
|TheIeo¡le’sRe¡ublicofjChina
alreadyrequires“enclosed¡ublic
s¡aces”lobefreeoflobaccosmoke.
Iolicymakersacrosslheregionshould
considerbuildingonlhala¡¡roach
vilhincenlivesandregulalory
mechanismsloincreaseaccesslo
heallhyfoodsandencourage¡hysical
aclivilyasvellasinlervenlionslhal
¡revenleasyaccesslofaslfood,
alcohol,andlobacco.
vvv.develo¡menl.asia
OFF THE PRESS
4DevelopmentAsiaA¡ril–}une2O12
Jobs Malaise
“Whalvilloffsellheshrinkingof
vaslinduslries`Nevinduslries`
Well,vehavenev,digilalinduslries,
bul lhey are even more efhcienl lhan
reslruclured old induslries. Com¡are
Google’sslaffsizeloGeneralMolors’,
even nov. Iacebook serves almosl a
billion¡eo¡levilhslafflhesizeofa
largenevs¡a¡er.Amazonem¡loys
farfever¡eo¡lelhanlhebookslores
il¡uloulofbusiness.Solhosenev
induslries vill bring grovlh, ¡rohl, and
veallh,bulnolmany|obs.”—Jeff Jarvis,
Guardian Unlimited, 30 January 2012
Just Sharing Space
¨Shared s¡ace is nol a bad mela¡hor for lhe vorld loday, a ¡lace vhere lhe
old road signs serve lillle ¡ur¡ose, se¡araleness is an illusion, and successful
navigalion de¡ends on inlense avareness of every aclor, from I¡anema lo
TehranbyvayofSoulhKensinglon.”—Roger Cohen, The New York Times,
2 April 2012
Achilles Heel of Emerging Markets
Country-Specific Censorship
¨Like Tviller ilself, il's lime for lhe Inlernel, and ils chir¡ing classes, lo
grov u¡.. Tviller has laid dovn lhe rules by vhich il vill hold counlries
accounlable, and by vhich il vill hold ilself accounlable, al leasl vhen il comes
lo censorshi¡. They are so fair as lo be vilhoul ¡recedenl, and if lhey are violaled,
lhe vorld ¡resumably vill be able lo see lhe hy¡ocrisy in an inslanl.¨
—Paul Smalera, Reuters, 28 January 2012
Stunted Growth
¨Su¡¡ose I asked you lo imagine a
courlroom in vhich a slern |udge
¡eers vilh indifference al a baby÷and
off-handedly condemns lhe infanl
eilherlodealhoralifeshorlerlhanher
¡eers, vilh ¡oorer cognilive ca¡acily,
morelikelihoodofdiseaseandless
abilily lo learn al school and earn as an
adull. Òf course, you vould say lhis is
unimaginable.Whal|udge,orhuman
being, vould do such a lhing` ßul lhis
isvhalisha¡¡eningloaneslimaled
18O million children under lhe age of 5,
children vhose bodies and minds are
limiledbyslunling.”—United Nations
Children’s Fund Executive Director
Anthony Lake, TIME, 31 January 2012
Burgernomics
¨The chea¡esl burger is found in India, cosling |usl $1.62. Though because
ßig Macs are nol sold in India, ve lake lhe ¡rice of a Mahara|a Mac, vhich is made
vilh chicken inslead of beef. Nonelheless, our index suggesls lhe ru¡ee is 6O/
undercooked.¨—The Economist’s Big Mac Index, which is based on purchasing-power
parity, 12 January 2012
¨Rising inequalily, lack of civic ¡arlici¡alion, ¡olilical a¡alhy, and a dearlh of good |obs, ¡arlicularly for lhe young, com¡rise
lhe Achilles heel of emerging-markel counlries' currenl develo¡menl model. A Gallu¡ ¡oll on sub|eclive vell-being in Tunisia
and Thailand shovs lhal, vhile income levels and social condilions in bolh counlries im¡roved belveen 2OO6 and 2O1O, life
salisfaclion dro¡¡ed.¨—Johannes Jütting, head of Poverty Reduction at the OECD Development Center in Paris, writing for Project
Syndicate on 12 February 2012
¨The ¡ooresl of lhe ¡oor seem lo have esca¡ed lhe vorsl of lhe ¡osl-2OO7
dovnlurn. ßul lhe grovlh in lhe middling ¡oor shovs lhere is much lo be done.¨
—The Economist, 3 March 2012, on the new global poverty estimates from the World Bank
Number of Middling Poor Growing
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia5
ON THE WEB
Daily Developments
The Guardian’s Global
Development Report
http://www.guardian.co.uk/global-development
I
l is difhcull lo hnd consislenl coverage of develo¡menl
issuesinlhemainslreammedia.Moslma|ormedia
oullels cover lhe lo¡ic, bul only infrequenlly.
The exce¡lion is lhe Uniled Kingdom nevs¡a¡er and
vebsile, The Guardian. Ina¡arlnershi¡vilhlheßill&
Melinda Gales Ioundalion, The Guardian o¡erales a global
develo¡menl seclion of ils vebsile lhal offers daily u¡dales.
The sile does nol merely louch on develo¡menl issues,
bul il is dedicaled lo lhem. In addilion lo slraighl nevs
slories, if offers ¡odcasls, a Tviller feed, video, ¡holo
galleries, and inleraclive infogra¡hics. Il also includes a
handy overviev of lhe Millennium Develo¡menl Goals and
a seclion devoled lo develo¡menl dala vilh a useful search
funclion.
Al lhe hearl of lhe sile is lhe Ioverly Mallers blog,
vhich brings in guesl vrilers lo discuss issues across a
broad s¡eclrum of develo¡menl lo¡ics. Recenl ¡osls have
included, ¨India's educalion malaise has all lhe hallmarks
of a develo¡menl disasler,¨ and ¨Cily migralion as a
develo¡menl ¡roblem` Il's lhe ullimale urban mylh.¨
Anolher very inleresling, and rare, fealure of lhe sile is a
calendar of develo¡menl-relaled evenls. lhal is aclually
ke¡l u¡daled! This may nol exisl anyvhere else on lhe veb.
Ior lhose vho use Gmail or Google Calendar, evenls can be
added lo your ¡ersonal calendar vilh lhe click of a bullon.
The sile also has a seclion devoled lo sludenl resources,
an area lhal ca¡lures olher inleresling develo¡menl
informalion around lhe veb, a mobile version, and a
nevsleller lhal ¡uls lhe sile's conlenls inlo your email inbox
on a regular basis.
Like all greal vebsiles, The Guardian’s Global Develo¡menl
re¡orl is dee¡, rich, and nuanced. The more you dig, lhe
more you hnd. Q
Surprising Choices
Yourtopia
http://www.yourtopia.net
W
hal is a develo¡ed counlry` There are as many
ansvers lo lhal queslion as lhere are ¡eo¡le
lhinking aboul il. Nov, lhere is a nifly vebsile
lhal hel¡s you delermine lhe ansver for yourself.
The vebsile, vhich vas develo¡ed for lhe World ßank's
A¡¡s for Develo¡menl com¡elilion, asks a series of
queslions aboul elemenls of develo¡menl lhal you consider
moslim¡orlanl.
Ior exam¡le, il asks: ¨Whal is lhe relalive im¡orlance
you allach lo each one of lhe folloving: Lconomy. Heallh.
Lducalion.¨ You assign a ¡ercenlage lo each, relaled lo ils
im¡orlance. The sile valks users lhrough lhe full range of
develo¡menl indices, lelling lhem decide vhich are mosl
im¡orlanl.
The resull is a nalional develo¡menl ¡rohle based on your
¡ersonal vievs of vhal is mosl im¡orlanl in sociely. In olher
vords, if you vere lhe leader of a counlry, lhis is vhal you
vould slress vhen il comes lo develo¡menl. Al lhe end of
lhe lesl, il lells users vhal counlry mosl closely reßecls lheir
¡ersonal¡riorilies.
This can be slarlling, ¡arlicularly vhen you discover your
ideal counlry is Cuba.
The ¡ur¡ose of lhe exercise is hel¡ users undersland
hov dala on Millennium Develo¡menl Goals (MDGs) is
organized and analyzed vhen |udging a counlry's ¡rogress.
Generally, lhis ¡rocess is exlremely com¡lex, bul lhe vebsile
¡resenls a user-friendly version.
¨Yourlo¡ia makes informalion aboul MDG ¡rogress
¡arlici¡alive and fun, incenlivizing grealer ¡ublic
engagemenl in lracking MDGs vhile relaining scienlihc
inlegrily,¨ nole lhe crealors of lhe sile.
Anolher revealing as¡ecl of lhe sile is lhal il illuslrales
hov dala can be mani¡ulaled lo im¡rove lhe develo¡menl
re¡orl card of a counlry. ßy veighing and ¡riorilizing
cerlain areas of develo¡menl over olhers, a counlry can
a¡¡ear lo have made grealer ¡rogress. Q
ßy Iloyd Whaley
PRIVATE SECTOR DEVELOPMENT: THE BIG READ
vvv.develo¡menl.asia 6DevelopmentAsiaA¡ril–}une2O12
A
I
I
W
henlheGovernmenlof
Afghanislan,vilhlhe
hel¡ofa¡rivalemobile
nelvorko¡eralor,
began ¡aying ¡olice ofhcers in var-
lornregionslhroughmobilebanking,a
funnylhingha¡¡ened:lhe¡olicemen
lhoughllheyhadreceiveda3O/raise.
Here’svhy.The¡olicemenreceived
credilsonlheircell¡honeslhallhey
couldlalerredeemforcash.ßecause
lherevasnovayforcommanding
ofhcers lo skim off bank noles, lhe
¡olicemen hnally received lheir lrue
vages—andvereslarlledbylhe
amounl.
Banking on Big Business
Can private companies do a better job of reducing poverty than governments?
ßY}ohnÒlis
Thesyslemvassosuccessfullhal
lheMinislryofLducalionado¡led
mobilebankinglo¡ayleachersin
1OAfghan¡rovinces—adecisionlhal
cameaflerseveralcouriersverekilled
vhiledeliveringschool¡ayrolls.
Mobilebankingvillensure“lhalno
minislryem¡loyeeloseshislifefora
dufße bag of cash,¨ says Ra|iv Shah,
adminislralor of lhe Uniled Slales
AgencyforInlernalionalDevelo¡menl
(USAID), vhich is hel¡ing lo hnance
lhe¡rogram.
Afghanislan’smobile¡aymenl
ex¡erimenlilluslraleshovlhe
¡rivale seclor can bolh make ¡rohls
andmakeadifferenceinoneoflhe
vorld's ¡ooresl and mosl conßicl-
affecledareas.Tradilionally,reducing
humanmiseryhasbeenvievedaslhe
burdenofgovernmenls,mullilaleral
develo¡menl banks (MDßs), and olher
develo¡menlorganizalions.ßulfora
varielyofreasons,ex¡erlssaylhallhe
FREE-FLOWING FOR NOW Residents
of Hyderabad get potable water from a
tanker truck supplied by the government.
Opinion has been divided over whether
to let the private sector modernize
and manage India’s water distribution
system, a move that may raise prices.
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia7
laskvillincreasinglyde¡endonlhe
hnancing, lechnology, and knov-hov
of¡rivalecom¡anies.
Takelhevilalissueofem¡loymenl.
Inaneravhenmanygovernmenlsare
dovnsizing,¡rivalecom¡aniesnov
¡rovide 9 of every 1O |obs in develo¡ing
Asiannalions,accordingloInternational
Finance Institutions and Development
through the Private Sector.Asaresull
¨lhe ¡ace of |ob grovlh and lhe qualily
ofem¡loymenlinlhe¡rivaleseclorare
cenlral lo develo¡menl,¨ says lhe |oinl
re¡orlof31mullilaleralandbilaleral
develo¡menl hnance inslilulions in 2O11.
Wilhilsengineers,scienlisls,
lechnicians,andnumbercrunchers,lhe
¡rivalesecloralsocarriesadee¡bench
oflalenllhalcanhel¡governmenls
dream u¡ beller ¡ublic vorks ¡ro|ecls.
Inaddilion,researchanddevelo¡menl
(R&D) budgels of ¡rivale hrms far
oulslri¡lhoseofgovernmenls.Vikram
Mehla, chairman of Shell Com¡anies
inIndia,sayshiscom¡anys¡enlmore
on R&D in one year lhan all of India's
slale-ovned com¡anies combined over
lhe¡asl5years.
¨Irivale com¡anies, such as ¡ro|ecl
s¡onsors and consulling hrms, can
¡rovide lhe ex¡erls,¨ says ßarbara
Samuels, execulive direclor of lhe
Global Clearinghouse for Develo¡menl
Iinance, a non-¡rohl organizalion
devoledloex¡anding¡rivaleseclor
involvemenlindevelo¡menl¡rograms.
“If¡eo¡ledon’lhavecleanvalerand
are gelling sick, lhe ¡roblem isn'l |usl
gelling lhe money for a valer ¡ro|ecl.
Il’salsoaboulunderslandinglhe
lechnologies,lhedislribulion,andlhe
business models lo hgure oul hov lo
¡ay for lhal valer.¨
Iorlhe¡asl2decades,¡rivale
com¡anieshavebeenvorkingvilh
governmenlslobuildhighvays,
¡over¡lanls,valersyslems,
lelecommunicalionsnelvorks,andolher
infraslruclurelhalcanhel¡¡oor¡eo¡le
moveu¡lheeconomicladder.Hovever,
Asia needs many more of lhese so-called
¡ublic÷¡rivale ¡arlnershi¡s (IIIs),
“If people don’t have clean water and are getting
sick, the problem isn’t just getting the money for
a water project. It’s also about understanding the
technologies, the distribution, and the business
models to figure out how to pay for that water”
—Barbara Samuels, executive director of the Global Clearinghouse for
Development Finance
becauselhelackofinfraslruclurehas
becomeabolllenecklogrovlh,alhreal
locom¡eliliveness,andanobslacle
lo¡overlyreduclion,accordinglo
Infrastructure for a Seamless Asia, a |oinl
sludyoflheAsianDevelo¡menlßank
(ADß) and lhe Asian Develo¡menl ßank
Inslilulein2OO9.Ilrecommendslhal
Asias¡end$8.3lrilliononinfraslruclure
belveen2O1Oand2O2O.
“Virluallyeverycounlryinlhe
regionnovneedsmore¡over¡lanls,
ex¡andedroads,valerlrealmenl
facililies, bridges, and ¡orls,¨ noles
lhere¡orlInfrastructure’s Unbalanced
Equation.“Inmanycounlries,lheneeds
are already al crisis ¡ro¡orlion.¨
AsidefromboomingIeo¡le’s
Re¡ublic of China (IRC), vhich has
beens¡endingalleasl7/ofgross
domeslic¡roducloninfraslruclure,
Samuels ¡oinls oul lhal mosl Asian
governmenlssim¡lycannol¡ayforlhe
long lisl of vilal ¡ro|ecls on lheir lo-do
lisls and musl seek exlernal hnancing.
Asilha¡¡ens,lhemoneyisoullhere.
Amidlheeconomicslovdovns
in Luro¡e and lhe Uniled Slales,
mullinalional hrms are looking for
bellerrelurnsinAsia.Thal’sone
reasonvhybelveennovand2O14,
Indonesiaex¡eclslhal$9Obillionof
a¡ro¡osed$14Obillionins¡ending
oninfraslruclurevillcomefrom
¡rivale sources. In ils 12lh 5-year ¡lan
(2O12÷2O17), lhe Governmenl of India
forecaslslhalhalflhemoney—aboul
$5OObillion—villcomefrom¡rivale
hnancing.
Iro¡onenlsoflheoverla¡¡ing
goalsof¡overlyreduclionand¡rivale
¡rohls, such as Indian economisl CK
Irahalad,¡oinloullhesecom¡anies
may hnd a ¨forlune al lhe bollom of
lhe ¡yramid.¨ The Uniled Nalions
Develo¡menl Irogramme (UNDI)
describeslhese¡arlnershi¡sas
havinglhe¡olenliallo“movebeyond
¡hilanlhro¡yloamoresuslainable
a¡¡roach lo reaching oul lo lhe ¡oor.¨
Yelforeveryu¡liflingchronicle
ofmobile¡aymenlsloco¡sin
Afghanislan,lherearecaulionary
lales,suchaslhelavsuilslhaldelayed
lheo¡eningoflhenevinlernalional
lerminalalManila’smainair¡orlorlhe
cancelledconlraclslhalnearlyderailed
ßangkok's SkyTrain mass lransil ¡ro|ecl.
Iradee¡ Singh, vice-chairman and
managing direclor of ¡ro|ecls for
India’sInfraslruclureDevelo¡menl
Iinance Com¡any, feels lhal lrying
lomesh¡rivaleseclorinlereslsvilh
nalional governmenl goals can quickly
become a fruslraling, square-¡eg-
round-hole exercise. A blunl 2OO8 UN
re¡orlvarnslhalIIIs¡resenl“a
severeorganizalionalandinslilulional
challenge.¨
Indeed,¡roblemscancro¡u¡allhe
veryslarlvilhunrealislicex¡eclalions
amonggovernmenlsaboullhes¡eed
vilh vhich ¡ro|ecls can be lendered
and buill. Iublic ofhcials also come
under hre for corru¡lion, lack of
lrans¡arencyinlhe¡rocuremenl
¡rocess,andcancellingconlraclsvilh
¡rivale hrms.
PRIVATE SECTOR DEVELOPMENT: THE BIG READ
vvv.develo¡menl.asia 8DevelopmentAsiaA¡ril–}une2O12
Com¡any execulives, meanvhile,
cancomeacrossasgreedyand
insensilivelolheurgenlneeds
and¡olilical¡ressuresfacedby
governmenls.Therehavealsobeen
ma|or backlashes over environmenlal
andlaborissues,faullyconslruclion,
andincreaseduserfeesforlrans¡orl,
eleclricily,andvaler.
¨Il can very easily lurn quile horribly
vrong,¨ says Mark Ralhbone, vho
leadslheinfraslruclureadvisoryleam
in Soulheasl Asia for IvC, lhe global
accounling and consulling hrm also
knovn as IricevalerhouseCoo¡ers.
“Òflen,youhaveariverdividing
ex¡eclalionsbelveenlhe¡ublicand
¡rivale seclors lhal can'l be bridged.¨
Thal's vhere inlernalional hnance
inslilulionscansle¡in.Manyex¡erls
argue lhal MDßs should de-em¡hasize
lendingandinsleadfocuson¡roviding
loanguaranleesandfeasibililysludies
vhileservingasadvocalesforgood
governmenl—lhekindsoflhingslhal
can make ¡arlnershi¡s ßourish.
“ThevorryIhaveislhalvevillnol
besuccessfuleilherfromagovernmenl
orabusinesssland¡oinlinreslarling
suslained grovlh in lhe region,¨
DeborahHenrella,grou¡¡residenlof
Iroclor & Gamble's Asia and Global
S¡ecially Channel, said al lhe 2O11
Asia÷Iacihc Lconomic Coo¡eralion
forum.“ßulIlhinkaloloflhalis
vilhinour¡overifvevorklogelher
morecloselyinlhe¡rivaleand¡ublic
seclors.¨
TRAGIC IRONY
Whenengaginglhe¡rivaleseclor,
develo¡menlex¡erlsfocuson
ils¡olenlialroleinbuildingu¡
infraslruclurebecauseevenslighl
im¡rovemenlscanbringoulsized
benehls lo lhe ¡oor. They nole lhal
valershorlages,¡overoulages,and
crumblingroads¡unishlhedeslilule
farmorelhanlhemiddleclassand
richvhocanaffordbollledvaler,
generalors, and four-vheel-drive
vehicles.
“The¡ooresl¡eo¡learelheones
vhosufferlhemoslfromlhelack
ofinfraslruclureand,ironicallyare
lhe ones vho have lo ¡ay more¨ for
essenlialservices,says}oYamagala,
de¡ulydireclorgeneralofADß’s
Irivale Seclor Ò¡eralions De¡arlmenl.
India's moslly governmenl-
conlrolledvalervorksisa¡rime
exam¡le. The anliqualed nelvork of
¡i¡es and ¡urihcalion ¡lanls is so
com¡romisedlhalhalfoflhecounlry’s
lrealedvalerisloslloleakageand
lhefl.InlheslumsofDelhiandolher
cilies,lhe¡eo¡levhocanleaslafford
lomuslbuyvalerfromlankerlrucks
oflen run by local mahas lhal la¡ inlo
lineslhen¡ilferandselllhevaleral
exorbilanlrales.
“Iorly¡ercenloflhevalerisbeing
sold on lhe black markel,¨ Vi|ender
Gu¡la,ano¡¡osilion¡olilicianin
Delhi, lells re¡orlers. ¨The valer maha,
lhe lanker maha, are earning billions of
ru¡eesaslhe¡eo¡lecraveevenaglass
of valer.¨
Thegovernmenllackslhemoney
lomodernizelhesyslemlhanks,in
¡arl,losubsidizedlariffs.Thereis
nolradilionoflruecoslrecoveryfor
valer, and ofhcials fear a ¡olilical
backlashiflheylryloraiselariffs.
Hovever, Singh argues lhal
lhe¡roblemisnolnecessarilyan
unvillingnesslo¡aybulralheran
unvillingnesslocharge.He¡oinls
oul lhal Indians quickly ada¡led lo
¡rivalelymanagedlollhighvayslhal
havegreallyim¡rovedroads.
Mehla, lhe Shell execulive, agrees.
“India’ssocielyisvibranl,dynamic,
and lhe ¡eo¡le are demanding,¨ he
says. ¨They are queslioning lradilional
conce¡ls…Theyareenlre¡reneurial
andlheyareclashingvilhaslalelhalis
slill hesilanl and sus¡icious of change.¨
ßesides crealing hscal nighlmares for
governmenls,subsidiesraisebarrierslo
oulsideinveslmenl.Mehla¡oinledoul
lhallheGovernmenlofIndiaisamong
lhevorld’slargeslundervrilersof
¡elroleum¡roducls,a¡olicylhallills
lhe ¡laying held in favor of slale-run
energycom¡aniesandgives¡auselo
¡rivale hrms as lhey consider invesling
inlheseclor.
Inolhercases,lhegovernmenl
chargesnolhing—bulusersgelvhal
lhey¡ayfor.
Òneexam¡leislheslaleeleclricily
board in lhe slale of Iun|ab, vhich
offersfree¡overlo¡oorfarmers.The
¡olicyhasdrivenlheboardlolheedge
ofbankru¡lcyvhilelhelackof¡ublic
or¡rivaleinveslmenlinlhegridhas
HOMELESS IN KARACHI Even slight
improvements to infrastructure can
EULQJRXWVL]HEHQHÀWVWRWKHSRRUZKR
often suffer the most when a city’s basic
services—such as water, power and
transport—are dysfunctional.
A
I
I
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia9
Thesebreakdovnsconlinueeven
asIndia’slelecomseclor,vhich
fealurescullhroalcom¡elilionamong
morelhanadozen¡rivalenelvork
o¡eralors,offerslheloveslmobile
¡hone rales in lhe vorld. Cuslomers,
vhooncehadlovailyearsforlhe
governmenlloinslalllandlines,can
novgelacell¡honeconneclionina
mallerofminules.
Iorlhe¡oor,dialingonamobileis
more lhan |usl a symbol of modernily.
Wilhbellercommunicalions,everyone
fromrickshavdriverslo¡easanl
farmers can vork more efhcienlly and
boosllheirearning¡over.
called il a ¨lragic irony¨ lhal far more
Indians have mobile ¡hones lhan ßush
loilels.
PATCHWORK DEVELOPMENT
AcrossAsia,lhousandsofIIIshave
formed since lhe 199Os. Reams of
¡rogressre¡orlshavebeenvrillen.
Case sludies abound. Yel, as India's
ongoingslrugglesdemonslrale,
makinglhemarriagevorkhasnol
becomemucheasier.
“Lverybodyunderslandslhal
governmenlsneedloleveragelhe
¡rivaleseclor.ßullhe¡roblemis
im¡lemenlalion,¨ Samuels says.
“Avholerangeofissuesblocklhe
facloryfromvorking.Andifvedon’l
mobilizelhe¡rivaleseclormore,ve
are going lo fail.¨
Some crilics say bolh lhe ¡ublic
and¡rivaleseclorssufferfromlunnel
vision, vilh com¡anies eyeing ¡rohls
andgivingshorlshrifllo¡olilical
realiliesandgovernmenlsobsessing
aboul¡alronageand¡ublico¡inion
al lhe ex¡ense of economic efhciency.
Wilheachsides¡eakingilsovn
language,vilaldelailslhalhel¡
make ¡arlnershi¡s ßourish gel losl in
lranslalion.
Thissilualioncanleadloselbacks
inevenlhemosl¡ros¡erouscounlries
vhere IIIs are a lo¡ ¡riorily. Ralhbone
of IvC noles lhal lhe Governmenl of
Singa¡ore crealed a handbook on hov
lhese ¡ro|ecls should be ¡rocured and
sayslhe¡romiseofa¡i¡elineofIII
lransaclionsallracledlegionsofforeign
ex¡erls and consullanls lo lhe cily-slale.
ßullheresullshavebeenmixed,
vilh high-¡rohle lrium¡hs as vell as
dismalfailures.Iorexam¡le,several
¡rivalecom¡aniess¡enllargesumslo
¡rovide ¡re-qualihcalion submissions
lolhegovernmenllobuildanev
cam¡us for lhe Nalional Universily of
Singa¡ore. Hovever, in 2OO7 lhe III
vassuddenlycancelledvilhnoclear
ex¡lanalion.Afevyearslaler,lhe
MinislryofLducalion¡ulledlhe¡lug
on a much-ballyhooed school III.
Critics say both the
public and private
sectors suffer from
tunnel vision, with
companies eyeing
profits and giving
short shrift to
political realities
and governments
obsessing about
patronage and
public opinion at the
expense of economic
efficiency
led lo frequenl ¡over oulages and a
massivebacklogofa¡¡licalionsfor
nevconneclions.Inlheho¡esofbeller
service, some farmers in Iun|ab are
novaskinglobebilled.
Thisilluslralesakey¡roblemlhal
¡rivaleseclor¡arlici¡alionin¡ublic
ulililiescouldaddress,saysLdgar
Saravia, lhe ¡rogram manager for IIIs
in Lasl Asia and lhe Iacihc for lhe
Inlernalional Iinance Cor¡oralion, a
branchoflheWorldßank.
“Therealilyislhalhavingnoservice
al a lov ¡rice doesn'l hel¡ very much,¨
hesays.
Long-lime o¡¡onenls of
¡rivalizalionconlinueloclaimil
vouldbedangerouslolransferconlrol
of nalural resources lo for-¡rohl
com¡anies,andnolelhallheresullis
oflenhigherrales.Andinsomecases
lheyhavea¡oinl.
Walerisanes¡eciallyemolional
issuebecauseilisheldu¡by¡oor
¡eo¡le and aclivisls alike as a life-
suslaining gifl of Molher Nalure.
Whal’smore,valer¡rivalizalionshave
alonghisloryoffailure.Inherbook
Water Wars,IndianaulhorVandana
Shiva vriles: ¨Waler musl be free for
suslenance needs. Since nalure gives
valerlousfreeofcosl,buyingand
selling il for ¡rohl violales our inherenl
righllonalure’sgiflanddenieslhe
¡oor of lheir human righls.¨
IorIndia’s¡oor,hovever,
mainlaining lhe slalus quo has meanl
scarcilyandhigher¡ricesforvaler
lhal is oflen conlaminaled. Singh
¡oinlsoullhalresearchinlheeaslern
cilyofGanglokshovedlhaldueloa
dehcil of clean valer, residenls vere
s¡ending2Olimesmoreonmedicinelo
lreal valer-borne illnesses lhan on lhe
valerilself.
“Amidlhisdebaleovervhelher
lobringinlhe¡rivaleseclor,lhe
faclislhalvalerhaslargelybeen
¡rivalized—bulinformallyand
inefhcienlly,¨ Singh says. ¨Il is in lhe
hands of mahas and ¡eo¡le vho are
slealing valer.¨
Òfcourse,com¡arisonsare
¡roblemalic.Ior¡rivalecom¡anies,
lhecosls,com¡lexilies,and¡olilicsof
u¡grading¡ublicvalersyslemscan
befarmoredaunlinglhansellingu¡
amobile¡honenelvork,alasklhal
usually requires far less governmenl
involvemenlandhasahisloryof
successinmanycounlries.
Slill, lhe slark conlrasl belveen
India’sabundanceofcell¡honesand
scarcilyofrunningvalerhascaughl
lheallenlionoflheinlernalional
communily. In a recenl re¡orl, lhe UN
PRIVATE SECTOR DEVELOPMENT: THE BIG READ
vvv.develo¡menl.asia 1ODevelopmentAsiaA¡ril–}une2O12
“Alolof¡eo¡lelikemyself,vho
came lo Singa¡ore lo vork on IIIs,
haveeilherleflorarefocusingonareas
oulside Singa¡ore,¨ Ralhbone says.
Illurnsoullhallhereisslillalol
ofconfusionaboulIIIs.Theyvere
inilially ¡ro¡osed as a hnancial
mechanismlo¡lacegovernmenl
ex¡endiluresofflhebalancesheels.
Whilelhishas¡rovedlobeauseful
hnancial slralegy for governmenl
ofhcials, il has oflen failed lo convince
average¡eo¡lelhallheyarelhemain
benehciaries.
Among governmenl ofhcials,
meanvhile,“lhemolivesand
underslanding levels of IIIs vary,¨
saysMichaelßarrov,direclorofADß’s
¡rivaleseclorinfraslruclureinveslmenl
o¡eralions in Soulh and Cenlral Asia
and lhe Caucasus.
¨Some counlries see il as a vay
ofgellingmoneylosolve¡ublic
fundingga¡sralherlhanasavay
ofbringingvalueformoney,grealer
riskscruliny,and¡rivaleseclor
managemenl,¨ ßarrov says. ¨They
lhinkil’safreeride,asin:‘We’lllel
lhe¡rivaleseclorlakecareofbuilding
someinfraslruclureforus.’Theydon’l
reallyunderslandlhecom¡lexilyof
a III or lhe conce¡l of equilable risk
sharing and lhe long-lerm engagemenl
required.¨
Ior lheir ¡arl, develo¡menl ofhcials
lookalonglimelovarmu¡lolhe
conce¡l,in¡arlbecausemanyoflheir
organizalionsverefoundeddecades
agoalalimevhenbiggovernmenl
¡rogramsveredeemedlhesolulionlo
manyoflheissuesfacinglhe¡oor.
LvenaflerIIIsaresigned,lhe
lvosidessomelimesvorkalcross
¡ur¡oses.Whenconslruclingloll
roads,forexam¡le,somegovernmenls
are¡reoccu¡iedvilhlayingdovn
asmanykilomelersofhighvayas
¡ossiblevhile¡rivaleconcessionaires
vill be engrossed in forecasling long-
lerm ¡rohlabilily, ßarrov says.
Thenlhere’slhe¡roblemofliming.
Governmenlsareoflenchom¡ingal
lhebillo¡ourlheconcrele,cullhe
ribbons,andrea¡lhe¡olilical¡oinls
aheadoflhenexleleclioncycle.ßula
damn-lhe-lor¡edoes a¡¡roach usually
crashes head-on vilh realily.
Ralhbone recalls consulling on
Singa¡ore's S¡orls Hub, vhich is
scheduledloo¡enin2O14vilh
indoorandouldoorsladiums,an
aqualic cenler, and a vasl sho¡¡ing
mall. Governmenl ofhcials ¡ushed lo
¡rocure lhe ¡ro|ecl in 12 monlhs. The
lendering¡rocessevenluallylook
6years.
Thoughlrans¡arencyinavarding
hugegovernmenlconlraclsisoflen
called inlo queslion, Samuels argues
oullhalonerousrulesdesignedlo
¡revenlcorru¡lioncanalsohurllhe
abililylodevelo¡enougheffeclive
IIIs. She ¡oinls oul lhal ¡rivale hrms
somelimesrefuselobrainslormvilh
governmenlsaboulinfraslrucluredue
lo¡rocuremenlruleslhalforbidlhem
from laler bidding on ¡ro|ecls lhey
hel¡edlodevelo¡.
¨If you've gol a lol of CLÒs in lhe
roomandyouasklhemvhylhey
arenolmoreengagedins¡onsoring
infraslruclure ¡ro|ecls lhal are going
lohel¡counlriesdevelo¡,lhey’llsay
il’sbecauseoflhe¡rocuremenlrules
asvellasaboulrisksandlhecoslsof
¡ro|ecl develo¡menl,¨ Samuels says.
Governmenl ofhcials musl also
learn lo be |udicious in enlering IIIs,
according lo Nisha ßisval, assislanl
adminislralor for USAID's Asia
ßureau. She says il can be u¡lifling
logelaknockonlhedoorfroma
¡rivalecom¡anylookingloforma
¡arlnershi¡.Donorscanbeexciledlo
leverage¡rivaleseclorresourcesand
ca¡abililies.ßulgovernmenlsneed
loensurelhal¡layersbringslralegic
valuelolhe¡arlnershi¡andlhallhey
have a common ob|eclive lo reach lhe
counlry’scoredevelo¡menlgoals.
Òverall,lheinlegrilybehindlhe
¡arlnershi¡muslbeaccounledfor.
ßy lhe same loken, ¡ublic ofhcials
acrosslheboardneedlovork
lovardlhesameend.Mehla,lhe
Shell execulive, ¡oinls oul lhal eighl
differenlminislriesdealvilhenergy
¡ro|ecls in India. ¨They have lheir
bureaucracies,lheyhavelheirvesled
inleresls,andlheyo¡eralelhrough
lheir res¡eclive silos,¨ he says.
To avoid so-called ¡alchvork
develo¡menl—vilhsomeregions
¡ros¡ering vhile olhers ßounder÷
cenlralgovernmenlsneedhel¡from
local ofhcials vho can be crucial
¡layers in acquiring land for ¡ro|ecls
and¡ullinginlo¡raclice¡olicies
comingouloflheca¡ilals.ßullhelvo
sidesdon’lalvaysseeeyeloeye.
Mehla¡oinlsoullhalclashing
visionshel¡ex¡lainlhega¡sinIndia’s
naluralgas¡i¡elinesyslemlhalcovers
lhenorlhandvesloflhecounlrybul
nol lhe soulh. In Indonesia, Ralhbone
sayslhecenlralgovernmenloflen
differs vilh regional ofhcials over
¡riorilies.Thiscrealesissuesvilh
¡ro|ecl managemenl and ¡rocuremenl.
“Hislorically,ralherlhan5or1O
¡ro|ecls coming lo markel, all of vhich
arecruciallolheeconomicgrovlhof
Indonesia, vhal you see are 15O ¡ro|ecls
cominglomarkel—noneofvhichis
veryvelldevelo¡edorunderslood
or able lo allracl ¡rivale ca¡ilal,¨
Ralhbone says. He noles lhal lhe
silualionhasim¡rovedinrecenlyears.
Differenlregionsalsohavelheirovn
rules and regulalions. Singh describes
hisadvancevorklo¡avelhevayfor
alollroadacrosssixslalesinIndia.
ßecauselherevasnolegislalionin
¡lacelhalex¡licillyallovedIIIslo
o¡erale,allsixslalegovernmenlshad
lorevrilelheirlavs.Thal¡rocesslook
18 monlhs for |usl one slale.
Ialiencehoveveroflen¡aysoff.
Des¡ilelheexlended¡rocess,
Ralhbone says lhe S¡orls Hub has
already ¡ul Singa¡ore on lhe ma¡ as
a deslinalion for fulure high-¡rohle
alhlelicevenls.
“Thevenueisvorldclassindesign
andfunclion,offersexcellenlvaluefor
money, and is on schedule,¨ he says.
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia11
InIndia,manyoflhenevloll
roads are lurning ¡rohls. When lhe
ex¡ressvay belveen Nev Delhi and
lhesalellilecilyofGurgaonvasbuill,
¡lannersforecasl12O,OOOvehicles¡er
dayvould¡asslhroughilslollboolhs.
Today, lhe level of lrafhc is nearly lvice
lhalnumber.
Yel vhen lhe ¡rohls resulling from
¡enl-u¡ demand exceed ex¡eclalions,
¡arlnershi¡scanfrayasgovernmenls
allem¡llorenegolialeconlraclslosecure
abigger¡ieceoflheeconomic¡ie.Thal
vas lhe case vilh ALS Kelanilissa, a
diesel-hred ¡over ¡lanl lhal su¡¡lies
1O/ of Sri Lanka's energy consum¡lion
needsandisovnedando¡eraledby
ALS, a US mullinalional.
The¡lanlbegano¡eralingin2OO3.
ßulvhenanevgovernmenlvas
svorn in, ofhcials claimed ALS vas
chargingloomuchfor¡over.They
vanledlonullifylheconlracland
mandalelovereleclricily¡rices.
Des¡ilelhechallenges,lhe
Governmenl of Sri Lanka remains
commilledlo¡ursuingIIIs.“The
Governmenl’sinlereslinIIIs
lo hnance selecled large scale
infraslruclure ¡ro|ecls has been
rekindled,¨ lhe World ßank noles
onilsvebsile.“TheGovernmenlis
novfocusingilsefforlsonsellingu¡
aframevorklo¡ursueIIIo¡lions
inmanyseclors.Aunilvilhinlhe
MinislryofIinancelodealvilhnev
inveslmenls is being crealed.¨
The case in Sri Lanka vas nol an
isolaledincidenl.Infacl,eversince
IIIsslarledforminginearneslin
lhe199Oslherehavebeenconlraclual
dis¡ules. A recenl IvC re¡orl on
infraslruclure¡oinlsoullhallhe
Asian hnancial crisis in 1997 led lo
lherenegolialionofslacksofIII
conlracls.Thisshakylegalenvironmenl
erodedlhe¡erce¡lionoflheslrenglhof
conlraclssignedvilhgovernmenls,lhe
re¡orlsays.
“Throughmuchoflhe199Os,lhe
American¡overcom¡aniesand
lheLuro¡eanvalercom¡anies,for
exam¡le,soughllo¡rovidelheir
services lo lhe emerging counlries,¨
saysanolherre¡orl,Infrastructure’s
Unbalanced Equation.“Yeldes¡ilelheir
beslefforls,lheyalmoslalllefl,dee¡ly
fruslraled and hnancially damaged by
lheim¡enelrablebureaucracy,lheir
inabililyloenforceevenlhesim¡lesl
conlracls,¡ervasivecorru¡lion,
andlheingrainednalivedislruslof
foreign ca¡ilal.¨
According lo ßarrov, vhen ¡rohls
fromIIIsslarlrollingin,governmenls
cansomelimeslosesighloflhehuge
risks¡rivalecom¡aniesassumedal
lheinilialslagesvhenlherevereno
guaranleeslhallheir¡arlnershi¡s
vould¡ayoff.
“Aflerlime,lhoserisksmayfall
avay,¨ ßarrov says. ¨ßul lhen if lhe
governmenllrieslore¡ricelhedeal
andclavbackmoreoflhecream,
lheymayendu¡losingalolmoreby
scaring¡rivaleinveslorsavayfrom
subsequenl deals.¨
Yelinmanyolher¡roblemcases,
dealscolla¡seddueloblunderson
lhe ¡rivale side. A marquee exam¡le
vasLnron’s1992agreemenllobuilda
¡over ¡lanl and liquehed nalural gas
lerminalinlheIndiancilyofDabholin
Masharashlra slale, a ¡ro|ecl lhal vas
su¡¡osedlomeel3/oflhecounlry’s
energyneeds.
BUMPER-TO-BUMPER7UDIÀFLVDWD
standstill at the 32-lane toll plaza
on Rao Tula Ram–Palam highway in
New Delhi, India. Motorists have quickly
adapted to privately managed toll
expressways in India.

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PRIVATE SECTOR DEVELOPMENT: THE BIG READ
vvv.develo¡menl.asia 12DevelopmentAsiaA¡ril–}une2O12
Infamousforilshubris,lhe
Houslon-based com¡any ignored
lheadviceoflheWorldßank,vhich
refused lo hnance lhe ¡ro|ecl on
lhegroundslhalilvasloobig,loo
ex¡ensive,andeconomicallyirralional.
Lnronlhennegolialedlhe¡over
¡lanlconlraclvilhlheGovernmenlof
Indiainsecrelbecausebolhsidesvere
anxiousloavoid¡ublichearingsand
scrulinybylhemedia,accordinglolhe
bookConspiracy of Fools.
Òncegroundvasbroken,Lnron
failedlogivelocalsasenseof
ovnershi¡bybringinginanIndian
com¡anyasacor¡orale¡arlner.
Anolhercom¡anyla¡sevaslo
overlooklhe¡olilicalo¡¡osilion
vhilecullivalingcloselieslolhe
Maharashlraslalegovernmenl.The
slralegyblevu¡in1995vhena
coalilionofHindunalionalislsvon
slaleeleclionsandlhrealenedlocancel
lheconlraclslheousledgovernmenl
hadsignedvilhforeigncor¡oralions,
suchasLnron.
The Dabhol ¡over ¡lanl hnally
cameonlinebulilvasamoney
loserfromlheslarland,amida
dis¡uleover¡aymenls,ilvas
closedin2OO1—shorllybeforeLnron
hled for bankru¡lcy. S¡eaking lo
The New York Times, Suresh Irabhu, a
formerIndian¡overminisler,said:
“Thisvasaclassiccaseofvhalshould
never be done.¨
WORD TO ACTION
The Lnron hasco had a ma|or im¡acl
onIndia.Ilgavelheconce¡lof
¡rivalizalionabadnameandselback
modernizalionoflheIndian¡over
seclorbydam¡eninglheenvironmenl
forforeigninveslmenl.Morelhana
decadeaflerlheDabhol¡lanlclosed
dovn,4O/oflheIndian¡o¡ulalion
hasyellobeconnecledlolhe
eleclricilygrid.
YelLricIoslel,lheassislanl
adminislralorforeconomicgrovlh,
agricullure, and lrade al USAID, ¡oinls
oul lhal mosl ma|or hrms invesling
abroadlodaycomefromanolher
mold and have a differenl mind-sel
com¡aredvilhmullinalionalsinlhe
196Os.Lvenlhoughlhe¡ayoffmay
nolbeimmediale,hesays,lhese
hrms lake lhe nolion of cor¡orale
socialres¡onsibililyexlremely
seriouslybecauselheyrealizelheir
conlribulions lovard lhe vell-being of
local ¡o¡ulalions can also benehl lheir
shareholders.
“Thesebiggercom¡aniessomelimes
lake an amazingly long-lerm viev,¨
Ioslelsays.“Iflheyareconlribuling
lo¡rimaryeducalion,lheyknov
lhallhe¡eo¡lelheyarehel¡ingmay
beem¡loyeesorcuslomersin5or
1O years' lime.¨
Òr,inlhevordsoflheInlernalional
Iinance Cor¡oralion's Saravia: ¨The
¡rivaleseclorhaslomakemoney.
ßul if you are able lo align lhe ¡rohl
incenlive vilh ¡roviding efhcienl and
PARTNERSHIP GONE SOUR Some
public–private partnerships have not
worked out well. Right, operations at
the Ninoy Aquino International Airport
Terminal 3 in Manila have been hampered
by the legal battle between the Philippine
government and private contractors.
%HORZWKLVÀOHSKRWRVKRZVWKH(QURQ
power station in Dabhol in Masharashtra
state, India before it was closed in 2001.
A
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vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia13
reliableservices,lhenyoucanhavea
vin÷vin.¨
In Viel Nam, for exam¡le, Mars,
oneoflhevorld’slargeslchocolale
manufaclurers,hasleamedu¡vilh
lhe governmenl and lhe World Cocoa
Ioundalionlolraincocoafarmers
in lhe Cenlral Highlands. Iarmers
aregivenadviceoncullivalion,
harvesling,fermenlingandare¡rovided
vilhcocoaseedlings,o¡eninglhedoor
loavaslex¡ansionoflhecro¡.
Similar ¡ro|ecls in Africa and Asia
¡rovidegloving¡ublicilyforMars
vhilehel¡ingloinsureasleadysu¡¡ly
of high-qualily cocoa lo make candy.
“Lverylhingvedoisaboulsellinglhe
slage for lhe fulure,¨ says Hovard-
Yana Sha¡iro, global slaff ofhcer for
¡lanlscienceandexlernalresearchal
Mars.
In anolher ¡olenlial vin÷vin, 12 US
com¡anies,includingMicrosofl,
Molorola, and Ihzer, recenlly
¡arlnered vilh lhe ßei|ing governmenl
loincreaseaccessibililyloheallhcare
in lhe IRC. In announcing lhe deal
in }anuary 2O11, lhen US Commerce
Secrelary Gary Locke, nov US
ambassador lo lhe IRC, said lhe
III vould hel¡ lhe IRC achieve ils
develo¡menlgoals,bul¡oinledoul
ilvouldalsoo¡enu¡nevex¡orl
markels for US hrms.
Ònoccasion,lhereisevenmoney
lo be made in com¡lex ¡ro|ecls lhal
may seem like obvious hnancial
losers.Iorexam¡le,¡oor¡eo¡le,al
hrsl, may be unable lo ¡ay markel
¡ricesforvalerorlighls.Yel¡rivale
com¡anies may slill hnd lhe incenlive
lolayvaler¡i¡esandbuild¡over
¡lanls because lhese ¡ro|ecls can
im¡rovelivingslandardsandhel¡
lransilion non¡aying benehciaries inlo
res¡onsible bill-¡aying cuslomers.
Thal’slheideabehindlheIamir
Irivale Iover Iro|ecl in easlern
Ta|ikislan.
Themounlainousregionvasa
slralegic Soviel oul¡osl during lhe
Afghanislanvaroflhe198Os,lhuslhe
slale¡rovidedsubsidized¡overlo
evenlhesmalleslvillages.ßulvhen
lhe Soviel Union colla¡sed in 1991 and
civil var engulfed Ta|ikislan, many
¡lanlsveredamagedordeslroyed,
¡overvasculoffloaboulhalflhe
¡o¡ulalion,and¡eo¡lebeganhacking
dovn lhe foresls for hrevood. Due
lolhehighbusinessrisksandlov
incomesoflheregion,allracling
oulsideinveslmenlloreslore¡over
seemedunlikely.
Illookavhile,bulasolulionvas
foundlhrougha¡arlnershi¡belveen
lhe governmenls of Ta|ikislan and
Svilzerland, lhe World ßank, and
lhe Aga Khan Iund for Lconomic
Develo¡menl, lhe for-¡rohl arm
of lhe Aga Khan Ioundalion. They
crealeda¡rivalelyovneds¡ecial
¡ur¡osecom¡any,IamirLnergy,lo
generaleandsu¡¡lyeleclricilylolhe
region’s25O,OOOresidenls.Meanvhile,
lhe ¡ro|ecl received $1O million in
concessional hnancing from lhe
Worldßankanda$5milliongranl
from lhe Governmenl of Svilzerland lo
kee¡lariffsaffordable.
A UN re¡orl called lhe Iamir ¡ro|ecl
“anexam¡leofhovIIIscanvork
eveninalransilioncounlryvilh
a¡erceivedhighlevelof¡olilical
risk.¨ Slill, il look a lol of innovalive
lhinkinglomakelhedealcome
logelherandsomeex¡erls¡oinllo
suchbrainslormingasexacllylhely¡e
ofvorkdevelo¡menlorganizalions
shouldfocuson.
Thegranlsandloanslhalused
lobelheir¡rinci¡le¡orlfoliohave
becomelessim¡orlanlnovlhallhe
¡rivaleseclorissle¡¡ingu¡lo¡arlner
vilhgovernmenls.Aidorganizalions
andMDßs,lheysay,shouldnov
concenlraleonlheir¡olenliallo
becalalyslsfor¡arlnershi¡sand
res¡ecledvalchdogslhalcan¡romole
lrans¡arenlgovernmenlandslable
legalframevorks.
Thisvasalsolheconclusionof
Building on the Monterrey Consensus:
The Untapped Potential of Development
Finance Institutions to Catalyze Private
Investment,are¡orlbylheWorld
LconomicIorumlhalbroughl
logelher2OOex¡erlsloexaminelhe
unla¡¡ed¡olenlialofdevelo¡menl
hnance inslilulions. Il recommended
shiflinglhefocusfromloanslo¡arlial
loan guaranlees and u¡-fronl risk
ca¡ilal lo idenlify ¡ro|ecls and carry
oulfeasibililysludies.Ilalsocalled
foramoreacliveroleingovernmenl
ca¡acilybuildinginareassuchas
¡ro¡erlyrighls,conlracldis¡ules,
bankru¡lcyframevorks,and
cor¡oralegovernancerules.
Theseissues“havebecomelhe
¡riorily develo¡menl hnance needs
in all bul lhe ¡ooresl counlries,¨
lhere¡orlsaid.“Hovever,MDßs
andbilaleralaidagencieshavenol
ada¡led sufhcienlly lo lhese changed
circumslances…Theymuslsee
lhemselvesfundamenlallyas¡roviding
bridges lo ¡rivale seclor hnancing
andlhisshouldbecomelheir¡rimary
o¡eralional elhos.¨
ThoughMDßsdonolclaimlhal
¡rivalesecloro¡eralionsarelheir
hrsl ¡riorily, lhey mainlain aclive
andra¡idlyex¡andingde¡arlmenls
devoled lo bridging lhe ¡rivale1¡ublic
hnancing ga¡. ADß, for exam¡le, nov
has a vice-¡residenl devoled solely lo
¡rivalesecloro¡eralions.Ilex¡ecls
lhalby2O2Oacliviliesin¡rivale
seclordevelo¡menland¡rivaleseclor
o¡eralionslocom¡rise5O/ofils
annual o¡eralions, vilh cohnancing
evenluallyexceedinglhevalueof
ADß's sland-alone ¡ro|ecl hnancing.
Des¡ilelheincreasedem¡hasison
lhe¡rivaleseclorbyMDßs,nolenough
¡rogresshasbeenmade,accordinglo
Samuels.
“Thesearemorecom¡licaledissues
lhan |usl vriling a check,¨ she says.
¨We need lo lrain governmenl ofhcials,
consullanls,andbankerssolheyhave
lheskillselslo¡ullogelherbankable
¡ro|ecls. Lverybody agrees on lhese
conce¡ls.ßulveneedlogofrom
vords lo aclion.¨ Q
vvv.develo¡menl.asia 14DevelopmentAsiaA¡ril–}une2O12
THE BIG PICTURE
Private Participation in Infrastructure Projects Trends
Central and West Asia
$3
2
1
0
billion
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
South Asia
0
60
40
20
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
billion $80
0
20
15
10
5
Southeast Asia
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
billion $25
0
80
60
40
20
Developing Asia*
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
billion $100
East Asia
0
billion $14
12
10
8
4
2
6
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
Pacific
0
120
80
40
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
million $160
Investment Commitments to Infrastructure Projects with private participation, in 2010 dollars
Number of Infrastructure Projects with private participation
* Afghanistan, Armenia, Azerbaijan, Bangladesh, Bhutan, Cambodia, People’s Republic of China, Fiji, Georgia, India, Indonesia, Kazakhstan, Kiribati, Kyrgyz Republic, Lao People’s Democratic
Republic, Malaysia, Maldives, Federated States of Micronesia, Mongolia, Myanmar, Nepal, Pakistan, Papua New Guinea, Philippines, Samoa, Sri Lanka, Tajikistan, Thailand, Timor-Leste, Tonga,
Turkmenistan, Tuvalu, Uzbekistan, Vanuatu, and Viet Nam.
0
50
100
150
200
250
Developing Asia
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
0
20
40
60
80
100
120
South Asia
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
0
10
20
30
40
50
Southeast Asia
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
0
2
4
6
8
10
12
14
16
Central and West Asia
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
0
40
80
120
East Asia
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
0
1
2
Pacific
’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10
Bridging the Gap
Public–private partnerships (PPP) offer an economically viable solution
to infrastructure needs when public funds are limited. Despite some failures,
PPPs continue to spread across developing Asia
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia15
Some Successful Partnerships
While failure of a PPP is not unheard of, many projects have had
great success in bringing better conditions and opportunity in areas
that might otherwise have gone without such improvements
Sri Lanka:
Port Expansion
Improved efficiency,
increased port traffic,
and improved
competitiveness
Tsunami Relief
Local PPPs established to rebuild
and improve water infrastructure
in countries including Indonesia,
Maldives, Sri Lanka,
and Thailand
India:
East Coast Road
Toll road cut congestion
and local air pollution
while improving
opportunities for
local business
and trade
Philippines:
North Luzon Expressway
Expanded toll road increased
safety, cut congestion,
created viable commute times,
and improved economic
opportunities in the area
Malaysia: Mixed-Use Tunnel
A tunnel beneath roads diverts
floodwaters in Kuala Lumpur
and carries automobile traffic
when clear of water,
cutting above-ground
congestion
Indonesia: Urban Water
To help address the major challenge of
access to clean water in Jakarta, a PPP
has been established and is increasing
water delivery efficiency.
Research and design: Mark Blackwell
Sources: World Bank Group. 2011. Private Partnership in Infrastructure Projects Database. http://ppi.worldbank.org/explore/Report.aspx;
United Nations Development Programme. 2008. Sharing Innovative Experiences, Volume 15: Examples of Successful Public–Private Partnerships.
Across developing
Asia, the majority of
PPPs since 1990 have
been energy projects.
Telecoms made up a
large portion of
projects in the Pacific
and in Central and
West Asia
Type of Infrastructure Projects with private participation, 1990–2010
Energy
43%
Telecom
9%
Transport
29%
Water/Sewerage
19%
Developing Asia
Energy
50%
Telecom
12%
Transport
27%
Water/Sewerage
11%
Southeast Asia
Energy
39%
Telecom
>1%
Transport
24%
Water/
Sewerage
37%
East Asia
Energy
27%
Telecom
66%
Water/ Sewerage
7%
Pacific
Energy
44%
Telecom
11%
Transport
43%
Water/Sewerage
2%
South Asia
Energy
43%
Telecom
39%
Transport
11%
Water/ Sewerage
7%
Central and West Asia
16DevelopmentAsiaA¡ril–}une2O12
PRIVATE SECTOR DEVELOPMENT: THE BIG VOICE
vvv.develo¡menl.asia
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Taking Stock
Durreen Shahnaz thinks investors will buy stocks in companies based
on social impact. She should know
ßYIloydWhaley
I
n1991,DurreenShahnazvasa
young¡rofessionalvorkingvilh
ßangladesh’s¡ioneeringGrameen
ßankduringalimevhenilvas
lrying lo allracl inlernalional hnancial
su¡¡orl.Agrou¡hadcomefromNev
Yorkloconduclduediligenceon
Grameenbeforemakingamulli-million
dollarinveslmenl.AflerShahnazgave
her¡resenlaliononbehalfofGrameen,
oneoflhevomenfromNevYork
a¡¡roachedher.
“Il’sashameyouvereborn
inlhiscounlry,”lhevomanlold
Shahnaz.“Youhavesuchagood
hnancial skill sel. There is a ¡lace
calledWallSlreelandifyouvere
borninmycounlry,vilhyourskill
selyoucouldhavevorkedlhereand
madealolofmoney,”lhevoman
said.ßeforeShahnazcouldres¡ond
lolhecommenl,Grameenfounder
MuhammadYunus|um¡edinandlold
lhevoman:“Aclually,Durreencamelo
usfromMorganSlanley,”referringlo
lhe Wall Slreel inveslmenl hrm.
The misconce¡lion is familiar lo
Shahnaz.Havingmovedbelveen
high hnance and socially conscious
enler¡risesherenlirecareer,she
believes hnance, develo¡menl, and
mediaareinlerconnecledandsu¡¡orl
oneanolher.ßorninßangladesh,
hergrandmolhervasmarriedal11
vilhoulknovinghovloreador
vrile.Wilh¡arenlscommilledlo
hereducalion,sheoblainedadegree
fromSmilhCollege,amaslerof
businessadminislralionfromWharlon,
UniversilyofIennsylvania,anda
maslerofarlsfromlheSchoolof
AdvancedInlernalionalSludiesal
}ohnsHo¡kinsUniversily.Aslinlal
MorganSlanleyinNevYorkvas
follovedbyvorkalGrameenßank
inßangladesh,Worldßankand
InlernalionalIinanceCor¡oralionin
Washinglon,DC,andMerrillLynchin
HongKong,China.Shelalerheaded
u¡lheAsiao¡eralionsofHearsl
MagazinesInlernalional,Reader’s Digest
Asia, andAsiaCilyIublishingGrou¡.
These days, Shahnaz is lrying lo
blendlhevorldoflhe¡rivaleseclor
andsocialenler¡risesinamore
aggressivevaylhanshehaseverdone
before.Sheislhefounderandchair
ofIm¡aclInveslmenlLxchange(IIX),
vhichseekslobeaslockexchange
lhalallovssocialenler¡risesloraise
ca¡ilal.Inlinevilhlhal,shehas
slarledorganizalionslhal“assislsocial
enler¡risesinraisingca¡ilalandin
lhe¡rocess,crealelhes¡aceforsocial
ca¡ilalmarkels.”Sheex¡eclslhesocial
enler¡riseslockexchangelobeu¡and
runningbymid-2O12.
DA: What is a social enterprise
stock exchange?
DS: Ieo¡lelhinkilisgoinglobelike
lheNevYorkSlockLxchangevilh
bellsgoingoffandsoforlh.Il’snol
goinglobelikelhal.Ilisonlineandil
basically¡rovideslheabililyloinvesl
inacom¡any,losellandbuysecurilies,
|usl like any olher exchange. The
differencehereislhallhecom¡anies
villbeshovcasinglheirsocialand
environmenlalrelurnalongvilhlhe
hnancial resulls. Thus, inveslors vill
makeinveslmenldecisionsbased
onlhelri¡lebollomline,nol|usl
on ¡rohl. When lhe lrading angle is
allachedlolhe¡lalform,ilvillbe
Im¡aclLxchange—Asia’s(and¡erha¡s
lhe vorld's) hrsl lrading ¡lalform for
invesling in social enler¡rises. The vay
ilissha¡ingu¡righlnov,illookslike
vevilliniliallyhaveonlyaccrediled
inveslors on lhe ¡lalform. This may
assislusinhavinglessregulalory
hurdleslhanalargerexchange,
includingnolhavingafull-blovn
¡ros¡eclus,vhichisverycosllylo
¡roducevilhalllhe¡arliesinvolved
increalingil.Asaresull,lhecoslof
raisingca¡ilalonlhe¡lalformvillbe
a lol less. The exchange vill be lhe
laslslo¡increalingfull-blovnsocial
ca¡ilalmarkels.

DA: All stock exchanges claim they are
committed to social improvement.
What makes IIX different?
DS:Òlherexchangesarelryinglo
embracesociallyres¡onsible¡raclices.
Someexcludecom¡anieslhalareinlo
alcoholorsmoking.Inolhervords,
lheyconduclnegalivescreening.
Whalvearedoingfocuseson¡osilive
revards,nolnegalivescreening.We
SOCIAL CAPITAL Dureen Shahnaz wants
to establish a stock exchange that allows
social enterprises, or businesses that
promote social change, to raise capital.
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia17
givealalk.Ivasaskedlogivelalksal
conferences. This inilialive has grovn
allighls¡eedbasicallyinres¡onse
lo lhe markel. The markel is really
craving lhis. The reason ve received
somuchallenlionisbecauseoflhe
2OO8crisis.Ilvasavake-u¡call.You
|uslcan’lconlinuelodolhingslhe
vaylheyhavebeendone.Ieo¡leare
seeinglhereisnolenoughca¡ilallo
meellhedemandforsocialchange.
The governmenl can'l hll lhis need and
¡ure¡rivaleseclorisnollookingalil.
ßuleveryoneisim¡acledbyil.
“You just can’t
continue to do things
the way they have
been done. People
are seeing there is
not enough capital to
meet the demand for
social change”
arevorkingvilhcom¡aniesvhoin
lheircorearefocusingonmaximizing
socialandenvironmenlalim¡acland
doing lhal in a hnancially suslainable
vay.Ilisfororganizalionslhal,al
lheircore,vanllodosocialgood.Ifil
isanenergybusiness,lheyaredoing
renevables,lheyarecrealingenergy
oulofvasle,orlheyareusingsolar
¡anelslhalarenoldeslroyinglhe
environmenl. They are laking a holislic
a¡¡roachoflookinglodobusiness
lhal ¡romoles social change. There are
com¡aniesandexchangeslhalcover
environmenl,social,andgovernance
(LSG)indicalors.IIXisbasicallyLSG
¡lus¡lus¡lus.
DA: There is a lot of cynicism toward
the markets and the global financial
system these days, due to the global
financial crisis. Has this created
problems for the launch of IIX?
DS: Wehaveseenlheo¡¡osile.WhenI
slarledlalkingaboullhisideain2OO9,
evenbeforeIhadasinglevordoflhe
business¡lanvrillen,Ivasalready
gellingcallslogivelalksonlhis.Ivas
inviledbylheIndiangovernmenllo A
I
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DA: When the exchange launches, if you
have a company that is performing
well financially, but its social impact is
decreasing, do you really think investors
will punish that stock by selling?
DS: Ilvillbeinlereslinghovlhis
manifeslsilselfonlheexchange.Òn
lhe¡lalform,vehavehaddiscussions
onlhefacllhalifcom¡aniesslarl
losinglhesocialas¡ecl,lheyneedlo
bevarned,andifnochangeoccurs,
lhenlheyvillneedlobede-lisled.
This ¡raclice is no differenl from
vhalregularexchangesdoiflhe
com¡aniesdonolcom¡lyvilhlheir
lislingrequiremenlsandconlinuelo
¡osl bad hnancial resulls. Ior IIX, ve
villdoduediligencelomakesure
lheycareaboullhesocialside.Having
saidalllhal,inveslorsvillslillsay,
¨I care aboul lhe hnancial side hrsl
andiflheyhave|uslalilllebilofsocial
im¡acl, lhal's hne.¨ Well, lhal's nol
hne for us. Social im¡acl is lhe vhole
¡oinlofvhalvearedoing.Iknovif
ve ¡ul u¡ com¡anies based on ¡rohl,
lheinveslorsvillloveil.ßuliflhe
com¡aniesdon’lhaveaslrongsocial
as¡eclloil,veslillvon’lacce¡lil.
18DevelopmentAsiaA¡ril–}une2O12 vvv.develo¡menl.asia
A
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CLEAN ENERGY A worker cleans solar
panels in Mehsana district, India. Impact
Investment Exchange (IIX) seeks to
promote investments in socially and
environmentally responsible businesses.
ßeinginlhe¡osilionvearein,being
aheadoflhecurve,vecanmakeour
ovnrules.
DA: If corporate social responsibility
(CSR) is an indicator of a company’s
social impact, Asian corporations do
not appear to be doing very well. Why
do you think Asian companies fare
so poorly on global CSR rankings?
DS:InAsia,vearenolverymuch
inlo“slruclured¡hilanlhro¡y.”Ilhink
il’saculluralas¡ecl.Wecareaboul
ourfamily.Wecareaboulourclan.
Wecareaboulourvillage.Andilends
lhere. This makes our Asian cullure
slrong, lhis inlensihes family and
villageslrenglh,bulalsoinsomevays
il makes us limiled. Tradilionally,
com¡aniesmakemoneyanyvay
lheycanandlhengiveavayalillle
lolhelem¡leorlocharily.Asian
com¡aniesareslillinlhedarkages
ofCSR.Òurho¡eislhal¡erha¡s
vhereCSRcouldnollakeoff,im¡acl
inveslingvill.Wilhim¡aclinvesling,
lheindividual1organizalionisnol
“givingavay”moneybulinvesling
and,inrelurn,receivingasocialand
environmenlalim¡acl.Inmanyvays
im¡aclinveslingmaybreaklhecurrenl
¡hilanlhro¡ybarriersandmakeAsians
hel¡eacholherbeyondourboundaries.
DA: With that kind of mentality, why
would Asian companies and investors
support these social enterprises?
DS: Ieo¡leinAsialikelhiskindof
inveslmenlbecauseilismoneylhal
lheydon’lhavelogiveavayallogelher.
They have lhe ¡olenlial of gelling
lheirmoneybackandlheycanslill
saylheydidsocialandenvironmenlal
good.Ifyouareaveallhyindividual
orcom¡anyandyouvanllogel
inlosu¡¡orlingsocialenler¡rises,
vesay,“lhisisnol¡hilanlhro¡y,il’s
aninveslmenl.”Alolof¡eo¡leare
rece¡livelolhal.
DA: You worked with Grameen, the
pioneer of microfinance, early in your
career. How do you feel about the
situation with microfinance today?
DS: Microhnance loday is gelling a
badra¡becauseofafev“bada¡¡les.”
When inveslmenls in microhnance are
lrealedasacommercialinveslmenland
lhesocialsideisnollakeninloaccounl
lhen,yes,youvillhavesilualions
likevhalha¡¡enedinAndraIradesh
vilh SKS |Microhnancej. So, yes, lhere
havebeensomeabusesinlheinduslry,
bullhalcannolbeusedlo|udgelhe
vhole induslry. Microhnance has
doneenormous¡osilivelhingsfor
lhedisadvanlagedgrou¡.Ilisloday
a$5Obillioninduslryandmillionsof
¡eo¡le(es¡eciallyvomen)haveaccess
lo ca¡ilal because of microhnance. This
¡henomenoncouldnolhaveha¡¡ened
vilhoul microhnance.
Im¡aclinveslinglodayisha¡¡ening
on lhe shoulders of microhnance.
Microhnance did a lol of good, il
broughllogelherlhe¡rivaleseclor,
¡ublicseclor,andcivilsocielyinavery
effeclivevay.Hovever,ilshouldnever
havebeenseenaslhesilverbullel.
There is no silver bullel for suslainable
develo¡menl.Wehavelokee¡on
lryingdifferenlmodelsandshould
beha¡¡yifamodel¡roducessome
¡osilive effecl, vhich microhnance
dehnilely did. Il is an amazing lool
andgoodvorkisslillbeingdonein
microhnance, giving access lo hnancial
serviceslhalolhervisenoonevould
give.Inlermsoflhenegaliveas¡ecls,
lhalvasvheregreedcameinloil,
vhere¡layersignoredlhesocialside
of microhnance. And nov lhere is a
backlash.Ilisacaulionarylale.
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia19
DA: Another hot issue where the
private sector and development
intersect is the debate about
marketing products to the poor, or
selling to the “bottom of the pyramid.”
Where do you stand on this?
DS: Irecenllyvenlbacklolhevillages
vhereIvorkedvhenIvasvilh
Grameenßanklovisilsomeoflhe
borroverslhalIvorkedvilhback
lhen.Ilvasvonderfulloseelhal
afler2Oyearslhesevomenvereall
runningsmallenler¡rises—lailoring
slore, grocery slore, elc. They also had
onaveragelhreemobile¡honesin
eachhousehold,colorlelevision,and
salellile dish. Along vilh lhe afßuence
alsohavecomeolherchangesin
consum¡lion¡allerns.WhenIasked
somevomenvhallheybuyvilhlheir
exlramoney,lheresoundingansver
vas“Coke”and“IairandLovely
SkinWhilener.”IknovIcannolbe
|udgmenlalaboullhe¡urchasing
habilsoflhesevomen.Idoen|oyan
occasionalCokeonceinavhilemyself
bulofcourselheissueofusingskin
vhilenerisanolherdislurbingsocial1
culluralissueallogelhersolel’snol
golhere.Hovever,onehaslovonder
hovmuchlheirdecisionisaninformed
one.Wouldlheyslillconsumelhe
¡roduclsonaregularbasisiflheyhad
lhecom¡leleknovledgeaboullhe
¡roducl’ssideeffecls`
DA: Should companies market
candy, skin whiteners, and other
non-necessities to the very poor?
DS:Ivouldsayaslongasilisan
informeddecisionlobuy.ßulIvould
saymosloflhelimeilisnolan
informeddecision.Whydon’llherich
useskinvhileners`ßecauselheyknov
lhereareissuesofcarcinogensand
so forlh. The ¡oor should be informed
oflhalasvell.Goaheadandmarkel
lolhe¡oor,bulinformlhem.Many
com¡aniesarelakingadvanlageoflhe
naivelóof¡oorconsumers.
DA: You have spent your life
blending the work of the private
sector with human development.
Has it been a life well spent?
DS:Ivasborninßangladeshbul
s¡enl my adull life in lhe US. These
aremylvovorldsandIalvays
slruggled lo bridge lhe lvo. The
¡ersonalslruggleofcoursevery
much inßuenced my career. I alvays
lriedlomergelhevorldofmaking
moneyvilhhumandevelo¡menl.
Somelellmelhalil|uslmakeslife
difhcull, bul as I like lo viev il, I am
a ¨dehanl o¡limisl.¨ Why can'l I
bringmore¡eo¡leinlodoinggood
inasuslainablevay`Whycan’llhe
differenlvorldslhalIvasforlunale
enoughloex¡eriencecomelogelher`
Weareaflerallinlhislogelher.Weall
sharelhisonevorldlhalisim¡acled
byoureveryaclion.
Inmysmallvay,Ihavealvays
lriedloblendlhese,lhe¡rivaleseclor
andhumansides,ineverylhingIdo,
in hnancial organizalions, in media
com¡anies,ineverylhing.Ihavefell
likeIhavebeen|um¡ingbackand
forlhandcarryingmessagesacrosslhe
borderslolhedifferenlseclorslikea
missionary.IfIgiveu¡,vhovilldoil`
ßul,novalmosl2decadesofdoing
lhis,ilfeelslikelheleclonic¡lales
areshiflingand¡eo¡learesillingu¡
andlakingnolice.Slovlybulsurely
everyoneiscominginlolhissame
s¡ace.Yes,everyonemayhavelheir
ovn selhsh reasons for doing lhal, bul
lheyaredoingil.Lveryoneisseeing
lhalvehavelovorklogelher.So,il
isha¡¡ening,inourlifelime.Weare
vilnessingca¡ilalismdoingsocial
good.IfIcansayIhadasmallrolelo
¡layinlhal,Ivilldieaveryha¡¡y
vomanbecauseIlhendidmy¡arlfor
lhevorld.Q
MOVING UP A vegetable vendor speaks
on a mobile phone at a roadside market
in Allahabad, India. A
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“Good work is
still being done in
microfinance, giving
access to financial
services that otherwise
no one would give. In
terms of the negative
aspects, that was where
greed came into it”
PRIVATE SECTOR DEVELOPMENT
vvv.develo¡menl.asia 2ODevelopmentAsiaA¡ril–}une2O12
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olfarfromlhesoulhern
ColombianvillageofLos
Iozos,vhichmeans“lhe
vells”inS¡anish,Marxisl
guerrillaskidna¡¡edfouroilvorkers
fromlheIeo¡le’sRe¡ublicofChina
(IRC).Thalvason8}une2O11,and
lodalelherehasbeennolraceoflhe
abducledmenvhovorkforLmerald
Lnergy,asubsidiaryoflheIRC
chemicalcom¡anySinochem.
Lmerald’s¡roblemsdidn’lslo¡lhere.
Shorllyaflerlhekidna¡¡ings,several
oillrucksconlracledbylhecom¡any
veresabolagedbylherebels.Yelfor
alllhesecurily¡roblems,Lmeraldhas
forgedaheadandconlinueslo¡um¡
oilandex¡loreformorede¡osilsin
someoflhemosldangerousareasof
Colombia.
Ilhasn’lalvaysbeeneasy.ßul
drivenbylheneedforravmalerialslo
feedilsdynamiceconomicex¡ansion
alhome,lheIRC,India,andolher
Asiannalionsareinveslingandlrading
alun¡recedenledlevelsvilhAfrica
andLalinAmerica.
Asiancom¡aniesarebuyingoil,
coal,soybeans,andolhercommodilies.
Theyarebuildingfacloriesand
acquiring banks. They are hnancing lhe
conslruclionofrailroads,highvays,
and¡residenlial¡alaces.Thishas
fueledeconomicgrovlhincounlries
Global Asia
Asian companies are using their new-found financial might to invest worldwide,
but they are not always welcome
ßY}ohnÒlis
DRILLING AHEAD Workers from the
Zhongyuan Petroleum Exploration
Bureau (ZPEB) of Sinopec drill an oil well
in south Sudan. To meet its growing
demand for fuel, the People’s Republic of
&KLQDLVLQYHVWLQJLQRLOÀHOGVRYHUVHDV
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suchasArgenlina,ßrazil,Nigeria,and
SoulhAfrica.
“The¡henomenalgrovlhinLalin
Americaoverlhe¡asldecadeisduelo
lhegrovlhin|lheIeo¡le’sRe¡ublicofj
China,”CharlesS.Sha¡iro,¡residenlof
lheUniledSlales-basedInsliluleoflhe
Americas,loldaconferenceonlheIRC
laslyear.
TheIRChasgarneredmosloflhe
allenlionbecauseilslvo-vaylrade
vilhLalinAmericahas|um¡edfrom
nexllonolhingadecadeagolomore
lhan$18Obillionin2O1O.Similarly,
lradevilhAfricannalionsnovslands
alaboul$11Obillion,vhilefrom2OO8
lo2OO9lheIRC¡rovidedmoreloans
lo¡oor,mosllyAfricancounlrieslhan
lheWorldßank.
MODEL FOR GROWTH
Allhoughlhenumbersaresmaller,
IndiaandlheRe¡ublicofKoreaare
alsogreallyex¡andinglheireconomic
linksvilhAfricaandLalinAmerica,
asis}a¡an,lhoughlhalcounlry’s
economicascendancehasla¡eredoff.
ßesidescrealing|obsandlransferring
lechnology,ex¡erlssay,Asiacan,in
someas¡ecls,serveasamodelfor
AfricaandLalinAmericaaslhose
regionsallem¡lloallainsimilarhigh
ralesofeconomicgrovlh.
“Thesamekindofincenliveslhal
vorkinAsiavorkinAfrica,”says
Harryßroadman,chiefeconomislof
lhe global consulling hrm IvC and
a former senior World ßank ofhcial.
“ßulsoloocanlhedisincenlives
suchaslhedislorlionsduelo¡rice
conlrols,corru¡lion,andlhelackof
infraslruclure.Soilculsbolhvays.”
Indeed,lhedovnsideslolhenev
economicrelalionshi¡oflengrabmore
headlines.
Somenalionsfearlheirinduslrial
basesarebeinghollovedoulbya
ßood of chea¡ goods from Asia. Trade
remainslo¡sidedinacommodilies-
for-machines¡allern—vilhAfrica
andLalinAmericaex¡orlingchea¡
ravmalerialsloAsiavhilebuying
backlhalregion’svalue-added
manufacluredgoods.Inlhevordsof
IeruvianIresidenlÒllanlaHumala:
“Wesellorangesandlheysendus
backorangemarmalade.Thalneedslo
change.”
AfricaandLalinAmericahave
lradilionallybeenvievedaslhe
“backyards”oflheUSandLuro¡e,
bulAsiahasalvaysmainlainedan
inßuenlial ¡resence in lhese regions.
}a¡an,forexam¡le,¡rovidedhuge
sumsofreconslruclionaidfolloving
LalinAmerica’scivilvarsinlhe198Os
and ¡layed an im¡orlanl hnancial
roleamidlheregion’sdeblcrisis.
TheIRCsu¡¡orledmanyofAfrica’s
nalionalliberalionmovemenlsin
lhe196Osandlheconlinenl’snevly
inde¡endenlnalionshel¡ed¡avelhe
vayforlheIRClogainasealallhe
UniledNalionsin1971.
“ChairmanMaosaidilvasour
friendsinAfricavhosenluslolhe
UniledNalionsso,lradilionally,
|lheIeo¡le’sRe¡ublicofjChinahas
¡rovidedalolofassislanceloAfrican
counlriesandlhalhel¡edusbuilda
¡rellygoodbusinessrelalionshi¡,”
says}un|ieZhang,anassislanl
¡rofessorofenvironmenlaleconomics
allheUniversilyofCalifornia,
SanDiego.
Thelinksarealso¡ersonal.Legions
ofLalinAmericanslivein}a¡an,
vhichhasbecomelheregion’slhird
largeslsourceofremillances,afler
lheUSandLuro¡e.Indiahasahuge
EXPANDING MARKET PRESENCE
$PDQZDONVSDVWWKHRIÀFHRI,QGLDҋV
mobile phone company Bharti Airtel
in the Kenyan capital, Nairobi. India is
expanding its economic footprint in
Africa in various industries, including
telecommunications.
“We sell oranges and
they send us back
orange marmalade.
That needs to change”
—President Ollanta Humala of Peru
PRIVATE SECTOR DEVELOPMENT
vvv.develo¡menl.asia 22DevelopmentAsiaA¡ril–}une2O12
ex¡alrialecommunilyacrossmuchof
Africa,eveninUgandavhereIndian
residenlsvereex¡elledenmassein
1972bylhen-diclalorIdiAmin,vho
vaseagerloblamehisdomeslic
¡roblemsonoulsiders.ManyLalin
Americanca¡ilalsarehomelolhrongs
ofIRCand}a¡aneseex¡alriales,
vhileformerIeruvianIresidenl
AlberloIu|imoriislhesonof}a¡anese
immigranls.
Alloflheselieshavehel¡edcemenl
so-called“Soulh–Soulhcoo¡eralion.”
Yel,lhemaindriverisAsia’seconomic
boom,vhichcomesalalimevhen
Luro¡eandlheUSa¡¡earlobe
slagnaling.ßy2O4O,someeconomisls
eslimalelhallhecombinedgross
domeslic¡roducls(GDIs)oflheIRC
andIndiavillbe1Olimeslargerlhan
Luro¡e’senlireannualoul¡ul.
“Weareslarlingloseevhallhe
cenluryofAsiavilllooklike,”saysLuis
AlberloMoreno,¡residenloflheInler-
AmericanDevelo¡menlßank(IDß).
Ilhel¡slhallheeconomiesoflhese
regionsarecom¡limenlary.
“InLalinAmerica,lhereareabundanl
mineralsandnaluralresources.In|lhe
Ieo¡le’sRe¡ublicofjChina,veneed
lhesemineralsandnaluralresources,”
saysLiuKegu,aformervice-¡residenl
oflheChinaDevelo¡menlßank,vho
mademorelhan2OvisilsloLalin
Americaduringhislenure.“InLalin
America,lechnologyisneeded.In|lhe
Ieo¡le’sRe¡ublicofjChina,vehave
lechnology.”
CAPITAL-INTENSIVE PROJECTS
LvenbeforelheIRCado¡ledils
“gooul”¡olicyin1999loencourage
domesliccom¡aniesloinveslabroad,
IRC hrms vere mining for iron, gold,
co¡¡er,andcoaloverseas.Thoseinilial
inveslmenlsveresomeoflhemosl
conlroversial.
In1992,forexam¡le,ßei|ing’s
Shougangsleelcom¡anyboughlan
ironoreminenearlheIeruvianlovnof
Marcona.Lversincelhal¡urchase,lhe
miningo¡eralionhasbeen¡laguedby
annualslrikesbyvorkersvhocom¡lain
oflovvages,lhehiringofIRClaborers,
dangerousvorkingcondilions,andlhe
dum¡ingofloxicvasle.
“Wequicklyrealizedlhalvevere
beingex¡loiledlohel¡buildlhenev
|Ieo¡le’sRe¡ublicofjChina,bul
vilhoulseeinganyoflherevards
fordoingso,”HonoraloQuis¡e,63,
a union ofhcial al lhe mine, lold
The New York Times in2O1O.
MoslIRCinveslmenlscomefrom
slale-ovnedenler¡riseslhalfollov
A
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SOUTH–SOUTH LINKS Brazilian
President Dilma Rousseff (left),
South African President Jacob Zuma
(center), and Indian Prime Minister
Manmohan Singh join hands at a
trilateral summit in Pretoria in 2011.
Right, a shop selling Chinese-made
shoes in the downtown area of
Kampala, Uganda.
“We are starting to see
what the century of
Asia will look like”
—Luis Alberto Moreno, president
of the Inter-American Development
Bank (IDB)
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia23
forbooslinglheregion’seconomies
lhroughslrongdemandfor
commodilies.
LikeIRCcom¡anies,Indian
com¡anieshavealsoram¡edu¡lrade
andinveslmenlvilhAfricaandLalin
America,bullheiro¡eralionshave
gonealilllesmoolher.Ioronelhing,
lhelanguagebarrierislessofan
issue,vhileIndia,lhevorld’slargesl
democracy,hasmoreincommon
¡olilicallyvilhlheelecledgovernmenls
ofAfricaandLalinAmerica.
Ierha¡sasaresull,ex¡erlssay,
Indian hrms have been more villing
lobringlocalvorkersinlolheir
o¡eralions,lransferlechnology,and
makegoodoncommilmenlsfordirecl
inveslmenl.
“Whenyous¡eaklolheirCLÒson
lheground,lheyvanllobeknovnas
Africancom¡anies,”saysßroadman,
vhoalsoleadsIvC’semerging
markels¡raclice.“Theyareablelo
inlegralemoreeasilyinlosocielyas
aresulloflhal¡rism.Ifyouvalk
ofhcial diclales making lhem less
nimble lhan ¡rivale hrms and, al limes,
lone-deaflolocalconcerns.More
recenlly,hovever,lheyhavebeen
hiring ¡ublic relalions hrms lo im¡rove
communilyrelalionsandhavebegun
lakinglhenolionofcor¡oralesocial
res¡onsibililymoreseriously.
“Whal’smore,IRC’sabililylo
¡rovidelargeamounlsofca¡ilalfor
¡ro|ecls,fromminingand¡elroleum
inveslmenlsloinfraslruclure¡ro|ecls,
givesilleveragevilhnalional
governmenls sufhcienl lo overcome
sourcesofo¡¡osilionlosuch¡ro|ecls,”
saysLvanLllis,aIRC–LalinAmerica
ex¡erlallheNalionalDefense
UniversilyinWashinglonDC.
Inaddilion,ilsgovernmenl-run
com¡aniescaninveslinhigh-risk
KEY PLAYER Former Brazilian President
Luiz Inácio Lula da Silva speaks at a
business event promoted by Korean
ÀUP/*(OHFWURQLFV1H[WWR-DSDQWKH
Republic of Korea is the second biggest
Asian investor in Latin America.
counlriesandvenlureslhal¡rivale
hrms, vhich musl ansver lo lheir
shareholders,shyavayfrom.Ilus,
lheycanalsoaffordlobe¡alienl.Ior
exam¡le,IRC’sCheryaulomobile
com¡anyrecenllyo¡eneda
$4OOmillionfaclorynearSaoIaulo,
ßrazil.Wilhslalebacking,Cherycan
lakeilslimeingainingafoolholdin
ßrazilanddoesnolex¡ecllomake
¡rohls for lhe nexl decade.
Whileßrazilis¡leasedlohave
lhosevell-¡aid|obsallheChery
¡lanl,lhereisgrovingconcernlhal
lheIRC—vhichhasalreadyre¡laced
ßrazilaslheNo.1ex¡orlerlolheresl
ofSoulhAmerica—is¡ushinglocal
manufaclurersoulofbusiness.Thebulk
ofanlidum¡ingcom¡lainlsregislered
byLalinAmericabeforelheWorld
TradeÒrganizalioninvolvelheIRC.
Meanvhile,lheßei|inggovernmenl
somelimesbalksalbuyinglheregion’s
¡rocessedgoods.TheIRCim¡orls
hugequanliliesofArgenlineand
ßraziliansoybeans,forexam¡le,bul
oflenresislsbuyingsoybeanoilfrom
lhosenalions.
TheshiflingalliludesinLalin
America are reßecled in lhe local
mediavherelheIRCisde¡icledas
bolh villain for ßooding counlries
vilhinduslrialgoodsandsavior A
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vvv.develo¡menl.asia 24DevelopmentAsiaA¡ril–}une2O12
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lhroughlheir¡lanlsandassembly
lines,youseeafairamounloflocal,
Africanvorkers,andlhisisinconlrasl
lomanyChineseinveslmenls.”
Alonglhevay,Indiahasburnished
ilsre¡ulalionby¡arlneringvilh
lheAfricanUnionloselu¡lhe
Ian-Africane-Nelvork,ahigh-
s¡eed hber-o¡lic nelvork belveen
lhegovernmenlsofall53African
counlries.Ilhasbeenadrivingforce
behindlhenevAfricanInslilulesof
ScienceandTechnology,vhichaim
lore¡licaleIndia’shighlyres¡ecled
inslilulesoflechnology.
Moregoodvillhasbeengeneraled
bylheIndian¡harmaceulical
com¡aniesCi¡laandRanbaxy,
vhichhaveo¡enedsubsidiariesand
manufacluringfacililiesinSoulhAfrica.
Thallaskvasmadeeasierbylhefacl
lhalbolhcom¡anieshavebeenlifelines
forAfricansvhoareHIV-¡osilive,
becauselhey¡roducechea¡ergeneric
anlirelroviraldrugslhanAmericanand
Luro¡eancom¡anies.
AmilMilra,lheformersecrelary
generaloflheIederalionofIndian
ChambersofCommerceand
Induslry,noleslhalIndiahasslood
insolidarilyvilhAfricaonanumber
ofma|orissues,includingefforlslo
eliminaleagriculluralsubsidiesinlhe
develo¡edvorld.
“Indiaunderslandslheneedsof
Africa,”hesaidina2O1Os¡eechallhe
LondonSchoolofLconomics.
ßulIndiancom¡aniesarealso
sendinginex¡ensiveeleclronics
andolhergoodsloAfricaandLalin
America.MauricoMesquilaMoreira,
anIDßeconomisl,varnslhalafler
lheinilialshockofchea¡IRC
im¡orls,lheseregionsmuslnovbrace
lhemselvesforanIndianonslaughl.
“Thisisgoinglobeasecondshock
and¡eo¡levillhavelo¡re¡arefor
lhalbecauseilisgoinglomakelifefor
manufaclurersevenmoremiserable
lhanilvasbefore,”hesays.
Somevhaloverlookedinlherivalry
belveenlheIRCandIndiahasbeen
lheRe¡ublicofKorea,a$1lrillion
economylhalhasregisleredanannual
GDIgrovlhof7/sincelhe196Os.
IlslradevilhLalinAmerica,for
exam¡le,soaredlo$44billionin2O1O.
Whal’smore,LalinAmericanex¡orls
lolheRe¡ublicofKoreagobeyond
chea¡commodiliesvilhaboul3O/
re¡resenledbymanufacluredgoods.
Meanvhile,lheRe¡ublicofKorea’s
direclinveslmenlinlheregion—
suchasHyundaiaulomobilefaclories
inßrazilandSamsungeleclronics
¡lanlsinMexico—lolaled$5.1billion
from 2OO3 lo 2O1O, a hgure 3 limes
largerlhanlheIRC’s.AmongAsian
nalions,only}a¡aninvesledmorein
lheregion.
ArecenlIDßre¡orlonlheRe¡ublic
ofKoreanoles:“ßreakingvilhlhe
¡allernofolherAsianinveslmenls,
manufacluringhasfrequenllybeen
lhelargelof|lheRe¡ublicofjKorea’s
inveslmenlsinlheregion,¡roviding
lhebasisforamorebalancedand
diversihed relalionshi¡.¨ Q
MIXED FEELINGS Mining operations at
a foreign steel company in Peru, above,
have been beset by labor strikes. In
Africa, right, Indian pharmaceutical
companies have generated much
goodwill through the production and
distribution of cheap anti-HIV/AIDS
drugs.
vvv.develo¡menl.asia
PRIVATE SECTOR DEVELOPMENT
A¡ril–}une2O12DevelopmentAsia25
one child
one life
one chance
There are more malnourished children
in Asia than any other continent.
Poor nutrition in the first 1,000 days
of life can lead to irreversible damage
to children's minds and bodies.
Inadequate nutrition kills human
potential and is a major barrier to
development.
The World Food Programme nourishes
children through the whole life cycle,
building the brains and bodies of the
next generation.
Join Marion Caunter and WFP in
the fight against child hunger and
under-nutrition in Asia.
Visit www.wfp.org/womenAsia
and make a donation today.
Fighting Hunger Worldwide
W
F
P
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B
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a
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Special thanks to
26DevelopmentAsia A¡ril–}une2O12 vvv.develo¡menl.asia
PRIVATE SECTOR DEVELOPMENT
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Tiny Savings
After the enthusiasm and then lowered expectations of microlending,
advocates for microsavings take a more cautious approach
ßYMarcLerner
N
ollongaflerbreakfaslon
asunnyDecemberday,
adozenvomenemerge
frommodeslhomes—
somemadeofbamboo,olhersof
cemenlblocks—andgalherlosellle
lheiraccounlsunderlheshadeofan
aluminumroofinßagongAnyo,alovn
inQuezonIrovinceinlheIhili¡¡ines.
Aflerabrief¡rayer,oneoflhe
vomenbeginsarollcalloflhose
galheredforlheirveeklymeelingvilh
an accounl ofhcer from CARD ßank,
aruralbankvilhaslrongfocuson
microhnance.
Ònebyone,lhevomencalloullhe
amounloflheirde¡osilforlheveek.
Manyoflhede¡osilscover¡aymenls
onmodeslloanslhevomenhaveused
lolaunchsmallbusinesseslhal¡ul
foodonlheirlables,kee¡lheirchildren
clolhed,andfuelbiggerdreams.
ßuloflhe5Olovnsfolkvhomakeu¡
lhe larger grou¡ of CARD ßank savers
vhomeeleveryThursdaymorningin
ßagongAnyo,only18haveloans.The
olher32aresim¡lysavers.
“Il’smydreamlobuildahouse
oneday,”saysMinervaßenavidez,
a55-year-oldgrandmolher.“Ionly
de¡osiledI5OO(lesslhan$12)loday,bul
Icanseemymoneybeginninglogrov.”
Anolherde¡osilor,MaryGracede
Caslro, used lo hide vhalever money
shecouldsave.“ßulilisloolem¡ling
vhenyouhavelhemoneyhiddenin
lhehouse,”shesays.“Andloomany
¡eo¡levillaskforaloan.Il’smuch
bellerlokee¡yourmoneyinlhebank.”
While lhe microhnance movemenl
hasbeencloselyassocialedvilh
microcredil—loansassmallas$75
or $1OO lo hel¡ build self-sufhciency
amonglhe¡oor—microsavings
HARD DAY’S EARNINGS A vendor
counts his money at a public market in
Manila. Initial studies show microsavings
programs offer a better solution to
EXLOGLQJVHOIVXIÀFLHQF\DPRQJWKHSRRU
than microcredit.
A¡ril–}une2O12DevelopmentAsia27 vvv.develo¡menl.asia
mayofferabellero¡lionformany
¡oorhouseholds.Lfforlsbybanks,
coo¡eralives,andnongovernmenl
organizalionslobringsavingsand
olher hnancial services lo lhe ¡oor are
novreceivingsu¡¡orlfromavariely
ofsources,includinglheßill&Melinda
GalesIoundalion,lheIinancialAccess
Inilialive,GrameenIoundalion,vhich
o¡eralesinde¡endenllyfromGrameen
ßank,InnovalionsforIoverlyAclion,
andlheUniledSlalesAgencyfor
InlernalionalDevelo¡menl(USAID).
¨The early microhnance movemenl
focusedloomuchonmicro-credil,”
says}ohnÒvens,vhohasbeen
vorkingvilhruralbanksinlhe
Ihili¡¡inesfor12yearsas¡ro|ecl
direclorforlheMicroenler¡riseAccess
loßankingServicesIrogram,vhich
hasfundingfromlheUSAID.
“ßul¡ullingclienlsindeblasavay
oulof¡overlydoesn’lalvaysvork,”
hesays.“Infacl,lhe¡oorcansave
andlheycanbequilegoodalsavingif
givenlheo¡¡orlunily.”
DOUBLE BURDEN
}onalhanMorduch,aNevYork
Universily¡rofessorvhoheadslhe
school’sIinancialAccessInilialive,
sayslhe¡oorfaceadoubleburden
oflovincomeandmanagingvhal
lilllemoneylheyhavevilhoulbank
accounlsorinsurance.
“Iinanceallovs¡eo¡leloinvesl
inlhefulureand—im¡orlanlly—lo
marshalresourceslomeelneeds
loday,”ex¡lainsMorduch.“Access
lo hnance, lhen, is a key lool for
im¡rovinglhelivesoflhe¡oor.”
Hovever,manyoflhe¡oor,
includingsome2.8billionadulls
vorldvide,havenoaccessloformal
hnancial services, including savings
accounls.
}ulieIeacheyvorksforGrameen
Ioundalionasanon-sile¡ro|ecl
managerinaruralareaoflhe
Ihili¡¡ines.Shesaysbanksmusl
makeforaysinloruralcommunilies
andvillages,andmainlainanongoing
¡resenceiflheyvanlloexlendsavings
and olher hnancial services lo lhe ¡oor.
“Manyoflheseclienlsvouldnever
valkinloabank,ilvouldbeloo
inlimidaling,”saysIeachey,vho
is assisling CARD ßank. ¨ßul nov
bankersarecominglolhemloex¡lain
hovsavingsaccounlsvorkandlo
colleclde¡osils.”
ßyreachingoulloonce-overlooked
clienlsinruraland¡oorcommunilies,
CARD ßank nov has a¡¡roximalely
6OO,OOOsavingsclienls,accordinglo
GlendaMag¡anlay,lhebank’sassislanl
vice-¡residenlforo¡eralions.The
moneymobilizedfromsavingsalso
makesileasierforlhebanklomake
loanslosmallenler¡risesandbudding
enlre¡reneurs,shesays.
The¡oor,ofcourse,havealvays
savedininformalvays—frombuying
ananimallofallenforslaughler,lo
hidingcashinbambooorhoarding
small¡iecesofgold.Someeven¡ayan
inlermediaryloholdlheirmoneyfor
lhem.
Novruralbanks,coo¡eralives,
andolherinslilulions—including
CARD ßank and Green ßank in lhe
Ihili¡¡ines, ßank Rakyal Indonesia,
lheKashfIoundalioninIakislan,lhe
Rural Women's Nelvork Ne¡al, SLWA
ßankinIndia,andmanyolhers—are
¡rovinglhal¡oorhouseholdscanand
villsavelhroughformalchannels.
Microhnance slarled vilh |usl a
handfulofclienlsinlhemid-197Osin
ßangladesh.There,Grameenßankand
lvosimilarinslilulions—ASAand
lhe ßangladesh Rural Advancemenl
Commillee (ßRAC)÷nov boasl
morelhan17millioncuslomers.
“Putting clients in
debt as a way out
of poverty doesn’t
always work. In fact,
the poor can save and
they can be quite good
at saving if given the
opportunity”
—John Owens, project director
for the Microenterprise Access to
Banking Services Program in the
Philippines
NEW CUSTOMER A loan applicant
in Ahmedabad, India completes the
UHTXLUHPHQWVRIDPLFURÀQDQFHÀUP
6XFFHVVIXOPLFURÀQDQFHSURJUDPVFDQ
turn borrowers into savers. A
I
I
28DevelopmentAsia A¡ril–}une2O12 vvv.develo¡menl.asia
PRIVATE SECTOR DEVELOPMENT
A
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Similar ¡rograms have ßourished
in Afghanislan, Cambodia, India,
Indonesia,Ne¡al,Iakislan,lhe
Ihili¡¡ines,andVielNamandhave
s¡readloAfricaandLalinAmerica,
¡roviding lhe ¡oor vilh hnancial lools
onceavailableonlylolhemiddleclass
andlhosevilhveallh.Globally,more
lhan15Omillion¡oor¡eo¡lenovhave
access lo microhnance services.
Moslsuccessful¡rogramssharelhe
samebasicslruclure.They¡rovide
sim¡leandreliableservices,require
smallandfrequenl¡aymenls,andare
convenienl, oflen vilh bank ofhcers
visilingclienlsinlheirvillagesor
neighborhoods.
Toallraclcuslomers,¡rogramsmusl
ada¡llolhe¡arlicularcuslomsand
needsofclienlsinavarielyoflocales,
ex¡erlssay.ßanksalsomuslinnovale,
using¡rogramssuchascommilmenl
savingsaccounlslhalrequireclienlslo
meelself-im¡osedgoalsiflheyvanl
loearnfullinlereslandavoid¡enallies.
Inasense,commilmenlaccounls
lurnborroversinlosavers.
“Iflhe¡oorcanmakeloan¡aymenls,
vhycan’llheysaveinsimilar
incremenls`”asksLslherDulfo,an
economics¡rofessorinacommenlary,
The World of Poor Economics, vhich
shecoaulhoredvilhAbhi|ilßaner|ee.
TogelhervilhSendhilMullainalhan,
lheyfoundedlheMassachusells
InsliluleofTechnology’sAbdulLalif
More than 3 decades
after its founding in
1976, Grameen Bank
holds a remarkable
$1.40 in savings
for every $1.00 in
outstanding loans
NO QUICK FIX Poor families queue up
to receive free bags of food items from
DGRQRULQ0DQLOD0LFURÀQDQFHLVQRW
a panacea for poverty, says Grameen
Foundation’s Christopher Tan. “The
move out of poverty is generational.”
CHANGING ATTITUDES A customer
exchanges money at a street corner in
Karachi. Many of the world’s poor have
never used a bank’s services.
}ameelIoverlyAclionLab,vhichhas
¡ioneeredlheuseofem¡iricalmelhods
loevalualedevelo¡menl¡rograms.
“Theansverseemslobelhallhe
¡ooruselheloanre¡aymenlschedule
asavaylocommillhemselveslonol
s¡endingacerlainamounlaveek.If
you don'l ¡ay u¡, your loan ofhcer
comes¡oundingonyourdoor.Ònlhe
olherhand,ifyoudon’lmanagelo
save,lhereisnoonelocom¡lainrighl
avay. Wouldn'l il be nice lo hnd a vay
loenablelhe¡oorlocommillosave,
vilhoulhavinglolakeoulaloan`”
A¡¡roacheslikelhalofGreenßank,
along vilh hnancial and lechnical
su¡¡orlfrom¡arlnersandfoundalions,
havehel¡edli¡lhebalancefrom
microcredillomicrosavings.The
grand dame of microhnance, Grameen
ßank,isa¡rimeexam¡leoflhis
melamor¡hosis in microhnance.
“Ineffecl,Grameenlurnedilself
fromamicroenler¡riselenderinloa
lruerelailbank,bulonelhalconlinued
lofocuson¡oorhouseholds,”say
MorduchandhiscoaulhorsinPortfolios
of the Poor, vhich used hnancial diaries
lolracklhes¡ending¡allernsof¡eo¡le
livingonaslillleas$2aday.
Infacl,morelhan3decadesaflerils
foundingin1976,Grameenßankholds
aremarkable$1.4Oinsavingsforevery
$1.OOinoulslandingloans.
Òlher ma|or microhnance
organizalionshaveshovnsimilar
success.Hyderabad-basedSKS
Microhnance raised $35O million in
aninilial¡ublicofferingin2O1O.This
valued lhe hrm al $1.5 billion.
The hnancial success of some
microhnance organizalions has
A¡ril–}une2O12DevelopmentAsia29 vvv.develo¡menl.asia
¡ublishedinlheQuarterly Journal of
Economicsin2OO6.
Aishvarya Ralan, direclor of lhe
MicrosavingsandIaymenlsInnovalion
InilialivealInnovalionsforIoverly
Aclion,sayslhalvhilesuchearly
hndings are ¡romising, furlher research
isneededinloolhervaysloslimulale
savings.
“Lvenlhen,”shesays,“ilis
im¡orlanllolhinkofmicrosavings,
asvellasmicrocredil,asoneamong
lhemanyinslrumenlsnecessaryfora
¡oor household lo manage ils hnances
o¡limally.”
Chrislo¡her Tan, lhe Lasl and
SoulheaslAsiaregionaldireclorfor
GrameenIoundalion,sayshe’sseen
evensmallamounlsofsavingsmake
adifferenceinlhelivesofcounlless
¡eo¡le.
“ßulil’snola¡anacea,”caulions
Tan.“Lifeforlhe¡oorisslill
difhcull. The move oul of ¡overly is
generalional.”
Researchers agree on one lhing:
lhe hnancial silualions of lhe ¡oor
arecom¡lex.Andlheygiveserious
lhoughl lo lheir hnancial life and are
eagerloim¡rovelheirlol.
“Wecameloseelhalmoney
managemenlis,forlhe¡oor,a
fundamenlalandvell-underslood¡arl
ofeverydaylife.Ilisakeyfaclorin
delermininglhelevelofsuccesslhal
¡oorhouseholdsen|oyinim¡roving
lheirovnlives,”Morduchandhis
coaulhorsconcludeinPortfolios of the
Poor.“Managingmoneyvellisnol
necessarilymoreim¡orlanllhanbeing
heallhyorvelleducaledorveallhy,
bulilisoflenfundamenlalloachieving
lhosebroaderaims.”
Il’snol|uslo¡eninganaccounllhal
makessomeoneasaver,bulralher
lhehabilofsellingasidesomemoney
forlhefulure,saysTan,lheGrameen
Ioundalionregionaldireclor.
“Tvenlydollarsmighlnolbealol
ofmoneyfromamiddle-class¡oinlof
viev,”saysTan.“ßullolhe¡oorilcan
meanlhedifferencebelveensendinga
youngchildloschoolorsendinghim
oullovork.”Q
crealedconlroversy.Theshiflby
Grameen ßank and olher microhnance
inslilulionsinlomorelradilionalrelail
bankinghasbeenaccom¡aniedby
crilicismsof“missiondrifl.”
DavidHulme,associaledireclorof
lheßrooksWorldIoverlyInslilule
allheUniversilyofManchesler,says
Grameenßank’sefforlloex¡andand
increase ¡rohlabilily has moved il
avayfromilsoriginalmissionloserve
lheexlremely¡oor.
“Whilelhebankslill¡roclaimsils
missionof¡overlyreduclion,my
¡ersonalobservalionsleadmelobelieve
lhalilsclienleleislesseconomically
de¡rivedlhanvaslhecaseinlhe198Os
and199Os,”saysHulme.
BUSINESS MODEL
LmilyLnad,vice-¡residenlofrisk
managemenlal1slValleyßankin
Cagayan De Òro in lhe soulhern
Ihili¡¡ines,saysherbank’sGihandom
(Dream)SavingsAccounl¡rogram—
vhichhasnearly2,OOOclienlsvilh
morelhanI71O,OOO(aboul$16,OOO)
inde¡osils—isabusinessmodellhal
vorks.
WhilelheGihandomaccounls
re¡resenlasmallfraclionoflhebank’s
lolal¡orlfolio,lheyhel¡mobilize
de¡osilsfromclienlsvhoveren’l
savingbefore.“Thal’sanev¡oolof
moneylhalallovsuslolendloolhers
launchingsmallbusinesses,”Lnad
says.Theaccounlsalsobringinnev
clienlsvhomighllalera¡¡lyforloans
andolherservices.
1slValleyßankandolherbanks
haveloallraclmicrosaverslhesame
vaylheylureolhercuslomers—by
underslandinglheirneedsand
energelicallymarkelingservices
lailoredlolhoseneeds.
1slValleyßankuseslheinleresl-
bearingGihandomaccounlslolargel
clienlslhalhavelikelyneverused
abankbefore.Theaccounlsrequire
aninilialde¡osilof|uslI1OO,(aboul
$2.25).ßank¡oslersvilhbrighlcomic-
book¡anels¡orlrayanallraclive
youngmolhervonderingvhelher
sheshouldborrovorsavelheI2,OOO
INFOMERCIAL 1st Valley Bank’s poster
WDUJHWVÀUVWWLPHVPDOOVDYHUVE\
requiring an initial deposit of just 100
pesos (less than $3).
Moslmicrosavingsinslilulions
andlargerbanksvilhmicrosavings
o¡lionsofferregular¡assbook
accounls,aulomaliclellermachine
cards,andcommilmenlaccounls.
Io¡ular¡romolionsincludegiveavays
andlolleriesvilhim¡rovedoddsof
vinningformorefrequenlde¡osilors.
Whiledozensofresearch¡ro|ecls
onmicrosavingsareundervay,a2OO6
sludyofcommilmenlsavingsaccounls
offeredbyGreenßankonlheislandof
MindanaoinlhesoulhernIhili¡¡ines
suggesledlhalsuch¡rogramsare
makingadifference,vilhsavings
grovingbyasmuchas82/inayear.
“Thesavingsres¡onsere¡resenls
alaslingchangeinsavings,andnol
merelyashorl-lermres¡onseloanev
¡roducl,”concludesaresearch¡a¡er
(aboul$45.OO)she’llneedforher
children’sschoolfees.ßorrovingal
2O/,sherealizesshe’dre¡ayI2,4OO—
orI8Oadayforamonlh.ßulbysaving
|uslI67aday,she’dhavemorelhan
I2,OOOin|uslamonlh.
“Ifyoucan¡lanahead,savingis
bellerlhanborroving,”lhe¡osler
advises.
If you need Z,000 pesos you
hove TWO opfions: You con
SAVE or you con 8OPPOW.
Lef's see whof hoppens when
you fry eoch of fhese opfionsl
Mof of oII. If you sove
o7 pesos eoch doy, you
wiII hove Z,000 pesos in
onIy I monfhl
WouIdn'f if foke o
Iong fime fo sove
Z,000 pesos7
Whof hoppens if I borrow7
If you borrow of Z07 per monfh you
hove fo poy 80 pesos eoch doy for I
monfh. Thof's o fofoI of Z,400 pesosl
OPTION 1: SAVING
saving 67
pesos per day
X
30
days
=
2,010
pesos
you pay 80
pesos a month
X
30
days
=
2,400
pesos
OPTION 2: BORROWING
PRIVATE SECTOR DEVELOPMENT
vvv.develo¡menl.asia 3ODevelopmentAsia A¡ril–}une2O12
N
ollongaflera
7.9-magniludeearlhquake
devaslaledSichuan
Irovince,inlheIeo¡le’s
Re¡ublicofChina,inMay2OO8,
killinganeslimaled7O,OOO¡eo¡le,lhe
cor¡oralesocialres¡onsibilily(CSR)
mechanismsofglobalcor¡oralionsin
lheareakickedin.
The¡arenlcom¡anyoflhe
inlernalionalfaslfoodo¡eralion,KIC,
immedialely¡ledged3millionyuan
($475,OOO)fordisaslerreliefandlaler
increasedlhallo15.8millionyuan
($2.5million).Òlhermullinalional
cor¡oralionsmadesimilar¡ledges
basedoncor¡orale¡oliciesdesignedlo
The Triple Bottom Line
Companies in Asia are reinventing the concept of corporate social responsibility by
putting people and the planet on par with profits
ßYIloydWhaley
allovforquick,charilableres¡onseslo
disaslers.
Des¡ilelhequickdonalions,many
oflheglobalcom¡anieso¡eralingin
lhearea—includingKIC,CocaCola,
McDonald’s,NokiaandSamsung—
foundlhemselvesonavidely
dislribuledSMSlexlmessagelhal
lisled“inlernalionalironrooslers,”a
derogalorylermreferringloaroosler
lhalvillnolgiveu¡asinglefealher.
Chineseconsumersex¡ressedoulrage
andcalledforboycollsoflhecom¡anies,
accordingloare¡orlinlheJournal of
Multidisciplinary International Studies.
“The¡o¡ular¡erce¡lionvaslhal
inlernalional hrms' relief conlribulions
A
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PROTECTING FUTURES School girls
walk on the shores of Galle Face Beach
in Colombo, Sri Lanka. Procter &
Gamble’s Protecting Futures program
aims to keep teenage girls at school
through the provision of free sanitary
protection.
nolonlydidnolmalchlhoseof
localChinesecom¡aniesinlermsof
scaleorlimeliness,bulalsoverenol
commensuralevilhlheir¡resencein
lheChinesemarkel,”saysasludyon
lhelo¡icbylheWharlonSchooloflhe
UniversilyofIennsylvania.
Thesludynoleslhallhe
mullinalionalsoflendidnolaggressively
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia31
¡ublicizelheirconlribulionsaflerlhe
earlhquake,vhichleflconsumers
unavareoflhem.Also,inlernalional
com¡aniescouldnoloblaina¡¡rovals
asquicklyaslocalcom¡aniesloincrease
lhelevelsofconlribulionsaslhedisasler
vorsened.
Localcom¡anies,closelyalluned
lo¡ublicsenlimenlaflerlhemassive
disasler,verequicklores¡ondand
quickloescalalelheirdonalions.
Theyalsovidely¡ublicizedlheir
¡hilanlhro¡y,somelimeslinkinglhe
¡urchaseoflheir¡roduclsloasenseof
nalionalism.
Themullinalionalsfollovedlheir
(CSR)guidelinesforres¡ondinglo
disaslers,madedonalionsaccording
locom¡any¡olicy,andyelcameoff
lookinglike¡oorcor¡oralecilizens
deservingofboycolls.
“Iormullinalionalcom¡aniesused
loo¡eralingunderaglobal(CSR)
framevork,lheensuingconsumer
backlashcameasashock,”lhe
Wharlonsludynoles.
Welcomelolhecom¡lex,ever-
changingvorldofcor¡oralesocial
res¡onsibililyinAsia.
AsAsiancom¡aniesemergeasglobal
¡layers,lheyareembracingloagrealer
degreelheinlernalionalconce¡lsand
¡rinci¡alsofCSR.Yel,ex¡erlsnole,
lheyarenolleavingbehindlheir
lradilionalmelhodsofgeneraling
goodvillinlhecommuniliesin
vhichlheyo¡erale.And,aslhe
mullinalionalsinlheIRCdiscovered,
lheyarekeenlyallunedlolheirfasl-
changingcuslomerbase.
“Manyoflhecom¡aniesinAsiaare
slillfamily-ovned,”nolesIranciscoL.
Roman,lheexeculivedirecloroflhe
Manila-basedCenlerforCor¡orale
Res¡onsibilily.“Theylendmorelovard
¡hilanlhro¡ylhanamodernconce¡lof
cor¡oralesocialres¡onsibilily.”
“Largefamily-ovnedcom¡anies
inAsiavillhaveaCSRunilbecause
LOCAL AID Proceeds from a book sale in
Beijing went to the Sichuan earthquake
relief fund. Thousands of Beijingers
donated blood, money, and other
essentials to earthquake victims.
everyolhercom¡anyhasone,bullhey
aremorefocusedonlhelradilional
charilyvorklheyhavealvaysdone,”
hesays.“Thecullureof¡hilanlhro¡yis
slrongbulAsiancom¡aniesarebehind
inlhemodern¡racliceofcor¡orale
socialres¡onsibilily.”
WINDOW DRESSING
ÒnekeychallengeinexaminingCSRis
agreeing on a dehnilion.
¨Is CSR a reßeclion of 'vindov
dressing’aclivilieslosu¡¡orl
a markeling goal or a reßeclion
oflhecom¡any’sinlegrilylo
¡romolegoodvillforsociely`”asks
Iachara¡ornKesa¡rakorn,lhedeanof
lheSchoolofCommunicalionArlsof
ßangkokUniversilyinarecenlsludy.
Inilssim¡leslform,CSRinvolves
charilablevorkslhalburnisha
cor¡oraleimage,bulonlyilsmosl
basic¡raclilionersvouldes¡ouse
lhal dehnilion loday. A broader, more
videly acce¡led dehnilion involves lhe
lri¡le bollom line: ¡rohls, ¡eo¡le, and
lhe¡lanel.Thisisaslralegyoflooking
beyond ¡rohls, shareholder value,
andrelurnoninveslmenl,andinslead
lakingabroadervievofcor¡orale
successlhalincludesenvironmenlal
andsocialdimensions.
TheCenlerforCor¡orale
Res¡onsibilily¡ulsillhisvay:
“Cor¡oraleSocialRes¡onsibilily
consislsoflheconscienliousaclions
acom¡anylakeslocrealegeneral
vell-beingforallofilsslakeholders.
In¡raclicingCSR,com¡aniesinlegrale
economic,social,andecological
concernsinlheirbusinesso¡eralions
andinlheirinleraclionsvilheachof
lheirmanyslakeholders.”
Thiscouldmeananylhingfrom
makingdonalionslolhecommunily
afleradisaslerlo¡rovidingem¡loyees
vilh ¡ro¡er vages and benehls
“Is CSR a reflection
of ‘window dressing’
activities to support
a marketing goal or
a reflection of the
company’s integrity to
promote goodwill for
society?”
—Pacharaporn Kesaprakorn,
the dean of the School of
Communication Arts of Bangkok
University in a recent study
A
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PRIVATE SECTOR DEVELOPMENT
vvv.develo¡menl.asia 32DevelopmentAsia A¡ril–}une2O12
FUTURE CONSUMERS
Indevelo¡ingcounlriesaroundlhe
vorld,im¡overishedgirlsmissschool
severaldayseachmonlhbecauselhey
lackbasicsanilary¡roleclionlomanage
lheirmenslrual¡eriods.Toaddresslhis
¡roblem,a¡rogramcalledIrolecling
Iulures¡rovideseducalion,sanilary
¡roleclion,andsanilaryfacililieslohel¡
vulnerablegirlsslayinschool.
Since2OO6,lhe¡rogramhashel¡ed
8O,OOOgirlsin17develo¡ingcounlries.
Underlhe¡rogram,vhichuseslhe
slogan“Iroleclingfulures,kee¡ing
girlsinschool,”lhegirlsreceive
AlvaysorTam¡ax,lvo¡roduclsoflhe
globalconsumer¡roduclgianlIrocler
&Gamble,Inc.
Whilelhe¡rogramlegilimalelyhel¡s
girlsinneedaroundlhevorld,ilalso
A
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lodis¡osingofcom¡anyvasle
malerialsinares¡onsiblevay.Ilis
acom¡rehensiveallem¡lloo¡erale
acor¡oralioninares¡onsibleand
suslainablemanner.
LOW RANKINGS
Tomakelhemallermorecom¡lex,
CSRhasslrongregionalvarialions.In
Luro¡e,forexam¡le,environmenlal
suslainabililyisadominanlas¡ecl
ofmanyCSR¡rograms.InlheIRC,
CSR¡rogramsoflenfocusoncrealing
harmonyornalionalunily.
Suchculluraldifferencesex¡lainin
¡arlvhyAsiancom¡aniesgenerally
scoreloveroninlernalionalcor¡orale
socialres¡onsibililyrankingslhan
NorlhAmericanorLuro¡ean
com¡anies,saysKyokoIukukava,
aseniorleclurerinmarkelingal
lheßradfordUniversilySchoolof
ManagemenlinlheUniledKingdom.
Iukukava,vhoediledlhe2O1O
book,Corporate Social Responsibility in
Asia,conducledinlervievsvilhCSR
managersof}a¡anesecom¡aniesand
lhey ¡oinled oul lhal vorker ßexibilily,
suchasanem¡loyee’so¡¡orlunilylo
change|obs,scoreshighinlheCSR
rankingsyslem.
“Yel,inlhe}a¡aneseconlexl,long-
lermem¡loymenlandcom¡anyloyally
isconsideredanim¡orlanlas¡eclfor
bolhacom¡anyanda¡ros¡eclive
em¡loyee,”saysIukukava.“There
isaslrongbeliefinandlradilionof
em¡loyers laking 'care' of and lraining
lheirem¡loyees.”
ShealsonoleslhalmanyCSR
rankingsyslemsincludeu¡holding
humanrighlsinlheircrileria,bul
lhalsomeAsiancom¡aniesvould
noldocumenllhalas¡arloflheir
cor¡oralecullure.
“Inlhe}a¡aneseconlexl,basedon
myresearch,onemanagerdescribed
hovhumanrighlsaresofundamenlal
lhal lhey vould nol lhink lo 'documenl'
hovlheyareexercised,”Iukukava
says.“ßul,ofcourse,forassessmenl
¡ur¡oses,ifilisnoldocumenled,lhere
is no 'evidence' of social res¡onsibilily.¨
Iukukavasuggeslslhallhefacllhal
lherearefeverAsiancom¡aniesonlhe
inlernalionalCSRlislslhanWeslern
com¡aniessaysasmuchaboullhe
rankingsyslemsasildoesaboullhe
com¡anies.
“Weneedloslarllhinkingaboul
hovassessmenlcrileriaaredevised
andvhelherornolconsullalion
genuinelyoccursacrossaviderange
ofslakeholders,”shesays.“Weoughl
nollolakerankingsalfacevalueand
labelAsiancom¡aniesaslaggards,bul
realizelhalcom¡anieslhalarenolina
rankingslislcannonelhelessbesocially
res¡onsibleinvariousvays.”
¨Whilsl 'social res¡onsibilily' is a
¡o¡ular¡hraserighlnov,veshould
acknovledgelhereisalonghisloryof
businesselhics,vhichiscom¡lexand
varied,”Iukukavaconlinues.“Hov
manycounlriesandslakeholders
oulsideoflheG8|Grou¡of8jare
involvedvilhrankingsandlhe
consullalioninlhedevelo¡menlof
rankingsyslems`Somelimes¡eo¡le1
com¡aniesarenolgiveno¡¡orlunilies
lohavelheirvoiceheard.”
CHARITY PREMIERE Chinese star Jackie
Chan holds a check for victims of the
May 2008 earthquake in Sichuan with US
ÀOPGLUHFWRU5RE0LQNRIIDQG-DSDQHVH
actress Misako Yasuda at a charity
premiere.
Cultural differences
explain in part why
Asian companies
generally score lower
on international
corporate social
responsibility
rankings than North
American or European
companies
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia33
dealvilhvorker’srighlsissues,lhe
environmenl,and¡roduclsafely—are
oflendrivenbylhedesireloca¡lure
markelshareinveslernsocielies
lhaldemandsuch¡rinci¡lesfrom
com¡anies,saysHanlon,a¡osldocloral
researchfellovallheInsliluleofAsian
ResearchallheUniversilyofßrilish
Columbia.
Com¡aniesinlheregionareless
oflendrivenbycivilsociely,vhichhas
beeninslrumenlalincor¡oralereform
inmanycounlriesaroundlhevorld,
hesays.
“Inmanyveslerncounlries,lhereis
anaclivecivilsocielylhalbringscourl
caseslhalhaveforcedcom¡anieslo
reformlheirsu¡¡lychains,im¡rove
vorkingcondilions,and¡roducesafer
¡roducls.InAsia,NGÒsoflendon’l
havelheleveragelomobilizeaslrong
socialmovemenlloraiseavarenessor
lhe conhdence in lhe courl syslem lo
bringacaseagainslacor¡oralion.”
Ònlhebrighlside,Hanlonnoles,
consumersinAsiaareusinglhe
Inlernelloforcecom¡aniesloembrace
CSR vhen lhey cannol hnd relief in lhe
courlsorlhroughlhegovernmenl.
“Youhaveconsumerslakinglheir
grievancesonline,”hesays.“Wehave
seenmass¡roleslsorganizedagainsl
com¡anies¡ollulingriversandnol
beingheldaccounlable.Ilisadifferenl
dynamicinAsialhaninlhevesl,lhe
¡overslrucluresaredifferenl.”
SHAREHOLDER VALUE
AllhecoreofCSRlieslheconce¡l
ofself-regulalion.CSR¡rogramsare
lheorelicallydesignedloim¡rove
com¡aniesfromvilhin,nollo
inslilulereformsslricllyforexlernal
consum¡lionorduelooulside
¡ressure.Andmany¡ro¡onenlsclaim
lhalslrongandcom¡rehensiveCSRis
direclly linked lo increased ¡rohl.
AsludybyMITSloanSchool
ofManagemenlleclurerCaroline
Ilammerfoundlhalcom¡anies
receivedadireclbooslinslock¡rices
associaledvilhres¡onsiblebehavior.
Hersludylrackedres¡onsibleand
irres¡onsibleenvironmenlalbehavior
by¡ubliclylradedcom¡aniesin
lheUniledSlalesfrom198Olo2OO9.
Thedalashovedlhalcom¡anies
ex¡eriencedanaverageslock¡rice
increaseof.84/inlhelvodays
follovinganannouncemenlof
environmenlallyres¡onsiblebehavior,
andvere¡unishedvilha–.65/
averagedeclinevhenlheyvere
involvedinaclivilylhaldamaged
lheenvironmenl.Thesludyfocused
on¡ubliclyknovnenvironmenlal
acliviliesre¡orledinlhemedia.
Making lhe link belveen ¡rohl and
res¡onsiblecor¡oralebehaviorisvilal.
Groving ¡rohls and increasing CSR
acliviliesareinlrinsicallylinked.
“Iamske¡licaloflheallruislic
molivesofcor¡oralionsvhenilcomes
locor¡oralesocialres¡onsibilily,”says
Hanlon.“ßulvhalIvillsayislhal
vhencom¡aniesreachacerlainlevel
of ¡rohl lhey oflen lry lo re-invesl lo
makelhingsbellerforlheirvorkers,
lryloim¡rovelhevicinilyvherelhey
arevorking,lheylendlolakeaclions
inlinevilhCSR.”Q
builds brand loyally. ßenehciaries of
sucha¡rogramvilllikelyconlinue
lobuylhose¡roduclslhroughoul
lheirlives.
Similarly,com¡ulergianlInlelhas
en|oyedenormoussuccessvilhilsInlel
Teach¡rogram,vhichhas¡rovided
com¡ulerlileracylraininglomorelhan
sevenmillionleachersindevelo¡ing
counlriesaroundlhevorld.Those
leachershave¡assedlhislrainingonlo
lheirsludenls,andalloflhemhave
usedInlel¡roduclsinlhe¡rocess.
A DIFFERENT DYNAMIC
Such¡rogramsareconsidered
modelsofmodern,so¡hislicaledCSR
inilialives,bullhereisanincreasing
callbymanyforcom¡anieslolook
invardvhenconsideringCSR.
AndAsiaisallheforefronloflhis
discussion,saysRoberlHanlon,
aulhoroflhere¡orl,Corporate Social
Responsibility, Corruption and Human
Rights: Multinational Corporations in
China and Southeast Asia.
“TheconversalionsaboulCSRare
muchmoremeaningfulinAsia,”says
Hanlon.“InlheWesl,ilisoflenaboul
¡ublicrelalionsandmiligalingrisk.
WhenyougelloAsia,youarelalking
aboulslrikes,suicidesinyoursho¡,
environmenlal¡roblemslhalcangel
youkickedoulofacounlry.”
Asiancom¡anieslhalado¡l
modernCSR¡rograms—vhich
INTEL TEACH Former Intel chairman
Craig Barrett interacts with a student of
Uttam School during his presentation
in New Delhi in 2006. The Intel Teach
program has trained more than seven
million teachers in developing countries
around the world.
A
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PRIVATE SECTOR DEVELOPMENT
34DevelopmentAsiaA¡ril–}une2O12 vvv.develo¡menl.asia
O
ulsideßahadurgarh,
nearDelhi,amanvilh
lroublebrealhinganda
¡aininhischeslislying
onhisback.Hehas|uslvalkedfor
anhourloreacharuralcardiacclinic
vhereGirishKhuranalreals¡alienls
everyveek.
AcrossIndia,lhousandsofrural
clinicsoflenlackbasicinfraslruclure,
lele¡honelines,andadequalemedical
su¡¡lies,androulinelyex¡erience
¡overoulagesformorelhan12hours
3RYHUW\3URÀWV
The world’s poor are increasingly being viewed as a lucrative market for
the private sector. Is it exploitation or long overdue?
ßY}adeLee-Duffy
aday.Hovever,lhis¡alienldoesn’l
havelovorryaboulKhurana’s
eleclrocardiogra¡h(LCG)—amachine
lhal¡rediclsanddiagnoses¡alienls
vilhhearldisease—breakingdovn
froma¡overfailure.
In2OO8,lheinlernisl¡urchased
lhe hrsl-of-ils-kind MAC 4OO LCG
machine,vhichhadseeminglyshrunk
fromearlier5O-¡oundmodelsvheeled
aroundonhos¡ilalcarlsloa7-¡ound
ballery-o¡eraledmachineaboulhalf
lhesizeofafaxmachine.The$1,OOO
coslalsomakeslhe¡orlablemachine
considerablymoreaffordablefor
doclorsinIndia,vho¡reviously
couldn’l¡aylhe$1O,OOOforanLCG
¡redecessor.Thesavingalsolransfers
lo¡alienls,allovingKhuranalo
chargeaboulhalfasmuchasbefore.
HANDY TOOL A farmer uses his mobile
SKRQHDVKHZRUNVLQDSDGG\ÀHOGLQ
western Bangladesh. Mobile phones
enable farmers to check crop prices and
allow migrants to transfer money easily.
Thisradicallyinnovalivemachine
vaslheresullofGeneralLleclric’s
Medical Syslems Grou¡ embarking
on“reverseinnovalion”:aslralegy
lo hrsl develo¡ enlry-level, lov-cosl
¡roduclsforemergingmarkels,and
lhen re¡ackage lhem lo ßov u¡hill lo
develo¡ed, hrsl-vorld markels.
Many olher com¡anies are also
redireclinglheirefforlslolhe“bollom
oflhe¡yramid”—lhevorld’s¡ooresl
¡eo¡le.Thesecom¡aniesseelhe
vorld's ¡oor as a ¡rohlable markel and
believelheycanchangelhelivesof
billionsforlhebeller.
Reverseinnovalionisa
develo¡menlalbusiness¡rocesslhal
goesagainsllheconvenlionalvisdom
ofglobalizalioninvhichcom¡anies
develo¡¡remium-¡riced¡roduclsfor
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia35
“I think there has been a lot of interest in frontier
markets at the bottom billion from the rich world.
They know that the environment is risky and
complicated, but opportunities are there”
—Paul Collier, author of The Bottom Billion: Why the Poorest Countries are
Failing and What Can Be Done About It
markel.Accordingloa2O11Uniled
NalionsChildren’sIund(UNICLI)
re¡orl,Global Inequality: Beyond the
Bottom Billion—A Rapid Review of
Income Distribution in 141 Countries by
Isabel Òrliz and Mallhev Cummins,
lheveallhiesl2O/inlhevorld
re¡resenlednearly83/oflhelolal
globalincome,vhereaslhe¡ooresl
2O/hadexaclly1/underlhe
globalaccounlingmodel,asof2OO7.
Shockingly, 4O/ of lhe vorld's ¡ooresl
¡eo¡leincreasedlheirshareoflolal
incomebelveen199Oand2OO7byless
lhan1/.
“Ilhinklherehasbeenalolof
inlereslinfronliermarkelsallhe
bollombillionfromlherichvorld,”
saysIaulCollier,¡rofessorof
economics,direclorforlheCenlrefor
lhevorld’sveallhiesl1O/allhelo¡
oflhe¡yramid(mainlyconsumersin
lhe Uniled Slales), lhen modify lhem
formarkels,suchasLuro¡eand}a¡an,
andlaslly,lricklelhese¡roduclsdovn
lo¡oorcounlries.
Hovever,ada¡lingandre¡ackaging
global ¡roducls made for lhe US lo
counlriessuchaslheIeo¡le’sRe¡ublic
ofChina(IRC)andIndiavillonly
ca¡lureafraclionoflheo¡¡orlunilies
lhalexisllhere,lheneedsofemerging
markelsareverydifferenllolhoseof
veallhierones.
Reverseinnovalionislhesolulion
formanycom¡aniesaslheaggregale
¡urchasing¡overoflhevorld’s¡oor,
vhonumbermorelhan4billion,is
lremendous.Inaddilion,lheu¡vard
migralionof¡roduclscanbehugely
¡rohlable.
¨When ve are designing s¡ecihcally
fordevelo¡ingmarkels,oflenlimes
youhavelouselhelalesllechnology
becauselhesizeoflheunilisvery
im¡orlanl,asvellasils¡orlabilily
and ruggedness,¨ Mike ßarber, chief
lechnology ofhcer al General Lleclric
Heallhcarelellsßloomberg.
“Wehavelurnedilaround18O
degrees,sonovour¡roduclslhalare
¡rimarilydevelo¡edfordevelo¡ing
markels,vehavebeenablelolake
lhese¡roduclsandbringlhemback
lo develo¡ed markels like lhe US or
WeslernLuro¡e.
“Il’sanevolulionoverlime,
leveraginglheminialurizalionof
eleclronics,andridingonlhevave
of¡ullingmorelhingsinlosoflvare,
andreallyunderslandingvhalislhe
¡rimaryinlerfacelhalvasnecessary.”
The¡eo¡leallhebollomoflhe
¡yramidareclearlynolanobvious
ENTERTAINMENT VALUE A street vendor
sells pirated DVDs. Research shows
the poor usually save up to buy small
luxuries, such as DVD players, rather
than more rice and other necessities.
A
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PRIVATE SECTOR DEVELOPMENT
36DevelopmentAsiaA¡ril–}une2O12 vvv.develo¡menl.asia
S
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N
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I
H
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T
Ò

L
I
ß
R
A
R
Y
,

G
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T
T
Y

I
M
A
G
L
S
lhe Sludy of African Lconomies al
TheUniversilyofÒxford,andaulhor
ofThe Bottom Billion: Why the Poorest
Countries are Failing and What Can Be
Done About It. “Theyknovlhallhe
environmenlisriskyandcom¡licaled,
bulo¡¡orluniliesarelhere.”
Nolonlyarecom¡aniessuchas
Microsofl, Nokia, and Levi's forging
inloemergingmarkels,bullarge
hnancial inslilulions are moving inlo
Africaasvell.“Agoodexam¡leis}I
Morgan, an im¡orlanl bank vilh a
hugelislofim¡orlanlcom¡aniesas
cuslomers,”ex¡lainsCollier.“Their
CLÒ}amieDimonisveryinleresled
inbuildingAfrica,andex¡anding
lhe ¡resence of }I Morgan in Africa.¨
Collieraddslhecoremolivalionfor
inlernalionalbanksloenlerAfricais
lhallheirovnclienlsandolherma|or
cor¡oralionsarealreadyinveslingin
lheconlinenl.
¨|}I Morganj is an exam¡le and an
indicalionofalarger¡henomenonin
lhe lasl 1÷2 years,¨ asserls Collier. ¨So
vhencuslomerssay,‘Whereisour
bank`’lheyarelherelo¡rovidelhe
hnancial services.¨
Aslhefasleslgrovingeconomiesin
lhevorldareinAfrica,lheIarLasl,
lhe Middle Lasl, and Cenlral Asia,
o¡¡orluniliesabound.“Aloloflhese
economiesaregroving.Ghanavas
lhefaslesllaslyear,faslerlhan|lhe
Ieo¡le's Re¡ublic ofj China. Ior lhese
counlries,lhereislillledovnsiderisk.
Theyhavebeenso¡oorforsolong,
lhereisamassivesco¡eforgroving,”
saysCollier.
“Thesecounlrieshaveenormous
resourcesfromexlraclions|ofnalural
resourcesj. And lheir conslruclion
seclorisbooming.Inconlrasl,ifyou
looklolheWesl,youhavelhedee¡esl
recessionindecades.”
Whilemany¡erceivelheIRClobe
lhevorld’sfasleslgrovingeconomy,
Ghanasurgedaheadlolakelhelo¡
s¡olin2O11,accordinglolheWorld
ßankre¡orl, Global Economic Prospects
January 2011: Regional Annex. Wilh
largeoilreserves,lhere¡orl¡ro|ecled
Ghana’seconomicgrovlhralelobe
13.4/in2O11and1O/in2O12,vhile
lheIRC’sgrossdomeslic¡roducl
grovlhralevas¡ro|ecledlobe9.3/in
2O11and8.7/in2O12.
Wilhnumerousmullinalionals
s¡ecihcally develo¡ing ¡roducls for
emergingmarkels,suchasIroclorand
Gamble’slover-¡riceddia¡ersand
Coca-Cola's Minule Maid Iul¡y |uice
drink,isilelhicallosellgoodsand
¡rohl from ¡eo¡le vho can'l afford lhe
basicnecessiliesoffoodandsheller`
Inlhere¡orl,More Than 1 Billion
People are Hungry in the World—But
What if the Experts are Wrong?aulhors
Abhi|il ßaner|ee and Lslher Dußo
revealedlhallhe¡oordidn’lealmore
evenvhenlheycouldaffordlo,or
vhen¡ricesforsla¡les,suchasrice
andgraindecreased.Thereverse
ha¡¡ened,lheyacluallyalelesssla¡les.
Alikelyex¡lanalionvasconsuming
morecaloriesvasnola¡riorily,vhile
buyingbeller-laslingfoodandolher
indulgencessuchaslelevisionsand
DVD¡layers,vhichcouldlakemonlhs
losaveu¡for,vasim¡orlanl.
“Weshouldn’lforgel,loo,lhalolher
lhingsmaybemoreim¡orlanlin|¡oor
¡eo¡le'sj lives lhan food. Ioor ¡eo¡le
inlhedevelo¡ingvorlds¡endlarge
amounlsonveddings,dovries,and
chrislenings. In Soulh Africa, ¡oor
familiesoflens¡endsolavishlyon
funeralslhallheyskim¡onfoodfor
monlhsaflervard,”ex¡lainßaner|ee
and Dußo. Al lhe same lime, ¡roducing
andsellingnonessenlialfoodand
goods,suchassodasandeleclronic
equi¡menl,creales|obs.
“IfyouaskanAfricanvhalislhe
moslvaluablelhinglheyhaveboughl
inlhelaslyearilvouldbeamobile
¡hone.Il’smuchmoreim¡orlanllo
lhem lhan lo us in lhe US or Luro¡e,¨
saysCollier.“Ifalandlinedoesn’lexisl
orisdovn,il’sanexlremelyuseful
lool—farmerscanuseamobile¡hone
lo hnd oul cro¡ ¡rices.¨
InAsia,lhesilualionissimilar.
Arecenlsludyamonglhe¡oorinseveral
Asiancounlriesfoundlhalmobile
¡hones“havelhecharaclerislicsofa
necessilyinlheßÒI|bollomoflhe
¡yramidj of ßangladesh, Iakislan, India,
Sri Lanka, lhe Ihili¡¡ines and Thailand.¨
“Theveallhierlheconsumer,lhe
lesserlheim¡orlanceofmobile¡hone
servicesinlheconsumer’sbudgel,”
noleslhe2OO9re¡orl,Bottom of the
Pyramid Expenditure Patterns on Mobile
Phone Services in Selected Emerging Asian
Countries, ¡roduced by Sri Lanka-
basedinformalionandcommunicalion
PRODUCTS FOR THE BOTTOM BILLION
Multinationals are developing entry-level,
low-cost products for emerging markets,
from medical equipment such as a
portable ECG to orange juice drinks.
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia37
lechnology¡olicyandregulalion
lhinklank,LIRNLasia.
There¡orlargueslhalmobile¡hone
shouldbeseenasanecessary¡ublic
service,nolaluxury,andshouldbe
laxedandregulaledassuch.“Given
lhalmobile¡honesare¡arlof
everydaylivesandlhallheyre¡resenl
aneedamongolherneedsinmodern
socielies,¡olicieslhalfoslerandnol
ham¡erinveslmenlandinduslry
grovlhshouldbedesignedand
im¡lemenled,”lhere¡orlslales.
Sluarl Lloyd Harl, lhe Samuel
C. }ohnson Chair in Suslainable
GlobalLnler¡riseand¡rofessorof
managemenlalCornellUniversily’s
}ohnson Graduale School of
Managemenl, agrees everyone al lhe
lo¡andbollomoflhe¡yramidshould
begivenachoiceofvhallheycanbuy.
“The¡oorare¡eo¡leloo.Theyarenol
|uslsurvivalmachinesvhoarelrying
logrindoulaliving.Theyvouldlike
lofeelmagicalaboullife,loo,”says
Harl,vhocoaulhoredlhe¡a¡er,The
Fortune at the Bottom of the Pyramid vilh
CKIrahalad.
“Whenfacedvilhchoices,lheydon’l
alvayschoosenulrilious,lov-cosl
food,bulneilhervouldanyofus,so
vhyshouldveex¡ecl¡oor¡eo¡lelo.
Weshouldallov¡eo¡lelodecideand
¡arlici¡aleinlheirovnfulure.”
Asaidmoneyalonevon’lsolve
lhevorld’schronic¡overlysilualion,
olhera¡¡roachesmuslbeex¡lored.
“Thereisnolenoughaidmoneylo
makelhelransformalionalshiflneeded
|in develo¡ing counlriesj. And il's nol
|uslaboulhovlogel¡eo¡lelobemore
¡roduclive,I’mlhinkingbiggerlhan
lhal,”saysHarl,vhoalsovroleNext
Generation Business Strategies for the Base
of the Pyramid vilhTedLondon.
AccordingloHarl,morelhan
2billion¡eo¡lesubsislonlesslhan
$2dayandhavebeenlefloulof
lheglobalca¡ilalismmodel.Ra¡id
induslrializalionofemergingmarkels
orca¡ilalizingonenergyresources
suchasoilarenolsuslainablesolulions
forliflinglhebaseoflhe¡yramidoul
of¡overly,Harlsays.“Theonlyvaylo
lifl4billion¡eo¡leoulof¡overlyand
locrealeadecenlslandardoflivingis
lolookallhe¡roblemverydifferenlly,”
heex¡lains.
Suslainabilily vhen markeling lo
lhevorld’s¡oor,saysHarl,requires
“lea¡frog”greeninnovalionlhal
combinesenvironmenlallysuslainable
lechnologiesoflodayvilhlhe
businessmodelsoflomorrov.Nev
lechnologiesforrenevableenergy,
¡oinl-of-use valer ¡urihcalion, vireless
informalionlechnologies,suslainable
agricullure,andnanolechnology
crealedindevelo¡ingmarkelsarevhal
Harldescribesas¡arlofagreenlea¡
slralegy.Headds“small-fool¡rinl”
¡roduclsandserviceslhalarebeller
suiledlolhebollom-of-lhe-¡yramid
conlexlareoneoflhekeyslosuccess.
¨Small-scale solar and ¡oinl-of-
usevalerlrealmenlcanbecomeso
effeclive,reliable,andcosl-com¡elilive
lhallheycanullimalelycom¡ele
direcllyvilhincumbenlofferingsallhe
lo¡oflhe¡yramid,”saysHarl.
Lven Microsofl has formed a nev
lrickle-u¡innovaliongrou¡,vhose
focusislocrealeanevgeneralionof
easy-lo-use,inex¡ensivea¡¡licalions,
nolesHarl.Thelechnologygianlhas
direcledilsinilialefforlsloIndia,vhere
ilis¡lanninglogeneralea¡¡licalions
lhalcombinemobile¡hones,soflvare,
andlheinlernelforlheunderserved
segmenloflhemarkel.
The Bottom BillionaulhorCollier
concludeslhereiscredibleho¡e
forlhevorld’s¡oor.“Ilhinkilcan
ha¡¡en.Òverlhenexldecadelhey
villbegellingalolofmoneyfrom
naluralresourceexlraclion,”he
says.“Andloharnessalllhalmoney
fordevelo¡menlde¡endsongood
economicgovernance.Whelherlhey
¡lunderlheirresourcesornol—lhal
villbelheclassicslrugglelhal¡lays
oulinlhenexlfevdecades.”Q
“The poor are people
too. They are not just
survival machines who
are trying to grind out
a living. They would
like to feel magical
about life, too”
—Stuart Lloyd Hart, the Samuel
C. Johnson Chair in Sustainable
Global Enterprise and professor of
management at Cornell University’s
Johnson Graduate School of
Management
GREEN ENERGY In a village in Nairobi,
a woman recharges a solar lamp by
hanging it from the roof. Sustainability
expert Stuart Lloyd Hart says one of
the keys to success in marketing to the
poor is developing “small footprint”
products and services that are reliable
and affordable.
A
I
I
OFF THE SHELF
38DevelopmentAsiaA¡ril–}une2O12 vvv.develo¡menl.asia
Demystifying the Chinese Economy
By Justin Yifu Lin
Cambridge University Press, December 2011, $75.00
I
nDemystifying the Chinese Economy, lheWorldßank’s
chiefeconomisl¡rovidesalheorelicalframevorkand
hisloricalconlexlforunderslandinglheeconomic
develo¡menlofhishomecounlryandilslransilionloa
markeleconomy.
ßefore|oininglheWorldßank,}uslinYifuLinvasfounding
direclorand¡rofessoroflheChinaCenlreforLconomic
ResearchalIekingUniversilyinlheIeo¡le’sRe¡ublicofChina.
“A¡alriolicyelhardheadedlookalhovhiscounlrynolchedu¡average
annualgrovlhof9.9¡ercenlforlhreedecades…a¡ragmalichisloryofeconomic
causeandeffecl—aninsider’saccounlofvhy|lheIeo¡le’sRe¡ublicofjChina,
vhichdominaledlhevorldeconomyrighlinlolhe19lhcenlury,fellsofarbehind
lheWeslandhovilcameroaringbackinourlimes.”—James Pressley, Bloomberg
“ThebookisalranslalionoflecluresIrofessorLingavealIekingUniversily.
Iloffersaninsider’svievoflhebiggesleconomicevenlofourera:lheriseof
|lhe Ieo¡le's Re¡ublic ofj China. Whelher one agrees, or nol÷I hnd much of his
argumenl¡ersuasive—vehavelounderslandhovsuchamanlhinks.”—Martin
Wolf, Financial TimesQ
Deng Xiaoping
Deng Xiaoping and the
Transformation of China
By Ezra F. Vogel
Belknap Press, September 2011, $39.95

T
hisbookbylheformer
direclorofHarvard’s
IairbankCenlerforLasl
AsianResearchandlheAsia
Cenlervasnamedasoneoflhebesl
booksof2O11.IlvashailedbyThe
Lconomisl as ¨lhe dehnilive accounl of
Denginanylanguage.”
LzraI.VogelisHenryIordII
IrofessoroflheSocialSciences
LmerilusalHarvardUniversily.
“Vogel’snevbiogra¡hy¡orlrays
Dengasnol|usllhemakerofmodern
|Ieo¡le’sRe¡ublicofjChina,buloneof
lhe mosl subslanlial hgures in modern
hislory….Thisbookisbolsleredby
insiderknovledgeandoulslanding
sources. The dehnilive accounl of
Denginanylanguage.”—The Economist
Boomerang
Travels in the New Third World
By Michael Lewis
W. W. Norton & Company, October
2011, $25.95
T
heaulhoroflhe2O1O
beslseller The Big Shortlurns
hisallenlionlolhecredil
bubblesinGermany,Greece,
Iceland,andIrelandinabooklhalis
¡arl-invesligalive
|ournalismand
¡arl-lravelogue.
MichaelLevisis
a hnancial |ournalisl
andßloomberg
Vievcolumnisl.
Healsovrole Liar’s
Poker, The Money
Culture, The New
New Thing, Moneyball, The Blind Side,
Panic, andHome Game.
“Combininghiseasyfamiliarily
vilh hnance and lhe lalenls of a lravel
vriler,Mr.Levisselsoffinlhese
¡ageslogivelhereaderaguided
lourlhroughsomeoflhedis¡arale
¡laces hard hil by lhe hscal lsunami of
2OO8,likeGreece,IcelandandIreland,
lracinghovverydifferenl¡eo¡lefor
verydifferenlreasonsgorgedonlhe
chea¡credilavailableinlhe¡relude
lolhaldisasler.Thebook—basedon
arliclesMr.LevisvroleforVanity
Fairmagazine—isacom¡anion¡iece
ofsorlsloThe Big Short: Inside the
Doomsday Machine,hisbeslselling2O1O
book aboul lhe hscal crisis.¨—Michiko
Kakutani, The New York Times“
“InThe Big Short Levisrealizedlhal
lhemoslexcilingvaylodocumenllhe
credilcrisisvaslofollovlheaclion
fromlhe¡ers¡ecliveoflhosevho
savilcomingandmadeamassive
¡rohl. His nev book Boomerangshifls
lhefocusloLuro¡eandlheongoing
melodramaoflheeuro.”—Andrew
Anthony, The GuardianQ
“Thefocus
oflhebookis
Deng’sunusual
careerlra|eclory,
hisuniqueslyle
ofrule,andlhe
slralegicchoiceshe
madeduringand
aflerlheCullural
Revolulion.…Thisbookshouldberead
byanyonevhovanlsloundersland
lhedomeslicandinlernalional
dynamicslhalhaveledlo|lheIRC’sj
riseasagreal¡over.”—Yanzhong
Huang, Foreign Affairs
“Hegiveslhereaderlhenecessary
hisloricalconlexlandbackground
lounderslandvhyDengmadehis
decisions….Ilisallaboullhegrand
hisloric viev. And lhal is hlling: oul of
allofDeng’samazingqualilies,ilishis
gras¡ofabroad¡ers¡ecliveandhis
keensenseofhislorylhalenabledhim
loachievevhalsomanyhaddeemed
im¡ossible.”—Chow Chung-yan, South
China Morning Post Q
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia39
Together
The Rituals, Pleasures and Politics of Cooperation
By Richard Sennett
Yale University Press, December 2011, $28.00
S
ociology¡rofessorRichardSennellargueslhal
coo¡eralionhasbecomeanecessaryskillina
mulliculluralsociely.
“Crilicsmaycar¡lhalSennell’shandbooklolhe
craflsofcoo¡eralionsidesle¡slhehardeslqueslionofrool-and-branchreform—
vhelherofinner-cilyveallhdislribulion,orlheglobalbankingsyslem.ßul
re¡air,asheinsisls,hasloslarlinyourovnbackyard—andoveryourovnfence.
Ioranyonevholakesu¡Togelher’schallengelomakea‘vocalion’ofcommunily,
hemayvellhel¡lhemloavoidbolhlhesquabblesinlhe¡layground—andlhe
riolsinlheslreels.”—The Independent Q
Honor in the Dust
Theodore Roosevelt, War in the
Philippines, and the Rise and Fall of
America’s Imperial Dream
By Gregg Jones
NAL/Berkley, February 2012, $26.50
A
nAmerican|ournalisl
goesbacklolheearly2Olh
cenluryvhenlheUniled
Slalesbeganilsascenlas
ama|orvorld¡over.Hisslorybegins
vilhlheyoungnalion’svicloryover
S¡ain,vhichgave
ilconlroloflhe
Ihili¡¡ines,lhen
aS¡anishcolony
lhalvasallhe
¡oinlofdeclaring
inde¡endence.
Honor in the
Dustchronicles
lheRoosevell
adminislralion’sres¡onselolhe
Iili¡inoguerillaresislanceandcharges
ofUSmililarymisconduclinlhe
Ihili¡¡ines,andhovlheseevenlshave
sha¡edAmerica’s¡osilioninglobal
affairs.
Gregg}ones,lhebook’saulhor,vas
acorres¡ondenlinAsiafor1Oyears.
He vas a hnalisl for lhe Iulilzer Irize
andGeraldLoebAvard.Hisvorkhas
a¡¡earedinThe Dallas Morning News,
The Los Angeles Times, The Washington
Post, The Guardian, and The Observer
(London),amongolhers.Healsovrole
Red Revolution: Inside the Philippine
Guerrilla Movement.
“WhalisslrikingaboulHonor in the
Dust,Gregg}ones’sfascinalingnev
bookaboullheIhili¡¡ine-American
War,isnolhovmuchvarhaschanged
inmorelhanacenlury,bulhov
lillle.”—The New York Times
“Alively,documenlednarralive
aboulanim¡orlanlbuloflenneglecled
sloryinAmericanhislory.”—Dallas
Morning NewsQ
Thinking Fast and Slow
By Daniel Kahneman
Farrar, Straus and Giroux October 2011, $30.00
E
minenl¡sychologislDanielKahnemandislillsyears
ofresearchinonebookloex¡lainhovlhemind
vorks—hovvearriveallhedecisionslhalvemake.
Kahneman’s¡ioneeringvorkvilhlhelaleAmos
TverskyondecisionmakingreceivedlheNobelIrizein
Lconomic Sciences in 2OO2. Their ideas have inßuenced many helds, including
economics,medicine,and¡olilics,andhel¡edlaylhefoundalionforbehavioral
economics.
InThinking, Fast and Slow, Kahnemansayslherearelvosyslemslhaldrivelhe
vayvelhink:Syslem1(fasl,inluilive,andemolional)andSyslem2(slover,
moredeliberalive,andmorelogical).Herevealslheexlraordinaryca¡abililiesof
fasl lhinking as vell as ils ¡ilfalls, vhen lo lrusl our inluilion, and lhe benehls
ofslovlhinking.Thinking, Fast and Slowvasraledasoneoflhebeslbooksof
2O11byThe New York Times, The Economist, The Wall Street Journal, andThe Globe
and Mail.
“Therehavebeenmanygoodbooksonhumanralionalilyandirralionalily,bul
onlyonemasler¡iece.Thalmasler¡ieceisDanielKahneman’sThinking, Fast and
Slow.”—William Easterly, The Financial Times
“Kahneman’snevandmoslaccessiblebookconlainsmuchlhalisfamiliar
lolhosevhohavefollovedlhisdebalevilhinlhevorldofeconomics,bulil
alsohasalollosayaboulhovvelhink,reacl,andreach—ralher,|um¡lo—
conclusionsinalls¡heres.WhalmoslinlereslsKahnemanarelhe¡rediclable
vayslhalerrorsof|udgmenloccur.”—Roger Lowenstein, Bloomberg Businessweek
“Manybooksaboullhemind—acrovdedgenrelhesedays—combinevivid
sloriesvilhaccounlsofseminalex¡erimenlsandlhen¡roceedloarguefor
changesinlav,¡olicyorbusiness¡raclices.Thinking, Fast and Slowisdifferenl.
Il is almosl dehanlly focused on lhe science, vilh a leavening of memoir and
¡ersonalobservalion.”—Christopher F. Chabris, The Wall Street JournalQ
4ODevelopmentAsiaA¡ril–}une2O12 vvv.develo¡menl.asia
ARTICLE
A
I
I
I
n lhe decade of conßicl lhal has
¡laguedAfghanislan,goodnevs
hasbeenaveryrarecommodily.
ßulin}une2O1O,UniledSlales
and Afghan ofhcials made a slunning
announcemenllhalseemedlochange
everylhinginlhelong-suffering
counlry.
Geologisls idenlihed nearly $1 lrillion
inunla¡¡edmineralde¡osils.The
GovernmenlofAfghanislanlaler
ad|usled lhal lo an eslimaled $3 lrillion
inmineraland¡elroleumde¡osils,
includingco¡¡er,iron,gold,oil,
chromiles,uranium,andrareearlh.
ßullhemassivediscoveriesvere
greeledvilhlimiledcelebralion.
“TheGovernmenlofAfghanislan
andilsallieshaveanarrovvindovof
o¡¡orlunilylobecomeavorldleader
inresourcelrans¡arency…asrighls
lolheseresourcesarebeingsoldover
lhe nexl 3 years,¨ says }uman Kubba,
acam¡aignervilhlheorganizalion
GlobalWilness.“Theslakescouldnol
behigher:gelilrighlandminerals
couldbelhecalalyslfor¡eaceand
¡ros¡erily,gelilvrongandlhere’s
amassiverisklheyvillbelosllo
corru¡lion,orformanevaxisof
inslabilily and conßicl.¨
Afghanislanislhelaleslinaslring
ofdevelo¡ingcounlriesinAsialhal
haveinlhelaslfevyearsdiscovered
vaslnaluralresourcede¡osils.These
counlries—includingCambodia,
Mongolia,andTimor-Lesle—areal
lhecenlerofadebaleonhovbesllo
manage lhe coming inßux of revenue
associaledvilhlhesediscoveries.
Lconomislshaveseveralnamesforlhe
¡henomenonofgrealveallh¡ouring
inloafragile,develo¡ingeconomy
vilhdisaslrousresulls.ßased¡rimarily
The Resource Curse
Asian nations are finding billions in oil, gas, and minerals. But will it make them poorer?
ßYIloydWhaley
PROSPECTING Miners drill into
rock in a makeshift emerald mine
in Panjshir Valley, Afghanistan. The
country is sitting on a gold mine of
mineral reserves, perhaps the richest
in the region, that offer hope for
an economy mired in poverty after
decades of war.
onhard-learnedlessonsinAfricaand
LalinAmerica,counlriesvilhlucralive
resources lhal hnd lhemselves ¡lagued
vilh conßicl and ¡overly are said lo
suffer from lhe ¨¡aradox of ¡lenly¨ or
lhe ¨resource curse.¨
Thereasonsforlhis¡henomenon
aremulli¡le.Lx¡orlearningsfrom
A¡ril–}une2O12DevelopmentAsia41 vvv.develo¡menl.asia
“The stakes could not
be higher: get it right
and minerals could be
the catalyst for peace
and prosperity; get it
wrong and there’s a
massive risk they will
be lost to corruption,
or form a new axis
of instability and
conflict”
–Juman Kubba, a campaigner with
the organization Global Witness
andmineralresourcesdiscoveredin
lhecounlryinrecenlyears.According
lolheAsianDevelo¡menlßank’s
Asian Development Outlook 2011re¡orl,
inveslmenlinlhecounlry’sÒyuTolgoi
co¡¡erandgoldmineis¡ro|ecledlo
lolal more lhan $4 billion over lhe nexl
2years.Wilh¡roduclionex¡ecledlo
begin in 2O13 and reach full ca¡acily by
2O18,lheoverallinveslmenlisex¡ecled
lo reach $18.6 billion over lhe lifelime
oflhemine.
Inaddilion,¡re¡aralionsare
undervaylodevelo¡oneoflhelargesl
coalhelds in lhe vorld, Tavan Tolgoi.
Al full ca¡acily, lhe helds are ex¡ecled
lo¡roduce15millionlonsofcoaleach
year.ßolhsiles—ÒyuTolgoiandTavan
Tolgoi—arelocalednearlheborder
vilhlheIeo¡le’sRe¡ublicofChina,
anavidbuyerofmineralandenergy
resourcesvorldvide.
TheGovernmenlofMongolia
haslakenavarielyofmeasureslo
manage lhe inßux of mineral and
energyrevenue.Ònekeyfealureofils
¡rogramhasbeenlheeslablishmenl
oflheHumanDevelo¡menlIundin
November2OO9.Thefundisex¡ecled
louseminingrevenueslogivecash
handouls, ¡ay luilion fees, and hnance
olher social benehls. In Iebruary 2O1O,
eachMongoliancilizenreceivedlhe
equivalenl of aboul $5O, and in 2O11,
monlhly cash handouls of aboul $15
veregiven.
DISTRIBUTION OF WEALTH
Cashhandoulinilialives,suchaslhose
beingunderlakeninMongolia,areal
lhecenleroflheglobaldiscussionof
hov lo deal vilh lhe inßux of mining
revenues.
ßecauseresourcerevenuesare
volalile,governmenlsneedlosave
during¡eakearning¡eriodsinorder
lovealherlhelimesvhen¡ricesand
resources can arlihcially increase
lhevalueoflhecurrency,vhich
discouragesmanufacluringforex¡orl.
Volalile earnings based on ßuclualing
global¡ricescanalsocrealeunslable
hscal and debl managemenl silualions.
And, mosl im¡orlanlly, a large inßux
ofnaluralresourcerevenuescanhavea
¡overful,negaliveim¡aclonnalional
inslilulionsandgovernance.Inshorl,
hovdolhosein¡overovercomelhe
lem¡lalionlouselhesevaslrevenues
forlheirovnenrichmenl`
“Ònevaylolookallhisqueslion
islo¡uloneselfinlolheshoesoflhe
¡residenlor¡rimeminislerofacounlry
lhal has large energy resources,¨ noles
lhenLxeculiveDireclor}ohannes
I.LinnofWolfensohnCenlerfor
Develo¡menlinanarliclein2OO8
¡ublishedbyTheßrookingsInslilulion
inWashinglon,DC.“Ilisslrikinghov
manydecisionssheorhehaslolakein
regardlolhenalionalenergyveallh,
hovmanyo¡¡orlunilieslherearelo
makelhevrongdecisions,andhov
manylimessheorhe,andmanyolhers
inlhegovernmenlandinlheenergy
induslry,maybelem¡ledloengage
incorru¡lbehaviorinorderlogaina
shareoflheresourceveallhfor¡olilical
or ¡rivale benehl.¨

BACKBREAKING WORK A miner
emerges from a hand-dug excavation in
a remote corner of Cambodia known as
the Gold Forest.
CASH HANDOUTS
InMongolia’svindsve¡lca¡ilalof
Ulaanbaalar,high-endluxurysho¡s
andex¡ensives¡orlscarscannov
befound.Ilisnoluncommonlosee
bollles of $4OO Irench vine on lhe lable
alreslauranls.Thisisinacounlrylhal
in2OO9hada¡erca¡ilagrossdomeslic
¡roducl of around $1,5OO and lolal
gross domeslic ¡roducl of $4.2 billion.
Thisoverldis¡layofveallhcanbe
allribuledlargelylolhevaslenergy
I
H
Ò
T
Ò
N
Ò
N
S
T
Ò
I
42DevelopmentAsiaA¡ril–}une2O12 vvv.develo¡menl.asia
ARTICLE
A
I
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incomesfall.Thisissomelimesdone
lhroughlheeslablishmenlofnalural
resourcefunds.The¡roblemvilhlhese
fundsislhallheycanbealleredor
raidedby¡olilicalleaders,saysLaura
Ialer,a¡olilicalscienlislalColumbia
Universilyvhohassludiedlheissue.
“Direcllydislribulingrevenuelo
cilizenscouldby¡asslhis¡roblemby
lelling¡eo¡ledecidehovmuchlo
consume or save,¨ says Ialer. ¨Il is also
arguedlhal,ifcilizensknovlheyare
enlilledloashareoflheresourceveallh,
lheyvillhaveslrongerincenliveslo
be¡olilicallyengagedandlomonilor
governmenllo¡roleclrevenuefrom
being diverled lo ¡olilicians.¨
“Slillolhershavemadelheclaimlhal
naluralresourcesbelongloeveryone
and il is only righl lhal cilizens benehl
direclly from lheir exlraclion and sale,¨
sheadds.
Suchdireclcash¡aymenlsneed
lobemanagedcarefully,argueslhe
Luro¡eanßankforReconslruclion
andDevelo¡menlre¡orl,Managing
Mongolia’sResourceßoom.Direcl
cashhandoulscanbeadisincenlive
lovork,vhichhinderslheeconomic
diversihcalion needed lo overcome lhe
resourcecurse.
“Ifindividualsreceiveabasicincome
vilhoulhavinglovork,lhevageslhal
lheyvillneedlobe¡aidinorderlo
¡ersuadelhemlolakea|ob—including
inlhenon-resourceseclor—mayneed
lo be higher lhan if lhey do nol,¨ lhe
re¡orlnoles.“Thisvouldreducelhe
com¡elilivenessoflhenon-resource
seclor.¨
Avarialionoflhisdislribulion
syslemlhalmanyex¡erlslhinkshovs
¡romiseisa¡ro¡osalbeing¡romoled
bylheCenlerforGlobalDevelo¡menl,
inWashinglon,DC,lhalvouldallach
laxeslocashhandoul¡rograms.
“Having¡ullhismoneyinlhe
handsofilscilizens,lheslalevould
lrealillikenormalincomeandlaxil
accordingly—lhusforcinglheslalelo
collecllaxesandfueling¡ublicdemand
forlhegovernmenllobelrans¡arenl
andaccounlableinilsmanagemenl
ofnaluralresourcerevenuesandin
lhe delivery of ¡ublic services,¨ slales
adescri¡lionoflhe¡ro¡osalonlhe
cenler’svebsile.
AccordingloIaler,lhiscouldhel¡
buildlhegovernmenlinslilulionslhal
villberequiredlongaflerlheresources
runoul.
“Thenolionislhalvhilenalural
resourcevindfallscanundermine
develo¡menl,manybelievelhal
laxalionslrenglhensbolhaccounlabilily
and bureaucralic ca¡acily,¨ she says.
BENCHMARK An off-shore drill ship
in the Timor Sea. Oil-rich Timor-Leste
has joined the Extractive Industries
Transparency Initiative, which sets global
standards for oil, gas, and mining.
“Direcllydislribulingresourcerevenue
locilizensandlaxingilbackcould
emulale lhe benehls of a hscal syslem
lhalde¡endsnolonvindfallsbul
ralher on laxes.¨
“Sucha¡ro¡osalneverlhelessalso
requireslhal¡olilicianshavelhevill
and abilily lo make il vork,¨ she adds.
A¡ril–}une2O12DevelopmentAsia 43 vvv.develo¡menl.asia
BOOMTOWN Tourists shop for Genghis
Khan-branded vodka in a store in
Ulaanbaatar. High-end shops opened in
Mongolia’s capital in recent years after
vast energy and mineral resources were
discovered in the country.
“If citizens know
they are entitled to a
share of the resource
wealth, they will have
stronger incentives
to be politically
engaged and to
monitor government
to protect revenue
from being diverted
to politicians”
—Laura Paler, a political scientist
at Columbia University
NinaMerchanl,assislanldireclorfor
lheeconomicreformanddevelo¡menl
¡rogramofTheAsiaIoundalion,
agreeslhaloneoflhegrealesl
challengesloim¡lemenlinganeffeclive
cashdislribulionsyslemisoflenlhe
governmenland¡overbrokersina
counlry.
“Llilesinmoslcounlries,
¡arlicularlysmallandinslilulionally
veakcounlries,havelillleincenlive
lo even lry lhis,¨ says Merchanl.
“Direcldislribulionnolonlyde¡rives
lheslaleofilsresources,bulalso
de¡riveselilesoflheirsourceof
renls.Inmanyinslilulionallyveak
slales—¡arlicularlylhosevilhveak
democralicinslilulions,corru¡lion,
¡redaloryorveakleadershi¡—lhis
vill |usl nol ha¡¡en from lhe oulsel.¨
TRANSPARENCY
Ifcounlriescanovercomelheobslacles
associaledvilheslablishingasyslem
lhal ¡uls lhe benehls of nalural
resourcesinlolhehandsoflhe¡eo¡le
vhoneedilmosl,lhalisonlylhe
beginning,saysIaler.
“Wilhoulaccessloinformalion
onlheamounlofresourcerenls
lhalgovernmenlreceivesandhov
lhalmoneyisbeings¡enl,ilisvery
onaclualgovernmenls¡endingcan
have a signihcanl im¡acl on vhelher
¡eo¡lescrulinizegovernmenlandhold
¡oliliciansaccounlableinresource-rich
environmenls.¨
TheLxlracliveInduslries
Trans¡arencyInilialive,vhichselsa
globalslandardforlrans¡arencyin
oil,gas,andmining,isakey¡rogram
forhel¡ingdevelo¡ingcounlrieslo
managelheirnevfoundresource
veallh,saysIaler.
Inaddilion,MongoliainÒclober
2O1Obecameoneoflhefevcounlries
inlhevorldloachievefullcom¡liance
slalusvilhlheLxlracliveInduslries
Trans¡arencyInilialive.Òlhercounlries
inAsialhalhave|oinedlhisinilialive
andhavereachedfullcom¡liancevilh
ilsslandardsincludeAzerbai|anand
Timor-Lesle.TheIhili¡¡inesisalsoin
lheinilialslagesof|oining.
Donorsandinlernalional
develo¡menlorganizalionshaveakey
rolelo¡layinlhe¡rocess,saysIaler.
Theycanbelhecalalyslsforbuilding
socielalmechanismslomainlaina
|uslandlrans¡arenlsyslemofsharing
naluralresourceveallh.
“Whenilcomeslolrans¡arency,
lheremighlbegrealersco¡eforlhe
inlernalionaldonoranddevelo¡menl
communilylovorkdirecllyvilh
domesliccivilsocielyorganizalions
and lhe media lo ¡ul lhe ¡ressure on,¨
saysIaler.“Thiscouldcomefrom
inilialivesloslrenglhenlheca¡acilyof
lhemediaandcivilsocielyloadvocale
forbelleraccessloinformalion,lo
monilorgovernmenlrevenueand
s¡ending,andlodisseminalelhal
informalion lo lhe broader ¡ublic.¨
ßul,sheadds:“Ilisanu¡hillballle
againsloflen¡overfulandenlrenched
inleresls.¨ Q
difhcull for cilizens lo hold ¡olilicians
accounlable,¨ she says.
“Revenueisonlyonesideoflhe
coin:civilsociely,lhemedia,and
cilizensalsoneedaclearer¡iclureon
vherelhalmoneyisgoinginorder
lobe¡olilicallyengagedandhold
¡olilicians lo accounl,¨ Ialer adds.
“Myresearchshovslhalensuring
lhalcilizensgelbellerinformalion
A
I
I
vvv.develo¡menl.asia 44DevelopmentAsia A¡ril–}une2O12
ARTICLE
S
everalyearsago,IaulRomer,
aneconomics¡rofessoral
NevYorkUniversily,vas
slrugglingvilhaverybasic
queslion:vhyilislhalsomeareas
develo¡andreduce¡overly,vhile
olherslanguish`
Hisconclusion—embracedby¡rivale
seclors¡ecialislsindevelo¡menl
organizalionsvorldvide—islhal
lhekeyfaclorinsuccessful¡overly
reduclionisgoodgovernance,orashe
¡ulsil:¡eo¡lein¡oorcounlriesaround
lhevorldsufferfrom“badrules”lhal
hinderlheirdevelo¡menl.
“Insleadoffocusingon¡oornalions
andhovlochangelheirrules,ve
shouldfocuson¡oor¡eo¡leandhov
lheycanmovesomevherevilhbeller
rules,”hevrolein2OO9.“Ònevay
lodolhisisvilhdozens,¡erha¡s
hundreds,ofnev“charlercilies,”
A
I
I
vheredevelo¡edcounlriesframelhe
rulesandhundredsofmillionsof¡oor
familiescouldbecomeresidenls.
HongKong,China,alinyenclave
ofgoodgovernancelhalgrevfasler
lhanilsneighborsfordecades,isoflen
ciledasanexam¡leoflhecharlercily
conce¡l.
WhalexacllyisRomer’sconce¡l`
“Myideaislobuilddozens,¡erha¡s
hundreds,ofcilies,eachrunbyanev
¡arlnershi¡belveenarichcounlry
anda¡oorcounlry.The¡oorcounlry
vouldgiveu¡somelandforlhecily,
vhileadevelo¡edcounlrylikeßrilain
orCanadacouldconlribuleacredible
|udicialsyslemlhalanchorslherule
oflav,”hevroleinThe Sunday Times
in}anuary2O1O.
“Wilhclearlegal¡roleclions,¡rivale
inveslorsvillbuildlhebuildingsand
infraslruclure,includinglhe¡over
Replicating
Hong Kong, China
Charter cities—small enclaves of good governance in developing countries—are gaining
supporters, but some remain skeptical
ßYShu-Ching}eanChen
GOOD GOVERNANCE Hong Kong,
China, a tiny enclave of good governance
that grew faster than its neighbors for
decades, is often cited as an example of
the charter city concept.
¡lanlsandgrid.Accesslolheseaislhe
onlyrealnecessily—aslongasacharler
cilycanshi¡goodsbackandforlhon
conlainershi¡s,ilcanlhriveevenif
ilsneighborslurnhoslileorunslable.
Andanyadminislralivecoslscanbe
recou¡edfromas¡eciallaxonlhe
hugeriseinlandvalueslhalha¡¡ens
asalargevell-runcilydevelo¡s.”
Thesecilies,ideally,vouldbe
roughlylhesizeofHongKong,
ChinaandSinga¡ore,oraboul1,OOO
squarekilomelers—enoughlohouse
1Omillion¡eo¡leina¡o¡ulalion
densilyof1O,OOO¡ersquarekilomeler,
aboulhalflhedensilyofcenlralIaris.
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia45
Heslresseslhalhisconce¡lisvery
ßexible. The lhree key ¡arlici¡anls in
acharlercily—lhehoslcounlry,lhe
sourcecounlryoflhe¡eo¡le,andlhe
guaranlor—couldbe¡layedbylhehosl
governmenlinvariouscombinalions.
“ßecauselheserolescanbe¡layedby
asinglenalionorbyseveralcounlries
vorkinglogelheras¡arlners,lhere
aremany¡olenlialarrangemenls,”he
slalesonlheCharlerCiliesvebsile,
vhichheselu¡lo¡romolelheconce¡l.
Òneoflhevarialionsisloallov
agovernmenlloassumealllhree
rolesinundervrilingacharlercily,
simullaneously¡layinglhehosl,source
of¡eo¡le,andguaranlor,“muchas
|lheIeo¡le’sRe¡ublicofjChinadid
ineslablishinglhes¡ecialeconomic
zonevherelhenevcilyofShenzhen
emerged,”orevenIndia’srecenl
inilialivelocreale24nevcilieson
greenheld siles based on vhal Romer
describesas“innovalivegovernance
slrucluresand¡ublic–¡rivale
¡arlnershi¡.”
Romer’slem¡laleinvokesa
sanilizedversionofHongKong,China
slri¡¡edofilshisloricalandcolonial
com¡licalions. He idenlihes such
ciliesashavingfourbasicelemenls:a
vacanl¡ieceofland,largeenoughfor
an enlire cily, a charler lhal s¡ecihes in
advancelhebroadruleslhalvilla¡¡ly
lhere,acommilmenllochoice,backed
byvolunlaryenlryandfreeexilforall
residenls,andlheequala¡¡licalionof
allrulesloallresidenls.
Healsoseeksloembodyinlhecharler
cilieslheverybeslbusiness¡raclicesof
aglobaleconomy—fromrulesoflav
andlrans¡arency,loequalilyforall
residenls—ca¡¡inglhesevilhlrade-
friendly, efhcienl infraslruclure, all al no
cosllolhehoslcounlryaslongasland
canbesuccessfullyleasedoul,nolsold,
lo¡rivaleo¡eralors—exacllylikein
HongKong,China.
CONTROVERSIAL PROPOSAL
Thecharlerciliesconce¡lhasbeen
allackedforbeingneocolonial,asil
suggeslslhallhe¡oorhoslcounlry
shouldgiveu¡sovereignlyin
exchangeforlhedevelo¡edcounlry
governmenl’sassurancelhalilvould
aclasguaranlorloensurelhecily’s
charlervasres¡ecledandenforced.
Romerre|eclslhis.“Ilvaslheabsence
ofvolunlarychoicelhaldoomed
moslcolonialvenlures,”hesaid.“The
commilmenllovolunlarychoiceisvhal
dislinguisheslhisnev¡ro|ecl.”
Su¡¡orlersofRomer’sconlroversial
¡ro¡osal,suchasVoxiHeinrich
Amavilah,anad|uncl¡rofessorof
LconomicsalGlendaleCollege,
Arizona,seeilasaninnovalivemeans
ofhasleninglheeconomicgrovlhof
develo¡ingcounlries.Òlhersrecall
similarsuccessesinhislory,suchaslhe
12lhcenluryfoundingoflheGerman
cilyofLubeck,lheRe¡ublicofKorea’s
ullrahigh-lechIncheonsmarlcily,and
Turkey’slov-laxandmanufacluring-
focused“organizedinduslrialzones.”
Crilics,meanvhile,¡oinllolhe
danger of ßirling vilh lhe birlh of a
cilyvilhoulregardfor¡olilicaland
socialconsequences,andfrelaboullhe
“holloving-oul”effeclofsuchcilies
aslheysa¡lo¡-endhumanresources
andundermineagovernmenl’s
abililylolaunchnalional¡ro|eclsfor
develo¡menl.Òlhersvorryaboul
are¡ealoflheIeo¡le’sRe¡ublicof
China’shumilialioninlheearly2Olh
cenluryvhenmanybigcilies,lo¡
amonglhemShanghai,cededareaslo
foreign¡oversascharlerzones.
Chrisßlallman,anassislanl
¡rofessorof¡olilicalscienceand
economicsalYaleUniversily,varns
againsllhe¡olenlialcoslsinvolved.
“Alrial-and-error¡rocessvould,
vilhouldoubl,¡roducedozensof
successfulcharlerciliesaroundlhe
vorld.ßullheerrorandlrialcould
haveaveryheavyhumancosl.”
Alleasllvodevelo¡ingcounlries
signedonloalailoredversionoflhe
¡ro¡osal.
Madagascar,eagerlola¡foreign
inveslmenl,vasconlem¡lalinglhe
“Instead of focusing
on poor nations and
how to change their
rules, we should
focus on poor people
and how they can
move somewhere
with better rules.
One way to do this is
with dozens, perhaps
hundreds, of new
‘charter cities,’ where
developed countries
frame the rules and
hundreds of millions
of poor families could
become residents”
—Economist Paul Romer
SHOWCASE CITY Factory workers
assemble electronic components in
6KHQ]KHQDÀVKLQJYLOODJHWKDWKDVEHHQ
transformed into a showcase charter city. A
I
I
vvv.develo¡menl.asia 46DevelopmentAsia A¡ril–}une2O12
ARTICLE
offoreigninveslmenl,andram¡anl
smugglingofforeignim¡orlsinlolhe
IRC,fueledbylhezone’sloverlariff.
“Allhoughlhecenlralgovernmenl
hadlaiddovnlhedireclionforlhe
s¡ecialeconomiczone,ilvasso
vaguelhalShenzhendidnolhavea
clearideaofvhal|iljvasgoinglo
be,bullheyneededlodosomelhing.
Inilially,lherevasaninveslmenlboom
focusingonrealeslaleandsmuggling.
Theboomingoflhecilydrainedlhe
resourcesoulof|lheIeo¡le’sRe¡ublic
ofjChinaandlheyhadlochange
becauseilranagainsllhenalional
inleresl,”saysThomasM.H.Chan,
headoflheChinaßusinessCenlre,
HongKongIolylechnicUniversily,
vhocrilicizedShenzhen’sfailingsina
famousarliclelhal¡rom¡ledarelhink
byChinese¡olicymakers.
Shenzhenresurrecledilselfasa
lov-cosl,lov-laxinduslrial¡arkinlhe
mid-198Oslola¡foreigninveslmenl,
anchoredbynevlycrealed,slale-
linkedlocalcom¡aniessuchasHuavei
andZTL,andfueledbyarushof
relocalionbyHongKong,Chinaand
Tai¡ei,Chinacom¡aniesesca¡inghigh
¡ricesalhome.ThusbeganShenzhen’s
rollercoaslerridelhalconlinueslo
lhisday.Morelhananylhing,“lhe
A
I
I
¡ossibililyofbuildinglvocharler
ciliesin}anuary2OO9,lhough¡lans
verederailedbylheouslingoflhen-
IresidenlMarcRavalomananabylhe
mililary.
Hondurassucceededinamending
ilsconslilulioninDecember2O11lo
sel u¡ charler cilies afler a facl-hnding
lri¡loAsiaearlierlhesameyearby
Iresidenl Iorhrio Lobo. He visiled
Singa¡oreandIncheoninlheRe¡ublic
ofKorea.Thegovernmenlenlisled
Romer’shel¡asilfoundhisidealo
beinclosealignmenlvilhlheirovn
¡lansloselu¡freelradezones.Lfforls
loeslablishHondurancharlercilies
conlinue.
THE SHENZHEN EXAMPLE
IorlhoseacquainledvilhAsia’s
recenleconomichislory,charlercilies
mighlsoundfamiliar,es¡eciallyin
lheIeo¡le’sRe¡ublicofChina(IRC),
vheresuccessinsellingu¡s¡ecial
economiczoneshasim¡ressednolonly
Romer,bulalsoanendless¡aradeof
visilors¡ayinglribuleeachyear.
Shenzhenisashovcasecharler
cily louled by Romer. Ònce a hshing
villageof3O,OOO¡eo¡le,Shenzhenhas
grovnlobecomeavibranlmelro¡olis
ofcloselomorelhan13million,all
vilhin3decadesofbeing¡ulona¡alh
loeconomicliberalizalionasas¡ecial
economiczoneandlaboralorylobreak
lheshacklesofadecaying¡lanned
economyandlureforeigninveslmenl.
Shenzhenmayhavea¡¡earedlikelhe
¡oslerchildofnevcilies,bulils¡alh
logloryvasslrevnvilhhigh-slakes
¡olilics,¡overslruggles,lrialand
error,and¡lenlyoffailures.
Shenzhenvasoneoflhrees¡ecial
economiczoneslhalverecrealedal
lhesamelime,closeloma|orcilies,
andinlendedasaneconomicbuffer
zone lo ease lhe evenlual reunihcalion
vilhnearby,moreadvancedHong
Kong,China,Macau,China,and
Tai¡ei,China.Nolalloflhemvere
successful.
Ior lhe hrsl several years afler ils
crealionasas¡ecialeconomiczone
in1981onasileaboulone-lenlhof
ilscurrenlsize,Shenzhenacledas
aborderlradingarea,bulvasheld
backbyrealeslales¡eculalion,lack
REGIONAL HUB Puerto Cortes is
Honduras’s main sea port and Central
America’s biggest port. The country
wants to set up charter cities as part of
its plan to establish free trade zones.
DEVELOPMENT STRATEGY Workers sort
vanilla beans in Madagascar, the world’s
largest producer of natural vanilla. The
country considered building charter
cities to attract foreign investment.
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia47
biggesladvanlageofShenzhenisils
convenienllocalionallhe|unclion
of|lheIeo¡le’sRe¡ublicofjChina’s
domeslicandforeignmarkels,”says
Zhong}ian,a¡rofessoralShenzhen
Universily’sSchoolofLconomics
vhos¡ecializesinlhedevelo¡menlof
economiczones.
Chanlhinksil’snol¡ossibleforolher
develo¡ingcounlrieslodu¡licalelhe
Shenzhenex¡eriencebecauseoflhe
IRC’sdominanceinlhenevglobal
lradeorder.“Novadays,becauseof
lhe‘Chinafaclor,’lhere’snolmuch
roomforex¡ansionofolhercounlries
loex¡orl.Therulesoflhegamehave
changed,nol|uslbecauseof|lhe
Ieo¡le’sRe¡ublicofjChina’slov
¡rices,bulbecause|iljhasdevelo¡ed
a very efhcienl syslem, including
infraslruclure.Il’salmoslim¡ossiblefor
olhercounlrieslocom¡ele,”hesays.
STRUGGLING WITH THE
CHINESE APPROACH
India,forone,lriedloselu¡IRC-
slyledeconomiczonesandfailed.
ßackin2OO5,lhegovernmenl
¡assedlheS¡ecialLconomicZones
Aclloallraclforeigninveslmenl,
generaleex¡orlrevenues,andcreale
manufacluring|obs.The¡lanvenl
novhere, sabolaged by difhcullies
inacquiringlandloselu¡lhezones
amidoulcrylhallhe¡olicyvould
increasemanufacluringem¡loymenl
andinveslmenlallheex¡enseoflhe
livelihoodsofmillionsoffarmers,
vhoverelhelandovners.Therevere
alsosus¡icionsaboulgovernmenl
involvemenlinlandlransaclions
belveen¡rivalelandovnersand
¡rivaledevelo¡ers.
Lven lhe IRC ilself has had difhcully
crealinganolherzoneasbigand
successfulasShenzhen.Slill,lhere’s
nodoublasloilscalalyliceffecl
inslimulalingacocklailofvider
economicreformsacrosslhecounlry.
Amishmashofco¡ycalzoneshas
s¡rouledu¡sincelhemid-198Os,each
meelingilsovndesliny,including
89high-lech¡arks,13bondedzones,
16borderlradecoo¡eralivezones,65
ex¡orl¡rocessingzones,1Os¡ecial
logislics¡arks,13bonded¡orls,and18
com¡rehensive¡referenliallaxzones.
TheIRC’sslralegyhasbeenlodevelo¡
se¡arale¡ockelsofs¡ecialzonesand
connecllhesurvivingdolsloforma
slralegiclineandevenageogra¡hical
block,accordingloZhong.
ÒlherlhanlheIRCa¡¡roach,
vhalelsecandevelo¡ingcounlries
dolocrealecharler-cily-likezonesas
¡ro¡osedbyRomer`Chansuggesls
governmenlsmuslbe¡re¡ared
forlhehighcoslsassocialedvilh
infraslruclurebuilding,from¡orls,
highvays,andrailvays,loulililies.
Theyshouldalsocurlaillheirglobal
ambilionsandfocusonlhedomeslic
orregionalmarkel,andlakelhe
limelocullivalevariousinslilulions
overseeinglhecily.
“Youcannolguaranleelohave
lhemarkel.Youcannolguaranlee
everylhingvillgoaccordingloyour
vishes.Andlhereareinslilulionslhal
gobeyondlheconlrolofca¡ilal.All
lheseinslilulionsvillnolberecrealed
easily.In|HongKong,Chinajlhey
haveevolvedoveralonglime,”Chan
advises.
“Theinveslmenlvillbevery
ex¡ensive.Theideaofbuildinga
cilyinaremoleareaismorelikea
¡lanlalioneconomymodelinlheearly
slageofcolonialism,inAmericaand
SoulheaslAsia,usingslavelaborfor
olhermarkels.S¡ecialeconomiczones
usedchea¡laborvhichisnolonger
¡ossiblein|lheIeo¡le’sRe¡ublicofj
China.Wilhoul|HongKong,China’sj
infraslruclureandinduslrialrelocalion
from|HongKong,Chinaj,Shenzhen
vouldnolbeablelobuildu¡ils
ex¡orl-orienledinduslriessoeasily.
Il’snolsomuchaboullhemodel,
bulaboulhovlosolvelhe¡raclical
¡roblems,”Chanadds.
Maybealesscosllya¡¡roachislo
slarlvilhvhalÒxfamInlernalional‘s
DuncanGreencalls“charlervillages.”
“Thea¡¡roachhassomesuccess
likeinsomes¡ecialeconomiczones
in|lheIeo¡le’sRe¡ublicofjChina,”
saysGreen,headofresearchallhe
Uniled Kingdom ofhce of lhe aid and
develo¡menlcharily.“Youcrealea
lillleex¡erimenl,ifilvorks,lhenyou
scaleilu¡,ifildoesn’lvork,youdilch
il.Ifyoucomeu¡vilhonebigidea,
likecharlercilies,ilcouldlurninlo
acom¡leledisasler.Ifyoudosmall
ex¡erimenls,lhenyouvouldbemore
likevenlureca¡ilalisls.Ifoneoflhem
succeeds,ilvillhel¡¡aylhebills.
Youcanex¡erimenl,bulIlhinkyou
shouldhavesmallex¡erimenls,ralher
lhanbig¡lans.Smallisbellerlhan
big.Youhavelobeablelofailvilhoul
deslroyinglhesyslem.”
TheGovernmenloflheIRC
a¡¡arenllylhinksilis¡ossiblelocreale
offshoresalellilesofilss¡ecialzones
onaminialurescale.Ilhassle¡¡ed
oulsideilsborderslos¡readlhevord
andundervrilelheeslablishmenlof
s¡ecialeconomiczonesinvarious
AfricancounlriesandVielNam.
ßulolhersremainske¡lical.Ha-
|oonChang,adevelo¡menleconomics
¡rofessorallheUniversilyof
Cambridgeobserves,“Ilisonelhing
foracounlrylhalisalreadyvellrun
locrealeex¡erimenlal¡ockelsrun
byaforeignbody(allhougheven
lhalIdoubl),bulilisquileanolher
fora¡oorlyruncounlryloleaveillo
oulsiderslorunlhemoslim¡orlanl
¡laces.”Q
Hong Kong, China,
a tiny enclave of
good governance
that grew faster than
its neighbors for
decades, is often cited
as an example of the
charter city concept
PROFILES IN DEVELOPMENT
vvv.develo¡menl.asia 48DevelopmentAsiaA¡ril–}une2O12
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A
K
A Leg Up
A doctor in Thailand has spent decades innovating prosthetic
limbs specially designed for the poor
ßYKarenLmmons
T
herdchai}ivacaleisbesl
knovnforlhe¡roslheliclegs
he’smadeforlvoele¡hanl
landmineviclims,Molalaand
Mocha,vhoverein|uredvhilevorking
inMyanmar(lhoughlesssoforlhedog,
horse, and eagle he also has oulhlled).
Ieo¡leinMalaysiaknovhim
forbringinglhemavasllychea¡er
allernaliveleg.Andßurundi,Senegal,
andAcehinIndonesiaknovhimforlhe
vorksho¡sheandhislechnicianssel
u¡inlhosecounlrieslomakealighler
arlihcial leg vilhin a day lhal am¡ulees
vhoare¡oorcanaffordandusemore
easilyandcomforlablysolhal“lheir
livesarebeller,”sayslhesofl-s¡oken
71-year-oldorlho¡edics¡ecialisl.
}ivacalehasalsocrealedaleglhal
lelsfarmersmarchlhroughmud,run
lo lhe rice held, hike u¡ hillsides, go
barefoolinlheirhomesvilhoullosing
lheirbalance,and¡raybenlleggedina
ßuddhisllem¡le.
“Ivanlam¡uleeslovalknormaland
lohavealeglhallooksnormal,”hesays,
InhisnaliveThailand,lherearesome
3O,OOOlegam¡ulees,novduemoslly
lomolorcycleaccidenlsandinfeclions,
says}ivacale.War-affecledcounlries,
suchasSenegal,likelyhavemanylimes
lhalnumber.
}ivacalebecamevellknovnin
Thailandin1991aflerlheBangkok Post
headlinedhiscrealionoflhe“vorld’s
chea¡esl arlihcial legs¨÷al 7OO bahl
each (aboul $21 lhen)÷using melled-
dovnsodacanlabsandacelone-melled
Yakullfermenledmilkbollleshis
assislanlscollecledfromgarbagebins.
Aflera}a¡aneselelevisioncrev
¡ickedu¡lhesloryofhovlheir
counlry’sYakullbrandvasbeing
recycled,hebecameahilin}a¡anand
receiveddonalionslhalheusedlo
makelegsforlhe¡oor.
Theexisling¡roslhelicusedbymany
¡oor¡eo¡leinThailandcouldbeused
by farmers lo vork in vel helds, bul
}ivacale¡referredlheYakullbollle
becauseilvaschea¡erandeasierlo
mainlain.
TheIrincessMolher’s¡alronage
enabled}ivacalelocrealeamobileunil
and hnally ¡rovide legs for ¨lhe real
under¡rivileged¨÷am¡ulees living in
remoleareasandlhoselhalcouldn’l
affordlolravelfar.Wilhdonalions
andvolunleers,henovmakesaboul
hve lri¡s a year around Thailand,
s¡endingaveekinanarea.Hehas
sinceselu¡smallvorksho¡sineach
¡rovincesolhallegscanmoreeasilybe
re¡laced.
TheIroslhesesIoundalionhas
alsolrainedmosloflhe¡roslhelic
lechniciansvorkingin¡ublic
hos¡ilals,allhoughsomehos¡ilals
slilluselegmodelsmadeofim¡orled
malerials lhal cosl hve limes more.
Hismobileunilshavealsovorkedin
lheLaoIeo¡le’sDemocralicRe¡ublic,
Malaysia,andMyanmar.
Whenheex¡lainedlhismelhodlo
lheIrincessMolherofThailand,vho
readaboulhiminlhenevs¡a¡er,
andloldherlhalhemadelhelegs
oflenvilhhisovnfunds,sheoffered
locoverhisex¡enses.Sheandher
daughlerselu¡lheIroslheses
IoundalionofHRHTheIrincess
Molher,andeversince,anyam¡ulee
vhois¡oor,regardlessofnalionalily
orreligion,receivesalegforfreeeach
limeanevoneisneeded.Achild
villneedaboul25–3O¡roslheliclegs
inalifelime,vhileanadullam¡ulee
villneedu¡lo2Ore¡lacemenls,
}ivacalenoles.
AllheKingofThailand’ssuggeslion,
}ivacale slo¡¡ed using acelone÷vhich
lhe monarch lhoughl vas unheallhy÷
and re¡laced il vilh hrsl ¡olyesler resin,
andlhen¡oly¡ro¡ylene.
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia49
‘FARMER’S FOOT’
}ivacalesoondiscoveredlhalfarmers
lrealedlheleglikea¡airoffeslival
¡anlslheyusedonlyfors¡ecial
occasionsforfearlhalvorkingvilhil
vouldbreakil.“Ilvasloofancy,bulky,
andheavyforfarmersvearing|iljon
lhefarmorvadinginvaler,”herecalls.
So}ivacaleremovedlhefoam
cosmelicoulerlayer,slrenglhenedlhe
melalshank,andreducedlhefoolloa
clubsha¡e,crealingakindof“medium-
lech”¡egleg.Healsore¡lacedlhe
voodenkeelinsidelheconvenlional
solid ankle cushion heel (SACH) fool
vilhnylonanddesignedilinloa
C-sha¡e,vhichgiveslhefoolahuman-
likes¡ringlo¡ushlhelegforvardand
¡rovidebalance.
“The‘farmer’sfool’islheonlyone,
Icansay,inlhevorld,”}ivacalealmosl
vhis¡ers,asiflellingasecrel.The
samelechniqueand“C”sha¡eisalso
usedinlhecosmelicfool,vhichhel¡s
saveenergyvhenvalkingvilhan
arlihcial leg.
Mosl arlihcial feel are made for
vearinginsideshoes,andlhusare
unablelomainlainbalancevhen
unfellered.Iarmers,headds,aregiven
lvolegs,lhe1.2-kilogramfarmer’s
versionlovearforvorkandlhe
1.5-kilogramcosmelicone.
The farmer's leg, lhe hrsl versions
ofvhichvereheldonloalegslum¡
vilhalealherslra¡,vasslurdybulnol
easily hxed if damaged. They became
moreconvenienlandchea¡erafler
}ivacaleandhislechniciansremoved
lheslra¡.ßyexlendinglhebrimoflhe
sockelandlhe¡olyelhylenefoamliner
higheru¡onakneelocrealevhalhe
callslheSu¡raCondyleSus¡ension
model,a¡ersoncaninserllheirslum¡
alanangle,lvislilforvard,andslarl
valking,asalechniciandemonslrales
inlheIroslhesesIoundalion’s
vorksho¡.Òflhe56slaffmemberslhe
foundalionem¡loys,14arelechnicians
vilh¡roslheliclegsand8oflhemare
am¡ulees.
REDUCING COSTS
Throughconslanllinkeringand
relhinkingoflheirmodels,}ivacale
andhislechnicianshavemadeaseries
ofim¡rovemenlsandinvenlions.In
1995lheycrealedalegforabove-lhe-
kneeam¡ulalions.In2OO6lheymadea
¡olycenlricknee|oinlfromaluminum
lhalcanmakemulli¡lemovemenls,
includingbendinginalem¡le.Andin
2OO8 lhey modihed anolher American
lechniqueforquicklymakinglhemold
ofalegslum¡,vhichisnecessarylo
make lhe arlihcial leg.
Goneverelhedaysof¡lasler
andgy¡sum,re¡lacedbyabaglhal
resemblesacakedecoralingfabriclube
lhalusesvacuum-¡ackedlechnology
lomakeanegalivemoldvilhsandin
aboul15minules.Alegcanbemade
vilhinadayfromlhemold,saving
¡oor¡eo¡lelimeandgrealex¡ense.
Thesand,vhichgoesrockhardvhen
lheairissuckedoul,fallsa¡arloncelhe
airisrelurnedandcaneasilybereused.
Thenegalivemold,vhich¡erfeclly
resembleslheslum¡,hel¡screalelhe
lighl hl of lhe ¡roslhelic leg. }ivacale
believeslhesyslemvorksevenbeller
lhanlhemorehigh-lechcom¡uler-
generaledmodels.
Thisislhelechnology}ivacale
inslalledinlhevorksho¡sinThailand,
lheninßurundiin2O1O,afevmonlhs
agoinSenegal,andinAceh,vhere
avorksho¡inslalledin2OO9vas
u¡daled.}ivacalecanselu¡avorksho¡
foraround$3O,OOO–$5O,OOOandannual
coslscanrequireonlyaboul$15,OOO,he
eslimales.Hesu¡¡liesalcosl¡ricelhe
infraredovenforbakinglhe¡lasliclegs
andfoamliners,vacuummachines,and
ulensilslhalheandhislechnicianshave
designedand¡rovideslhemalerialsfor
lhelegs,vhicharemadeinachocolale-
brovncolorforAfrica,alsoalcosl.
AllhoughlheIroslhesesIoundalion
¡rovideslhehard-lo-re¡licale¡raclice
ofgivingfreelegsloevery¡oor
am¡ulee,lhecosmeliclegcoslsaboul
$16Olomake,vhilelhefarmer’slegcan
befabricaledforaboulhalflhe¡rice.
}ivacalerelired12yearsagofromlhe
¡roslhelicvorksho¡hecrealedallhe
norlhernChiangMaiUniversilyMedical
Cenlerduringhisresidencyvhenhe
vasonly27.Hemainlainshisdecades-
old¡rivale¡racliceandslilllecluresal
lheuniversilyaboulhis¡roslhelics,bul
muchofhislimeiss¡enlhel¡ings¡read
lheuseofhislechniques.“Myaimis
for every am¡ulee lo have an arlihcial
leg,”hesays.Hisnexldreamlocalions
forbuildingavorksho¡areßhulan,
Myanmar,andIa¡uaNevGuinea,
vhereheknovslheneedisimmense.Q
Of the 56 staff
members the
foundation employs,
14 are technicians with
prosthetic legs and 8 of
them are amputees
RISKY RIDE There are some 30,000
leg amputees in Thailand because of
motorcycle accidents and infections.
H
L
M
I
S
.
I
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RECONNAISANCE
vvv.develo¡menl.asia 5ODevelopmentAsiaA¡ril–}une2O12
H
L
M
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S

.
I
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I
nacoaslalIa¡uaNevGuinea
(ING)village,Tomaru,a
vidovervilhlvochildren,
lakes u¡ dynamile hshing lo
increasehiscalchesandmakemore
money lo fulhll his dream of ¡roviding
hischildrenvilhaneducalion.Then
hemeelsabeaulifulmarinebiologisl,
Òini,doingresearchoncoralreefs.
Theyfallinlove.ßulÒini¡romoles
suslainable hshing ¡raclices and is
aghaslvhenshelearnslhaloneof
lhe cul¡rils ¡raclising illegal hshing
isTomaru.AslheradiodramaNau
em Taim(“NovislheTime”)unfolds,
lhevidoverslruggles,veighinghis
loveforÒinivilhlhequesllohel¡his
childrenvilhfaslcashandlhefear
ofinlroducinghissonlodangerous
dynamile hshing. In lhe end, Tomaru÷
and lhe lisleners÷choose suslainable
hshing ¡raclices over deslroying lhe
reefs,aresourceforlhefulure.
LveryTuesdayandThursdayal
8:3O¡.m.sinceIebruary2O11almosl
3millionresidenlsacrossINGhave
lunedlheirradiosloIM1OOlofollov
lhelrials,lribulalions,andrevelalions
ofTomaruandolhersinlhelocal
Iidgindialecl¡rogram,Lnglish
s¡eakershearasimilarseries,Lchoes
ofChange.ßolhareclassicsoa¡
o¡erasvilhafullroslerof¡lollvisls
andcliff-hangerslhalhavelisleners
anxiouslyavailinglhenexle¡isode.
Soap Operas for
Social Change
Serial dramas broadcast on radio or television can be an effective way
of promoting social change at the grassroots level
ßYMargoIfeiff
¡residenlofCommunicalionsand
IrogramsforlheUniledSlales-based
Io¡ulalionMediaCenler,anon¡rofil
nongovernmenlorganizalionlhal
¡roducedNauLmTaimandolher
serialsin17counlrieslhroughoul
Africa,Asia,andLalinAmerica.
Usingenlerlainmenlloeducaleisas
oldas¡arablesandfables,bulilvasn’l
unlillhe197Oslhalsolidresearch
onlheirim¡aclvasmeasured.In
1977–1978,anearly¡ro-develo¡menl
soa¡o¡era,Acompaname(“Accom¡any
Me”)vasbroadcaslinMexicolo
¡romolefamily¡lanning.Thecrealor,
MiguelSabido,vasvice-¡residenl
forresearchalaMexicanlelevision
slalion.Heada¡ledlhe¡o¡ularLalin
Americantelenovela(“lelevisionnovel”)
formalofcrealingslrongemolional
bondsbelveencharaclersandvievers
TIME TO CHANGE In Papua New Guinea,
a radio drama promoting sustainable
ÀVKLQJSUDFWLFHVLVUHDFKLQJVRPH
PLOOLRQUHVLGHQWVDFURVVWKHFRXQWU\
ßullhe¡rogramsarenolsellingsoa¡.
Inslead,lheydeliverabroads¡eclrum
of¡osilivesocialchangelhrough
educalionalenlerlainmenl.
During2O8e¡isodesairingover
2years,eachseriesfealureslhree
se¡araleslorylinesofcharaclers
confronlingissuesfrom¡overly,
violence,family¡lanning,gender
inequalily,educalion,landovnershi¡,
andecologyloalcoholanddrug
addiclion,sexualbehavior,malaria,
and HIV1AIDS÷and ullimalely
makinglherighlchoices.“Nev
Guineaisexlremelymounlainousvilh
fevroads,ahighlevelof¡overly,
andlelevisionovnershi¡ofless
lhan1O/,yellhelvo¡rogramsare
reachinginlolhehomesofalmosl
halfofNevGuinea’s¡o¡ulalionof
6.7million,”saysKalieLlmore,vice-
vvv.develo¡menl.asia A¡ril–}une2O12DevelopmentAsia51
overalenglhy¡eriodoflimeduring
vhichadramalicandun¡rediclable
¡lollineencouragesvieverslo
conlinueluningin.ßy1986Sabido
had¡roducedsixsocialconlenlserial
dramas.Duringlhallimelhenumber
offamily¡lanningado¡lerssoared,
conlrace¡livesalesskyrockeledand
lhecounlryex¡erienceda34/decline
in¡o¡ulaliongrovlh.Asaresull,
Mexicovasavardedlhe1986Uniled
NalionsIo¡ulalionIrizeaslhevorld’s
foremosl¡o¡ulalionsuccessslory.
Sabidohadcrealedasle¡-by-sle¡
melhodologyof“enlerlainmenl
vilh¡rovensocialbenefil”loreach
andchangelhebehavioroflarge
numbersof¡eo¡le.Thevidelyused
lem¡lalecrealesclassicslorylineslike
boy-meels-girlandrags-lo-riches,
carefullyformulaledlodeliver7O/
enlerlainmenlvilh3O/educalional
messagesvoveninlolhescri¡l.
Mulli¡leslorylinessuchasurban,
semi-urban,andruralscenariosunfold
allhesamelimeloengageavider
audience. ßul lhe key is change÷
characlersmighlbeginvilhnegalive
values,bulinleraclionsvilholhers
and¡lollvislscom¡ellhemlorealize
lhevalueof¡osilivesocialbehavior.
Il’shardlysur¡risinglhalcarefully
crafledandfocused¡rogramscan
insligalechange:sim¡lyinlroducing
lelevisioninloruralIndiaex¡osed
vomenloaglim¡seofurbanlife
vhere vomen÷generally vell-
educaled vilh fev children÷vork
oulsidelhehome,runbusinesses,and
conlrollheirmoney.Theconsequenl
dro¡inferlililyofruralIndianvomen
ex¡osedloTVvasequivalenllo
increasinglhelenglhoflimegirlsslay
inschoolby5years!
To¡roducelheserials,lhe
Io¡ulalionMediaCenlerlrainslocal
vrilersnolonlylocrealelhelong
formaldramas,bulalsolodirecl
and¡roducelhem.Thal’snol|usllo
¡rovide|obsandskillslocarryon
vilhaddilionalseries,bulalsobecause
localsbeslunderslandlhesublle
nuancesoflheircullure,lheissues,
laboos,andchangesneeded.
lhe¡o¡ularcullureinHindi-s¡eaking
norlhernIndia.ßeforelhedramavas
aired,lhousandsoflellersveremailed
lofulurelislenersinvilinglhemlo
sendinlheircommenlsandqueries.
Theradioslalionreceived15O,OOO
lellersandansveredlhemduring
radiodiscussion¡rograms.Among
lhemvasalvo-by-lhree-fool“leller”
signed÷oflen vilh lhumb¡rinls÷by
184residenlsofLulsaanVillagein
UllarIradesh.Ilslaled:“Lislening
loTinkaTinkaSukhhasbenefiled
alllislenersofourvillage,es¡ecially
lhevomen....”Theyformedavillage
grou¡,endeddovry-giving,and
slarledaschool.
Morelhan2OOheallhinlervenlion
educalionalenlerlainmenl¡rograms
havebeenusedsincelhe198Osin
5OAfrican,Asian,andLalinAmerican
counlries,¡rimarilyforre¡roduclive
heallhissues,suchasHIV1AIDS
avareness,family¡lanning,leenage
¡regnancy,environmenlalheallh,and
genderequalily.Soa¡sarenolonly
effeclive,lheyarealsochea¡,cosling
aslillleas$.O3¡erruralAsianlislener.
Wilhhigherislandcoslsinremole
ING,lhe¡ricelagforanaverage
e¡isode of Nau em Taim is $6,75O÷bul
eachlislenercanslillbereachedforlhe
2-yearduralionoflheseriesforless
lhan$1.The¡ro|eclisadminislered
bylheIMCandfundedbylheUniled
Nalions,lheDavidandLucileIackard
STAY TUNED United States-based
Population Media Center uses
HQWHUWDLQPHQWVXFKDVVHULDOUDGLR
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Introducing
television into
rural India exposed
women to a glimpse
of urban life where
women—generally
well-educated with
few children—work
outside the home,
run businesses, and
control their money
Theycanalsoregionallylailor
conlenl:forahighly¡o¡ular2O-minule
educalionalradiodramabroadcasl
lviceveeklyforayearinIndiain
1996–1997calledTinka Tinka Sukh
(“Ha¡¡inessLiesinSmallThings”),a
ßollyvoodsingervascommissioned
locom¡osecalchylunesforlhishighly
musicalseriesdesignedloa¡¡eallo
RECONNAISANCE
www.development.asia 52 Development Asia April–June 2012
P
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C
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Foundation, Population Services
International (with a grant from Asian
Development Bank), AusAID, the
Flora L. Thornton Foundation, and
Colgate-Palmolive.
“One powerful aspect of dramas
is that listeners relate to the radio
characters and they discuss and
gossip about the complex situations
in which they find themselves,” says
Katie Elmore, “and that provides a
comfortable environment for them to
tackle issues and personal experiences
they might normally not talk about
with others.” That was the case in the
devoutly Catholic Philippines where
the 120-episode Sa Pagsikat Ng Araw
(“The Hope After the Dawn”) radio
serial drama addressed delicate
subjects like family planning, HIV/
AIDS prevention, and spousal abuse
in 2005.
Viet Nam has taken strongly to
educational entertainment radio
dramas. At the invitation of the United
Nations Population Fund in Viet
Nam, a 104-episode radio drama, Khat
Vong Song (“The Desire of Life”), was
created to address issues relating to
reproductive health and HIV/AIDS,
including improving the status of
women, delaying the age of marriage,
and valuing male and female children
equally. It debuted in March 2008 in
all 64 provinces on Voice of Vietnam
Radio and is streamed online. An
interactive website allows listeners
to find more information about the
program’s issues, post their comments,
and download episodes.
While most radio series focus
on age-old concerns, they are also
being used to address new issues.
In July 2011 Voice of Vietnam began
broadcasting a second serial, Hanh
Trinh Zanh (“Green Journey”), focusing
on climate change and environmental
practices in four regions of the country
from river deltas to mountains. While
the varied characters of Hanh Trinh
Zanh are tested through dramas of
love, friendship, and family ties,
they struggle with accepting new
sustainable farming methods and
drought resistant crops, are deterred
from illegal tree cutting, and learn how
to survive in an economy increasingly
dependent on natural resources.
Radio may be low-tech and old-
fashioned technology, but it is proving
to be an ideal information delivery
method for social change, even in
a hyper-wired world. “Reaching so
many people in remote areas at such a
low cost,” says Katie Elmore, “would
otherwise be impossible.” Q
www.development.asia April–June 2012 Development Asia 53
ON THE RECORD
“In our quest for growth
and development I
think we have lost
the balance between
development on one
side and environment
on the other ... If we
have the political will,
can Asia embrace
sustainability? I say yes.
$P,FRQÀGHQWWKDW$VLD
would do so? I confess
that I do not know.”
Tommy Koh, ambassador-at-large
of Singapore, speaking at the Asian
Development Bank’s Eminent Persons’
Forum in February 2012
“There’s this theory that you
have to pick one: economics or
environmental performance.
That’s nonsense. Innovation is
the way you can have both.”
Mark Vachon, vice-president of GE’s Ecomagination program, in a video interview at the
biennial Investor Summit on Climate Risk at the United Nations in January 2012
“The fact that policies often fail for no good reason is annoying, but
less depressing than the view that it is a big conspiracy against the
poor. Name your favorite enemy—capitalism, corruption... Our view
is easier. You think hard about the problems and you can solve them.”
Esther Duflo, Abdul Latif Jameel Professor of Poverty Alleviation and Development
Economics at the Massachusetts Institute of Technology and coauthor of the book Poor
Economics with Abhijit Banerjee, in an interview with the Financial Times in March 2012
“At present, Europe’s debt
problem poses the biggest risk
for the global economy, including
Japan’s. If the situation worsens
further, it may trigger a global
credit crunch”
Bank of Japan Governor Masaaki Shirakawa
at a news conference in January 2012
A
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S
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A
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P
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S

H
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D
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(
P
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O
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T
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K
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)
“Removing barriers
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women and making
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small weapon in this
battle.”
World Bank Managing Director Sri Mulyani
IndrawatiVUÄNO[PUNNLUKLYPULX\HSP[`
Good Governance. Strong partnerships. Investment in infrastructure, education, and
the basic necessities of life. Tese are the keys to solving the poverty puzzle and giving
billions of Asia’s children hope for a brighter future.
From 2–5 May, delegates from 67 member countries will gather in Manila, Philippines
for ADB’s 45th Annual Meeting to discuss development in Asia and the Pacifc.
Find out more at www.adb.org
Solving the poverty puzzle
www.adb.org

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