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Infrastructure Fuels Growth in BRIC Countries BY JASON NOVEMBER 4, 2012POSTED IN: AID & DEVELOPMENT, BRAZIL, BUSINESS, CHINA,

, COUNTRIES, INDIA, SUSTAINABILITY While infrastructure isnt exactly the sexiest topic in international development, its hard to argue with its importance. Indias massive power blackout in July, the largest in world history, is a stark reminder of infrastructures critical role in economic development. The quality of infrastructure in China and India says much about why Indias manufacturing sector has lagged behind while China transformed itself into the worlds factory. Brazil has experienced five lesser known power failures of its own since September, including one that knocked out power to 11 states. The transportation of raw materials and finished goods in Brazil is stifled by the poor quality of ports, railways and roads, a mere 14 percent of which are paved. The 2012 annual report of the International Finance Corporation (IFC), a member of the World Bank Group, estimates that developing countries will require $1.1 trillion in infrastructure investment annually. A survey of business leaders identified Indias underdeveloped infrastructure as the nations top priority. Roads, ports, railways, electricity and information communications technology are all vital enablers of economic growth and better living standards in emerging markets and developing countries around the world. BRIC countries like India, Brazil and China have all announced significant commitments to infrastructure development. The success of these efforts will depend on their capacity to follow through on these commitments and a number of critical project design and implementation issues, including cross-sector cooperation in the form of public-private partnerships.

Indias Energy Infrastructure and Power Blackouts Indias electrical blackout on July 31 affected about 670 million people or just under 10 percent of the entire world population. The outage stretched some 2,000 miles from Indias eastern border with Pakistan to its western border with Myanmar according to theNew York Times. The nation-wide outage was far from an isolated incident. The quality of Indias electricity supply ranks 110 out of 144 countries, putting it behind Mali and just ahead of Ethiopia in the World Economic Forums Global Competitiveness Report 2012-2013. Lack of reliable power has greatly hindered Indias ability to develop a manufacturing sector that could compete with China. In India, Brazil and other developing countries, infrastructure issues have deterred muchneeded foreign direct investment (FDI) and undercut rates of economic growth and development.

Indians are known for their jugaad, or resourceful ingenuity in the face of constraints. When it comes to electricity, Indians have become so used to compensating for inadequate infrastructure that their extensive, everyday reliance on generators and other makeshift solutions helped to cushion the immediate blow from the July blackout. On the other hand, this admirable capacity for self-reliance could actually get in the way of addressing the widespread corruption that exacerbates Indias infrastructure challenges. One group of Indians that wasnt affected by the blackout was the 300 million or so people who do not even have access to the electric grid when it is working. Around the world, some 1.6 million people are energy poor without access to electricity. The world map below shows recent (2009) and projected (2030) populations that live in energy poverty based on data from the International Energy Agency (IEA) as presented by the World Business Council for Sustainable Development (WBCSD).

Education to Sanitation As the example of energy poverty illustrates, infrastructure affects everything from access to education and health services to sanitation. In Bihar, India, a program that gives a bike to girls who otherwise wouldnt have a means of getting to school has led to much higher enrollment rates and even improved girls status in their families. In developing countries, lack of access to safe water and modern toilets still cause millions of preventable fatalities every year. Jairem Ramesh, Minister of Rural Development, was quoted in the Financial Times describing Indias sanitation challenge as humongous and blamed poor hygiene and diarrhea for annual losses of some 400,000-500,000 children under age five. Quality of Infrastructure in the BRIC Countries Brazils overall quality of infrastructure, at 107 out of 144 countries, ranks well below those of fellow BRIC countries, India at 87 and China at 69, and nearly on par with that of Russia at 101 based on the World Economic Forums assessment. Overall results can mask large variations in

the quality of different types of infrastructure. While Brazil fares relatively well on the quality of electricity supply despite the spate of recent outages, manufacturers complain about Brazil having the worlds fourth highest utility rates. The chart below presents the infrastructure quality rankings for the BRIC countries and a selection of OECD countries for comparison purposes. (Click on the chart below to view the full-size image in a separate window or browser tab.)

Infrastructure Development in Brazil, India and China Brazils government plans to spend some 163 billion reais ($80 billion) or 1% of GDP, on infrastructure as part of its growth acceleration from 2011-2014 according to theEconomist. On the other hand, a 2010 report by Morgan Stanley calculated that Brazil would require infrastructure investment of 6 to 8 percent of GDP annually to catch up withSouth Korea in 20 years and 4 percent to pull even with its smaller Latin American neighbor Chile. China and India both have five-year plans that call for aggressive infrastructure investment. Chinas 12th Five Year Plan (2011-2015) continues to emphasize massive infrastructure development and exports, along with clean energy, as a recipe for economic growth, which together are forecasted to create 45 million new jobs. Among other infrastructure investments, the plan includes:

RMB 5.3 trillion ($840 billion) in energy by 2015 and a total of 11.1 trillion ($1.76 trillion) in the power industry over the next 10 years; RMB 700 billion ($112 billion) annually in rail projects to expand high speed rail and connect every city with a population of at least 600,000 people; Extending Chinas highway network to 83,000 kilometers; and

Building a new airport in Beijing and increasing Chinas total number of airports from 175 to 220.

To further spur development and help stave off an economic downturn, China unveiled the approval of 60 additional infrastructure projects worth more than $150 billion at Septembers annual convening of the Asia Pacific Economic Cooperation (APEC) Summit in Vladivostok, Russia. Indias ambitious 12th Five Year Plan (2012-2017) calls for $1 trillion in infrastructure investment, with the goal of funding half of that hefty sum through private sector involvement in public-private partnerships (PPPs). As in other BRIC countries, the scope of Indias infrastructure challenges correspond to the countrys expansive geography and ample development needs. At 3.14 million kilometers, India has the second largest road system in the world behind the U.S. In 2009, India needed to build 20 kilometers of road per day at a cost of $70 billion over three years to ensure future economic growth. Described as a lifeline to the nation, India Railways operates the worlds second longest railroad network and is the nations largest employer. Among other measures, Indias infrastructure development plans call for:

$42 billion in road-related infrastructure, including doubling the size of the countrys 70,000 kilometer highway network; $67 billion in rail-related infrastructure to expand routes to ports and the countrys vast interior and improve shipping capabilities, among other objectives; and Upgrading infrastructure in Delhi and other cities to support the nations rapid urbanization.

BRICs Development Bank To help pursue these infrastructure goals, the BRIC countries, including South Africa, first discussed creating their own South-South development bank at the fourth BRICS summit in New Delhi in March, 2012. The idea seemed to be gaining momentum as the countries moved from considering if to how such a bank would be formed and function at a meeting in Chongqing, China in late September. A BRICS development bank would be the first major multilateral lender to emerge since the European Bank for Reconstruction and Development in 1991 according to theFinancial Times. Supporters of the concept include prominent economists like Joseph Stiglitz and Nicholas Stern who have argued that the bank could help address important global challenges, such as the adoption of green technologies to ward off climate change.

Despite the concepts potential, a host of prickly issues have yet to be worked out before there is any real indication of whether a BRICS development bank will become an economic or political force in international development. Infrastructure Investment: Private Sector Role Government institutions and international organizations like development banks play key roles in mitigating risks and overcoming market failures that often stand in the way of badly needed investments. Private sector participation is usually critical for supplying the funding, technical expertise and implementation capabilities that are necessary for undertaking complex infrastructure development projects. Government entities, often at the state or city level, typically act as project sponsors and bid out contracts to private companies. The capacity and conduct of government sponsors can have a major impact on the initiation and delivery of infrastructure development projects. Governments need to be able to efficiently and competently identify and execute deals with private partners and manage projects over the course of their lifecycles. Ajit Gulabchand, chairman and managing director of Hindustan Construction Company, credits public-private partnerships with greatly accelerating the pace of road construction in India. Overcoming Obstacles in Infrastructure Development Government Regulations Part of governments role involves working with the private sector to remove cumbersome, timeconsuming regulations that impede infrastructure development. Excessively long waits for acquiring business permits and property rights and environmental laws that have little to do with real conservation are just a few examples of the potentially endless list of regulatory blockades. The Economist sites a case in Brazil where an investor had to wait months for 21 different government entities to sign off on granting control of a port terminal. Governments responsibility for administering land acquisitions and environmental clearances should be designed into project plans from the outset according to a report by the Asian Development Bank (ADB) and Indias Department of Economic Affairs (DEA). Private sector partners want assurances that these issues will not delay or block prospective projects. Project design and planning must also responsibly provide for the needs of any local communities and people who are impacted by land transfers. This is particularly true in countries and regions where poor people lack land and property rights and are especially vulnerable. To prevent this scenario and protect individuals rights, project feasibility and design studies should be sure to carefully assess the needs of local communities and make sure they are represented in decision-making processes. Corruption

Infrastructure development can be disconcertingly vulnerable to corruption, particularly in countries with fewer legal protections and less accountable governments. Where the rule of law and transparency are weak, infrastructure deals often take place behind closed doors through uncompetitive processes. Over-priced contracts are awarded to sub-par contractors who manage to sidestep project budgets and timelines. In the absence of well-designed public-private partnerships, time and cost overruns have tended to be the norm in Indias roads projects according to research cited by Charles Kenny in a World Bank working paper, Publishing Construction Contracts and Outcome Details. In fact, more than half of all roads projects took more than 50 percent longer to complete than expected, as shown in the chart below. (Click on the image to view the full-size chart in a separate browser tab or window.)

Kenny goes on to explain how corruption often leads to shoddy implementation and quality concerns. Cutting corners on substandard materials and building procedures can limit a roads capacity and reduce its useful life by half, upend the return on infrastructure investments, and even put lives at risk by leaving poorly constructed buildings and bridges vulnerable to earthquakes and other natural disasters. In his World Bank research and a more recent paper for the Center for Global Development with Jonathan Karver, Kenny argues that proactively publishing government contracts could be an effective, straightforward approach to countering corruption. A requirement to publicly disclose contract details could improve government decision-making and competition while reducing contract costs and corruption. Sustainability Sustainability is a critical criterion for infrastructure investments. China is the worlds largest emitter of climate-altering greenhouse gases. Water stress and scarcity are serious concerns for developing and developed countries around the world. India will experience a water shortfall of 50 percent by 2030 according to projections by the Water Resources Group, a project sponsored by the International Finance Corporation. Rising affluence and rapid urbanization in the BRIC countries and other emerging markets put an increasing burden on natural resources.

Fortunately, China, Brazil and India are all taking measures to promote sustainable development, though more needs to be done. Chinas 12th Five Year Plan promotes clean energy both as a strategic industry and as a means of limiting carbon emissions and air pollution that chokes many of Chinas cities. By 2020, China aims to cut the carbon intensity of its economic output by 40 percent. Each country is pursuing a mix of clean energy solutions that includes some combination of solar, hydroelectric and nuclear power. More importantly though, infrastructure projects in all countries need to be evaluated and made to adhere to feasibility and performance criteria that strike a sustainable balance between economic growth, protection of the natural environment and the well-being of the people and communities who come before them. Closing Thoughts Infrastructure investments hold the great promise of accelerating economic development, expanding opportunities and improving lives. Private sector companies would do well to follow the lead of social entrepreneurs who look to these infrastructure challenges as opportunities rather than obstacles. Both governments and companies should recognize their social obligation to look out for the welfare of local communities and environments while pursuing broader development goals. While easier said than done, citizens should strive to hold their public leaders responsible for making the long-term investments that are vital to promoting inclusive development and better living standards.

Infrastructure Fuels Growth in BRIC Countries BY JASON NOVEMBER 4, 2012POSTED IN: AID & DEVELOPMENT, BRAZIL, BUSINESS, CHINA, COUNTRIES, INDIA, SUSTAINABILITY While infrastructure isnt exactly the sexiest topic in international development, its hard to argue with its importance. Indias massive power blackout in July, the largest in world history, is a stark reminder of infrastructures critical role in economic development. The quality of infrastructure in China and India says much about why Indias manufacturing sector has lagged behind while China transformed itself into the worlds factory. Brazil has experienced five lesser known power failures of its own since September, including one that knocked out power to 11 states. The transportation of raw materials and finished goods in Brazil is stifled by the poor quality of ports, railways and roads, a mere 14 percent of which are paved. The 2012 annual report of the International Finance Corporation (IFC), a member of the World Bank Group, estimates that developing countries will require $1.1 trillion in infrastructure investment annually. A survey of business leaders identified Indias underdeveloped infrastructure as the nations top priority. Roads, ports, railways, electricity and information communications technology are all vital enablers of economic growth and better living standards in emerging markets and developing countries around the world. BRIC countries like India, Brazil and China have all announced significant commitments to infrastructure development. The success of these efforts will depend on their capacity to follow through on these commitments and a number of critical project design and implementation issues, including cross-sector cooperation in the form of public-private partnerships.

Indias Energy Infrastructure and Power Blackouts Indias electrical blackout on July 31 affected about 670 million people or just under 10 percent of the entire world population. The outage stretched some 2,000 miles from Indias eastern border with Pakistan to its western border with Myanmar according to theNew York Times. The nation-wide outage was far from an isolated incident. The quality of Indias electricity supply ranks 110 out of 144 countries, putting it behind Mali and just ahead of Ethiopia in the World Economic Forums Global Competitiveness Report 2012-2013. Lack of reliable power has greatly hindered Indias ability to develop a manufacturing sector that could compete with China. In India, Brazil and other developing countries, infrastructure issues have deterred muchneeded foreign direct investment (FDI) and undercut rates of economic growth and development.

Indians are known for their jugaad, or resourceful ingenuity in the face of constraints. When it comes to electricity, Indians have become so used to compensating for inadequate infrastructure that their extensive, everyday reliance on generators and other makeshift solutions helped to cushion the immediate blow from the July blackout. On the other hand, this admirable capacity for self-reliance could actually get in the way of addressing the widespread corruption that exacerbates Indias infrastructure challenges. One group of Indians that wasnt affected by the blackout was the 300 million or so people who do not even have access to the electric grid when it is working. Around the world, some 1.6 million people are energy poor without access to electricity. The world map below shows recent (2009) and projected (2030) populations that live in energy poverty based on data from the International Energy Agency (IEA) as presented by the World Business Council for Sustainable Development (WBCSD).

Education to Sanitation As the example of energy poverty illustrates, infrastructure affects everything from access to education and health services to sanitation. In Bihar, India, a program that gives a bike to girls who otherwise wouldnt have a means of getting to school has led to much higher enrollment rates and even improved girls status in their families. In developing countries, lack of access to safe water and modern toilets still cause millions of preventable fatalities every year. Jairem Ramesh, Minister of Rural Development, was quoted in the Financial Times describing Indias sanitation challenge as humongous and blamed poor hygiene and diarrhea for annual losses of some 400,000-500,000 children under age five. Quality of Infrastructure in the BRIC Countries Brazils overall quality of infrastructure, at 107 out of 144 countries, ranks well below those of fellow BRIC countries, India at 87 and China at 69, and nearly on par with that of Russia at 101 based on the World Economic Forums assessment. Overall results can mask large variations in

the quality of different types of infrastructure. While Brazil fares relatively well on the quality of electricity supply despite the spate of recent outages, manufacturers complain about Brazil having the worlds fourth highest utility rates. The chart below presents the infrastructure quality rankings for the BRIC countries and a selection of OECD countries for comparison purposes. (Click on the chart below to view the full-size image in a separate window or browser tab.)

Infrastructure Development in Brazil, India and China Brazils government plans to spend some 163 billion reais ($80 billion) or 1% of GDP, on infrastructure as part of its growth acceleration from 2011-2014 according to theEconomist. On the other hand, a 2010 report by Morgan Stanley calculated that Brazil would require infrastructure investment of 6 to 8 percent of GDP annually to catch up withSouth Korea in 20 years and 4 percent to pull even with its smaller Latin American neighbor Chile. China and India both have five-year plans that call for aggressive infrastructure investment. Chinas 12th Five Year Plan (2011-2015) continues to emphasize massive infrastructure development and exports, along with clean energy, as a recipe for economic growth, which together are forecasted to create 45 million new jobs. Among other infrastructure investments, the plan includes:

RMB 5.3 trillion ($840 billion) in energy by 2015 and a total of 11.1 trillion ($1.76 trillion) in the power industry over the next 10 years; RMB 700 billion ($112 billion) annually in rail projects to expand high speed rail and connect every city with a population of at least 600,000 people; Extending Chinas highway network to 83,000 kilometers; and

Building a new airport in Beijing and increasing Chinas total number of airports from 175 to 220.

To further spur development and help stave off an economic downturn, China unveiled the approval of 60 additional infrastructure projects worth more than $150 billion at Septembers annual convening of the Asia Pacific Economic Cooperation (APEC) Summit in Vladivostok, Russia. Indias ambitious 12th Five Year Plan (2012-2017) calls for $1 trillion in infrastructure investment, with the goal of funding half of that hefty sum through private sector involvement in public-private partnerships (PPPs). As in other BRIC countries, the scope of Indias infrastructure challenges correspond to the countrys expansive geography and ample development needs. At 3.14 million kilometers, India has the second largest road system in the world behind the U.S. In 2009, India needed to build 20 kilometers of road per day at a cost of $70 billion over three years to ensure future economic growth. Described as a lifeline to the nation, India Railways operates the worlds second longest railroad network and is the nations largest employer. Among other measures, Indias infrastructure development plans call for:

$42 billion in road-related infrastructure, including doubling the size of the countrys 70,000 kilometer highway network; $67 billion in rail-related infrastructure to expand routes to ports and the countrys vast interior and improve shipping capabilities, among other objectives; and Upgrading infrastructure in Delhi and other cities to support the nations rapid urbanization.

BRICs Development Bank To help pursue these infrastructure goals, the BRIC countries, including South Africa, first discussed creating their own South-South development bank at the fourth BRICS summit in New Delhi in March, 2012. The idea seemed to be gaining momentum as the countries moved from considering if to how such a bank would be formed and function at a meeting in Chongqing, China in late September. A BRICS development bank would be the first major multilateral lender to emerge since the European Bank for Reconstruction and Development in 1991 according to theFinancial Times. Supporters of the concept include prominent economists like Joseph Stiglitz and Nicholas Stern who have argued that the bank could help address important global challenges, such as the adoption of green technologies to ward off climate change.

Despite the concepts potential, a host of prickly issues have yet to be worked out before there is any real indication of whether a BRICS development bank will become an economic or political force in international development. Infrastructure Investment: Private Sector Role Government institutions and international organizations like development banks play key roles in mitigating risks and overcoming market failures that often stand in the way of badly needed investments. Private sector participation is usually critical for supplying the funding, technical expertise and implementation capabilities that are necessary for undertaking complex infrastructure development projects. Government entities, often at the state or city level, typically act as project sponsors and bid out contracts to private companies. The capacity and conduct of government sponsors can have a major impact on the initiation and delivery of infrastructure development projects. Governments need to be able to efficiently and competently identify and execute deals with private partners and manage projects over the course of their lifecycles. Ajit Gulabchand, chairman and managing director of Hindustan Construction Company, credits public-private partnerships with greatly accelerating the pace of road construction in India. Overcoming Obstacles in Infrastructure Development Government Regulations Part of governments role involves working with the private sector to remove cumbersome, timeconsuming regulations that impede infrastructure development. Excessively long waits for acquiring business permits and property rights and environmental laws that have little to do with real conservation are just a few examples of the potentially endless list of regulatory blockades. The Economist sites a case in Brazil where an investor had to wait months for 21 different government entities to sign off on granting control of a port terminal. Governments responsibility for administering land acquisitions and environmental clearances should be designed into project plans from the outset according to a report by the Asian Development Bank (ADB) and Indias Department of Economic Affairs (DEA). Private sector partners want assurances that these issues will not delay or block prospective projects. Project design and planning must also responsibly provide for the needs of any local communities and people who are impacted by land transfers. This is particularly true in countries and regions where poor people lack land and property rights and are especially vulnerable. To prevent this scenario and protect individuals rights, project feasibility and design studies should be sure to carefully assess the needs of local communities and make sure they are represented in decision-making processes. Corruption

Infrastructure development can be disconcertingly vulnerable to corruption, particularly in countries with fewer legal protections and less accountable governments. Where the rule of law and transparency are weak, infrastructure deals often take place behind closed doors through uncompetitive processes. Over-priced contracts are awarded to sub-par contractors who manage to sidestep project budgets and timelines. In the absence of well-designed public-private partnerships, time and cost overruns have tended to be the norm in Indias roads projects according to research cited by Charles Kenny in a World Bank working paper, Publishing Construction Contracts and Outcome Details. In fact, more than half of all roads projects took more than 50 percent longer to complete than expected, as shown in the chart below. (Click on the image to view the full-size chart in a separate browser tab or window.)

Kenny goes on to explain how corruption often leads to shoddy implementation and quality concerns. Cutting corners on substandard materials and building procedures can limit a roads capacity and reduce its useful life by half, upend the return on infrastructure investments, and even put lives at risk by leaving poorly constructed buildings and bridges vulnerable to earthquakes and other natural disasters. In his World Bank research and a more recent paper for the Center for Global Development with Jonathan Karver, Kenny argues that proactively publishing government contracts could be an effective, straightforward approach to countering corruption. A requirement to publicly disclose contract details could improve government decision-making and competition while reducing contract costs and corruption. Sustainability Sustainability is a critical criterion for infrastructure investments. China is the worlds largest emitter of climate-altering greenhouse gases. Water stress and scarcity are serious concerns for developing and developed countries around the world. India will experience a water shortfall of 50 percent by 2030 according to projections by the Water Resources Group, a project sponsored by the International Finance Corporation. Rising affluence and rapid urbanization in the BRIC countries and other emerging markets put an increasing burden on natural resources.

Fortunately, China, Brazil and India are all taking measures to promote sustainable development, though more needs to be done. Chinas 12th Five Year Plan promotes clean energy both as a strategic industry and as a means of limiting carbon emissions and air pollution that chokes many of Chinas cities. By 2020, China aims to cut the carbon intensity of its economic output by 40 percent. Each country is pursuing a mix of clean energy solutions that includes some combination of solar, hydroelectric and nuclear power. More importantly though, infrastructure projects in all countries need to be evaluated and made to adhere to feasibility and performance criteria that strike a sustainable balance between economic growth, protection of the natural environment and the well-being of the people and communities who come before them. Closing Thoughts Infrastructure investments hold the great promise of accelerating economic development, expanding opportunities and improving lives. Private sector companies would do well to follow the lead of social entrepreneurs who look to these infrastructure challenges as opportunities rather than obstacles. Both governments and companies should recognize their social obligation to look out for the welfare of local communities and environments while pursuing broader development goals. While easier said than done, citizens should strive to hold their public leaders responsible for making the long-term investments that are vital to promoting inclusive development and better living standards.

China and India Planning vs. Jugaad


BY JASON MARCH 4, 2011POSTED IN: CHINA, CITIES & COUNTRIES, COUNTRIES, GLOBALIZATION, INDIA

China and India the worlds two biggest countries, and maybe someday, two largest markets have much in common, and much that sets them apart. Chinas 12th Five -Year Plan and Indias penchant for jugaad are prime examples. Why has Chinas economic growth and development outstripped Indias? What accounts for the differences and what doesnt? In this article, we consider some current, lesser known drivers and obstacles of economic development in each country.

China and India Economic Development in the News


Two hot news topics about China and India expose interesting differences in the two countries approaches to economic development.

China National Peoples Congress 12th Five-Year Plan


News about China highlights the expectations going into this weekends Chinas National Peoples Congress (NPC) session. Largely a function of the Communist Party of China (CPC or CCP), the NPC is the highest governing body in China and the countrys only legislative house. The key output of the latest NPC session will be Chinas 12th Five-Year Plan. Chinas Five-Year Plans have played an important role in identifying key economic and social objectives and successfully shaping the course of Chinas economic development in a number of areas. The latest, 12th iteration of the Five-Year Plan is seen as particularly noteworthy for its emphasis on addressing key factors in sustaining Chinas development, including the needs to: boost domestic economic demand; provide social safety nets (potentially involving universal health insurance and pension programs); reduce inequality; and nurture strategic emerging industries, such as alternative energy and new materials.

India Foreign Investment and Jugaad


In sharp contrast to the official order of Chinas Five-Year Plans, recent New York Times coverage of India has focused on the Hindi concept of jugaad and a significant reduction of foreign direct investment in India.

Foreign Direct Investment (FDI) in India

Contrary to the generally positive uptick in foreign direct investment in other BRIC countries and emerging markets in Asia and Latin America in 2010, India saw a sizeable reduction in inflows of foreign investment from 2009 to 2010. Whereas FDI (direct physical investment as opposed to portfolio or stock market investments) in China increased by 6.3 percent and other countries benefited from much greater gains, FDI in India declined by 31.5 percent from $34.6 billion to $23.7 billion. The chart below is a reproduction of one from the New York Times that uses data from the United Nations Conference on Trade and Development.

Jugaad in India
Jugaad, a Hindi word referring to a seemingly beneficial trait of resourcefulness when the odds are against you, is part of the problem behind Indias FDI and more enduring development issues according to several Indian commentators. In a letter to the New York Times, Indian author and editor Manu Joseph describes jugaad as a product of, an important Indian character the uncompromising practicality of the individual, an untamed form of great personal freedom and informality. According to Joseph, the pitfalls of jugaad for development and civil society in India include the pronounced lack of a value structure that would provide valuable, long-term guidance and corrosive, rampant political corruption. Rather than just jugaad itself though, the issue seems to involve a kind of chicken and egg problem related to the conditions and circumstances that give rise to jugaad in the first place. From social science, we know that human beings have a clear tendency to act in accordance with the incentives and parameters of their environment. In other words, did jugaad lay the groundwork for corruption or does jugaad result from the necessity of finding a way to survive and prosper in a corrupt world? Its likely that the

answer lies somewhere in the middle or involves healthy portions of both interpretations. In either case, the spur-of-the-moment, turn-on-a-dime, improvisational nature of jugaad stands in stark contrast to the highly regimented, methodical, long-term planning of the Five-Year Plans generated by Chinas National Peoples Congress.

Compare China and India


Despite the yin and yang quality of Chinas Five-Year Plans and jugaad, China and India still look very similar in many respects when compared to the rest of the world. The population of each country is well over one billion people. The worlds next largest country, the U.S., has barely one quarter of Indias roughly 1.2 billion people. In terms of geography, culture and politics, the relative global proximity of China and India in Asia has contributed to a history of religious, cultural and economic exchange and influence between the two countries. While Chinas total area is about triple Indias, both countries large territories make for an abundance of large, distant provinces and states as well as economic centers (like Shanghai, Hong Kong, Mumbai, Guangzhou and Bangalore) that are physically and mentally far removed from the two countries political capitals and leadership in Beijing and New Delhi.

Economic Growth and Development in China and India


Both China and India have also made great strides in economic growth and development in recent years. In each country, rapid economic development has led to widespread improvement in living standards and quality of life and lifted hundreds of millions of people out of poverty. The UNDPs Human Development Index (HDI) accounts for three fundamental components of development and living standards: income, education and health. From 1980 to 2010, Chinas human development index (HDI) rose by 80 percent from 0.368 to 0.663. Over the same period, Indias HDI increased by 62 percent from 0.320 to 0.519. In comparison to all other developing countries including fellow BRICs Brazil and Russia, China and India rank 4th and 6th respectively in the list of countries with the largest HDI increases from 1980 to 2010. In addition to large increases in per capita income, China and India have also achieved considerable gains in health and longevity. From 1960 to 2008, life expectancy at birth in China and India increased by 56.8 percent from 46.6 to 73.1 years and by 50.2 percent from 42.4 to 63.7 years, respectively.

Some of the key commonalities and differences between China and India are summarized in the table below.

Economic Development Lessons


Despite their countrys impressive performance, many Indians still look to Chinas economic development and wonder why India has lagged behind. To be sure, the answer is far more complicated than the distinction between long-term planning and short-term adaptation. Successful economic and social development depends on the complex interplay of a multitude of factors. Education and training, capital and labor markets, entrepreneurship, government policies and regulations, and other important variables can all have a major impact on the pace of economic growth as well as the magnitude and distribution of increases in living standards.

China has certainly not gotten everything right, nor has India done at all badly for itself either. The same highly centralized system in China that facilitates long-term planning and mobilization can be conducive to excessive regulation and control. India has done well to achieve so much in the face of corruption and other systemic obstacles that are part and parcel of the jugaad response. Still, the concepts of planning and jugaad seem to shed some light on possible lessons for future development initiatives. Indias experience suggests countries that are able to adopt value systems and institutions that limit corruption and inefficient bureaucratic red-tape stand a better chance with economic development. Chinas overall economic development and more targeted wins in clean energy, rare earths and transportation to name a few speak to the merits of long-term planning that can identify and address important development issues by facilitating the effective allocation of resources, overcoming market failures and supplying essential public goods. Let Us Hear Your Thoughts! Wed love to hear what you think about comparing the development experiences of China and India. What do you see as the key factors behind Chinas and Indias economic development and relative performance? Please share any thoughts you may have in the comments section below.

BRIC Countries Discover Foreign Aid BY JASON AUGUST 31, 2011POSTED IN: AID & DEVELOPMENT, BRAZIL, CHINA, CITIES & COUNTRIES, COUNTRIES, FOREIGN POLICY, INDIA Foreign aid from the four original BRIC countries (Brazil, Russia, India and China) more than doubled from 2005 to 2008, according to the organization Global Humanitarian Assistance. During that period, Chinas foreign assistance grew by more than 30 percent annually. India, the largest foreign aid recipient in history, is actively looking to establish a national aid program akin to USAID or the U.K.s Department for International Development (DFID), according to a recent Economist article. Chinas Foreign Aid Expansion Chinas very official-sounding Information Office of the State Council issued the countrys first white paper on foreign aid in April of this year. Chinas concerted efforts to ramp up its foreign aid marks a noteworthy shift in the countrys involvement with foreign assistance programs. As recently as six years ago in 2005, the World Food Programme discontinued 25 years of continuous food assistance to China. The U.K.s DFID shuttered its foreign aid program in China just this year. Despite Chinas prominent role as a long-time recipient of foreign aid, the white paper asserts that Chinas position as a foreign aid donor has been several decades in the making. After initially targeting North Korea and Vietnam, China reportedly expanded its foreign aid program to African countries as far back as 1956. The lack of detail about the origins of Chinas African aid could raise questions about the materiality and motives of this history, though that line of investigation is beyond the scope of this article. The white paper refers to 2004 as a pivotal year in Chinas foreign aid efforts, with the national aid budget growing nearly 30 percent annually between 2004 and 2009. During this period, the Chinese government endeavored to, strengthen foreign aid in the fields of agriculture, infrastructure, education, health care, human resources, and clean energy. The table below shows the sectoral distribution of Chinas foreign aid projects through the end of 2009.

Chinas foreign aid financing takes the form of grants, interest free loans and concessional loans. The chart below shows the sectoral distribution of Chinas concessional loans through the end of 2009.

Chinas foreign aid program entered a new stage in August, 2010 when the Chinese government convened the National Conference on Foreign Aid. Indias Foreign Aid Conversion As the largest foreign aid recipient in history, India took in $55 billion in foreign aid between 1951 and 1992 according to the Economist. In this context, the mere fact that India is seriously entertaining the idea of establishing a national development program is a clear testament to the extent of the countrys economic progress. An Economist source maintains that Indias government will announce the Indian Agency for Partnership in Development (IAPD) within months. This source is apparently well-informed enough to suggest that the IAPD will have $11.3 billion to spend over the next five to seven years. Not just a work in progress, Indias foreign aid efforts have already yielded positive results. Indias huge investments in hydropower in Bhutan in exchange for electricity have helped both countries in the Economists assessment. Other Indian foreign aid initiatives include similar power investments in Nepal, post-war reconstruction in Sri Lanka and infrastructure development in Afghanistan, where India is the fifth largest donor of foreign aid. Brazils South-South Social and Agricultural Assistance Brazil is fast becoming one of the worlds biggest providers of help to poor countries according to an earlier 2010 article from the Economist. The authors estimated the total value of

Brazils development aid could already reach $4 billion per year, though they labeled this figure as broadly defined development aid, cautioning about comparability with data for other countries. A more recent article reaffirms that reliable aid data for new donors, including China, can be hard to come by. Relative to China and other countries, Brazils brand of foreign aid tends to emphasize social programs and agriculture. Both are areas in which the country has had its share of successes and could be regarded as having a comparative advantage over other donors. The Economist credits Brazils foreign aid with one of the most successful post-earthquake initiatives in Haiti. Based on a Brazilian welfare scheme called Bolsa Familia and financed by the Brazilian government, the initiative successfully expanded a Haitian dairy cooperative, into a project encouraging mothers to take their children to school in exchange for free meals. In the African country of Mali, Embrapa, Brazils highly accomplished, public agricultural research organization, has managed to make cotton yields soar at an experimental farm. Incidentally, the potential for Brazil and Embrapa to contribute to a green revolution in Africa seems quite real considering Embrapas instrumental role in Brazils amazing transformation from a net food importer to one of the worlds leading agricultural exporters. Aid Considerations The extent to which the BRIC countries foreign aid programs will spur development in recipient countries remains to be seen. There is ample, if often ill-founded skepticism about the extent to which the objectives of these efforts might be largely self-serving. For example, critics often cite the link between foreign aid to Africa and securing rights to the continents ample reserves of strategic raw materials. In terms of diplomacy, there should be limits to the value of self-serving initiatives since welldesigned foreign aid programs ought to produce benefits that engender genuine goodwill and long-term diplomatic capital. More immediately, there is also plenty of potential for these new aid programs to provide much-needed resources for the development of recipient countries and, in the process, also serve the greater global socio-economic good. While the outcomes of aid programs depend on a number of factors, there is encouraging evidence to suggest that this hopeful scenario is already happening in a number of places.

Global Science Research and Collaboration BY JASON APRIL 13, 2011POSTED IN: BRAZIL, CHINA, COUNTRIES, GLOBALIZATION, HEALTH, INDIA, SOUTH KOREA Science research has grown rapidly in recent years. BRIC countries, including China,India and Brazil, and South Korea account for much of the increase in scientific publications. Despite suggestions of a major reversal in the global pecking order of science research, the U.S. continues to head rankings of research quality and influence. Regardless of relative standings and ample room for questions about data reliability, a recent report by the U.K.s Royal Society paints an encouraging picture of the positive influence that global collaboration in science research has on scientific discovery, knowledge dissemination and addressing important global issues. Global Science Research Statistics and Trends Spending on Science R&D Since 2002, global spending on science R&D has increased by 45 percent to more than $1,000 billion (one trillion) U.S. dollars. In 2008, 218 countries generated more than 1.5 million research papers, with contributions ranging from Tuvalus one paper to the U.S. 320,000 papers. The U.S. leads the worlds production of science research, accounting for 21 percent of publications and nearly $400 billion worth of public and private science R&D. The top 10 countries, ranked by their authorship of science research publications, are shown in the chart below. The chart also presents each countrys share of citations in global science publications.

BRIC Countries China, India and Brazil Developing countries, particularly the emerging BRIC nations of China, India and Brazil, are responsible for a large portion of the increase in science research publications. The Royal Society study points out that these BRIC countries, along with South Korea, are often cited as rising powers in science. From 2002 to 2007, the three BRIC countries more than doubled their spending on science research, bringing their collective share of global spending up from 17 to 24 percent. Chinas development planning has targeted a number of scientific fields and related industries, including clean energy, green transportation and rare earths, among others. Since 1999, Chinas spending on science R&D has grown 20 percent annually to more than $100 billion. By 2020, China plans to invest 2.5 percent of GDP in science research. The Royal Societys analysis of BRIC countries science research publications reveals some weighting toward certain fields. Engineering is a common focus of science research in China, India and Russia. Scientific fields in which China has developed a leading position include nanotechnology and rare earths. Agriculture and biosciences are two important fields of emphasis in Brazil, which is a leader in biofuels research.

In keeping with their rapid economic development and massive populations, China and India, the worlds first and second most populous countries, produce large and growing numbers of science and engineering graduates each year. In 2006, about 2.5 million students in India and 1.5 million students in China graduated with degrees in science and engineering. South Korea South Koreas prolific research efforts are reflected in the countrys high ranking on the list of countries with the most patent registrations at the U.S. Patent Office. In 2009, South Korea ranked third on the list with 8,762 registrations, just shy of No. 2 Germanys 9,000 registrations, but well off the pace of No. 1 Japans 35,501 registrations. South Koreas U.S. patent registrations more than doubled from 3,562 registrations in 1999 and fewer than 500 registrations as recently as 1989, when it did not make the list of the top 11 countries. The chart below presents recent and targeted figures for science research spending, where available, for China, India, Brazil and South Korea.

BRIC Cities Beijing, Sao Paulo, Nanjing, Moscow In the BRICs and many other countries, certain cities, states and regions tend to produce a disproportionate share of each countrys science research articles. Moscow accounts for more than 50 percent of Russian articles. Beijing and Sao Paulo each contribute more than 20 percent of Chinas and Brazils publication totals. Nanjing, Chinas position in the world ranking of most science publications by city jumped 66 places into the top 20 cities between the periods 1996-2000 and 2004-2008. Nanjing is one of the Four Great Ancient Capitals of China (along with Beijing, Luoyang and Xian) and home to seven national universities, the Peoples Liberation Army University of Science and Technology and numerous industrial parks. International Collaboration in Science Research

Today, over 35 percent of science research articles are the result of international collaborations among researchers from different countries, a 40 percent increase from 15 years ago. The number of internationally co-authored papers has more than doubled since 1990. The U.S., U.K., France and Germany continue to be key hubs of international collaboration in science research. Researchers in other developed and developing countries actively collaborate with scientists from these countries. According to the Royal Society report, while links between the BRIC countries (Brazil, Russia, India and China) have been growing in recent years, they pale in comparison to the volume of collaboration between these individual countries and their partners in the G7. Regional Collaboration International science research often takes the form of regional collaboration. For example, countries within the European Union or Africa may collaborate to address common issues. Regional political institutions, including the European Union (EU), African Union (AU) and the Association of Southeast Asian Nations (ASEAN), each have their own research strategies that foster and facilitate regional collaboration in science research. The Royal Society study identifies South Africa as the linchpin of the continents collaborative efforts, while Egypt and Sudan have emerged as bridges between north and Sub-Saharan Africa. South-South Collaboration South-South Collaboration is a growing form of international science research in which developing countries collaborate with one another to build capacity and share knowledge. The International Centre for South-South Cooperation in Science, Technology and Innovation was inaugurated in Kuala Lumpur, Malaysia in 2008 under the auspices of UNESCO. The IBSA Initiative of India, Brazil and South Africa promotes South-South cooperation in several arenas, including science and research collaboration in fields such as nanotechnology, oceanography and Antarctic research. Key Benefits and Drivers of International Collaboration There are a number of important benefits, motivations and enabling factors that help explain the growth of international collaboration in science research, including: 1) greater impact; 2) scientific discovery; 3) scale of research projects; 4) scope and complexity of research topics and international issues; 5) capacity-building; and 6) advances in technology and communications. 1. Greater Impact International collaboration and joint authorship have a strong, positive influence on the impact of science research articles. The Royal Society study constructs a table of country pairings that shows the additional impact from collaborating with another country. Fourteen countries experienced more than a three-fold increase in their standard domestic publication impact by collaborating with one or more of 22 partner countries. Each additional international author leads to an increase in a papers impact, up to a tipping point of about ten authors. The chart

below shows the range of impact multiples from international collaboration for the 14 countries. (Click on the image below to view the full-size chart in a separate browser tab.)

2. Scientific Discovery Much of the international collaboration in science research is driven by scientists inherent desire to further their research and make new scientific discoveries. The Royal Society study describes science as a meritocratic field in which the best scientists seek out their peers around the globe, with relatively little regard for geographic boundaries. By collaborating with one another, scientists can access complementary skills and knowledge and stimulate new ideas. 3. Scale of Research Projects The scale of some major science research projects is too large for most countries to undertake on their own. In such cases, international collaboration is necessary to meet extensive requirements for human, financial and other resources. The International Space Station and Large Hadron Collider are two examples of these types of very large-scale, international research endeavors. 4. Scope and Complexity of Research Topics and International Issues The scope and complexity of certain science research topics and objectives can also drive international collaboration. These types of complex projects may involve many hundreds or thousands of parts that must be completed separately. The Human Genome Project and the First Census of Marine Life are two examples of projects where research activities needed to be allocated among a large, diverse pool of scientists around the world. Many of the worlds most pressing social problems are international issues that call for collaboration and cooperation. Climate change, food security, public health (e.g., AIDS/HIV,

malaria and tuberculosis) and sustainability are just a few of the global issues that require international collaboration and solutions. 5. Capacity-Building Collaboration allows scientists in one country to build their capacity to conduct significant science research by leveraging the resources of partners in other countries. In addition to brain power and research experience, vital resources include funding and access to scientific facilities and instruments. Collaboration can be particularly beneficial to partners from developing and developed countries. Developing countries can take advantage of the expertise, equipment and financial resources of developed country partners. For example, 77 percent of African biomedical research papers result from collaborations with international partners, while just 5 percent is a product of regional collaboration with other African countries. In return, research partners from developed countries can gain access to local knowledge and data sources. Local access can be particularly beneficial to scientists conducting research in other countries, such as environmental research into local ecosystems and biodiversity. 6. Advances in Technology and Communications Advances in technology have contributed greatly to the feasibility and appeal of international collaboration. For researchers in developing and developed countries alike, improvements in communication technologies and services have made international collaboration simpler, faster and cheaper than ever before. Encouraging Success Stories The Royal Society report calls attention to several encouraging examples of cases where science research and international collaboration have contributed greatly to addressing global food, health and other issues by reducing mortality rates and improving the quality of life. Food Security and Agricultural Productivity The Consultative Group on International Agricultural Research (CGIAR) facilitates research collaboration and the application of advances in agricultural technology and farming. Donors established the CGIAR in 1971 following a series of policy consultations led by the World Bank, U.N. Food and Agriculture Organization (FAO), United Nations Development Programme (UNDP), and the Rockefeller and Ford Foundations. CGIAR encompasses an international network of independent centers of agricultural research in Africa, Asia, Latin America and the Middle East. The International Rice Research Institute (IRRI) in the Philippines and other CGIAR centers emphasize their critical role in engaging and mobilizing local communities, whose farmers can contribute valuable local knowledge in such areas as traditional rice varieties, soil conditions,

farming practices and social and dietary preferences. Educating local communities on better farming methods is also a key component of CGIARs efforts and success. According to IRRIs Director General, IRRI was founded with a clear mandate to develop and conduct education in the production of rice in Asia. Research and education were seen to be equally important. CGIAR operates on a modest yet significant annual budget of $550 million. Every $1 invested in CGIAR is estimated to yield a very healthy return of $9 worth of additional food in developing countries. Health SARS The World Health Organization (WHO) set up FluNet in 1996 as a global tool to monitor and evaluate influenza virus strains by leveraging data from a number of national influenza laboratories around the world. When the epidemic of severe respiratory illness broke out in Hong Kong in 2003, the FluNet network contributed to a coordinated, rapid response from the international science and medical community that identified the virus and helped minimize the related public health threat and consequences. Health Immunization The Global Alliance for Vaccines and Immunization has immunized more than 200 million children and prevented over 3.4 million premature deaths since receiving a start-up grant of $750 million from the Bill and Melinda Gates Foundation in 1999. According to the Royal Society study, the Gates Foundation has transformed global health research by making up for market failures that prevent scientific research from finding solutions to the health problems that plague some of the poorest developing countries. The Gates Foundation has devoted considerable funding and resources to R&D efforts aimed at combating the most devastating diseases in subSaharan Africa and other parts of the developing world, including AIDS, tuberculosis, malaria and other neglected tropical diseases. Royal Society Study Knowledge, Networks and Nations These are some of the key findings published recently in the Royal Societys examination of global science research entitled Knowledge, Networks and Nations: Global Scientific Collaboration in the 21st Century. The Royal Society study is based on statistics from international organizations, including the United Nations Educational, Scientific and Cultural Organization (UNESCO), and the Societys own analysis of data on science research articles published in roughly 25,000 separate scientific journals by the more than 7 million researchers around the world. The Royal Society defines science as natural knowledge, which includes the natural sciences, mathematics and engineering. The global science research statistics cited in the study also include research in the social sciences, arts and humanities due to the way data are collected by UNESCO and other sources. The report takes the position that the latter only account for a very small 8.9 percent of total research publications.

Science research encompasses both research and development, the R and D, respectively, of public and private R&D efforts, which range from abstract and conceptual exploration through to market-oriented development of scientific applications. Quality vs. Quantity China could overtake the U.S. in the output of science publications as early as 2013 based on a simple linear extrapolation of current publication levels and rates of increase. While this trend is noteworthy, the value of global science research relates more closely to the quality than the quantity of scientific publications. The quality of science research is challenging to measure and may only be known many years after research becomes available to the scientific community. One popular, albeit rough, measure of quality is the number of times one scientific research article is cited by other articles. The research contributions of the U.S. and China are most affected by evaluating scientific publications by citations rather than article volume. During the period 2004-2008, U.S. science research accounted for 30 percent of global article citations, even though the U.S. only contributed 21 percent of article publications, as shown in the chart above. China accounted for just 4 percent of article citations, despite contributing 10 percent of article publications. Its worth emphasizing that citations have many shortcomings as a measure of research quality. For one, citations are lagging indicators. In addition, citations are a function of researchers awareness of and access to other articles and publications. In some cases, articles by researchers from China and other developing countries may receive fewer citations simply because they appear in publications that are less familiar to the international research community. On the other hand, the meritocratic, international nature of science research and the availability of searchable article databases facilitate access to science research from around the world. Data Reliability Considerations Sources, Language and Gray Research Two noteworthy formats for publishing science research that are not included in the reports statistics are foreign (non-English) language publications and so-called gray research. Gray research includes the large and growing body of technical reports, working papers, white papers and Internet publications from government agencies, NGOs and other research interests, which do not make their way into the peer-reviewed scientific publications referenced in the Royal Society study. Prominent areas of gray research include agriculture and food security. Agriculture research, particularly involving developing countries, tends to be driven from the bottom up by the scientists and researchers themselves, who often rely on the participation of local farmers. On one hand, peer-reviewed, English-language publications tend to contain research by the most prominent scientists and researchers, which is likely to be the most significant and influential. In

addition, the Royal Society study suggests that English will continue to be the predominant common language of collaborative, global research efforts. On the other hand, as the quantity and quality of scientific research from large, developing countries like China, India and Brazil increases, the exclusion of foreign-language publications could take on greater significance. This may be most applicable to certain fields where a large portion of research is conducted among scientists who speak a language other than English. For example, much of current research on vital rare earths is currently concentrated in China. Research Findings and Policy Recommendations The Royal Society study paints an encouraging picture of growing international investment in science research. International collaboration is a highly valuable mechanism for promoting scientific discovery and maximizing the impact of science research. Publicly and privately funded science R&D has played a key role in successfully addressing key issues related to public health, food security and the environment, among others. Here are several recommendations on actions that could contribute to improving the evaluation, impact and application of science research.

Measurements of Science Research Quantity and Quality The Royal Society study could benefit from developing an effective method to incorporate or at least separately provide some assessment of non-English language and so-called gray research publications. In addition, it could contribute to international efforts to develop more effective methods for assessing the quality and value of science research. Promotion of International Collaboration Governments, private donors, NGOs and other interests should make use of incentives and other mechanisms to promote more international collaboration in science research. One approach could involve setting aside a certain portion of funding for projects that meet relevant, consistent benchmarks for international collaboration. Another method might consist of linking matching research funding to collaboration with researchers in other countries, provided that collaboration furthers the research process and objectives. Development Policy and Science Research Governments should make the promotion of science research a larger and more integral component of their development policies. Science research funding guidelines should be established jointly with development policy goals and objectives. Policy-makers could think of allocating development policy and funding to a portfolio of strategically aligned science research fields and corresponding projects. Let Scientists be Scientists Scientific discovery tends to be an exploratory process that requires ample imagination, brainstorming, adaptation and persistence. Managers of

science research efforts should considering taking a cue from a leading corporate innovator, 3M, and give their top scientists sufficient time and freedom to think and ponder what science can do to make the world a better place for all of us.