12 - WTO and South Asia by South Asian Media Net

S O U T H

A S I A N

Editor Imtiaz Alam

Contents WTO in South Asia

......i

In this Issue

....iii

Nepal and WTO: Benefits and Challenges Shiv Raj Bhatt

.....6

Executive Editor Zebunnisa Burki Consulting Editors Bangladesh Reazuddin Ahmed India K. K. Katyal Nepal Yubaraj Ghimire Pakistan I. A. Rehman

Implication of WTO on India's Trade Policy ...18 Dr Rajesh Mehta WTO and Pakistan: Multilateral Trading System Shahid Javed Burki

...29

Sri Lanka Sharmini Boyle

Sri Lanka in the WTO Doha Round Dushni Weerakoon and Jayanthi Thennakoon

...39

Publisher Free Media Foundation

Gender and Globalisation in South Asia Dr Karin Astrid Siegmann

...50

Facilitator South Asian Free Media Association (SAFMA) Designed by DESIGN 8 Printer Qaumi Press Editorâ&#x20AC;&#x2122;s Post E-mail: sajournal@gmail.com journal@southasianmedia.net

Address 09-Lower Ground, Eden Heights, Jail Road, Lahore, Pakistan. Tel: 92-42-5879251; 5879253 Fax: 92-42-5879254 Email: journalsubscriber@southasianmedia.net Website : www.southasianmedia.net

Indo-Nepal Women Trafficking Connection ...65 Yubaraj Sangroula Rethinking Pakistan's Growth Strategy Dr Nadeem-ul-Haque

...83

Organised Sector Employment in India Pravakar Sahoo and Rajesh Kumar

..102

Entertaining the Inevitable: Earthquakes in South Asia Roger Bilham and Dr Susan Hough

..120

India: Regional Language Press and Cross Border Themes Radha Vij

..132

National Integration in Bangladesh Lailufar Yasmin

..141

WTO and South Asia The time left for the conclusion of the Doha Round of trade negotiations is too little and they have to be concluded by the end of 2006, while the progress made at Hong Kong was not quite substantive and thornier issues have yet to be sorted out. The Uruguay Round of trade talks, resulting in the creation of World Trade Organization (WTO), could conclude after the developed countries conceded the demand to phase out quotas under the MultiFibre Arrangement arbitrarily imposed on textiles and clothing from the developing countries. The WTO was, and is being, seen among the developing countries as an instrument in the hands of developed, powerful economies and multinational corporations against the interests of developing countries and the poor. The Marrakech Treaty, due to its various and elaborate provisions, was in fact poised in favour of the developed countries and powerful multinationals and demands were violently raised by the protestors from Seattle (1999) to Cancun (2003) to give way to a 'just economic order'. The issues of patents and intellectual property further exacerbated the differences between the North and the South. Of greater concern were the relatively higher tariffs on the exports, coupled with restrictive quotas on textiles and clothing, from developing to the developed countries and higher subsidies given to the farmers of the developed countries making agriculturists in the developing countries vulnerable in an area where they have had a comparative advantage. Setting higher international standards and prices, while keeping wages lower, served the interests of the developed and powerful. The trade regime, rather than becoming evenhanded, became more biased in favour of the rich countries who continued to practice unequal standards by demanding withdrawal of subsides and lowering of tariffs in the developing countries while keeping their own agriculture related subsidies and thirdworld-specific higher tariffs and employing so many non-tariff barriers. However, by the time of the Doha Round the situation had changed and the demands of developing countries could not be further ignored if the WTO were to survive. Therefore, the Doha Round brought on agenda the issues of real concern to the developing countries. The Hong Kong ministerial could meet a total failure unless Europe and United States were made to agree to address the goals set by the Doha Round, the issues of subsidy on agriculture in Europe and the U.S., in particular. The leading agro-protectionists of Europe followed by the United States agreed to lift subsidies on their agricultural products by the year 2013 and 97 per cent of the product lines from the Least Developed Countries (LDCs) were given access to their markets. They agreed to create a financing facility of 'aid for trade' to compensate for the losers and those not still prepared to enter the global realm of open and free trade, especially the LDCs. A multi-tier formula was evolved to apply bigger cuts on higher tariffs, smaller cuts on 'sensitive' products in the developed countries and exemption for 'special' products produced by the developing countries without, however, determining the size of cuts and number of special and sensitive products. The concessions granted by the EU and the U.S. were seen as a buy-off of 50 LDCs by the developed countries to isolate the relatively more developed developing countries or Group-20 and pressurise them to bring down their tariffs and subsidies.

The G-20, including Brazil, China, India, South Africa and Pakistan, was essentially keen at getting Non-Agricultural Market Access (NAMA) to the markets of developed countries. Along with the LDCs the G-20 attacked the higher agricultural subsidies being maintained and disguised in Europe and the U.S. and extracted certain concessions, even though at the costs of LDCs on certain issues. They succeeded, such as Pakistan and India, in including the textiles in the three per cent of production lines that are not being opened for LDCs' free access to the developed markets. There were differences of conflicting interests within the G-20, for example between Brazil and others, including the LDCs, which wanted an even playing field, undistorted by subsidies, for its agricultural products. Yet the G-20 negotiated hard without conceding much on the demands of developed countries which are no more prepared to keep the preferential treatment that they had once allowed to the now rapidly growing developing countries, such as India, China and Brazil. Various rounds of the trade talks have shown that even though the developing countries are not as united, as they could and should have been, they can still make better deals rather than pursuing their particular self-interests or entering into bilateral deals with the US or the EU. Similarly, more developed developing countries still insist upon keeping protectionist tariff and non-tariff barriers and distorting subsides in the face of a reluctant South yet not agreeable to an even playing field. This will not work, nor will it help in ushering in an era of free but fair trade. The best course for developing countries is to keep their unity and use their new found weight in order to create an even playing field. But they could not keep their ranks together and negotiated deals at variance with their overall interests. The South Asian countries also played their cards disparately, despite rightly ratifying the agreement on South Asian Free Trade Area (SAFTA). If India and Pakistan, as part of G20, pursued the cause of relatively more developed developing countries, Bangladesh and Nepal were too happy to join the ranks of LDCs. In textiles and clothing, for instance, India, Pakistan and Sri Lanka were on the opposite side of Bangladesh and Nepal. If India was more concerned about the Non-Agricultural Market Access, Pakistan showed greater keenness for the access of its textiles to the developed markets, rather than together focusing on the greater access for their more value added agricultural products. What makes them pursue different lines of action is that they compete in similar products in which they have similar relative advantage and are at various stages of macro-economic reforms. While Sri Lanka leads, followed by Pakistan, in undertaking economic reforms and opening of their economies, India lags behind in both lifting higher subsidies and reducing tariffs and eliminating non-tariff barriers that may also obstruct the path of creating a free trade area in South Asia. Regardless of what the critics of multilateralism and globalisation say, the real battle around the WTO is going to be fought from within. Be it the countries of South Asia or other developing countries, they can gain by evolving a common strategy to create a just and free trade world order. They have to prepare to face the challenges of globalisation, on the one hand, and seek due share in the world market, on the other. If seen from the point of view of optimists, freeing international trade of all distortions can help 320 million poor rise above the poverty line and the Millennium Development Goals set by the UN can be met, even though if not by 2015. But for that to happen the developed countries must let some resources flow back to the developing countries by removing their own barriers and abandoning many a privileges they have enjoyed far too long and at the cost of the developing countries.

advocating special safeguard mechanism for developing countries. Since Sri Lanka sought the extension of concessions granted to LDCs to other vulnerable economies, it was happy over exclusion of three per cent of tariff lines, benefitting its textiles, showing how divided the developing countries are on major issues of global trade.

In This Issue (The views expressed in this journal are solely those of the authors)

Nepal and WTO: Benefits and Challenges

Shiv Raj Bhatt, Programme Officer at UNDP, Nepal, explores the challenges Nepal faces after its accession to the WTO. The author feels that global integration of small and landlocked countries like Nepal through WTO membership can be instrumental for rapid economic growth, poverty reduction and promotion of human development. However, according to the author, this membership does not necessarily guarantee immediate or longer-term economic and human development. The author suggests proper policy interventions, institutions, infrastructure and the removal of supply side constraints for Nepal to benefit from its WTO membership.

Implication of WTO on India's Trade Policy

Dr Rajesh Mehta, Senior Fellow, Research and Information System for Developing Countries (RIS), New Delhi, studies India's trade policies in the light of the formation of the WTO. Using select case studies that have directly affected trade policies of India, the author analyses issues such as the removal of quantitative restrictions, renegotiations of agriculture commodities and the implications of the removal of multi-fibre agreement (MFA). He concludes that, among many other significant implications of WTO, the removal of MFA has been advantageous to India's exports.

WTO and Pakistan: Multilateral Trading System

Shahid Javed Burki, former Vice-President World Bank and former Finance Minister of Pakistan, looks at Pakistan's stance on international politics of trade in the context of WTO by tracing the evolution of the WTO. He discusses the main issues being debated in the various rounds of trade talks, and the 'little' progress that took place at Hong Kong. The author suggests that Pakistan should work harder to define its position in global trade talks to secure better access in agricultural products and spend less energy on improving access for textiles, since it has considerable potential in the rapidly growing markets in Asia.

Sri Lanka in the WTO Doha Round

iii

Dushni Weerakoon and Jayanthi Thennakoon, Deputy Director and Research Assistant, Institute of Policy Studies of Sri Lanka (IPS), respectively, examine the gains Sri Lanka has been able to achieve by taking unilateral measures to liberalise its trade and tariff regimes. As distinct from other developing countries, Sri Lanka has taken a pro-active role and favours 'harmonisation' of tariff reductions. The authors say that Sri Lanka, a member of the G-33 Group, spear-headed 'criteriabased' approach on issues of 'special products' while

Gender and Globalisation in South Asia

Dr Karin Astrid Siegmann, junior fellow at Sustainable Development Policy Institute (SDPI), Islamabad, looks at the gendered face of globalisation in South Asia, and argues how global economic integration has influenced and interacted with gender imbalances in the region. Evaluating conflicting impacts of globalisation in various sectors and countries of the region, the author suggests the need to investigate potentially unfavourable consequences for gender equality to guide the policy makers in their liberalisation decisions.

Indo-Nepal Women Trafficking Connection

Yubaraj Sangroula, Associate Professor, Kathmandu School of Law, looks at the issue of trafficking of women in South Asia while focusing on Nepal. Although exact figures of the number of women trafficked are not available due to many reasons, the author says that the situation has become worse in the country more so due to the growing Indian sex market. Adding to this is the internal chaos Nepal suffers as a result of the Maoist insurgency, intensifying the vulnerability of Nepalese women.

Rethinking Pakistan's Growth Strategy

Dr Nadeem-ul-Haque, Consultant at Pakistan's Ministry of Commerce, makes a thorough critique of Pakistan's growth strategy that strengthened rent-seeking, government's domination and mercantilism. Reverting the erstwhile paradigm and open-heartedly embracing globalisation, competition and free market, he offers a very creative and merit-based alternative strategy that should essentially focus on the issues of governance and the ultimate consumer. In the end, he proposes how Pakistani cities should become hubs of creativity and growth.

Organised Sector Employment in India

Dr Pravakar Sahoo, Assistant Professor, Reserve Bank of India (RBI) Unit, New Delhi, and Rajesh Kumar, Research Officer at Institute of Economic Growth (IEG), New Delhi, look at the economic reforms in India since 1990s. The authors conclude that there has been deterioration in the employment sector during post-reforms period as compared to pre-reforms period. According to their findings, India witnessed a growth in joblessness with respect to organised sector employment during the 1990s, such as: construction,

trade, hotels, transports and communication, finance, insurance and community, social and personal services, which witnessed higher growth during post-reforms period but lower employment growth.

Entertaining the Inevitable: Earthquakes in South Asia

Roger Bilham, Associate Director of the Cooperative Institute for Research in the Environmental Sciences (CIRES), Colorado, and Dr. Susan E. Hough, research scientist at the U. S. Geological Survey, Pasadena, examine the seismic zones in the Indian subcontinent. The authors, while admitting that future earthquakes are inevitable, warn that without risk mitigation efforts, the loss of life and economic penalty will be catastrophic. Due to increasing population, urbanisation, and the construction of buildings vulnerable to earthquakes, the risk to cities close to the earthquake belts in the region is immense. They suggest mandatory earthquake resistance for all new construction.

India: Regional Language Press and Cross Border Themes

Radha Vij, Researcher at Centre for Media Studies, New Delhi, looks at the way the Indian regional languages news media presents news from five neighboring countries: Pakistan, Bangladesh, Nepal, Sri Lanka and Afghanistan. Using a recent study conducted by the CMS Media Lab, the author says that the current representation crisis in cross-border news coverage in India exists because progressive coverage is not a priority for the Indian news media. She feels that the only way the Indian news media can attempt to play any sort of role in regional conflict resolution, is by broadening their perception, re-orienting 'national interest' and by including cross-border voices.

National Integration in Bangladesh

Lailufar Yasmin, Assistant Professor at the University of Dhaka, Bangladesh, studies the problem of national integration in a seemingly homogenous Bangladesh in the context of national identity and ethnic composition of the country. The author says that there are distinct fragments in the apparent homogeneity of the country. The bigger problem is a deep contention in the formation of national identity which manifests itself as a struggle for political power. According to the author, amidst the debate between Bengali and Bangladeshi nationalism, a new extremist religious identity formation has been exploiting the masses. She feels that if this trend is strengthened, the country will be further fragmented.

Nepal's WTO Membership: Benefits and Challenges Shiv Raj Bhatt

1. Background It is argued that economic globalisation boosts the world economy and that global integration of small and landlocked countries like Nepal through WTO membership can be instrumental for rapid economic growth, poverty reduction and promotion of human development. Trade liberalisation can affect the welfare of the people (especially poor) through a number of channels1, namely: (i) by changing the price of tradable goods (i.e., lowering prices for imports for poor consumers and producers, increasing prices of exports for poor producers), and improving access to new products; (ii) by changing the relative prices of factors of production (skilled and unskilled labour and capital) used in the production of tradable goods and affecting the income and employment of the poor; (iii) by affecting government revenue from trade taxes and thus the government's ability to finance programmes for the poor; (iv) by changing incentives for investment and innovation and affecting economic growth; and (v) by affecting the vulnerability of an economy (or subgroups within the economy) to negative external shocks that could affect the poor. However, the link between trade liberalisation and people's welfare or poverty is extremely complex and, therefore, drawing generalisations about these links is very difficult. Theoretically, it is argued that trade contributes to growth and better income and employment opportunities, hence positively promoting human development and poverty reduction. In a cross-sectional study (involving 100 countries) Frankel and Romer (1999), found that openness does have a statistically and economically significant effect on growth. Similarly, Jeffrey Sachs and Andrew Warner (1997) find that developing countries with open economies grow much faster than closed economies. William Cline (2003) shows that an estimated 75 million people would be lifted out of poverty in India over the long term from the dynamic productivity effects of free trade. On the basis of such empirical studies, it may be claimed that the global integration of Nepal through WTO membership can be instrumental for rapid economic growth, poverty reduction and promotion of human development. In reality, however, the evidences and experiences of many countries do not always support this argument, especially in the case of least developed countries (LDCs) [Guru-Gharana K. K., 2001]. Moreover, a wide range of concerns have arisen throughout the world about the likely implications of the various WTO agreements on various developmentrelated issues, particularly related to the poverty, inequality and promotion of human development. Multilateral organisations, such as the United Nations Development

Programme (UNDP), United Nations Conference on Trade and Development (UNCTAD), Food and Agriculture Organization (FAO), along with other stakeholders (NGOs, community organizations, government agencies, individual researchers and others), have raised various issues/concerns about the likely implications of various WTO agreements, especially for the poor. Therefore, Nepal - a least developed country (LDC) of the world - needs to be careful to maximise the benefits of WTO membership. In this regard, Nepal, with a predominantly agricultural economy and with very poor infrastructure and scarcity of resources, needs proper policy interventions, institutions, infrastructure and the removal of supply side constraints to seize the benefits of globalisation and WTO membership not only at a macro level but also at the grassroots level. 2

2. World Trading System: A Brief Historical Background

Shortly after the Second World War, the international community realised the importance of globalisation and sought to establish an international organisation that regulates international trade. The United Nations Monetary and Financial Conference, held in Bretton Woods in 1944, led to the creation of the International Monetary Fund (IMF) The World Bank was and the International Bank for Reconstruction and initially set up to assist the Development (IBRD)also known as the World Bank. European economies, Delegates at the conference recommended the devastated by the war, to creation of the International Trade Organisation finance production (ITO). Unfortunately, this was never established projects. However, its because some nations, including the United States, objectives quickly strongly opposed it. Although the idea of the creation broadened and of the ITO was nixed, a liberalised global international development financing trading system, one based on free trade, was became its main appealing. Four years later, in March 1948 at the responsibility. Initially, Havana Conference, the General Agreement on Tariffs the GATT concentrated and Trade (GATT) came into effect and consisted of solely on trade in goods. 23 nations (formally known as the 'contracting Reduction of tariffs and parties'). trade barriers, promotion of the liberalization of The above three institutions -- the International world trade, elimination of Monetary Fund (IMF), World Bank and the General discriminatory treatment Agreement on Tariffs and Trade (GATT) -- have been and an increase in the pillars of the economic system that emerged after competition were some of World War II. The main purpose of the IMF was to the GATT objectives. manage the international monetary system. The World Bank was initially set up to assist the European economies, devastated by the war, to finance production projects. However, its objectives quickly broadened and development financing became its main responsibility. Initially, the GATT concentrated solely on trade in goods. Reduction of tariffs and trade barriers, promotion of the liberalisation of world trade, elimination of discriminatory treatment and an increase in competition were some of the GATT objectives. To ensure that there was no discriminatory treatment, each country had to

grant most-favoured nation (MFN) treatment to other contracting parties. Over the years, through rounds of negotiations, GATT developed into a strong foundation that provided rules for international trade. 'GATT helped establish a strong and prosperous multilateral trading system that became more and more liberal through rounds of trade negotiations. But by the 1980s the system needed a thorough overhaul3.' 123 countries participated in the 8th and final round of GATT negotiations, the Uruguay Round (1986-1994), which led to the signing of the Marrakesh Agreement and the creation of the WTO. The Marrakesh Agreement developed out of the GATT. Article II of the Marrakesh Agreement states that the WTO is established 'to provide the common institutional framework for the conduct of trade relations among its members in matters related to the agreement.' It consists of the GATT, as well as several other agreements. The issues covered in the Marrakesh Agreement include trade in services, trade-related aspects of intellectual property (TRIPS), and technical barriers to trade, among others. It also defines the functions and structure of the WTO and establishes a legal and more efficient dispute settlement process. The WTO was formally established on January 1, 1995. 2.1 WTO agreements, functions and objectives WTO Agreements cover not only trade in goods, but trade in services and in ideas (intellectual property) as well. The 123 GATT 'contracting parties' automatically became members of WTO. Any country thereafter that wishes to join the WTO has to go through an accession process (Article XII of the Marrakesh Agreement). Currently, there are 150 member states in the organisation and 25 countries are negotiating in the hope of acceding to the WTO. Over 97 per cent of global trade takes place among WTO members. The key functions of the WTO (Article III of the Marrakesh Agreement) are to: l facilitate the implementation, administration and operation of this agreement and

any new agreements that may be implemented in the future; l provide a forum for negotiations among its members concerning their multilateral

trade relations; l settle disputes among its member countries; l carry out periodic reviews of the national trade policies of its member countries;

and l cooperate with the IMF and IBRD (World Bank) with a view to achieving greater

coherence in global economic policy making. According to the Preamble of the Marrakesh Agreement, the basic objectives of the WTO are "raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services (while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development)…by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations.'

The following principles are the foundation of the multilateral trading system:

substantial improvements in market access over the existing bilateral and multilateral preferences accorded to Nepal; secure transit rights; and provide a stronger, faster, impartial, and a binding mechanism for dispute settlement. In addition, it is argued that the membership would dismantle the cost of non-membership; and ensure greater stability in economic and trade policy. The benefits of membership can be outlined as follows: 4.1.1 Market access opportunities Market access opportunities provided by the WTO system can lead to further investment addressing the constraint of limited domestic market for economic scale of productive operation, which will also help to raise investment, economic production of goods and services and industrialisation process. The membership has also secured extended market opportunities in member countries without discrimination for Nepal's exports. Many factors determine volume, composition and growth of trade (export) and WTO membership can be only one among them; and moreover, only two years are not enough to judge the performance, but some kind of symptoms should be there that show the progress. The experience and performance of the past two years, however, does not show any kind of remarkable achievement in this regard. This clearly indicates that, unless the supply side constraints are managed properly, Nepal cannot benefit from increased market access opportunities. 4.1.2 Policy stability The WTO regime provides opportunity for policy stability internally which is of utmost urgency in the context of the existing political instability in order to provide an environment of predictability for investment and industrialisation. National policy decisions are locked to the framework of WTO provisions, which enhance the credibility of the country in terms of economic governance. 4.1.3 Attract foreign direct investment Policy stability due to WTO membership provides credibility to the nation in terms of economic activities with predictable environment. Such environment is essential to attract foreign direct investment (FDI) and technology to expedite industrialisation process in Nepal. Additionally, the mandatory provision of WTO in protecting intellectual property rights creates a better situation for attracting investment. However, apart from policy stability, foreign investors need some more preconditions; most importantly, the size of market, infrastructure, security of private property, peace and condition of law and order in the country. Unfortunately, most of these pre-conditions are absent at present in Nepal; therefore, it would not be appropriate to blame WTO membership for not boosting FDI flows and for making Nepal a less attractive destination for investors even after the membership. 4.1.4 Gearing up domestic institutional capability Joining WTO reflects national commitment in gearing up domestic institutional capability in delivering services related to trade and economic transactions. Similarly, the challenge to business community in enhancing their competitive capability certainly builds pressure to look at their own existing lapses and inefficiency, paving the way for the effective actions to correct them. Therefore, WTO membership can be

an effective excuse in domestic constituency and private corporate culture to adopt and enforce reform measures with drastic changes departing from traditional and status quo oriented approach. 4.1.5 Benefits of positive discrimination Nepal, a least developed country (LDC), can benefit from the WTO mechanism of positive discriminations. Special and Differential Treatment (S&DT) provisions of WTO, though considered best endeavor clauses without strength as in binding clauses, provide comfort from abiding tough obligations, and longer transition period for necessary policy and institutional adjustment. Orientation of WTO system towards development dimension of trade can prove beneficial to have trade-led growth in the context of increasing opportunities from the process of globalisation. Growth in trade linking to address poverty is of utmost concern to countries like Nepal. The strategic approach of backward and forward linkage in actions to develop trade is the added advantage to weaker economies, which is expected to derive from multilateral rules of global trade, after the Doha Declaration. 4.1.6 Establishment of trade and transit rights Establishment of trade rights of the WTO members saves them from the consequences of unilateral decisions between trading partners. Trade rights are institutionalised by WTO framework. The dispute settlement body of WTO has demonstrated courageous decisions in favour of weaker and smaller trading partners against stronger members. Nepal, as a landlocked country, has to get institutionalised recognition for access to sea. Article V of General Agreement on Tariffs and Trade (GATT), which constitute mandatory provisions to all member countries of WTO, deals with freedom of transit. It is clearly stated that, 'there shall be freedom of transit through the territory of each contracting party, via the routes most convenient for international transit, for traffic in transit to or from the territory of other contracting parties.' It is further stated in this Article that, ' no distinction shall be made based on the flag of vessel, the place of origin, departure, entry, exit or destination, or any circumstances relating to the ownership of goods, of vessels or other means of transport, and traffic shall not be subject to any unnecessary delays or restriction.'

expand business activities by expanding market access opportunities and by providing predictability, security, transparency and stability in economic policies at national level and globally. But in a predominantly agricultural economy like Nepal, with poor infrastructure, resource scarcity, and very underdeveloped industrial base that depend on traditional methods of production; the said benefits are doubtful to achieve. Nepal's commitment to further liberalize its trade regime and adopt WTO compatible policies and legislation is likely to produce winners and losers in industrial sector, particularly within the SMEs sector. Many WTO agreements have significant importance for Nepal's SMEs, which may affect the SMEs both positively and negatively. Therefore, likely implications of various WTO agreements should be analyzed and assessed cautiously. Status of SMEs in Nepal Industrial Policy 1997 (amended) has defined small industries as industries having fixed assets not exceeding Rs 30 million and medium industries having fixed assets between 30 million and Rs. 100 million. The overall status of SMEs, including investment and contribution to the economy is not well documented, but it comprises most of the country's economic activities. As stated in the Tenth Plan, more than 90 per cent of the industries fall under small and cottage industry (cottage and small scale) categories and these industries have contributed over 70 per cent of employment in industrial sector, and 50 per cent in value addition. The plan recognised the huge potential of SMEs as an important means for poverty reduction, and sets an objective to increase the income and purchasing power of the rural people through employment generation in the micro, cottage and small industries. Accordingly, the plan adopted strategies to give special attention in sustainable development of infrastructure, entrepreneurship and skills to develop micro, cottage and small industries based on local-agro forest resources.

4.1.7 Removal of supply side constraints As the Nepalese economy is import dependent due to limitation on its resource endowment, consistency and predictability in supply is of paramount concern. Being a member of WTO, alternative trading partners among the members, without discrimination in terms of trade, extend additional assurance of supply consistency required both for industrial input and domestic consumption. 4.1.8 Implications for SMEs7 Membership to a rule based multilateral organisation like WTO has opened many economic opportunities as well as challenges for Nepal's entrepreneurs/enterprises, including small and medium enterprises (SMEs). The membership may help to

Table 1 clearly shows that the golden age for SMEs starts with the restoration of multiparty democratic system in Nepal in 1990. The number of SMEs registered increased more than five times in year 1991/92 than the previous year. The growth

continued almost for one decade, albeit with some ups and downs. Number of SMEs registered, fixed capital investment and loan disbursed by the banks all reached the

institutional/legal mechanism; removal of supply side constraints to transform available market access into trade opportunities; restructuring of industrial sector to make it more competent and contemporary; and averting marginalisation of the country as well as weaker sections of the society. In total, the benefits of membership depends on Nepal's ability to identify and take advantage of trading opportunities; fulfill multilateral trade obligations; formulate and pursue development strategies within the framework of those obligations; and above all, defend her economic, finance and trade needs [Pandey, 1999].

5. Conclusion The membership has opened tremendous economic opportunities and established global recognition of Nepal as an independent economic entity competent to trade under the global framework of rules. However, it also poses many challenges for Nepal. To realise intended benefit from WTO membership Nepal needs strategic alliance among the domestic stakeholders as well as with external trading partners to enhance competitive capability of business community and service delivery capability of public agencies related to investment, production and trade.

(Shiv Raj Bhatt is Programme Officer at UNDP Nepal)

Table 1: Status of Small and cottage industries (SCIs) in Nepal Year

Number of SCIs registered

Fixed Capital investment (Rs. Million)

1989/90 932 829 1990/91 1112 1226 1991/92 5727 2574 1992/93 6781 3150 1993/94 9486 5720 1994/95 8519 5370 1995/96 9650 7220 1996/97 8196 6040 1997/98 9650 8960 1998/99 9990 9620 1999/2000 10127 10340 2000/01 9317 7320 2001/02 9890 7720 2002/03 7572 5910 2003/04 7133 6110 Source: Economic Survey (various issues), Ministry of Finance, HMG -N

Loan disbursed by commercial banks in SCIs under intensive banking programme (Rs. Million) 8.51 9.27 8.42 9.29 21.23 13.49 22.62 20.04 13.64 49.78 49.97 16.71 14.54 16.59 21.24

End Notes 1. Adapted from Bannister Geffery J. and Thugge Kamau (2001), International Trade and Poverty Alleviation, IMF Working Paper (WP/01/54), International Monetary Fund. 2. Most of the information in this section comes from Understanding The WTO, 2003 and the ' Marrakesh Agreement' from WTO Legal Texts website, http://www.wto.org/english/docs_e/legal_e/legal_e.htm 3. Quoted from Understanding The WTO, 2003. (p.15). 4. Quoted from Understanding The WTO, 2003. (p.11). 5. Look at the following agreements for more information: Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS. 6. A new Commerce Policy aimed at transforming the trade sector to make it open, competitive and market oriented was formulated and implemented during the Eighth Plan of Nepal (1987-1992). 7. This section is heavily drawn from, Bhatt Shiv Raj, 'WTO and SME's in Nepal' an article published in the New Business Age, a monthly magazine published from Katmandu, March 2006. 8. For details see, International Trade Rules: An answer book on the WTO Agreements for small and medium-sized exporters, ITC UNCTAD/WTO, 2001 9. ibid 10. For more details, see Shrestha, Prachanda Man, 'Multilateral Trading Regime: Implications on the Nepalese SMEs' in Dahal Navin and Sharma Bhaskar (ed) 2004. 11. For details see Bhatt, September, October and December 2005. 12. Several studies have estimated that after implementation of TRIPS agreement the prices of drugs will increases in the range of 12 per cent to 68 per cent in developing countries [Fink, 2000; Watal, 2000; Lanjouw, 1997; and Subramanian, 1995 as quoted in UNDP, 2003]. 13. It is argued that the TRIPS agreement can affect the nutritional aspects through its negative impact on farmers' rights (by reducing farmers' access to basic agricultural inputs, basically

seeds) in developing and underdeveloped countries [See, Adhikari, Ratnakar (ed.), Food Security in the Global Age: South Asian Dilemma, SAWTEE Kathmandu, Pro Public,

Implication of WTO on India's Trade Policy Dr Rajesh Mehta India is founder member of World Trade Organisation (WTO) and its predecessor - the General Agreement on Tariffs and Trade (GATT) system. The multilateral trading system has significantly affected India's export and import during 1995-2004. India's global export has increased from US$ 30.63 billion during 1995 to US$ 71.79 during 2004 an increase of 10 per cent per annum. India's corresponding import has increased from US$ 34.7 billion during 1995 to US$ 94.1 billion in 2005, i.e. annual growth of around 11.9 per cent. However, it is difficult to say that the growth in India's import and export is mainly due to various decisions in the multilateral trading system of the WTO. This paper analyses select case studies that have directly affected trade policies of India, due to formation of the WTO. The paper is divided into five sections. Section I deals with removal of quantitative restrictions (QRs) as per dispute settlement of the WTO in 1999. India had bound few important agriculture items in Uruguay Round at zero per cent. After removal of Quantitative Restrictions (QRs), India had to re-negotiate bound tariffs of these items. Re-negotiation process of WTO demands that member country (India) has to give more market access (or compensation in WTO terminology) in lieu for increasing level of bound tariffs of these agriculture items. Section II deals with these renegotiations of agriculture commodities, which were bound at zero per cent till Uruguay Round. Section III deals with anti-dumping and other safeguard duties. The impact of implication of removal of Multi-Fibre Agreement (MFA) on India's textile and clothing sector is analysed in Section IV. Concluding remarks are given in Section V.

I. Removal of Quantitative Restrictions GATT/WTO does not allow imposition of quantitative restrictions (QRs). However, India (and few other countries) had maintained quantitative restrictions on its imports under provisions of article XVIII:B of GATT system/WTO. This article allows member countries whose economies are in the earlier stage of development to 'apply quantitative restriction for balance of payment position'. Before the launch of WTO, dispute settlement mechanism of multilateral trading system was loose. India had been maintaining QR regime, despite the fact that Article XVIII:B, relating to Balance of Payment (BOP), mentions that a member country has to publicly announce the time-schedule for elimination of QRs. After the formation of WTO, the U.S. filed a dispute against India that the continued maintenance of QRs on India's import was inconsistent with her obligations under the WTO agreement. A number of other developed countries, Australia, Canada, Japan, the EU, New Zealand, and Switzerland, later joined in this dispute against India.

In November 1997, a panel by the WTO was constituted to examine this U.S. allegation against India's quantitative restriction on imports for agriculture, textile and industrial products. The panel report was not favourable to India; but it challenged the finding of panel, leading to formation of an appellate body. In August 1999, the report of the appellate body1 of WTO ruled that 'India maintains quantitative restriction on agricultural, textile and industrial products falling in 2714 tariff lines' and recommended that 'India bring its balance-of-payments restrictions, which the panel found to be inconsistent with articlesâ&#x20AC;Ś of the GATTâ&#x20AC;Ś into confirmatory with its obligations under these agreements'. After this report, India had no option but to reach a mutual agreement with the U.S., or face arbitration. India signed an agreement2 with the U.S. on December 28, 1999, for phasing out of quantitative restriction (QRs) on all imported items by March 2001, i.e. within 15 months. India started its economic reforms in early 1990s. In the pre-reform era, India's import policy was highly protective with different categories of importers, different types of import licences and alternate ways of importing. A number of concrete steps towards liberalisation had been taken during the 1990s within the framework of economic reforms. Table 1 gives the number of tariff lines, which were subject to different types of Non Tariff Barriers (NTBs). Table 1: NTBs imposed on Indias imports number of lines Year % lines subject to NTBs (QRs) Before 1992 More than 90% 1997-98 34.2% 1998-99 29.8% 2000-01 13.6% Sources: (i) Mehta R. (1999), Tariff and Non -Tariff Barriers of Indian Economy: A Profile , RIS, and (ii) Goldar, B. and Mehta R. (2001), The Budget and Customs Duties, EPW, March 24, 2001, pp. 989- 991

After the removal of QRs, as per India-U.S. agreement under provisions of the WTO, there was panic that India's import of some sensitive products may significantly increase. There were many reasons for this. First, Indian industry was subject to a high level of protection for a long time. Second, India had not bothered to bound its tariffs appropriately in the Uruguay round because it was possible to put restriction on imports through QR. Thirdly, there can be adverse impact of increased import on welfare indicators like employment, out put, etc. A number of steps were taken by the Government of India to handle sudden and significant increase in import of select items: (i) Number of tariff lines were identified which were sensitive to imports; (ii) A control room was set-up to watch sudden increase in import of commodities, for appropriate action; (iii) Imposition of WTO-consistence Non-Tariff Measures (NTMs), like standards, were stream-lined, and (iv) Tariffs of sensitive items are not significantly reduced below committed bound levels, mentioned in schedules of the WTO.

An attempt has been made by Mehta (2000)3 to estimate the likely increase in India's imports due to removal of QRs as per mutual agreement between India and the U.S. under provisions of WTO. The likely increase in India's import, due to removal of QRs, has been carried out by using a simple econometric model in static framework. The study shows that India's import will increase by 3.0 per cent due to removal of QRs. II. Re-negotiating Bound Tariffs of Agriculture Commodities It is well known that the Uruguay Round led to the tariffication of all agriculture items, by removing all types of other barriers. India also bound all its agriculture items4. India had bound select agriculture commodities at rounds earlier than the Uruguay Round. Under Article 28 of GATT, India had agreed to keep its import duty on some agriculture items at 0 per cent, as India was a food deficit country when the pact was signed. India had not bothered to change the rate of import duties of these commodities in the Uruguay Round, probably because it was following the QR regime. Some of these agriculture items were rice, split wheat, skimmed milk powder, sorghum, Jawar (or Millet), maize, etc. After the removal of the QR regime, tariff was one of the most important policy instruments for India's import. India's import of number of agriculture items increased sharply in QR-removed and zero-tariff regime. To quote an example, India's import of skimmed milk powder increased from 2000-3000 tonnes between April to October 1998, to around 18,000 tonnes during the same period in 1999. Keeping these factors in view India had no option but to re-negotiate these zero bindings with its principal trading partners. The re-negotiation process of the WTO is cumbersome5. It is well known that each WTO member has the obligation not to raise its tariff rate above the bound level. However, there are a number of exceptions to this rule, tariffs may be raised above the bound level. In the course of safeguard actions like anti-dumping and countervailing duties, action such as increase in level of tariffs are take for temporary action. In such temporary cases, the member country obligations of bound tariffs contained in the WTO schedules remain unchanged. During 1999/2000, India has successfully renegotiated the binding rates under the WTO framework on select agriculture products (with zero bound tariffs) with its principal trading partners. The negotiations have been conducted mainly for those agriculture commodities whose bindings have been made at rounds earlier than the Uruguay Round. Under Article XXVIII of GATT, the renegotiated agreement would enable the country to change the import duty on 17 items such as sorghum, jawar6, maize, rice, split wheat, skimmed milk powder, etc. The deal was a part of a trade-off with agriculture exporting countries under which India has given more access on other items by decline/restructure in tariff bindings like groundnut oil. As mentioned earlier India had to begin renegotiations of the bound rates with principal suppliers of the commodities in the light of removal of QRs. As a part of these renegotiations, India will impose a custom duty of 15 per cent on import of skimmed milk/whole milk up to 10000 tonnes under the tariff-quota deal. Imports above

10000 tonnes would attract a 60 per cent duty. Similarly, the bound rate for inquota of maize is 15 per cent up to 3,50,000 metric tonnes, while the corresponding rate for

highest number of anti-dumping cases for a product are engineering products (including steel products), which account for 32 per cent of the total cases, followed by textiles and articles (19 per cent) thereof, drugs and pharmaceuticals (18 per cent), rubber/plastics and articles thereof (13 per cent), and consumer industrial goods (12 per cent). In the anti-subsidy cases again engineering products (including steel products) account for 38 per cent of the total cases, followed by rubber/plastic articles (25 per cent) and textiles/articles and drugs (13 per cent each).

Table 2: Year -wise Break up of Anti-Dumping & Anti-subsidy cases faced by Indias export till 2 003 Year Anti-Dumping cases Anti-subsidy cases 1990-91 1 1991-92 1 1992-93 2 1 1993-94 3 1 1994-95 5 1996-97 6 1997-98 5 2 1998-99 16 9 1999-2000 13 6 2000-01 7 4 IV. Removal2001-02 of MFA for Textiles and 13 Apparel Industry 9 2002-03 7 Up to the end of the Uruguay Round, a major portion of textile and1 clothing exports Total 82 32 from India and other developing countries to the developed countries was subject to Source: Government of India, Directorate General of Anti-Dumping and Allied Duties, Annual Report, quotas. These quotas were negotiated on bilateral basis at regular intervals, and 2002-2003.

governed by the rules of multi-fibre agreement (MFA). The multi-fibre agreement was adopted in the mid-1970s. This agreement allows selected quantitative restrictions when there was surge in import of particular product cause, or threatened to cause, to the textile industry of the importing developed country. MFA was a major departure from basic GATT rules of most favoured nation (MFN). On January 1, 1995, MFA was replaced by the WTO agreement on textiles and clothing (ATC), which set Fig. I: Top 15 Countries Facing Anti-Dumping Cases, 1-1-1995 to 3006-2005 South Africa

Ukraine

European Community

Malaysia

Germany

Brazil

Countries

Russia

Thailand

105

Indonesia

113

India

115

Japan

121

Chinese Taipei

155

United States

158 212

Korea, Rep. of China, P.R.

434 0

Source: WTO, www.wto.org

100

150

200

250

300

Number of Cases

350

400

450

500

Table 3: Country -wise Break up of Anti-Dumping Cases against India, till 2003 Country Anti-dumping Argentina 1 Australia 2 Brazil 4 Canada 5 EU 27 Indonesia 8 Mexico 1 Trinidad & Tabago 1 South Africa 11 Turkey 4 Thailand 2 USA 14 Korea 1 Venezuela 1 Russia Federation 1 China 1 Total cases 82 Source: Government of In dia, Director General of Anti -Dumping and Allied Duties, Annual Report, 2002-2003.

out the process for ultimate removal of these quotas by December 31, 2004. This WTO agreement can be summarised as 'The ACT is transitional instrument, built on the following key elements: (a) the product coverage, basically encompassing yarns, fabrics, made-up textile products and clothing; (b) a programme for the progressive integration of these textile and clothing products into GATT 1994 rules; (c) a liberalisation to progressively enlarge existing quotas (until are removed) Table 4: process Country-wise Break up of Anti Subsidy Cases against India,they till 2003 by increasing annual growth rates at each stage; (d) a special safeguard mechanism to Country Anti subsidy cases deal with new cases of serious damage or threat thereof to domestic producers during EU 14 the transition period; (e) establishment of a Textiles Monitoring Body ('TMB') to South Africa 5 supervise the implementation of the Agreement and ensure that the rules are faithfully Canada 5 followed; and (f) other provisions, including rules on circumvention of the quotas, USA 5 their administration, treatment of non-MFA restrictions, and commitments Brazil 1 undertaken elsewhere under the WTO's agreements and procedures affecting this Total 32 sector'. (c.f. web: www.wto.org). Source: Government of India, Director General of Anti -Dumping and Allied duties, Annual Report, 2002-03. Textile and clothing is an important sector in developing economies like India. It has played a developmental role on several dimensions. India's export has a substantial share in global trade of textile and clothing. It ranks seventh in world export of textile, and corresponding rank of apparel is 6th. In terms of India's global export by commodity groups, textiles and clothing constitute around 20 per cent. In this context it is worth noting that China is top exporter of textile and clothing in world market. Countries like India have been waiting for 40 years for removal of multi-fibre agreement (MFA) to enhance its export in developed countries. The main objective of this section is to understand the implication of removal of MFA on India's textile and Table 5: Product-wise break up of Anti-dumping and Anti-subsidy cases against India till 2003 clothing industry, in one of major exporting countries, i.e. the U.S. market. It has been Product Anti-dumping cases Anti-subsidy cases carried out through trend analysis. Import statistics of the U.S. for first eight months Engineering including steel products 27 12 (Jan.-Aug. 2005) of 2005 have been collected and 15 compared with corresponding Textile and articles 4 period 2004. January to August 2005 is called post-MFA period in this sub-section. Drugs &of pharmaceuticals 15 4 U.S. global import of textile and clothing (as defined by Electronics 4 Harmonised System 2 of trade Rubber, plastic, glassware 10 classification system, and i.e.articles HS chapters 50-63) during Jan.-Aug. 2005, was8US $ 61.7 Consumeran industrial goods 9 billion increase of more than 9 per cent over Jan.-Aug. 2004. US total2 import of Agri. products 1 0 to Jan.the textiles has increased by 6.4 per cent during Jan.-Aug. 2005 as compared Total 82 32 Aug. 2004; while corresponding US import of clothing has noticed growth of 9.4 per Source: Government of India, Directorate of General of Anti Dumping and Allied Duties, Annual Report, cent (Table 6). 2002-03 U.S. import of textile and clothing from India increased from US$ 2.6 billion during Jan.-Aug. 2004 to 3.3 billion during Jan.-Aug. 2005, i.e. increase of 26.5 per cent in post-MFA period. Most of this increase was noticed in apparel sector. The biggest winner in the U.S. market (by countries) during post-MFA regime was China. US import from China increased from 9.6 billion $ during Jan.-Aug. 2004 to 15.5 billion $ - a big jump of 62.1 per cent in post-MFA regime (Fig. II). Significant growth of India and China in U.S. market shows that they have not only captured increased import demand of US, but also market of other countries (in the US). It is due to this reason that the share of China in the US global import of textile and clothing has increased from 17 per cent during Jan.-Aug. 2004 to 25 per cent during Jan.-Aug.

2005. Similarly, India's share in US market has increased from 4.7 per cent in Jan.Aug. 2004 to 5.4 per cent in Jan.-Aug. 2005 (Fig. III). There is a significant change in category-wise import basket of US textile and clothing sector during post-MFA period. Table 7 gives US import in Jan.-Aug. 2004 and Jan.-Aug., 2005 for top 10 imports segments of overall textile and clothing from (i) world, (ii) India, and (iii) China. The main object is to test whether India' export growth has been noticed in all the important segments of the US. The following observations can be made from this table: 1. All top 10 import segments of the U.S. belong to the apparel industry (Table 7). 2. U.S. global import demand for all these segments (except women and girls' blouses, shirts, etc. not knit or crocheted) has increased in post-MFA regime. 3. U.S. import from India has increased in all these top 10 segments in post-MFA regime. Similarly US import from China has also increased in all 10 segments. The percentage increase in US import from China was higher than that of India in all top 10 segments. 4. Higher growth of India and China in U.S. import for all top 10 segments show that the percentage share of these two countries has substantially increased in the post-MFA regime. However, level and growth of China in the U.S. market was significantly higher than that of India. The impact of the ATC on India's export of textile and clothing has been positive and increasing. This increase has been due to (i) increased import demand, and (ii) trade diversion of 'other countries' in destination (developed) countries. Further, the increase has not been restricted to a few commodities, but almost all commodities.

Conclusion

In the Uruguay Round, India and other developing countries took part in the multilateral trade negotiations in a comprehensive way. The impact of the WTO on India's trade policy has been very significant. Some concluding observations based on the findings of this paper are: 1.

India's imports of almost all quantities were subject to QRs for more than fifty years. In the WTO regime, India was forced to remove all types of quantitative restrictions on its imports. In other words, any importer in India, without any restriction, can import any commodity. It is all due to QR removal as per US dispute settlement with India under provisions of the WTO. 2. The negotiation process in WTO is not simple or easy. In the Uruguay Round India had bound number of important agriculture items like rice, maize, millet and sorghum etc., at zero per cent. Sudden sharp increase in import of these select items in QR-removal and zero-tariff regime made it necessary for India to re-negotiate (zero) bound tariffs of these items. India learned the negotiation tactics through such processes. India has been taking part in the present process of negotiations carefully with a pro-active agenda. 3. India's exports and imports have been consistently and sharply increasing since the past two decades. However, its export has been subject to large number of

Table 6: US Imports of Textile and Clothing in Pre - and Post-MFA, from World, India and China US Global Imports in Jan-Aug 2004

US Global Imports in Jan-Aug 2005

Growth, Global imports (%)

Overall Imports All Comm. 947531 1075464 Category wise Imports Textiles 7433 7914 % share in US Global Imports Clothing 49182 53819 % share in US Global Imports Textiles and 56616 61733 Clothing % share in US Global Imports Note: All figures are in US$ million. Source: World Trade Atlas.

US Imp. from India, Jan-Aug 2004

US Imp. from India, JanAug 2005

Growth of imports from India (%)

US Imp from China, Jan-Aug 2004

US Imp from China, Jan-Aug 2005

13.5

10153

12002

18.22

121486

152832

25.8

6.46

538.49 7.24 2105 4.28 2643

595.9 7.53 2747 5.11 3343

10.6

741.71 9.98 8858 18.01 9600

1008.4 12.74 14551 27.04 15559

35.9

4.67

5.42

16.96

25.2

9.43 9.04

30.54 26.49

non-tariff barriers, by its principal trading partners. More than 40 per cent of India's exports to the U.S. has been subject to at least one type of non-tariff

(US $ million) Growth of imports from China (%)

64.26 62.08

Table 7: US Import of 10 Top Segment of Textile and Clothing in Pre - and Post MFA from World, India and China HS Fig. II: US IMPORTS - ALL TEXTILES AND CLOTHING: Pre- & Post-MFA JAN-AUG 2004 & 2005 (US$ Billion)

56.6

60 US$ Billion

61.7 62.07

26.5 15.5

9.6

9.03

3.3

2.6

0 World

China JAN-AUG 2004

JAN-AUG 2005

India Growth in Post-MFA regime

Fig. III: SHARE IN US IMPORTS - ALL TEXTILES AND CLOTHING: Pre- & Post-MFA

JAN- AUG 2004 & 2005 30 25.2

Percent

15 10 5.41

4.7

5 0 China

India JAN-AUG 2004

YOY % Change

Description

US Global Imp in Jan-Aug 04

US Growth- US Imp. Global Global from Imp. (%) India, Jan-Aug Jan-Aug 05 2004

US Imp. Growth US Imp US Imp from India, Jan- in from China, JanAug 2005 imports China, Aug 2005 from Jan-Aug India (%) 2004

Top 10 Import Segments in USA 6204 WOMEN'S OR 8604 9464 10 309.91 GIRLS' SUITS, (3.6) ENSEMB ETC, NOT KNIT ETC 6110 SWEATERS, 7531 7977 6 152.34 PULLOVERS, (2.02) VESTS ETC, KNIT OR CROCHETED 6203 MEN'S OR BOYS' 5153 5740 11 118.46 SUITS, ENSEMBLES (2.30) ETC, NOT KNIT ETC 6109 T-SHIRTS, 2668 2874 8 36.14 SINGLETS, TANK (1.35) TOPS ETC, KNIT OR CROCHET 6205 MEN'S OR BOYS' 2142 2425 13 201.35 SHIRTS, NOT (9.40) KNITTED OR CROCHETED 6302 BED LINEN, TABLE 1939 2424 25 353.67 LINEN, TOILET (18.24) LINEN & KITCH LINEN 6206 WOMEN'S OR 1890 1883 0 291.53 GIRLS' BLOUSES, (15.42) SHIRTS ETC NOT KNIT ETC 6108 WOMEN'S OR 1501 1563 4 13.82 GIRLS' SLIPS, PJS, (0.92) ETC, KNIT OR CROCHET 6307 MADE-UP 1484 1546 4 52.98 ARTICLES OF (3.57) TEXTILE MATERIALS NESOI 6104 WOMEN'S OR 1354 1410 4 19.96 GIRLS' SUITS, (1.47) ENSEMB ETC, KNIT OR CROCH Note: All figure are in US$ million. Figures in parentheses represent share in US global imports of the segment.

(US$ million) Growth in imports from China (%)

515.67 (5.45)

1694.83 (19.70)

2876.95 (30.40)

187.07 (2.35)

958.24 (12.72)

1893.65 (23.74)

161.96 (2.82)

402.77 (7.82)

856.45 (14.92)

113

68.14 (2.37)

54.41 (2.04)

209.31 (7.28)

285

225.70 (9.31)

284.40 (13.28)

459.12 (18.93)

439.89 (18.15)

301.04 (15.53)

524.60 (21.64)

325.98 (17.31)

467.16 (24.71)

673.47 (35.76)

18.63 (1.19)

160.42 (10.69)

378.78 (24.24)

136

53.33 (3.45)

759.61 (51.19)

878.17 (56.69)

25.39 (1.80)

57.32 (4.23)

194.16 (13.77)

239

JAN-AUG 2005

and assist the development of the countries that were on the verge of gaining independence from centuries of colonial rule and domination. However, agreement could not be reached on the creation of the third institution, a world trade organisation. That had to wait for another 50 years; it was only after the Uruguay Round of trade negotiations that the international community agreed to set up the World Trade Organisation to regulate international commerce.

WTO and Pakistan: Multilateral Trading System Shahid Javed Burki

Introduction Pakistan has done less well in international commerce than most rapidly growing economies of Asia. Its share in world trade has declined over the years and it remains committed to developing external markets in the sectors in which, although it has comparative advantage, it faces stiff competition. This is the case with textiles. It is also concentrating a great deal on political and bureaucratic efforts in improving access to the textile and garment markets in the United States. However, these markets are subject to internal political compulsions and the preferences of a few large buyers that can be affected by perceptions about the security of supply. In other words, by choice Pakistan's exporters are operating in an extremely volatile environment. Could this be changed? Pakistan's approach to trade diplomacy was influenced by If Pakistan were to rely more on its the structure of its industry, unique agricultural endowment not necessarily by the longand the advantages presented by a term potential of the large and young workforce, its economy. If Pakistan were to rely more on its unique stance in international politics of agricultural endowment and trade would be different. the advantages presented by a large and young workforce, its stance in international politics of trade would be different. What should be this stance and how can it be developed within the context of the World Trade Organization, WTO? This article attempts to answer this question by providing a brief history of the evolution of WTO, the main issues being discussed in the WTOsponsored trade negotiations known as the Doha Round, the progress made between Doha and Hong Kong, the sites of the two main rounds of trade discussions and what is likely to happen since Hong Kong.

Creation of WTO: Global Economic System The multilateral financial, economic and trading system took half a century to form. The work on it began even after the Second World War was over and continued until 1995. In the first phase, agreement was reached to form two institutions each with a well specified objective. The International Monetary Fund was set up to ensure that the world would not suffer from the type of financial crises that did so much damage before the world went to war. The International Bank for the Reconstruction and Development was establishment to aid the rebuilding of war-torn Europe and Japan

That it took 50 years to create the third leg of the system to regulate economic relations among nations was not surprising. It was largely due to the reluctance of governments to accept some encroachment on their authority on matters relating trade. International commerce was too political a subject to be let into the control of a bureaucracy. However, by the mid-1990s, the process of globalisation had advanced sufficiently to lead to some worry that some aspects of it had to be subject to regulation. Accordingly, at Marrakech, Morocco, the world's major trading nations the European Union, Japan and the United States agreed to create a framework that would not only regulate trade but also create a mechanism for the resolution of disputes. Regulating trade meant essentially prescribing the tariffs that could be levied by the members of WTO and governing the use of non-tariff barriers to trade. The most important organising principle for WTO is the 'Most Favoured Nation' approach according to which access given to one country -- MFN -- had to be shared with all other. Members could not discriminate among themselves; however, some margin was left for giving 'favored treatment' to groups of countries. This is the way the countries regarded as 'developing' were allowed to maintain higher tariffs and other constraints on trade than allowed to developed nations. All countries that were the contracting parties of the General Agreement on Trade and Tariffs, GATT, were invited to become members of WTO as long as they signed the treaty concluded at Marrakech in the final round of the Uruguay negotiations. Those that had not joined GATT but wished to become the members of WTO had to agree to the conditions set by the existing membership. These could be extremely rigorous and took a long time to negotiate as happened in the case of China and is now happening in the case of Russia. A country such as Pakistan, having joined the GATT, was not subject to this additional conditionality. Once the WTO was up and running, it was clear that another set of negotiations was needed to smoothen out the various wrinkles that remained in the international trading system. Three of these were important. One, some of the sectors of vital interest to the developing world had been left out of the Marrakech treaty. Most important of these was agriculture. To bring this sector in line with other sectors, some of the protectionist policies pursued by the developed world had to be abandoned. This was politically not easy since the voting blocks in America, Europe and Japan that benefited from these policies had considerable political clout. Second, some of the rapidly growing developing countries now had a place in international commerce that did not justify the continuation of preferential treatment that was initially given to this group. Brazil, China, India and South Africa belonged to this group of countries. Third, some of the more rapidly growing parts of the global

economy were not under the purview of WTO. The ICT information and communication technology was foremost among these. To fill these gaps there was agreement among developed countries that a new round of trade negotiations had to be inaugurated. This was resisted by the developing world for as long as it was not promised what it termed as 'fairer treatment' in international commerce.

The Doha Round The Doha round of negotiations had an inauspicious beginning. The first attempt to begin the dialogue in 1991 ran into stiff resistance from a variety of non-governmental groups. They arrived at Seattle, the site of the meeting, determined to stop the start of a new set of discussions among worlds' trading nations. Those who were against the launch of yet another round of negotiations had several grievances. They ranged from the belief that the previous round -- the Uruguay Round -- concluded in 1995, created a world trading regime that was of no use for the world's poor. In fact, according to this line of thinking, the world trading order that resulted from the Marrakech Treaty created an un-level playing field, tilted away from the developing world. The tilt was particularly sharp in two sectors of enormous interests for the developing world, agriculture and textiles. There were also reasons for the opposition by the non-government organisations to another global trade round. Many people believed that by creating an elaborate system of international trade rules, the Marrakech Treaty provided considerable space to the large transnational corporations (TNCs) that dominated the world production system. This space was used to exploit the poor. Some NGOs that appeared at Seattle were concerned that the outsourcing of production that was resulting from the process of globalisation and had the support of the World Trade Organisation resulted in poor working conditions and low wages for the workers employed by the TNCs. Several other were troubled by the fact that the Uruguay process had provided considerable authority to the world's rich nations to protect patents or intellectual rights even at the cost of not providing cheap medicines to the sick in the developing world. For instance, the drugs needed for slowing down the progress of AIDs could be produced in the developing world at a fraction of the cost charged by the large pharmaceutical companies. This was demonstrated by some pharmaceutical companies in India who defied the rules and supplied cheap AIDs drugs to the poor countries of Africa. This could not be done more openly since any infringement of patents could be severely punished by the WTO. There were also NGOs who went to Seattle to make the point that the rules governing the international production system allowed considerable latitude to the TNCs to exploit physical resources in a way that caused grievous harm to global environment. These corporations had to be constrained and made accountable to the civil society since the world governments had failed to draw up a program for protecting the environment. For these and other reasons the demonstrations in Seattle turned violent and blood flowed in the streets of this attractive city on the America's west coast. The ministers who had assembled at Seattle slipped out of the

city without coming to any agreement. They met again at Doha, the capital of Qatar in November 2001. They succeeded this time in launching a new round for two reasons. The Qataris were able to use the limited access to their capital to keep out potential trouble makers from the city. And, the terrorist attacks of September 11, 2001 on the United States had convinced Washington that something quite significant had to be done to reduce the level of resentment that existed in the Muslim world against the West -- particularly against the U.S. There was a widespread feeling not only in Muslim countries but in all parts of the developing world that the global trading system discriminated against them. This discrimination had taken at least three different forms. The tariffs against the exports from the developing world were considerably higher than on the trade between developed countries. In some cases the use of tariffs was coupled with the use of quotas against the developing world's exports. This was the second cause of developing countries' resentment. The quotas were directed mostly at clothing and textiles. Even before the launch of the Uruguay Round, industrial countries had operated a system called the Multi-Fibre Arrangement, or MFA, that allowed limited exports of various items of textiles and clothing from poor to rich countries to come under quotas. The developing countries agreed to the conclusion of the Uruguay Round and the establishment of the World Trade Organization only after it was promised that the MFA would be phased out over a ten year period and by January 1, 2005 the MFA would be completely eliminated. This was done and the textile industry in the developing world began to quickly restructure and grow. The third area of unhappiness among the developing countries were the subsidies given by rich counties to their farmers and the constraints placed on developing countries' exports to the markets in rich countries. Under the European Union's Common Agricultural Policy (CAP), large amount of subsidies were given for the production of agricultural products, such as rice, sugar and dairy products, in which the developing world had a distinct comparative advantage. The United States also operated a farm support program in which the items entering world trade fetched relatively low prices because of the subsidies given by Washington. The subsidies to the cotton producers were by far the most important policy that had a negative impact on the incomes of farmers in the developing world. These unfriendly policies toward the developing world had one important consequence: they hurt the poorest people in the developing world. They hurt the semi-skilled workers employed in the developing countries' textile sector, a high proportion of whom were women. They hurt the poor cotton farmers of West Africa whose incomes fell because of the low price in the international market that resulted from cotton subsidies in the United States. They hurt those parts of the developing world in which farmers could produce such high value crops as fruits and vegetables for export to the high income markets but market access was denied to them for various reasons. Phyto-sanitary regulations regulations against plant products were the most often used non-tariff barrier to keep out exports from the developing world. It was the decision by the developed world -- the United States in particular -- that

the new round of negotiations would pay special attention to the demands of developing countries that led to the agreement to launch the Doha round. The United States, traumatised by the terrorist attacks on its territory on September 11, 2001 identified continuing slow growth, persistent poverty and deteriorating income distribution in the developing world as the reasons of the alienation of the youth and the direction of their anger at Washington. Trade, therefore, became one of the many weapons the United States was prepared to use in order to win over the hearts and minds of the people of the developing world. However, trade is one area where good intensions seldom translate into intended actions. The decision to focus the Doha round on the issues of interest to the developing world had the backing of economic theory. By addressing these issues, rich nations, wedded to the principles of free markets, would be removing a number of serious distortions in international trade that hurt the developing world. It was calculated by a number of individuals and institutions that by removing these distortions, the developed world would be transferring incomes to the developing world that would be many times more than the official aid they provided. By taking this step, rich countries would also be sending additional incomes directly into the pockets of the people. Administration of aid required governments as intermediaries and governments were often inefficient and corrupt. By allowing the poor to trade openly in world markets, incomes would flow to them without much intermediation. The World Bank estimated in a study published in 2002 that freeing international trade of all barriers and subsidies would lift 320 million people above the US$2 a day poverty line1. This could be achieved by 2015, the year set by the United Nations for achieving what were designated as the Millennium Development Goals (MDGs) by the world leaders in their 2000 summit held in New York2. The Bank's estimate was vindicated by William Cline, a highly respected economist who had worked in several think tanks, in a widely read book among the policy circles in the United States, Cline reached a higher figure 440 million of the number of people who would be helped by free trade, in particular free trade between poor and rich nations3.

From Doha to Hong Kong While the principles on which the Doha round was to proceed were supported by theory, politics had its own goals. Most developed countries found it difficult to overcome the opposition of the small number of people in their countries who would have been temporarily hurt by the removal of farm subsidies. Also opposed to the easing of some of the constraints were the influential pharmaceutical companies who were not prepared to lose their patents and reduce the price of their drugs even if that meant not delivering relief to the poor people facing certain death from such communicable diseases as AIDs. For these reasons, as the ministers planned their trip to Hong Kong, the site of the December 2005 ministerial meeting connected with the Doha round, there was not much hope of success. Pascal Lamy, the new Director General of WTO, feared that the Hong Kong meeting could result in a total impasse unless the ministers from the developed countries were prepared to make some commitments that would meet the goals of the Doha round when it was initially

launched. Pakistan did not go to Hong Kong with a great deal of hope. Humayun Akhtar Khan, the Pakistani commerce minister, had carved out good space for himself as a designated negotiator for G-20, a group of large and influential developing countries who by virtue of their size carry considerable weight in international trade matters. The group had worked hard to develop a common position which would have positive consequences for its members. Non-agricultural market access, or NAMA, was the area of greatest interest to this group of countries. But in pursuing this line, the G-20 faced two conflicting interests. There was the interest of the countries such as Brazil, the world's most efficient producer of agricultural products, to gain an even playing field in trade in agriculture, undistorted by subsidies and other forms of state assistance. If this were to happen, large agriculture exporting countries such as Brazil would most certainly benefit while countries such as Pakistan that had begun to rely on importing commodities such as cotton for providing inputs to a rapidly growing industry would pay a higher price for the needed raw materials. There was one another contentious issue the G-20 had to deal with. This concerned the willingness on the part of the developed world to permit duty free imports of textile and clothing from the least developed countries while levying heavy tariffs on the producers in the relatively more developed developing countries that included Pakistan. How to reconcile these opposing interests? How to ensure that the evolving global trading system moved forward even after the shaky push received at Hong Kong and that it would bring benefits to Pakistan which was only now, nearly sixty years after becoming a state, beginning to draw developmental benefit from international trade? What was the outcome of Hong Kong? The question has produced two answers. According to Professor Jagdish Bhagwati of Columbia University who is a leading exponent of multilateralism in trade, the summit was a great success. It was a success for the simple reason that it did not produce a deadlock among so many different trading interests represented at Hong Kong. Bhagwati was also pleased that one of the decisions taken at Hong Kong was the agreement to create a new global financing facility that would provide 'aid for trade'4. He had argued for the establishment of such a facility for a long time, suggesting that one way of appeasing the potential losers from the furtherance of multilateralism is to help them adjust to free and open trade5. Another view [to which the author subscribes] is that only small steps were taken at Hong Kong; the objective was to save the talks from collapse and hope that time will narrow the considerable differences that remain among important trading nations. This is unlikely to happen in the time available to the negotiators. These talks must be concluded by the end of 2006 since the authority given to President George W. Bush to negotiate a deal will expire in the middle of 2007 and is not likely to be renewed. Not much can be achieved in the short time that is available unless Europe, America and large developing countries are prepared to accept some fundamental changes in their trading systems.

How would Hong Kong's conclusions affect Pakistan? What was the position taken by Pakistan at the meetings and why did it differ from the one assumed by much of the developing world? Pakistan went to the trade summit with the belief that its economic future depends on its ability to create a larger market share in textiles and that in textiles the United States and the European Union will remain the dominant markets for many years to come. Both assumptions are questionable. It is not a sound economic strategy to put all economic eggs in the textile basket and it is equally imprudent to ignore the fact that the fastest developing markets in the world are in Pakistan's immediate neighborhood and not in distant Europe and America. Reading global economic trends from a static angle and not from a dynamic perspective is a big mistake. Looking at the world from the more dynamic perspective should have resulted in Pakistan pursuing a different approach at Hong Kong than the one it actually followed. Before indicating what should have been that approach, a quick account of the mini-steps that were taken at the meeting in order to save the talks from total collapse is essential. The previous rounds of negotiations had made significant progress in reducing the level of tariffs on industrial products particularly among developed countries. Developing countries were permitted to maintain higher tariffs in order to give them the time to prepare their industries for competition from rich countries. Before Hong Kong, there was pressure on more advanced developing countries to lower their tariffs, if not for the goods produced in rich countries, then at least for the products of less developed countries. There was a demand that countries like Brazil, China, India and South Africa that had well developed industrial sectors should grant preferential access to less developed countries. However, rich countries did not make much progress in further splitting the developing world. There was agreement that developed countries will not demand from the developing world more than they were prepared to give themselves. Rich countries, given the way they had handled trade in textiles and clothing for more than four decades were playing on a weak wicket. Developing countries forced them to concentrate their attention on the opening up of the sector of agriculture.

Moving Beyond Hong Kong After a series of all night sessions that engaged most of the ministers who were present at the meeting, Pascal Lamy was able to come out of Hong Kong with a declaration that provided nothing more than a hint of progress. The only achievement was to keep the talks alive. Another failure after the debacle at Seattle in 1999 and Cancun in 2003 would have killed the Doha round of negotiations and probably also killed the World Trade Organisation. The ministers made little tangible progress. Those representing developing countries were able to secure a promise from the developed countries that agricultural export subsidies would be abolished by end 2013. There was an additional promise that a substantial part of the subsidies would be scrapped before 2011 and that there will be a parallel elimination of indirect subsidies. The choice of the timetable was forced on Hong Kong by the budgetary cycle followed by the European Union. The EU now follows a seven year budgetary

cycle. Instead of going through the pain of agreeing on a budget every year, it adopts fiscal parameters every seven years. This was done at a summit of the EU leaders, held shortly before the meeting in Hong Kong which in itself is an indication that for Europe promoting integration in Europe has a much higher priority than promoting multilateralism in trade. The EU could have waited for the outcome of the Hong Kong meeting before setting its own budgetary policy. Instead it chose to dictate to the WTO its own timetable. Since the next round of budgetary talks will take place in Brussels only in 2012, the EU was not prepared to accept any WTO deadline that came before that time. Hence the choice by the EU of 2013 as the deadline for the removal of agricultural subsidies. Agricultural subsidies take several forms including export credits, food aid and trading through state enterprises. It was agreed that in the coming months, WTO member nations will agree on the value of indirect subsidies since at Hong Kong they were unable even to define state policies that could be described as subsidies. Governments pledged that they will also draw up a timetable for phasing out subsidies. The Europeans, led by France, had declared that any attempt to force them to drastically reduce subsidies could mean the end of the Doha round. At Hong Kong, the Europeans agreed to a three tier classification which placed them at the top, the United States in the middle and all other nations at the bottom. The members with the highest subsidies meaning the Europeans agreed to cut the trade distorting subsidies the most. Having agreed to this qualification, governments will need to determine the size of the cuts and to devise rules to stop them from reclassifying subsidies into categories that could shelter them from future cuts. This is an area in which Pakistan could benefit if it changed the structure of its economy to reflect fully its natural advantage. A multi-tier formula agreed at Hong Kong set bigger cuts in higher tariff, smaller cuts for 'sensitive' products produced in developed countries and exemption for 'special' products grown in developing countries. A mechanism was also agreed upon that would allow poor nations to raise duties in case there was a surge in imports following the implementation of the tariff structure at the conclusion of the Doha round. These agreements notwithstanding, a great deal of work remains to be done in 2006. WTO members must decide in the coming months on the size of tariff cuts and on the number and treatment of 'sensitive' and 'special' products. For a country such as Pakistan the Doha round must produce a sizeable market access for various fruits, vegetables and flowers it can grow for export to developed country markets. The Hong Kong negotiators dealt with the sensitive subject of cotton subsidies by giving concession only to African countries and to least developed nations but not to countries such as Pakistan. They agreed to eliminate subsidies in 2006 and grant unrestricted access to the countries in these two categories. The United States will further cut its $4 billion subsidy to cotton growers and also promised to reduce its farm support program for cotton producers.

Before they met in Hong Kong, WTO members had agreed to extend the deadline for the poorest countries to comply with intellectual property rules. Another concession to the least developed countries included giving market access to them for 97 per cent of their product lines. At the urging of Pakistan and some developed countries, textiles were included in the 3 per cent 'tariff lines' left over that would not have duty free access. As was to be expected, Pakistan's stance was not appreciated by the least developed nations who had gone to Hong Kong in the hope of gaining free market access for the entire list of their products. Before the Hong Kong meeting, there was agreement that talks will be intensified bilaterally between various groups of countries to liberalise trade in services. At Hong Kong, the Europeans pressed for liberalisation targets and that position was opposed by most developing countries that fear that their underdeveloped service industry would be swamped by such developed country institutions such as banks and insurance companies. Instead, developing countries want greater access for their workers to the service sector even on a temporary basis.

(Shahid Javed Burki is former Vice-President, World Bank and former Finance Minister of Pakistan)

End Notes 1. 2. 3. 4. 5.

The World Bank, International Trade and Global Poverty, Washington DC., 2002 Human Development Report 2002, (UNDP, New York: Oxford University Press, 2002). William Cline, Trade Policy and Global Poverty, (Washington DC.: International Institute of Economics, 2004). Jagdish Bhawati, 'From Seattle to Hong Kong', Foreign Affairs, (Special Edition, December 2005). Jagdish Bhagwati, In Defense of Globalization, (New York: Oxford University Press, 2004).

Conclusion The way Pakistan is approaching the WTO, it will benefit only marginally from what is likely to happen to the multilateral trade framework. The process begun at Hong Kong aimed at bringing trade in agricultural products into the multilateral framework was perhaps the most notable achievement of the trade talks. Pakistan adopted a different posture; it decided to pursue market access in textile as its main objective. As such it showed little interest in the development of trade in agriculture. To neglect the opportunities agriculture offers and to concentrate entirely on developing longdistance foreign markets in textiles is to neglect Pakistan's real comparative advantage in favor of a sector that is over-crowded with competitors and the development of which in Pakistan was the result of faulty policies adopted in the past rather than the exploitation of the country's real potential. I have also always found it hard to understand the strong protectionist sentiment in the developing world in the service sector. Instead of seeking protection and long periods of time for opening the sector, the developing world in particular the countries that have large and young populations, a category of countries that includes Pakistan should ask for opening the markets in the developed world for services such as airlines and shipping. As already indicated above, I believe that Pakistan should work harder to define its position in global trade talks in a way that helps it to secure a better access in agricultural products. It should spend less energy on improving access for textiles. In textiles Pakistan has considerable potential in the rapidly growing markets in Asia. For opening these markets it should focus on providing such regional arrangements as the proposed South Asian Free Trade Area, SAFTA, with greater substance than it presently has and to obtain better access to China in the context of the bilateral agreement on which it is presently working.

services, development dimensions and trade facilitation to assess the policy options for Sri Lanka in the run up to the possible conclusion of the Doha Work Programme (DWP) in 2006.

Sri Lanka's Trade Regime: Background

Sri Lanka and the WTO Doha Round Dushni Weerakoon and Jayanthi Thennakoon

Introduction Since the late 1970s, Sri Lanka has undertaken broad-based unilateral liberalisation in trade policy as part of a shift towards a more open economic policy regime. From the 1990s, the country also turned its attention increasingly towards regional and bilateral trade initiatives as a part of its drive towards integration with global markets. In the arena of multilateral negotiations, Sri Lanka has been a contracting party to the General Agreement on Tariffs and Trade (GATT) since 1948 and ratified the Marrakesh Agreement in 1994 to become a member of the World Trade Organisation (WTO). With the signing of the WTO agreement, Sri Lanka agreed to undertake the commitments of the Multilateral Agreement on Traded Goods, The General Agreement on Trade in Services (GATS) and the Agreement on Trade Related Intellectual Property Rights (TRIPS) including other Uruguay Round (UR) commitments and provisions such as Agreement on Agriculture (AOA), Agreement on Sanitary and Phytosanitory Measures and Agreement on Safeguard, Anti-dumping, Subsidies and Countervailing Measures. Trade liberalisation saw the rapid ascent of manufacturing exports, driven overwhelmingly by garments, replacing the dominance of tea in Sri Lanka's total merchandise export trade. Manufactured products accounted for nearly 78 per cent of total exports in 2004 while earnings from garments accounted for nearly 50 per cent of the country's total exports, with almost two-thirds destined for the U.S. market. The direction of Sri Lanka's trade shows that developed countries, dominated by the USA and the EU (32 per cent and 33 per cent of exports, respectively, in 2004) are the major export destinations whereas Asian countries, particularly developing countries, including India as the single largest source (18 per cent), are the major sources of imports. Expansion of industrial sector activity concurred with a decline in the share of agricultural in the country's GDP, but the latter nevertheless remains important in terms of its contribution to employment generation (35 per cent in 2004), particularly in the rural economy. The services sector has proven to be the most dynamic and has come to account for over 55 per cent of GDP in Sri Lanka. While the pace of Sri Lanka's reforms in the trade policy arena has varied over time, significant progress has been made in reducing tariff levels, eliminating virtually all quantitative restrictions and other para-tariffs. Unilateral reforms have typically outpaced Sri Lanka's multilateral commitments in key areas of agriculture, non-agriculture and services sectors. Nevertheless, the country faces critical issues under the Doha Round of negotiations of the WTO that are likely to have far reaching implications on its development goals that need careful consideration. This paper will examine the key areas of negotiations on agriculture, non-agricultural market access,

Sri Lanka initiated an economic liberalisation programme in 1977 with its adoption of open economic trade policies1. While substantial progress was made in liberalising trade by the mid-1990s, the liberalisation effort in general has tended to receive less attention since then (WTO, 2004). With the policy reforms, the existing import control regime was dismantled, with prohibitions maintained only for reasons of health, environment, security, etc2. while Sri Lanka has notified the WTO that it applies no quantitative restrictions (WTO, 2004). Tariff liberalisation was considered as a major component of the policy package introduced in 1977. The existing tariff structure was revised and simplified with progressive liberalisation of the tariff structure in the following years. While Sri Lanka proposed a move to a two-band structure in 2000, it has not been implemented due largely to revenue considerations and political pressure from interest groups (WTO, 2004). As Table 1 indicates, despite the existence of a three-band structure, there were eight bands in actual operation with most items, however, at two, ten or five per cent.

Table 1: Distribution of Tariff Bands (2003) Rate (%)

No of items % of total

Free

2.5

Specific

793 13

7522 24

1 -

820 13

1666 27

19 -

58 1

1260 20

46 1

Ad valorem specific 31 1

100

Source: Cuthbertson (2003).

Sri Lanka's tariff structure provides higher levels of protection for processed goods and raw materials than for semi processed goods and this pattern of protection has increased since 1998 as tariffs on certain inputs were reduced to assist specific sectors ( WTO, 2004). The average level of applied MFN tariff protection in Sri Lanka has declined substantially from 20 per cent in 1995 to 9.8 per cent in 2003 while the average tariffs remained higher for agricultural goods than for manufactured goods though the tariff rates declined over the period 1998 to 20033. Sri Lanka has no laws or regulations with regard to anti-dumping or countervailing actions. A draft law on antidumping (and countervailing duties) has been prepared, but is yet to be enacted. In addition, Sri Lanka has no laws or regulations relevant to safeguard measures. Sri Lanka has enacted intellectual property legislation, while in the case of sanitary and phytosanitory measures, it has a quarantine system in place to ensure that exotic diseases are not introduced through the implementation of livestock and livestock products.

Issues in Agriculture Negotiations Sri Lanka's agricultural sector comprises two sub-sectors, namely the export oriented plantation sector which is predominantly medium to large scale in operation and the semi-subsistence oriented non-plantation sector. The latter consists of the majority of rural small farms. While the contribution of Sri Lanka's agricultural sector towards GDP has declined consistently over the years to stand at only about 18 per cent, the sector remains important providing employment to about 35 per cent of the country's labour force. More than 75 per cent of the population is considered to be 'rural' based where livelihood opportunities are to be found mainly in agriculture and livestock related activities.

Therefore, Sri Lanka favors a method of 'harmonising' tariff reductions i.e., a formula that is designed principally to make steeper cuts on higher tariffs, bringing the final tariffs closer together. Sri Lanka's preferred option would be along the lines of the tariff reduction schedule proposed in the Harbinson's text which attempts to harmonise tariff structures by having a more progressive schedule where larger tariff cuts are mandated for higher tariffs. Sri Lanka's position therefore is that if tariffs are harmonised first, applying a linear formula thereafter is more appropriate.

As such, domestic agriculture has been offered the highest rates of tariff protection within the broader framework to progressively reduce overall tariff levels in the country. At present, domestic agriculture in Sri Lanka is subject to the top tariff band applicable of 35 per cent, relatively high applied tariffs (28 per cent), ad valorem, and specific duties. However, there are no export subsidies, nor a safeguard mechanism to offset any negative effect of import surges (Indikadahena, 2005). At the multilateral level, Sri Lanka committed to bind all its agricultural products at a tariff rate of 50 per cent at the Uruguay Round at a rate much lower than the rest of the neighbouring economies of South Asia.

Further liberalisation of agricultural products proposed under the DWP is a key area of concern to Sri Lanka. Given that Sri Lanka has bound its agricultural tariffs at a relatively lower level, further reductions of applied tariffs in the sector is not viewed favourably. It has been argued that the need is for increased rather than decreased support to agriculture, and freezing the current bound levels in order to maintain the required tariff protection to enable agriculture productivity and production growth (Indikadahena, 2005). Increased support to farmers in Sri Lanka is viewed to have negligible effects on 'distortions in the world agricultural markets'. The key arguments are based on the development aspects of agriculture sector such as food and livelihood security and rural development that may be very different from the needs of developed countries.

The primary focus of the WTO negotiations on the Agreement on Agriculture (AoA) has been to establish a 'fair and market-oriented agricultural trading system' through 'reduction in agriculture support and protection'. A firm outcome of the Hong Kong Ministerial was a commitment by the EU to eliminate all export subsidies on agriculture products by 2013, and agreement to adopt four bands for structuring tariff cuts, recognizing the concerns of relevant thresholds including those applicable for developing countries. Nevertheless, negotiations under the DWP based on the July 2004 package has left many unresolved issues, including market access (the formula, special products and special safeguard mechanism for developing countries, sensitive products mainly for use by developed countries); domestic support (the redefinition of the Blue Box, the need to control box-shifting, the reduction rates for the Amber Box subsidies); and export subsidies (phasing out of subsidies, the equivalent disciplines for export credits, etc.). As far as export subsidies are concerned, there is recognition that such measures increase the instability and viability of prices in the world agricultural markets, with serious effects on developing countries, while certain uses of export credits have negative effects on prices and competition in the world market. However, Sri Lanka as a net food importing country4, however, has accorded the highest priority to the market access negotiations of the AoA relative to the two other pillars of domestic support and export subsidies. An important element in the market access pillar that can impact on the effectiveness of S&D is the tariff reduction formula. While Sri Lanka should, ideally, have supported a linear formula, the difficulty is the current regime of high tariffs, given its own relatively low binding rate of 50 per cent on all agricultural products.

Therefore, Sri Lanka as a member of the G-33 group is opposed, in particular, to the idea of reducing tariffs on essential commodities. It is of the view that a 'stand alone' Special Products (SPs) category is needed for developing countries for their particular development needs as opposed to subsuming such products under the 'sensitive' product concept. It has been one of the countries spearheading issues of Special Products (SPs) arguing for a 'criteria based' approach, emphasising the flexibility of developing countries to declare a certain number of agricultural products as SPs where such products would be excluded from further tariff reduction commitments. As such, agreement was reached at the Hong Kong Ministerial to allow developing countries the flexibility to self designate an appropriate number of tariff lines as SPs based on the criteria of food and livelihood security and rural development. The G-33 has also strongly advocated the need to develop a Special Safeguard Mechanism (SSM) for developing countries, which is flexible and less cumbersome than the existing Safeguared Mechanism which can only be used on products that are tarrified. Given that Sri Lanka has no non-tariff barriers that are 'tarrified' and eligible for current SSM for developing countries has placed it at a distinct disadvantage, but its position is that there should be a SSM in place to deal with import surges. The Hong Kong Ministerial agreed to grant developing countries the right to have recourse to the SSM based on import quantity and price triggers.

Non Agricultural Market Access (NAMA) Industrial output accounts for over 26 per cent of GDP in Sri Lanka, providing

employment to about 21 per cent of the labour force. Sri Lanka is overwhelmingly dependent on the export of garments in its industrial sector and negotiations over the Agreement on Textiles and Clothing (ATC) arrived at under the Uruguay Round have tended to be the primary focus of its concerns in the multilateral arena. Like many other smaller garments exporting countries, Sri Lanka benefited from the Multi-Fibre Arrangement (MFA) that assured it of some degree of market penetration. While the longer-term outlook for the garments industry in the post MFA environment still remains somewhat unclear, Sri Lanka also has other concerns arising from the proposed non-agriculture market access (NAMA) negotiations. The scope of NAMA negotiations (the choice of tariff reduction formula or approach, the treatment of binding, the sectoral approach) as well as how to deal with preference erosion and non-tariff barriers remains complex. Developed countries favoured a simple Swiss formula which represents deeper cuts for higher tariffs while developing countries favoured a more flexible Swiss type formula. The latter argue that the simple Swiss formula does not take into consideration each country's development needs and reverses the principle of 'less than full reciprocity' by reducing the tariffs of developing countries more than those of developed countries. While there was intense disagreement on the nature of the formula, the agreement arrived at the Hong Kong Ministerial is to proceed on the basis of a Swiss formula with coefficients, which reduces or eliminate tariffs, tariff peaks, high tariff and tariff escalation, in particular on products of export interest to developing countries. The text has ensured the consideration of special needs and interests of developing countries through less than full reciprocity. It has also offered some flexibility for small and vulnerable economies. As in the case of many other developing countries, Sri Lanka's focus in NAMA negotiations is on the proposed formula approach for tariff cuts, tariff bindings, sectoral approach and non-tariff barriers. While Sri Lanka has unilaterally instituted significant tariff reductions in industrial products and therefore has a low applied rate, its bound coverage remains fairly limited at around 28 per cent, concentrated primarily in the textiles sector. Thus, for countries such as Sri Lanka where bound coverage is low but the applied rate is also low, a proposed tariff reduction formula such as the 'Girard formula' can have adverse implications. In order to avoid such pitfalls, Sri Lanka spearheaded moves to include a paragraph in the DWP text that allows a small number of developing countries not to undertake tariff reductions through the formula if their bound coverage is less than 35 per cent. Instead, they would be required to bind 100 per cent of their tariff lines at the average of bound tariff rates for all developing countries (estimated to be around 28.5 per cent). Another issue of concern to Sri Lanka in WTO negotiations on industrial products relates to the issue of erosion of preferences where special tariff concessions for imports from developing countries are granted by developed countries. Sri Lanka, for example, has been enjoying such preferences under the labour incentive of the Generalized System of Preferences (GSP) scheme of the EU since February 20045. Sri Lanka has, therefore, been offered deeper tariff cuts under the EU GSP scheme and has also qualified for the GSP Plus scheme of the EU since July 2005 which is

intended to benefit recipients over the next 10 years. Instances where preference erosion takes place includes elimination of preferences by import trading partners, expansion in the number of beneficiaries and the lowering of Most Favoured Nation (MFN) tariff rates without lowering preferential tariffs proportionately. Under NAMA negotiations, the latter is a cause of concern to Sri Lanka. Nevertheless, there is also a recognition that preferences already made can be easily changed due to their non-binding nature. Sri Lanka's primary concern, therefore, is more on MFN reduction than preferential erosion since the principle of MFN is designed to secure binding and fair conditions of trade.

Negotiations on Services Liberalisation The services sector has emerged as the most important provider of both output and employment in Sri Lanka. It has come to account for over 55 per cent of total gross value added and 44 per cent of total employment in the country. Trade in services in Sri Lanka is dominated by transportation, travel, computer and information services and other business services. Substantial liberalisation of services sector has occurred over the last two decades; the progress, however, has been made unilaterally than under the auspices of the GATS framework. Since, unlike for trade in goods, trade in services require the simultaneous liberalisation of both external and internal barriers to trade, the preferred mode of liberalisation has tended to be through a liberal foreign direct investment (FDI) regime permitting the commercial presence of service providers6. As such, Sri Lanka has removed most limits on foreign capital ratios except for a few specified sectors and instituted liberal foreign remittance regulations. Nevertheless, existing regulations applicable to areas such as residence requirements may inhibit commercial presence of service suppliers across most sectors. Sri Lanka also retains certain sector specific restrictions applicable to trade in services such as in the areas of professional services, establishment of local branch campuses or subsidiaries/partnerships with foreign universities/institutions, tourism and travel related services, financial services, etc. For example, some restrictions on the supply of financial services exist in accordance with provisions governing the Exchange Control Law; in the tourism sector, there is a 40 per cent limit in foreign investment in travel related services; and in transport, Sri Lanka maintains entry restrictions on FDI in the provision of freight forwarding and shipping agencies, etc. Unlike in other areas at the WTO, services negotiations are moving slowly since negotiations are based on bilateral 'request-offer' approach which takes more time. The July 2004 framework text agreed on a new deadline for improved offers in the area of services by end May 2005. However, there does not seem to be a strong commitment to undertake very ambitious liberalisation in this sector, as evidenced by the limited number and low quality of market opening offers that have been received by the WTO. Only 50 offers have been submitted so far, and if LDCs are excluded, there are 40 developing countries yet to make initial offers. The three most popular services sectors in terms of improved offers are the financial, telecom and business sectors. While developed countries are aggressively seeking to open up many sectors

in the developing countries, the latter for the most part remain cautious. Sri Lanka has made a series of commitments on several sectors of services under the General Agreement on Trade in Services (GATS) purview in the areas of tourist and travel related services, financial services such as banking and insurance, and in telecommunications. Under the Uruguay Round, Sri Lanka made specific commitments only under the area of tourism. Subsequently, it participated in the extended negotiations on basic telecommunications and financial services and accepted the GATS Fourth Protocol (basic telecommunications) and Fifth Protocol (financial services) in 1997 and 1999, respectively7. As far as on going negotiations are concerned, Sri Lanka has expressed its concern for flexibilities that GATS offers under the request-offer approach and gradual opening up of the sector on the basis of a country's comfort level. Sri Lanka has submitted its request list to 18 countries mainly in professional services, computer related services, health related and social services, transport services and services auxiliary to all modes of transport (Kelegama, 2006). There is also a significant lobbying by developing countries to make developed countries open up their professional services. Sri Lanka's primary focus in GATS negotiations like many other developing countries is to pursue progress in developed countries' commitments in Mode 4 (movement of natural persons)8. Sri Lanka attaches importance to rule making in services, viz. emergency safeguard measures, subsidies and government procurement. The country, therefore, would be offensive on Mode 1 and 4, which are vital in terms of development aspect of Sri Lankan economy but be defensive in safeguarding its underdeveloped services (Kelegama, 2006). A request for a new negotiating approach ('alternative complementary methods') was widely viewed as 'benchmarking' asking countries to commit themselves to liberalisation in a list of sectors of major economic value. Many developing countries, including Sri Lanka, are of the view that the existing methods are adequate given their concern that the new proposed approach may compromise the flexibilities that the developing countries now have in the GATS over the sectors and pace for liberalisation. Nevertheless, the text of the Hong Kong Ministerial agreed on a plurilateral approach to 'complement' the bilateral request-offer approach, although some ambiguity remains on whether it is mandatory for members to enter into plurilateral access negotiations if requested to do so. Member countries also agreed to give particular attention to sectors and modes of supply of export interest to developing countries.

Development Dimensions In development issues, the core of the problem is S&D treatment for least developed and developing countries. The proposals forwarded by developing countries are mainly related to implementation issues, enhanced market access and flexibility in rules and capacity building commitments. While Sri Lanka's overall position also reflects the same concerns, there is increasing disillusionment that developing countries have benefited very little from

S&D provisions, partly as a result of their non-binding nature. Sri Lanka's interests in pursuing S&D treatment has waned as a result. It has been recognized that the increasingly divergent status of 'developing countries' as a group has complicated efforts to find common ground and to insist on such provisions from developed countries. Developed countries have stymied efforts to design what they view as different sets of rules on the basis that the Uruguay Round established a single rule approach. Such differences of opinion have slowed down the progress of S&D negotiations with hardly any achievements being made. One of the primary concerns to Sri Lanka in development issues is the necessity of flexible policy space for the country to address its development needs. Sri Lanka is, therefore, increasingly pursuing the view that negotiations on S&D treatment should take into account the different development needs of countries and 'differentiate' them accordingly rather than placing the emphasis on 'special' provisions9. Such an approach, it is hoped, would ensure that commitments are consistent with individual development needs and capacities. In addition, the slow moving progress delays the entire process of developing countries' concerns at WTO negotiations. Therefore, it is Sri Lanka's view that clarifications and procedures should be updated to extend beyond the initial definitions and ensure a new mechanism for addressing developing country concerns. It was agreed at the Hong Kong Ministerial to reaffirm the provisions for S&D treatment and to complete the task set at Doha as an integral part of the WTO agreements. Also, members agreed to review the progress of S&D provisions in order to make them more precise, effective and operational. The key elements of the Hong Kong Ministerial in addressing development issues was with regards to providing duty and quota free access for LDC products to developed countries' markets. In pursuing the issue of fair market access for its exports, Sri Lanka is of the view that such a package should also be extended to other vulnerable economies, particularly those that would be adversely affected by such expanded concessions to LDCs. In particular, a major concern would be with regard to expanded concessions in the area of garments exports. In this context, the final agreement was to lower the product coverage for duty free treatment to 97 per cent of products, allowing the exclusion of some tariff lines. While this may prove to be advantageous to Sri Lanka, it is likely to be of limited benefit to LDCs if products of export interest to them (such as garments) are excluded.

Trade Facilitation The rapid growth of international trade in recent years, and with it the relative importance of border procedures, has added to the transaction costs involved in the movement of goods across borders. In this environment, unnecessary or overcomplicated trade procedures and requirements can mean a significant cost for both businesses and governments. For businesses, border-related costs are both direct, such as expenditures related to supplying information and documents to the relevant authority, and indirect, such as those arising from procedural delays, lost business opportunities and lack of predictability in the regulations. Costs to governments include potential loss of revenue collection and smuggling problems, as well as

difficulties in implementing trade policy. Inefficient border procedures may also lead to poor export competitiveness and make the country less attractive to investment, limiting the potential to fully participate in global trade expansion. From the inception of trade facilitation as a separate issue (added to the agenda at the WTO Singapore Ministerial Meeting in 1996), developing countries have not shown enthusiasm to negotiate a multilateral agreement of trade facilitation commitments. While some developing countries have even suggested that trade facilitation remain a national, bilateral or regional concern, others have asked that the agreement if members insist on creating standards through the WTO be a list of voluntary guidelines, or an agreement based on capacity building, rather than a legally binding rule-based agreement. Nevertheless, trade facilitation is the only one of the four original 'Singapore issues' to have survived in the DWP. The work plan under the July Framework aims to clarify and improve relevant aspects of certain WTO articles relating to trade facilitation. The July Framework has also recognised the need for S&D treatment for developing and least developed countries, support for capacity building and infrastructure development, and addressing concerns related to cost implications of proposed measures. Sri Lanka has been progressively implementing measures aimed at improving its trade facilitation related infrastructure and regulatory environment (WTO, 2004). It has from the outset made apparent its broad acceptance of some of the trade facilitation principles and potential benefits. In fact, Sri Lanka was the only developing country to take the floor in support of accepting trade facilitation on the negotiating agenda at the WTO Cancun Ministerial in 2003. Sri Lanka too has extended strong support to the developing country position that proposals tabled so far have failed to contain any definitive S&D treatment, financial or technical assistance components as mandated by the July Package.

Conclusion The Uruguay Round had an in-built agenda for further negotiations on agriculture and services. However, it was perceived that negotiating them in isolation would not lead to much progress and a more wide ranging Doha round was launched as a result, with a particular focus on 'development'. On the substance of issues leading up to the Hong Kong Ministerial, there was a clear difference of perception between developed and developing countries on the nature and effects of the WTO rules and what the DWP is supposed to achieve in terms of balance and development goals. In particular, there are differences of basic perspectives on agriculture and NAMA, and the lack of any progress so far on the development issues of S&D treatment and implementation. Developing countries generally view the existing rules in the WTO overall to be imbalanced against their interests. They want a re-balancing of existing rules to take place, and to have a strong development dimension in the new agriculture, NAMA and services negotiations. However, developing countries are also increasingly finding very divisive issues within their ranks. The differences in ambitions and needs are very wide as evident from the differentiated groups newly acceded countries, small and vulnerable

economies, low income economies in transition, etc. that are emerging. In that context, there is some degree of fluidity in groupings on an issue-by-issue basis. Given Sri Lanka's relatively long history of an open liberal economic policy regime, the country's engagement in the WTO process has drawn little overt antagonism unlike in many other developing countries. The country has also tended to move faster in the unilateral sphere, and now increasingly under bilateral/regional initiatives, than it has under the multilateral framework. Nevertheless, given the binding nature of WTO commitments, Sri Lanka's negotiating position holds significant implications for the development goals that the country sets for itself. The primary aim is to achieve a 'balanced package' at the end of the DWP. It remains to be seen whether it is possible to agree to full modalities on agriculture and NAMA by end April 2006 as agreed in the Hong Kong Ministerial text without substantive agreement in other areas that have been left largely without clear deadlines.

(Dushni Weerakoon is Deputy Director & Fellow, Institute of Policy Studies of Sri Lanka (IPS), Colombo and Jayanthi Thennakoon is Research Assistant, Institute of Policy Studies of Sri Lanka (IPS), Colombo)

End Notes 1. 2.

3. 4. 5. 6.

7. 8.

These policy reforms have been well documented. See Lal and Rajapatirana (1989), Cuthbertson and Athukorala (1991), Athukorala and Jayasuriya (1991). The Special Licensing Scheme (SIL) was introduced on grounds of national security, health and environments as well as 'economic' reasons in place, and in 2003, only 474 items at 8digit-level were subject to import licensing (WTO, 2004). The simple average tariff for agricultural goods was 21.3 per cent while non agricultural products have been protected by an average tariff of 8 per cent in 2003 (WTO, 2004). The concern for affected parties in the process of agriculture liberalisation has been annexed to the Marrakesh Protocol to the GATT 1994. Sri Lanka has been eligible for the special social clause concessions due to ratifying and adhering to International Labour Organization (ILO) Conventions as required by the EU. In April 2002, for example, Sri Lanka announced new sectors open to foreign investors (even up to 100 per cent of equity capital). These included sectors such as construction of residential buildings and roads, supply of water, mass transportation, production and distribution of energy and power, professional services, and permitting branch or liaison offices of companies incorporated outside Sri Lanka. Sri Lanka adopted the Reference Paper on Regulatory Principles as an additional GATS commitment. Bilaterally, Sri Lanka is pursuing liberalization in services for the first time under the proposed Comprehensive Economic Partnership Agreement (CEPA) currently under negotiation with India. For example, Sri Lanka has been pursuing the recognition of the special development needs of small, vulnerable economies without, however, creating a sub-category.

References l P. Athukorala and S. Kelegama, 'The Uruguay round Agreement on agriculture: Implications for Sri Lanka', Colombo: Institute of Policy Studies of Sri Lanka: Research studies: Agricultural Policy Series No. 4. , 1996) l P. Athukorala and S. Jayasuriya, 'Macroeconomic Policies, Crises, and Growth in Sri Lanka, 1969-90', (World Bank, Washington, D.C.: World Bank, 1991)

l S. Cuthbertson, 'Tariff and Trade Policy Framework for Sri Lanka in 2003', a draft report prepared for a policy seminar for officials and representatives of chambers, Colombo, 21 August, 2003. l S. Cuthbertson and P. Athukorala, 'Sri Lanka', D. Papageorgiou et. al (Eds.), Liberalizing Foreign Trade, (Oxford: Basil Blackwell, 1991) l G. Indikadahena, 'Agriculture and Poverty Sri Lankan Perspective', paper presented at a seminar on 'Trade, Development and Poverty Dialogue', organised by the Law and Trust Society (LST), Colombo, 21 November, 2005. l S. Kelegama, 'WTO Hong Kong Ministerial Outcome and Sri Lanka', paper presented at a seminar on 'Achievements at the Recent WTO Ministerial Conference in Hong Kong' organized by the National Chamber of Commerce of Sri Lanka ( NCCSL), Colombo, 24 January, 2006. l D. Lal and S. Rajapatirana, Impediments to Trade Liberalisation in Sri Lanka, (London, UK: Trade Policy Research Centre, 1989). l World Trade Organization (WTO), 2004, Trade Policy Review: Sri Lanka: Report by the Secretariat, WT/TPR/S/128 (http://www.wto.org/english/tratop_e/s128-0_e.doc)

Table 2: Selected Macroeconomic Indicators: 1980-2004 Unit

1980

1990

2000

Dr Karin Astrid Siegmann

1. Economic Integration, Stagnating Gender Equality? During the high-level meeting in Hong Kong, WTO member countries discussed issues ranging from abolishing agricultural export subsidies and industrial tariff reduction, and market access for foreign banks and telecom providers. The human face of trade and investment flows, however, is often hidden behind economic statistics and legal formulations. This human face is gendered: Globalisation has meant different things for women and men.

2004

Sectoral composition of GDP Agriculture Industry Services

% of GDP % of GDP % of GDP

27.5 28.6 43.8

26.3 24.7 48.9

20.1 26.3 53.6

17.9 26.5 55.7

Employment by industry Agriculture Industry Services

% of total % of total % of total

45.2 14.1 40.6

46.8 14.8 34.5

36.0 23.9 40.8

34.1 21.4 44.5

Exports Total exports Agricultural exports Industrial exports Textile and garments

% of GDP % of exports % of exports % of exports

26.4 61.8 33.0 14.3

24.7 36.3 52.2 31.6

33.4 18.1 77.5 54.0

28.7 18.5 78.2 48.8

Imports Total imports Consumer goods Intermediate goods Investment goods

% of GDP % of imports % of imports % of imports

51.0 29.9 45.7 24.0

33.5 26.4 51.8 21.7

44.2 19.0 51.8 23.6

40.0 20.2 58.0 20.9

Source: Central Bank of Sri Lanka, Annual Report, various issues.

Gender and Globalisation in South Asia

'Globalisation' refers to a process of progressive integration of economies and societies, driven by new technologies, new economic relationships, and national and international policies The notion of 'gender' refers (World Commission on the Social Dimension of to socially constructed roles Globalization, 2003). The formation o f and socially learned transnational entities, behaviours and expectations such as the WTO, and also the rise in t r a n s n a t i o n a l associated with females and operations of private corporations a r e males. Gender equality as a examples of such new economic relationships. universal goal is enshrined in Policies implemented from actors outside the various international national realm, such as stabilisation a n d declarations. The Millenium structural adjustment programmes (SAPs) Development Declaration implemented by International Financial (2000) reaffirmed the Institutions (IFIs) since the beginning of the primacy of gender equality as 1990s were further c a t a l y s t s o f development goal. globalisation (BenerĂa, 2002). These policies were relevant for several South Asian countries such as India, Pakistan, Nepal, and Bangladesh who speeded up their integration with the world economy since the beginning of the 1990s (MHHDC, 2002; Khan, 1999). Most South Asian countries took significant steps to open their economies for trade and investment in the beginning of the 1990s2. Sri Lanka had already taken the course of liberalistaion of economy int he late 1970s. Tariff rates for imports can serve as an approximation for the difference between domestic and world market prices. According to this indicator, South Asia has become more integrated into the world trading system, as tariffs fell significantly throughout the 1990s from initially very high levels. Similarly, South Asian trade to gross domestic product (GDP) ratios have risen between the 1980s and 1990s. Regional exports almost doubled during the 1990s as compared to the previous decade. Whereas the share in manufactured goods

Table 1: Economic globalisation in South Asia, selected indicators 2003 Exports of goods and Services (% of GDP) Bangladesh 14.21 Bhutan .. India 14.48 Maldives 85.17 Nepal 16.65 Pakistan 20.48 Sri Lanka 35.77 Source: World Bank (no date)

Foreign direct investment net inflows (thousand current US$) 102472 200 4269000 13505 14778 534000 228720

increased in the same period, a large portion of it remains in labour-intensive goods such as textiles and clothing (T&C) across South Asia (MHHDC, 2002). Put in global perspective, however, the degree of integration into the world economy is relatively low as compared, for example, with Southeast Asia or Latin America. A gender dimension in this tighter integration is commonly noted in the margin. The notion of 'gender' refers to socially constructed roles and socially learned behaviours and expectations associated with females and males (World Bank, 2001). Gender equality as a universal goal is enshrined in various international declarations. More recently, the Millenium Development Declaration (2000) reaffirmed the primacy of gender equality as development goal (Tran-Nguyen, 2004). Despite the recognition of gender equality, little progress has been made in achieving this goal, particularly in South Asia. Varying between 15 and 20 percentage points, the gender gap in education remains significant in most South Asian countries (Table 2). With an average of 37.4 per cent in 2003, South Asia is characterised by the second lowest female labour force participation rate world-wide after the Middle East and North Africa. They hardly increased during the past decade (ILO, 2004). Even in a country that has been praised for its implementation of labour legislation like Sri Lanka, including non-discriminatory remuneration, women workers in manufacturing only earn 81 per cent of men's average wages (UN DESA, 2006). Resultantly, India, Nepal, Bangladesh, and Pakistan rank 99th to 107th on the gender development index (GDI) and thus at the bottom of the distribution. Sri Lanka forms an exception with a rank of 66 (UNDP, 2005a).

Table 2: Gendered youth literacy rates in South Asia, 2003 Female Male Bangladesh 41.1 57.8 Bhutan .. .. India 67.7 84.2 Maldives 99.2 99.1 Nepal 60.1 80.6 Pakistan 53.9 74.8 Sri Lanka 96 95.1 Source: Genderstats (no date) Note: Youth literacy rates (% of people aged 15 -24)

Tran-Nguyen (2004) relate this situation to gender-related social norms that (for e.g.) associate reproductive work3 with women and serve as barriers to their economic participation on equal footing with men. It is compounded by male authority at home and in the workplace that weakens women's bargaining power. This article tries to answer the question if and how global economic integration has influenced and interacted with gender imbalances in South Asia. The focus hereby is on indicators related to the labour market such as employment opportunities, wage equality, working conditions, as they can be assumed to be affected most directly by intensified trade and investment flows. The next section presents theoretical approaches and empirical evidence regarding the globalisationgender interface. Examples from the South Asian experience are then provided in the third section. Section four concludes with a summary and recommendations for a globalisation that benefits gender equality and women's empowerment.

2. Gender and Globalisation -- Theory and Experience Does globalisation marginalize or empower women? Although different types of economic players, such as buyers, sellers, savers, and investors are identified in macro-economic theory and policy-making, they do not refer to the basic social category of gender. They implicitly assume that policy measures affect women and men equally (Randriamaro, 2005; Corner, 1996). In reality, trade policies may affect women and men differently due to gender inequalities in access to and control of economic and social resources and decisionmaking. Their impact is also mediated by the different roles that women and men have within societies in particular, the gender division of labour (Randriamaro, 2005). In order to analyse trade-gender effects and interactions, the different roles of women and men need to be kept in mind. They may differ across regions and sectors, yet, some general features of women and men's economic roles can be identified4. The most significant gender difference is the strong influence of reproductive work on labour market decisions of women as compared to men. It results in lower participation rates, higher labour turnover, employment and wage discrimination, as well as a high concentration of female as compared to male workers in unskilled, informal, and unpaid occupations across economic sectors. Occupational and sectoral segregation is particularly pronounced in South Asia where cultural norms in a number of countries prescribe a separation of female and male work environments. According to Tran-Nguyen (2004), trade and investment flows can be associated with gender equality in different ways: First, they can have a positive or negative impact on growth and employment opportunities for women and men. Second, they may induce competitive pressures, which may reduce or encourage gender discrimination in terms of access to employment or regarding wage differentials. Third, they may facilitate or raise barriers to access resources and services by women and men; and finally, multilateral trading rules may facilitate or

constrain governments in applying policies or regulations that address gender inequality.

food aid, or disaster relief. These are important areas where existing social and economic biases against women may call for specific public intervention. For instance, there is a significant bias in many countries against the provision of extension services to women farmers that may need to be addressed. Furthermore, specific support for fertilisers, seeds and water may be critical for small subsistence and women farmers. The objective of the General Agreement on Trade in Services (GATS) is to assist the freer flow of services across national borders - from postal delivery via tourism to medical advice. Indiscriminatory treatment of foreign service providers, socalled national treatment, according to WTO rules inhibits provision of support for domestic providers who behave in a way that enhances women's empowerment and gender equality. However, the GATS does not require its members to extend unconditional national treatment to all its trading partners. There are no restrictions on the number of types of conditions, which may be attached to national treatment conditions. A requirement, for instance, that a foreign university setting up a branch in Karachi applies a minimum quota for female students would thus be perfectly legitimate.

3. Gendered Face of Globalisation During the period of tighter integration of South Asia into the world economy, South Asian women's involvement in the paid labour force has not increased significantly (Figure 1). Whereas the female labour force participation rate is comparatively highest in Bangladesh, it has not changed much since the beginning of the 1990s. Significant increases can be observed in Pakistan only, from a very low initial level of about 30 per cent.

Across South Asia, women are perceived as home-makers, i.e. in charge of reproductive activities. Apart from that, agricultural work is most common for female employment. As can be gauged from Figure 2, up to 94% of the female workforce in Nepal are involved in agricultural work, also reflecting the lack of diversification of the mountain kingdom's economy. However, a large proportion of this work is not remunerated. In Pakistan, for example, more than half of all employed females above 10 years as compared to about

one third of males are employed as unpaid family helpers in agriculture (Federal Bureau of Statistics, 2003). Yet, in Sri Lanka, the majority of women work in the plantation sector (MHHDC, 2000). Their employment is thus both remunerated and directly tied to the world economy. Technological change through the 'Green Revolution' did not provide an encouraging example of globalisation's impact on women in South Asian agriculture. The adoption of high-yielding varieties (HYV) of rice and wheat in India and large parts of Asia depressed landless labourers wages, many of whom are female, and replaced female post-harvesting work - a traditional area of female wage employment. This may have offset any gains made by increasing employment due to the introduction of HYV technology packages (FAO, no date). Seasonal cotton-picking in Pakistan is almost exclusively done by women and girls. The increase in cotton production at an annual growth rate of 14% in the latter half of the 1980s is likely to have caused a tremendous rise in the demand for female wage labour (Kazi, 1999). However, recent research shows that they did not benefit from liberalisation in textiles and clothing trade in terms of better wages and working conditions (Siegmann, 2006). In Bangladesh, the area under commercial shrimp farming has tripled between the 1980s and 1990s, the largest share of the produce is exported to northern markets (Rahman, 1999). Activities related to shrimp farming are dominated by female employment. Globalisation here meant employment creation for women. Women are also strongly involved in marine food export processing in India where workers are commonly young, unmarried migrants. Wages in this sector are higher than agricultural The employment given them financial Figure 1: Labourwages. force activity rates in South has Asia,thus selected countries 1991-2002independence (% female) and a chance to improve their standard of living, however, often at the cost of their health (Jha, 2005). Shiva (1996), on the other hand, highlights the gendered costs of 80 the rise of Indian marine exports. She stresses that women in fishing and farming 70 communities suffered most through the expansion in shrimp farming as it was chiefly female-dominated jobs in fisheries and agriculture that were replaced. Similarly, in 60 the Maldives, when exports of marine products increased between 1977 and 1990, Bangladesh 50 women's participation declined from 62 per cent to 20 per cent (Shiva, 1996).

Figure 2: Gendered employment in South Asia by major sector (%) 100 90 80 70 60

Agriculture

Industry

Services

30 20 10 0 BD-M BD-F I-M

I-F

N-M

N-F

P-M

P-F

SL-M SL-F

Source: MHHDC (2000) Note: BD=Bangladesh (1996 data), I=India (1994), N=Nepal (1996), P=Pakistan (1997), SL=Sri Lanka (1995), F=female, M=male

significant textile rather than garment production, whereas Bangladesh and Sri Lanka specialise in garment manufacturing.

India

Significant opportunities have become available for women inPakistan South Asia's 30 Sri Lanka(T&C) low-technology manufacturing industries such as the textiles and clothing industry (MHHDC, 2002). This process has paralleled the export-oriented 20 development path, South Asian countries embarked on, mainly since the 1990s. 10 Therefore, within South Asia, differences in gendered manufacturing employment often have to do with the structure of the T&C sector. Pakistan as well as India display 0 a relatively low share of 1995 female in 2000 the T&C industry due to a more 1991 1992 1993 1994 1996employment 1997 1998 1999 2001 2002

Source: World Bank (no date)

Box 1: Women's employment and empowerment in Bangladesh's export manufacturing Bangladesh's exports of ready-made garments have experienced exceptional growth since the mid-1980s. The country developed its clothing sector in the shadow of the quota system in T&C trade. In 2002, Bangladesh was the seventh largest supplier of

ready-made garments to the USA and number nine for the EU market (Nord책s, 2004). Growth of the sector has gone hand in hand with employment creation for

cash income, the move from unpaid farm work to income-generating work outside agriculture implies better working conditions in terms of hours of work and physical strain. Indirectly, the risen income in their community has led to the investment of time-saving technologies such as water pipes, toilets, and rice-mills. The availability of these facilities helped especially to reduce women's workload. However, it is mainly the relatively well-to-do who have benefited. Due to cultural and legal constraints, the majority of migrant workers from India, Pakistan, Nepal, and Bangladesh are men (Kaspar, 2005; Oishi, 2002). Whereas in the late 1970s, migrant workers from Sri Lanka were only a small stream, it had swollen to nearly a million by 2002 (Tran-Nguyen, 2004). Almost 80 per cent of them are female (Oishi, 2002). Female domestic workers in households of the Middle East form a large portion of these migrants. They make an important contribution to the nation's foreign exchange earnings and to family resources, but at considerable cost to themselves and with minimal improvement of their position (Fontana, Joekes and Masika, 1998). Indirectly, male migration abroad, in particular to the Middle East, has led to a feminisation of agriculture, e.g. in Pakistan (MHHDC, 2000; Kazi, 1999).

Figure 3: Female workers in paid employment in the South Asian T&C industry (% of total T&C workforce) 90 90

Conclusions

80 70 60 60 50 40 30 30 20

10 0 Bangladesh

Sri Lanka

Nepal

Pakistan

Sources: Siegmann (2005a)

As many developing countries, South Asian nations compete for foreign investment in order to create employment, overcome foreign exchange constraints and to upgrade technologies. But the efforts to become competitive often hurt the social sectors first. It is most often these sectors that face budgetary reductions when liberalisation policies are implemented. Such cuts in social spending are likely to hit poor rural women the hardest who already have limited access to education and health facilities (MHHDC, 2002).

The presentation of examples across South Asia mirrors the inconclusive theoretical and international evidence regarding the interface between globalisation and gender equality. Theoretical approaches regarding gender and globalisation are still in a nascent stage and cross-country studies few. Moreover, no systematic investigation into the interrelationship between globalisation and parity between the sexes has been undertaken in the South Asian context. Therefore, obviously, generalisations are inappropriate. Any empirical analysis has to take country- and sector-specific features into account. Even then, an assessment of the costs and benefits of globalisation for gender equality in South Asia might still depend on the aspect of gender equality investigated. An increase in relative female employment, for example, might be paralleled by worsening health indicators.

India

Having said that, some commonalities can be identified in the South Asian experience outlined above. In agriculture, the concentration of female farmers in labour-intensive activities with little utilisation of technology has led to a replacement of women's work where more capital-intensive techniques were introduced, such as through the 'Green revolution'. Conversely, where labour-intensive primary subsectors were stimulated through globalisation, for instance in cotton-picking and shrimp farming, women were recruited on a preferential basis.

Sustainable Development and Gender, Geneva 12-13 July 1999). New York and Geneva.

A similar pattern can be noted in the manufacturing sector. New avenues for

l Federal Bureau of Statistics Government of Pakistan (2003): Household Integrated Economic Survey (HIES) 2001-2002. Islamabad, Available at: http://www.statpak.gov.pk/depts/fbs/statistics/hies0102/hies0102.html. l M. Fontana, S. Joekes and R. Masika, (1998): 'Global Trade expansion and liberalisation: gender issues and impacts', BRIDGE Report No. 42., 1998. Brighton. Available at: http://www.bridge.ids.ac.uk/reports/re42c.pdf. l Food and Agriculture Organisation of the United Nations (FAO) (no date): Women and the Green Revolution. Available at: http://www.fao.org/FOCUS/E/Women/green-e.htm. l Genderstats (no date): Database of gender statistics. World Bank. Available at: http://devdata.worldbank.org/genderstats/home2.asp?cty=AFG,Afghanistan&hm=home2. l D. Gurung, Tourism and gender. Impact and implications of tourism on Nepalese women. (Kathmandu: International Centre for Integrated Mountain Development (ICIMOD) Discussion Paper No. MEI 95/3, 1995. l Promoting fair globalization in textiles and clothing in a post-MFA environment. Geneva: I L O , 2 0 0 5 ) . A v a i l a b l e a t : http://www.ilo.org/public/english/dialogue/sector/techmeet/tmtc-pmfa05/tmtc-pmfar.pdf. l Global employment trends for women 2004. (Geneva: ILO, 2004). Available at: http://kilm.ilo.org/GET2004/DOWNLOAD/trendsw.pdf. l V. Jha, 'Trade and Gender. Evidence from South Asia', Trade Insight 1 (2), 2005, pp. 31-33. l N. Kabeer, 'Globalization, Labour Standards, and Women's Rights: Dilemmas of Collective (In)action in an Interdependent World', Feminist Economics 10 (1), pp. 3-35, 2004. l H. Kaspar, (2005): 'I am the Household Head now!' Gender Aspects of Out-migration for Labour in Nepal. Kathmandu. l S. Kazi, Gender Inequalities and Development in Pakistan', S. R. Khan (Ed.), 50 Years of Pakistan's Economy. Traditional Topics and Contemporary Concerns, Karachi, 1999. l S. R. Khan, 'Traditional Topics and Contemporary Concerns: An Overview and Summary of Findings', S. R. Khan (Ed.), 50 Years of Pakistan's Economy. Traditional Topics and Contemporary Concerns. Karachi, 1999. l S. Klasen, 'Does Gender Inequality Reduce Growth and Development? Evidence from CrossCountry Regressions', Gender and Development Working paper Series No. 7. World Bank. Washington DC. Available at: http://siteresources.worldbank.org/INTGENDER/Resources/wp7.pdf. l Mahbub ul Haq Human Development Centre (MHHDC) (2002): Human Development in South Asia 2001. Globalisation and Human Development. Islamabad. l Mahbub ul Haq Human Development Centre (MHHDC) (2000): Human Development in South Asia 2000. The Gender Question. Islamabad. l R. Mehra and S. Gammage, 'Trends, Countertrends, and Gaps in Women's Employment', World Development 27 (1999), pp. 533-550. l No author, Garments' workers to get training, Daily Times, March 8, 2006. Available at: http://www.dailytimes.com.pk/default.asp?page=2006\03\08\story_8-3-2006_pg5_10. l H. K. Nord책s, 'The Global Textile and Clothing Industry post the Agreement on Textiles and Clothing', (Geneva: World Trade Organization, 2004). Available at: http://www.wto.org/english/res_e/booksp_e/discussion_papers5_e.pdf. l N. Oishi, 'Gender and Migration. An Integrative Approach', CCIS Working Paper 49. San Diego, 2002. Available at: http://www.ccis-ucsd.org/PUBLICATIONS/wrkg49.PDF. l M. Rahman, I'nvolving stakeholders in policy-making: The case of export-oriented shrimp culture in Bangladesh', UNCTAD (Ed.), Trade, sustainable development and gender, Papers prepared in support of the themes discussed at the Pre-UNCTAD X Expert Workshop on Trade, Sustainable Development and Gender, Geneva 12-13 July 1999). (New York and Geneva: UNCTAD). l Z. Randriamaro, Gender and Trade. Overview report, 2005. Available at:

http://www.bridge.ids.ac.uk/reports/CEP-Trade-OR.pdf.

l S. Seguino, 'Accounting for Gender in Asian Economic Growth', Feminist Economics 6

Countries Affected by Cross-Border Trafficking

Indo-Nepal Women Trafficking Connection Yubaraj Sangroula

Dimension of the Trafficking Problem As UNIFEM (1998:1) in a report rightly observed, 'trafficking in women and children is a spreading and worsening global phenomenon. Millions of human beings are trafficked and exploited worldwide largely into global sex industry'. Trafficking is estimated to generate gross earnings of between 5 and 7 billion US dollars annually (UN Office for Drug Control and Crime Prevention, 1998:3). The intensified economic globalisation has increased the mobility of capital, commodities, information and people, reducing the world to a smaller village in terms of accessibility and contact. The sex market has grown to operate at a global scale with increased sophistication and organised networks; and in this market millions of women and girls from poor and developing countries are being trafficked. Trafficking of women and girls is, therefore, no longer a 'local phenomenon'. Sexual exploitation is no longer a matter of 'traditional pattern of women's subordination'; it is rather an industry.

Global Figure of Trafficked Persons It is very difficult to find accurate data as to how many people are annually trafficked internally and internationally. According to a U.S. Government estimate, based on 1997 figures, annually 700,000 persons are trafficked across the international borders worldwide (Miko and Park 2002). The table below gives a scenario of minimum number of people trafficked from one country to another annually. Origin of Trafficked Persons

Minimum Number of persons trafficked annually Number

Percent

South East Asia

225,000

32.14

Former Soviet Union and Eastern and Central Europe

175,000

25.00

South Asia

1,50,000

21.43

Latin America and Caribbean

100,000

14.29

Africa

50,000

7.14

Source: Miko and Park, 2002.

According to an estimate of the International Organisation on Migration (IOM, 2001), size of trafficking of persons annually across international borders is between 700,000 and 2 million. The number of trafficked persons would be much larger if the figures of internally trafficked persons are included (UNPF, 2003:3). Internal trafficking is phenomenal in many smaller countries such as Nepal, Thailand, and Colombia, etc. However, the accurate figure is difficult to find (UNPF, 2003:3)1.

A large number of studies show that 'poor and developing' countries in South and South East Asia, states in former Soviet Union, East and Central Europe and South America are most severely affected by trafficking across the international border. While the problem of internal trafficking is pervasive all through out the world, the smaller poor and developing countries most vulnerable to transnational trafficking. Thousands of women from these countries end up every year 'brothels' of metropolitan cities of developed or big countries. The regional distribution of the problem as found as follows: South East Asia: Nearly one-third of the cross-border trafficked persons comes from the South East Asia. Countries like China, Vietnam, Thailand, Cambodia, Laos, Myanmar, and the Philippines are major countries of origin in this region for cross-border trafficking. Thailand, Cambodia and the Philippines are the countries that maintain huge sex market internally as well. As a matter of fact, these countries are major destinations for sex tourism from the western developed countries as well as the rich gulf countries. As one UNPF (2003:3) reports claims, the growth of sex tourism in this region is one of the main contributing factors for trafficking in women and girls. Countries in the South East Asia constitute place of origin as well as destination of trafficked persons for each other. Trafficking trend analysis of this region shows that while a huge number of women and girls prostituting in the Thai sex market are trafficked from Myanmar, Cambodia and Laos, China and Cambodia are destinations for trafficking of women and girls from Vietnam. On the other hand, Japan is a destination for trafficking of women and girls from Thailand and the Philippines. According to Thailand's Foreign Ministry's estimate, 50,000 Thai women were living in 1994 illegally in Japan working in prostitution. This situation of Thai prostitutes parallels in Japan with that of Burmese women held in Thailand. Thai women in countries like Switzerland and Germany also have considerable number in prostitution2. Similarly, newly industrialising nations such as Taiwan, South Korea, Malaysia and Hong Kong are other important destinations of trafficking from South East Asian countries. As reported by UNPF(2003:3), international criminal gangs are involved in trafficking away women and girls from China, Myanmar, the Philippines, Thailand, Cambodia and Vietnam to western Europe, the United States, Australia and the Middle East. Women and girls from Thailand, the Philippines and Indonesia are trafficked to Saudi Arabia and United Arab Emirates mainly for domestic service work and to become brides. Former Soviet Union and Eastern and Central Europe: Countries in the former Soviet Union and Eastern and Central Europe is part of the world worse hit by the problem of cross-border trafficking after South East Asia. As reported by UNPF (2003:4), over 175, 000 women and girls are annually trafficked from this region. Austria, Belgium, Bosnia-Herzegovina, Germany, Greece, Italy, Macedonia, France, Spain, Portugal, Switzerland, the Netherlands, Sweden, Denmark, Norway, United Kingdom, Japan, Israel, Canada, United States and Thailand are identified as major destinations. According to UNPF, organized criminal gangs operating from Russia,

Albania, Estonia, Chechnya, Serbia and Italy are active for trafficking in women and girls in Europe.

uncommon nor the youngest (McGirk, 1997) l Approximately 20,000 or 20% of women in prostitution in Bombay are under 18

years (Friedman, 1996). Latin America and Caribbean: The flourishing sex tourism in Argentina, Brazil, the Dominican Republic, Mexico, Honduras, Costa Rica and Trinidad and Tobago is one of the major factors of increasing number of trafficking in women and girls in this region. The cross-border trafficking in this region takes place between these countries and outside the region to some extent. Child sexual exploitation, including child prostitution is a serious problem in this region. Brazil has been identified as having one of the worst child prostitution problems in the whole world (UNPF, 2003:5). Africa: The size of the cross-border trafficking in women and children for sexual exploitation is comparatively smaller in Africa. As reported by UNPF (2003:5), annually 50,000 women and girls are trafficked away from Benin, Togo, Botswana, Zaire, Somalia, Ethiopia, Zambia, Nigeria, and Algeria to Nigeria, Gabon, Ghana, and South Africa. Western European countries are destinations for women and girls from some countries like Nigeria and Ghana. South Asia South Asia is economically one of the most backward regions in the world. As suggested by intelligent estimate, 150,000 women and girls are trafficked to big countries in the region such as India and Pakistan as well as overseas. While women and girls from Nepal are trafficked to a number of cities in India, Pakistan is the destination for a large number of women and girls from Bangladesh. As reported by UNPF (2003:4), while India a major destination for women and girls from Nepal and Bangladesh, it is also a transit and sending country for women and girls to Europe and Gulf countries. Besides India, Nepalese women and girls are trafficked to Hong Kong, the United Arab Emirates and Saudi Arabia are major destinations for women from India, Bangladesh, Pakistan and Sri-Lanka. India and Pakistan are thus both the receiving and sending countries. India: In India, Maharashtra, Bengal, Karnataka, Andhra Pradesh, Tamil Nadu and Delhi are considered 'high supply zones' for women in prostitution. Women and girls from rural villages are trafficked to brothels in cities of these provinces. Districts such as Bijapur, Belagaun and Kolhapur are common districts particularly affected. Districts bordering Maharashtra and Karnataka provinces, known as the devadasi3 belt, are also equally affected areas. It is estimated that there are approximately 10 million prostitutes in India (Friedman, 1996). The following additional information about sex market of India presents a scary picture: l Over 2000 women are prostituting only in the Baina beachfront in Goa, a small

sea beach city (Moronha, 1997). l The child population in prostitution is between 300,000 and 500,000, who are

abjectly exploited (Bedi, 1997). l Men who believe that AIDS and other STDs can be cured by having sex with a

virgin, are forcing young girls into sex market; seven year old girls are neither

l Everyday, about 200 women and girls in India enter prostitution, 80 per cent

against their will (CEDPA 1997). l 90 per cent of 100,000 women in prostitution in Bombay are indentured salves

(Friedman, 1997) l There are 1000 red light areas all over India. In these red light areas, a large

numbers of women and girls caged are trafficked from Nepal and Bangladesh (CATW). The red light district in Bombay generates at least $400 million revenue annually, with 100,000 women serving men 365 days, averaging 6 customers a day (Friedman, 1996). The Falkland road at Kamathipura area of Bombay is the largest red light area in Asia, perhaps in the world. In this red light area 70,000 prostitutes work every day. l 60% of female prostitutes in Bombay's red light district areas are infected with STDs and HIV/AIDS (CATW). Many women too sick to prostitute are thrown onto the street. Government hospitals refuse to treat prostitute who are HIV positive (Friedman, 1996). l Child prostitution is one of the prime goals of many foreign tourists, who repeatedly visit India. The relaxed laws and abundance of child prostitutes bring them (tourists) repeatedly to India. Moreover, the false notion that sex with a younger prostitute poses less chance of HIV contraction is also a popular cause for their repeated visits to India (Bedi, 1997). l India is one of the favored destinations of pedophile sex tourists from Europe and United States (The Indian Express, 1997). l In Bombay as well as other major cities, top politicians and police officials are in connection with underworld sex mafia who control the sex industry, exchanging the protection for cash payoffs and donations to campaign war chests (Friedman, 1996) l Police receive weekly bribes called haftas from the brothel owners. Police personnel often harass prostitutes, take their money and demand free sex (Friedman, 1996). l The prostitution in Bombay and other cities has immensely influenced the politics. The brothel owners pump money to the election of criminals (Friedman, 1996)4. These scary descriptions project a gloomy picture of women's vulnerability in India and its neighboring countries. The mammoth sex market is dangerous to the lives of 'women and girls from smaller countries' like Nepal, Bhutan and Bangladesh. Since the sex market in India is deeply connected with politics, the law enforcement situation is not only poor but dangerous to the victims. The central government is largely silent and passive to this issue. The involvement of the underworld mafia groups has invested huge money in this industry. The sex market is thus a booming business in many metropolitan cities of India. The booming sex, market is in turn a cause and incentive both for the rapidly increasing phenomena of trafficking in persons. The corrupt politics and police system on the other are rich 'manure' for the growth of sex market.

Trafficking in Women and Girls in Nepal Over the years, the trafficking of women and girls internally and across the border for sexual exploitation has emerged as a serious problem in Nepal. While thousands of women and girls have been now enslaved in many brothels of India, the sex market within the country itself is growing in mammoth dimension. Ignorant and young village girls are increasingly becoming objects of organised trafficking. History of trafficking in Nepal: Trafficking of Nepalese girls for sexual exploitation began as early as the Rana regime (1846-1951), in which a single family held the Prime Ministership of Nepal as a hereditary position and dominated other aspects of political and military life. The Ranas drew many young girls from the hills surrounding the Kathmandu Valley to their palaces as servants and objects of sexual exploitation. The trade in hill girls for the Rana rulers and their courtiers continued until the Rana regime was overthrown in 1951. After the overthrow of the Rana regime, the Ranas could no longer support hundreds of women sex servants. Many of these women left the service of the Rana palaces. However, returning home to hill villages was not preferred by many, who had become used to a somewhat more prosperous life as Rana house servants and courtesans. With the downfall of the Ranas, the market for hill girls decreased in Kathmandu. The traders involved in supplying young girls to Rana Palaces subsequently established connections with brothels in Indian cities. Indian brothels have a high demand for Nepalese girls for many reasons. First, there have long been many Nepalese workers in India, providing a source of 'buyers of sex.' Second, the fairer complexion of the Nepalese girls is attractive to most Indian native 'buyers.' Third, importing Nepalese girls has been safer than selling local Indian girls into prostitution. Ignorance of local customs, procedures and languages makes Nepalese girls less likely to complain to the police, and their fleeing from the brothel is less likely. Trafficking in Nepalese girls and women to the Indian brothels became fully established in the 1960s, and increased tremendously in the 1980s (Maskey, 1991). By the 1970s, criminal links between Indian sex traders and the Nepalese pimps were well established. A segment of pimps also grew out of the Nepalese workforce in India. An ineffective law enforcement system in Nepal and the high demand of Nepalese girls in India attracted a number of migrant Nepalese workers to engage in smuggling of girls from Nepal. Prior to 1990, Nepalese brothel owners in Mumbai and Kolkota used to be one of the prominent groups of girl traffickers. These are mostly Nepalese women who migrated to India in search of jobs or who had been trafficked for prostitution themselves. These women, called 'gharwali,' prior to 1990, visited Nepal and smuggled a number of girls from Nepal to India. The parents or guardians of the girls were assured that the gharwali would help the girls get good jobs. This practice was largely responsible for giving rise to a belief that parents or guardians sell their female dependents for the sake of monetary benefit. Although taken to cities like Kathmandu and across the border with assurance of good jobs, the women were eventually forced

into the sex market. In this course, a group of men and women emerged to trade in rural girls and women. During 1980s, when the market for Nepalese girls grew in the Indian sex market, the high demand for a supply of the girls was created. This increased demand caused the emergence of a group of local traffickers in Nepal to facilitate the supply of Nepalese girls. When the Nepalese group established contacts with the Indian sex market, this trafficking began to take the shape of an organized international criminal organisation. These organised criminals have a variety of ways of trafficking girls. This has rendered law enforcement agencies in Nepal desperately confused and ineffective. From 1963 to 1990, Nepal was ruled under an 'autocratic system' led by the king. An absolute monarchy prevailed in Nepal for a period of 30 years curtailing all freedoms of the people. All political activities were banned. This regime was hardly concerned about issues like 'trafficking of women and girls', and the law enforcement agencies were generally concerned with suppression of the political activities rather than prevention of crimes such as trafficking. Allegedly, some high ranking police officers had also been protecting 'flesh traders'5. Following the 1970s, with a larger number of girls being preyed upon every year, Nepalese intellectuals, the press and social workers began to recognise the seriousness of the problem. Some studies emerged strongly suggesting that rampant poverty in the hills was the It is essentially erroneous major cause behind increasing incidents of trafficking. to assume that many girls People concluded that poverty drove girls and women and women voluntarily 6 enter prostitution to gain a to seek employment in prostitution . However, this conclusion had no factual base; it was a baseless livelihood. These studies assumption. In fact, it was a well structured rumor to also presented another cover the 'criminal face' of the problem. As it was factually unfounded gradually exposed, a well-established criminal nexus conclusion: that many between traffickers, law enforcement officials and parents intentionally and politicians was preying on poor and ignorant rural knowingly sold their girl women and young girls. children into the Indian sex market. Many people It is essentially erroneous to assume that many girls also denied the existence and women voluntarily enter prostitution to gain a of an organized network livelihood. These studies also presented another involved in the trafficking factually unfounded conclusion: that many parents of girls and women. intentionally and knowingly sold their girl children into the Indian sex market. Many people also denied the existence of an organised network involved in the trafficking of girls and women. Even today there is a group of people, including a few foreign journalists who advance the thesis that poverty is the major cause of trafficking, and deny the existence of the organised criminal network of traffickers. The migration of people to cities, including large numbers of girls, has been a phenomenon in Nepal in the last few decades. Many girls do come to the city, with the consent or under the arrangement of parents, to work as domestic workers, carpet weavers or construction laborers. After coming to

the city the girls are deceptively enticed and taken away across the borders. An organized group is active in this illegal business. The stories of many girls returned from brothels reveal that traffickers and local pimps have good connections, and the traffickers and brothel owners also maintain business relationships. The trafficker has to perform the task with great care and caution as the risk of being caught is always there. Hence, it is almost impossible to 'complete the whole process of trafficking by a single person'. The nature of this crime itself presupposes that more than one person should 'breathe together' for a successful completion of the act.

researchers or sample observation of Indian sex market by some Nepali researchers. As compiled by IIDS/UNIFEM (2004), the following figures are often used to 'describe the magnitude of the problem of trafficking in Nepal: Sources Number of Trafficked Frequency/ Destinations Persons Time Frame Acharya 1998, and Koirala 1999

200,000 40,000-50,000 60,000 17,000

India Mumbai Falkland Kolkota

Numbers of Nepalese Women Trafficked In the 1980s, the problem of sex trafficking in Nepal and other developing countries gained wider attention in the outside world. Tragic stories of abduction, fraud, deception, fake marriage and enticement to good jobs by sex traffickers of ignorant Nepalese girls were exposed by the Nepalese press and Non-Governmental Organisations (NGOs). The Nepalese press deserves recognition for its significant contribution in exposing the problem. The press helped attract the attention of the NGO's to the problem so that initiatives against it could be developed. The sex trafficking problem gained regional attention when the Times of India (1989) published the findings of a study conducted by Dr. Galida of the Indian Health Organisation. The Nepalese press repeated the Times of India's story, an important reason for recognition of the problem by the Government of Nepal. Despite wider recognition of trafficking as a serious social problem and an atrocious sexual exploitation of the girls and women, very few attempts are made to establish an accurate numerical evaluation of the problem. No official figures are available on the number of girls and women trafficked into the Indian sex market. Neither the government of India nor that of Nepal has made any attempt to identify the magnitude of the problemthe numbers, the health status of those involved in prostitution, the causes and factors for increasing incidents of trafficking, the vulnerable groups, or any possible means of intervention. Figures available are ones based on intelligent estimation. Because of the clandestine nature of the crime of trafficking, it is always difficult to present reliable data on trafficking. Several factors render it difficult to establish accurate number of girls and women trafficked. The information of missing of girls or women is not disclosed by the family members, as such information incurs 'stigma' to the honor of the family. In general, the family and relatives do not/cannot go the extent of searching the missing girls or women so that the true information is established. The information of people concerning the problem of trafficking is poor, so that in many cases the incident of missing of female members is registered in the police office. Nepal and India share an open border, so that the record of how many people cross the border every day is not possible to maintain. Finally, trafficking is an organised criminal phenomenon, which often removes the evidence to trace it out7. Since it is difficult to establish empirical data on the number of trafficked women and girls, all figures available are based on estimation. These estimates, on the other hand, are largely based on information of sex market supplied by Indian

The best estimate is that the number of girls and women trafficked is enormous8. In January 1989, the Times of India reported that, according to the Indian Health Organization, about 100,000 Nepalese girls and women from Nepal were engaged in Indian brothels. Pauline O'Dea, who prepared a report on the problem of trafficking to the United Nations Children's Fund (UNICEF) mentioned that, in 1992, the Government of Nepal had declared the number as 200,000 women and girls (O'Dea 1993:7). However, the figure was simply a conjecture. A meeting of the Nepalese and Indian organisations held in India in 1987 speculated the figure was about 153,000 women and girls (Paradhan, 1992:49). In her report, O'Dea estimated that 40,000 to 45,000 Nepalese women and girls were engaged in the brothels of Bombay alone (O'Dea, 1993:7). Guari Pradhan (1992:59), chairman of CWIN, however, claimed that the number of the Nepalese girls and women in prostitution in brothels of Bombay was more than 60,000. Dr. Galida in 1989 reported that 90 per cent of the total population of sex workers in Mumbai were migrants from Nepal, Bangladesh and other states of India besides Maharashtra9. All these figures are based on intelligent speculations. Recently, an organisation challenged the credibility of the 'estimated figures' as exaggeration10. In its opinion, the figure of Nepalese women in the Indian sex market is in no case bigger than 25,000. Allegedly, according to this organisation, the organisations working to combat the trafficking exaggerate the figure to attract the 'attention of the government'. This argument is not grounded on truth for several reasons. First, the research is confined to our major cities of India, but the sex market of India is scattered many parts, both cities and growing urban centers. The sex market is rapidly increasing in border towns of India such as Siliguri, Jogbani, Farmeshgunj, Raxual, Sunauli, Rupedia, etc. Several other cities such as Gorakhpur, Kanpur, Agra, Chandigarh, and satellite cities of Mumbai, Delhi, Kolkota are also rapidly increasing sex markets. Emerging metropolitan cities like Bangalore11, Hyderabad, etc. also contain huge sex markets. In all these cities, Nepalese women have been found as one of the popular groups trafficked for prostitution. Second, rapidly escalating conflict in Nepal is causing unprecedented displacement and exodus of Nepalese families to Indian cities. Third, the conventional forms of trafficking and sexual exploitation has replaced by increasingly sophisticated forms like 'night clubs, dance or bar clubs and camouflaged sexual exploitation such as 'message center, highway food centers (dhaba)12, and sexual pleasure centers at rental apartments. These facts deny the reliability of the research that claims lower size of

figure. Obviously, the true population of the Nepalese women in the Indian sex market is yet to be ascertained. But the following facts about vulnerability show that the number of trafficked Nepalese women and girls is big, the exploitation they are subjected to is inhuman and the danger of being trafficked is serious: = Economically, Nepal ranks as one of the world's poorest countries with a per

capita gross national product of US$ 220 a year. About 44 per cent of the population lives below the national poverty lines of US$ 77 per capita annum, which is based on minimum caloric intake, housing and other non-food standards (ADB 2001). Gender discrimination is a serious problem in Nepal. Conventional or stereotyped conception of society towards women's position as well as male and female relations are factors which hinder women's development. The population of the Nepalese women is enormously illiterate. The ignorance is therefore a great source of injustice and vulnerability. The widely prevailing defective value system13 effectively blocks the Nepalese girls' access to education, empowerment and development. Ignorance is one of the most dangerous forms of vulnerability. = The gender gap between men and women is wider in Nepal. The following characters of wider gender gapes create higher vulnerability of sexual exploitation of the Nepalese women: = Families headed by females compared to men have a higher incidence of poverty (ADB, 2001). Female poverty is more severe than male poverty because of lack of access to resources and very low rates of human capital among women. Since women have fewer opportunities for appropriate skills and exposure to technology, the gap between men and women in economic disparity is further widening. 'Sex' is thus seen as the best option for women. Employers have thus emerged who 'want to exploit women as sexual commodities'. = Women's share of employment in the formal sector (industry and services) is negligible in Nepal. Women's involvement in nor-formal sector is emphasised. A huge number of girls and women are thus engaged in cities as maids, without job guarantees and adequate protection against sexual exploitation. = Feminisation of poverty in rural areas, in hills in particular, is phenomenal. It has been inducing the migration of increasingly larger number of women and girls to cities and urban sectors for 'subsistence jobs'. Unsafe migration, in turn, results in women ending up in the sex market. = Practices of child marriage of daughters, engaging in domestic service in other families since childhood, refraining from sending schools are very common in rural parts of the country. = All these characters relate to widespread practice of gender disparity, which constitute formidable causes of trafficking for sexual exploitation'. = Approximately 50,000, or half of the women in prostitution in Bombay, are trafficked from Nepal (Friedman, 1996). Radhika Coomaraswamy (1997) says: 'Brothels of India hold between 100,000 and 160,000 Nepalese women and girls, 35% being taken on the false pretext of marriage or a good job'. Of the 5,0007,000 Nepalese girls trafficked into India yearly, the average age over the past decade has fallen from 14-16 years old to 10-14 years old (CATW-Asia Pacific, 1997). In Bombay, one brothel has only Nepalese women, who men buy because

of their golden skin and docile personalities (Friedman, 1996). 2.5% of prostitutes in India are Nepalese (TOI, 1997). = 'Poor Nepalese girls are tricked into fraudulent marriages, or promised employment in towns only to find themselves (in) Hindustan's brothels. They are locked up for days, starved, beaten and burned with cigarettes until they learn how to service up to 25 clients a day. Some girls go through 'training' before being initiated into prostitution, which can include constant exposure to pornographic films, tutorials in how to please customers, repeated rapes' (Wadhwa, 1998). = 'Trafficking in women and girls is easy along the 1,740 k.m. long open border between India and Nepal. Trafficking in Nepalese women and girls is less risky than smuggling narcotics and electronic equipment into India. Traffickers ferry large number groups of girls at a time without the hassle of paperwork or threats of police checks. The procurer-pimp-police network makes the process even smoother. Bought for as little as Rs. 1000, girls have been known to fetch up to Rs. 30,000 in later transactions. Police are paid by brothel owners to ignore the situation. Girls may not leave the brothels until they have repaid the debt, at which time they are sick, with HIV and/ or tuberculosis, and often have children of their own' (Wadhwa, 1998) = In 1996, 218 Nepalese women and girls had been rescued by the Indian police. Most pathetically, 60/70% of them were HIV positive (McGirk, 1997). = 'In 1982, 13 year old Tulsa was abducted from a village near Kathmandu and sold to a brothel. She was dressed in European-style cloths and taken to luxury hotels to serve mostly Arab clients until a Hotel Manager called the police. Hospitalized, Tulsa was found to be suffering from three types of venereal diseases and tuberculosis' (Friedman, 1997). = India has an increasingly huge sex market, even though it is illegal. According to an estimate, every day about 200 girls and women enter prostitution in India, 80% of them are trafficked (Friedman, 1997). Nepal has an open border of over 14 00 k.m. Every year over 5,000 women are girls are trafficked across India. The rapidly increasing market thus poses a serious threat to the security of many more women in the days to come. Moreover, such an unimaginably high rate of growth is accompanied by fears of spread of AIDS. This phenomenon is thus obviously prone to trafficking of girls with lower age. It is estimated that 1000 red light districts in India are forcing Nepalese minor girls into prostitution. = Trafficking victims in Indian brothels are subjected to the condition of slavery and to serious physical abuse. Held in debt bondage for years at a time, they are raped and subjected to other forms of torture, to severe beatings, exposure to AIDS, and arbitrary confinement. Escape from brothel is virtually impossible. Owners use threats and severe beatings to keep inmates in line. In addition, women fear capture by other brothel agents and arrest by police if they are found on the streets; some of these police are brothel owners' best clients (Human Rights Watch, 2000). The following trends are observed in this situation: i.

Increasing market of prostitution in India is the incentive for the increasing number of trafficking in women and girls from Nepal. Trafficking in women and girls is easier compared to that of narcotics, mainly due to poor law enforcement

situation both in Nepal14 and India15. In addition, the nexus between the brothel owners, police and politicians both in Nepal and India is one of the major factors for poor law enforcement situation. The poor law enforcement situation is also an evidence of the human rights insensitivity and lack of political will of the governments of these two countries to protect thousands of poor women and girls enslaved in brothels. ii. Most of trafficked victims are subjected to debt bondage. The purchase price, plus interest becomes the 'debt' that the victims must work to pay off- a process that can stretch indefinitely (Human Rights Watch/Asia 2000). The debt bondage is virtually a condition of 'enslavement'. Most of victims trafficked are poor and illiterate teenagers from hills of Nepal. False marriage, enticement of good jobs and abduction are major modes of trafficking women and girls from Nepal. iii. The market is inseparably entwined with traditional or stereotyped conception to women, which define them as 'sex commodity'. Prostitution is viewed as 'expendable commodity' by the society. The sex market is thus taken not unusually as that of 'narcotics'16. iv. Existing laws in India and Nepal have had virtually no effect on curbing the problem of trafficking. The failure of the laws is widespread. v. Infection of HIV/AIDS and other sexually transmitted diseases is common in trafficked women. This is one of the factors raising resistance to social reintegration of rescued women and girls17.

The Magnitude of Trafficking During the 1990s, steps towards empirical investigation of the problem started taking place, although not adequate and fully representative. However, these efforts provide grounded basis to 'estimate the dimension of the problem' with more accuracy of the figure of women and girls trafficked. Center for Legal Research and Resource Development (CeLRRd) is one of the leading organisations in this regard. In 1996, CeLRRd collected information from various institutions, the Nepal Television, the Police Offices and Courts being the important ones. Findings of this study established that Nepal Television received 20 requests per month from the police for announcements of missing persons. This figure, however, covered only the Kathmandu Valley. Obviously, while this figure is not exhaustive, as the bulk of the missing are never reported to the police, it gives a ground to conjecture that every month hundreds of girls are trafficked monthly from Kathmandu and other parts of the country. In most such cases, no follow-up procedures take place except delivering photographs of the missing girl or woman to the border police stations and check points. In many cases, the parents receive information on their missing daughters quite a long time after the incidents take place. Despite the wider attention to the problem, incidents of trafficking are still increasing. Trafficking being mostly confined to a few specific ethnic communities and regions in the past, has now scattered widely and swiftly to almost every ethnic community and areas across the country. The problem has become national. The rural villages that are subject to widespread illiteracy and without access to any kind of development activities are the worst affected by the problem. The circumstances of abject poverty in the rural villages and the growing migration of young girls to cities in

search of better lives help create an environment where it is easy to prey on these young girls. This is a leading reason that the number of young girls being trafficked has sharply increased over the years. The baseline survey of households at 24 Village Development Committees (VDCs) of Sindhupalchok and 15 VDCs of Nuwakot, for instance, uncovered 2116 girls and women missing from the villages18. Information on the whereabouts of the greater number of these girls and women since the time of disappearance is not available. Based on hearsay from relatives of those missing girls and other villagers, it appears that most of the girls were trafficked to Indian brothels. The figure is, however, not exhaustive. Information still might have been concealed. Yet, the figure itself exhibits the size of the girls missing nationwide. Over the past some years, the problem of trafficking has become intensely acute in Terai districts like Jhapa, Morang, Sunsari, Parsa, Chitwan, Udyapur, Makwanpur, Rupendhi, Nawalparasi, Kapilavastu, Banke, Kanchanpur, etc. These districts are densely populated and face tremendous pressure of migration from hills. Unemployment and insecurity are phenomenal in these districts, becoming a boon for trafficking. Most importantly, these districts border with, or closely situated to Indian territory. One can thus easily estimate that the proportion of trafficking in these districts is higher to hill districts. Although there is no concrete basis for presuming all the missing girls and women were forced into the sex market, there are valid grounds for suspicion. Lack of communication between the missing girls and their families for a long time is one of the grounds to provide a basis for the suspicion that the girls are in the sex market. There is no reason to avoid communication otherwise. The lack of communication is a likely indicator of the virtual enslavement of the missing girls and women. As mentioned before, there are reasons to believe that the figures of missing girls and women reported in the survey may not be exhaustive. Many incidents of missing girls may be concealed as some family members do not want to reveal the incidents for fear of prosecution, revenge by the traffickers, or social humiliation. In some instances, the girls are easily forgotten, since daughters are considered less important than sons. The prevalent attitude of parents, extended family, and the society as a whole that daughters are not significant members of the family implicitly makes it easier to ignore or forget missing girls. The findings of the survey mentioned above, indicate the magnitude of the problem. A figure of about 2000 missing girls and women in 39 VDCs of the aforementioned two districts suggests that the nationwide figure for missing girls and

Distribution of Girls by Age, Marriage, Schooling and Missing Districts

Surveyed VDCs

Total Girls

Girls in Married Childhood

Girls Going to Schools

Girls Out of Districts

Girls in Nepal

Girls Out of Nepal Place Identified

Girls Out of Nepal Place not Identified

Sindhuplachok

15,325

4,506

10,819

1,713

238

307

1,168

Nuwakot

8,091

2,548

5,343

668

168

473

Source: Baseline Survey of Households conducted by CeLRRd.

women exceeds what is generally estimated -- that is, over 100,000. From press sources19 and the record of court cases under judicial trial20, it appears that the highrisk areas for trafficking encompass more than 30 of Nepal's districts. The increasing number of districts where trafficking is common indicates an increasing number of girls are being trafficked to Indian brothels. Another important source for establishing the figure of the trafficked persons is the census. According to 2001 census data, the female population absent from households is 82, 712. Of this 40.6 per cent of them are absent without known reasons. This 40.6 per cent absent female population indicates to the possibility of their being trafficked. However, many women and girls are missing from the households are generally not reported to the census as there is no systematic practice of registration of events. Based on the census, one can estimate the figure of missing women in between 50,000 to 100,000. In fact, the baseline survey of two districts presented by CeLRRd above also indicates to the similar picture.

community and the state. Women are thus defined as a sex commodity.

(Yubaraj Sangroula is Associate Professor, Kathmandu School of Law. Writer of the Book "Condemned to Exploitation": Trafficking in Women and Girls) End Notes 1.

The issue is not about what the exact 'figure' of trafficked women and girls is; rather the fact that it is an increasing trend should concern the researchers, policy makers, law enforcement agencies and civil society involved in combating trafficking. Obviously, the problem of trafficking of women and girls from Nepal should pay attention to the following factors or affairs that potentially contribute to worsen the problem: 21

& The booming sex market in India

is a major factor for increasing vulnerability of

the Nepalese women and girls. wake of the internal crisis in Nepal, thousands of people have been displaced, the migration of population for the search of safety and livelihood has been terribly intensified. This situation has made women trafficking easier than in the past. & Over the years, the local sex market has reportedly increased. Development of tourism along with widening access to information and transportation has been rapidly transforming some cities of Nepal into 'metropolitan areas'. This development has opened a way for the 'emergence of illegal economy in Nepal in nexus with outsiders, the Indian in particular. Extension of the Indian underworld economy in the sex market of Nepal along with influx of Indian tourists will surely sophisticate the pattern of trafficking. Many ignorant women and girls traveling to cities for work are likely to face the danger of 'sex market exploitation'. As the Eastern European and Russian examples show, the 'the cross-border or transnational trafficking in such a situation increases at an incredibly higher rate. & The law enforcement situation is poor. The number of crimes of trafficking reported to the police is smaller: 150 cases a year, and the success rate of the police is below 50 per cent. Corruption and inefficiency are major problems of the Nepalese law enforcement agency, including the judiciary. These factors seriously hinder efforts of prevention, thereby aggravating the vulnerability. & Systematic sex discrimination is a serious problem in South Asia. The value system being practiced here virtually subordinates women. On the other hand, sexual exploitation is largely taken as an 'acceptable form of pleasure' by the male

& In the

Figures of internal trafficking for sexual purpose in some countries, for instance, present a horrific situation of sex trade. Internal trafficking is a problem in big countries like India, China, Basil, USA, etc. In India, though exact figure is not available, brothel owners and pimps purchase low-caste Hindu women, often girls under the age of 16 years, to fill their brothels (Hornblower, 1993). In China, the unprecedented economic boom over the last 20 years has intensified the flesh trade. For instance, in the village of Houtou in the southern Guangdong province, villagers kidnapped young women and girls from other areas and transported back to Haotou and forced them into prostitution. Many of the peasants turned their homes into brothels employing 100 sex slaves. In China, more than 240,000 people engaging in prostitution were arrested last year, but many times more sales of women bodies went unreported (Kristof, 1993). In Thailand, internal trafficking to 'sustain its enormous sex market' has longer history. One United Nations Economic and Social Council study calculated that 'two million Thai women work as prostitutes and that 800,000 are adolescent and children (Simons, 1993). Problem is equally serious in United States despite law against prostitution. Pimps prey on young 'runaways'. It is estimated that each year, approximately 600,000 to 1,000,000 children run away from home; ait is estimated that a large number of them become prostitutes (Toepfer and Wells, 1994). Preference of Asian women in European sex market is great. Brouchers of European Travel Agencies depict Asians as most obedient and lavish prostitutes. One such agency (Life Travel, Switzerland), among many leaped into sex tourism business, put this description in its broucher: 'Slim, sunbrunt, and sweet, they love the whitemen in an erotic and devoted way. They are masters of the art of making love by nature, and the art that we European do not know'. Similarly, Kanita Khama Travel in Netherlands gives the following description in its broucher: 'Many girls come from the sex world come from the poor north-eastern region of the country and from the slums of Bangkok. It has become a custom that one of the nice looking daughters goes into the business in order to earn money for the poor familyâ&#x20AC;Ś You can get the feeling that taking girl here is as easy as buying a package of cigarettesâ&#x20AC;Ś little slaves who give real Thai warmth' ( These brouchers are quoted in Truong 1990:178) Devadashi are women endowed to God (Yellamma). They are religiously forbidden to marry. Such women are 'supposed to belonging to Gods. As it is interpreted to their disadvantage, because they belong to God, they belong to everyone. This is how they are compelled to accept prostitution. As Meena Menon reports, such women are trafficked through coercion or deception into brothels. As she mentions, all 15 girls in one brothel of Karnataka were devadashi. An account of Friedman (1996) in 'The Nation' newspaper is worth mentioning here. Excerpts: 'South Central Bombay is home to the biggest organized crime family in Asia, run by Dawood Ibrahmim. In 1992, 40 candidates in Bombay's municipal elections, and 180 of 425 legislators in Uttar Predesh had criminal records. Shantabai, Bombay's most powerful madam controlled as many as 10,000 pimps and prostitutes' votes in 1985 election. Bombay's sex industry has evolved into a highly efficient business. It is controlled by four separate crime groups: One in charge of police payoffs, another controlling money laundering, a third maintaining internal law and order, and the fourth procures women through vast network stretching from South India to the Himalayas. Of the four mafia groups in Bombay, the most powerful is Mehoob Tahasildar, the procurer of women. Thasidar opened a restaurant on the ground floor of a two-story, block long brothel he also

9. 10.

11.

12.

13.

owned, one of biggest in Bombay, with more than 50 women. A former Police Inspector General (D.B. Lama) who had been arrested on the charge of corruption was allegedly involved in 'trafficking of women and girls'. After his arrest, media reported that photographs of women girls had been seized from his residence. Similarly, a number of panchas (as the supporters of the regime were called) had connections with traffickers. In the grassroots, supporters of the regime had been pretty much involved in trafficking. This theory was well designed and structured to deviate attention of the people. Propaganda of this theory largely covered the 'criminality' involved in the trafficking. Many people then condemned the poor parents and victims themselves for choosing the 'ways' for trafficking. This theory was so massively sold that virtually every law enforcement officials, politicians and even intellectuals had been deeply influenced. It thus effectively hindered the growth of 'scheme for prevention of the problem and prosecution of the criminals'. In fact, the issue of true figure is not a matter of great concern. The most important aspect of this problem is in fact the 'gravity of the crime of trafficking'. Obviously, the big or smaller number is not issue of trafficking problem. Trafficking of even a single person is 'equally important as trafficking of many'. Often there has been an attempt to see the problem in terms of 'number of women and girls' trafficked. While it is useful and necessary to establish the figures for working out programs to address it, the wider recognition that hundreds of women and girls are subjected to sexual enslavement in Indian sex market and many are vulnerable is enough for governmental and non-governmental organizations to effectively involve in prevention. From the human rights perspective, the figure being greater or smaller makes no difference. In the context of immensely increasing sex market in India along with huge investment by the underworld mafia in political protection, the vulnerability of Nepalese women's trafficking is enormous. The issue of protection of vulnerable groups should be the prime agenda of the Nepalese Government as well as non-governmental organizations. See, Times of India, January 2 1989: New Delhi. See, Kantipur (A National Daily Newspaper from Nepal) Sunday, April 3 2005 (Chaitra 21, 2061) has reported about findings of research carried out by 'Asmita Mahila Prakasan Griha, Sanchar and Srhot Sanstha' . According to the News, the research was conducted in four big cities of India, Viz. Mumbai, Delhi, Pune, and Kolkota. The findings of the research were released at Bhairawa. Concerned persons of the organization claimed that the figure of 25,000 is highest figure. According to them, the figure could not in any case higher to that. Bangalore is one of the major five cities in India which together account for 80 percent of child prostitutes in the country (Seethalakshimi, 1998). Recently, a number of Nepalese media has reported trafficking of the Nepalese Women in Bangalore brothels. An Indian Daily, The Hindu, 27 July 1997, reports that there are many dhabas, or smallscale brothels, along the Sholapur-Hyderabad higway, which provided women as an 'additional service' to truck driver and motorists. One woman who runs a dhabha had previously been in prostitution. Now with a shed, two cots and few gilrs from nearby villages, she owns the brothel. These kinds of dhabhas are scattered everywhere in India. Provinces like Bihar, Uttarpradesh and West-Bengal are famous for such dhabhas. 'Defective Value System' in the context of social relations of the population is a 'set of traditional norms' that nurtures a condition 'status quo'. Status quo rejects 'change' in the situation and as such prevents the course of 'progress in the life style. The condition of 'status quo' in terms of value system creates a condition where one person or group or class exacts all possible advantages to the disadvantages of other. Status quo in social value system is therefore a source of inequality or injustice. To be specific and concrete, status quo in the social value system provides 'a stereotyped justification for the prevailing form of discrimination'. Discrimination on the other hand results in 'perceived subordination', which in turn legitimizes the 'violence' and 'exploitation'. Protection of patriarchy by social values is a 'condition of status quo', which refuses 'changes in the stereotyped conception of

society to women'. Their legal position is defined in terms of marital status and sex. 14. As Human Rights Watch/Asia (2000) states, 'In Nepal, border police are bribed to allow to transport girls to India. In many districts, traffickers exploit political connections to avoid arrest and prosecution. On return to Nepal, the few women who escape the brothels and appeal to the police for help, or who are returned by the Indian police, are shuttled from one police station to another as they make their way back to their home districts. Some remain in police detention for weeks until their guardians come to collect them.' 15. According to Human Rights Watch/Asia (2000), in India, police and local officials patronize brothels and protect brothel owners and traffickers. Brothel owners pay protection money and bribes to the police to prevent raids and to bail out under-age girls who are arrested. Police who frequent brothels as clients sometimes seek out under-age girls and return later to arrest thema way of extorting bigger bribes. Girls and women who complain to the police about rape or abduction, or those who are arrested in raids or for vagrancy, are held in 'protective custody'a form of detention. Corrupt authorities reportedly allow brothel owners to buy back detainees. 16. In Nepal, for instance, the 'prevention of drug trafficking has been undertaken as one of the priority agenda of government to combat organized crime. Annually, the Government allocates special budget for this purpose. A special legislation has been enacted to 'empower the law enforcement agency to combat the problem'. A special police unit is set up to deal with the problem. However, the prevention of trafficking has never been a serious or priority agenda of the Government. This issue has hardly been discussed in the parliament so far. Largely, the problem has been raised by NGOs, and that is their efforts that have brought the issue to the limelight and concern of the public. This situation demonstrates the lack of 'political will on the part of the government to combat the problem'. 17. During 1990s, a number of novice NGOs strategically used HIV/AIDS as an instrument to deter parents selling their daughters. This campaign was designed on wrong assumption that 'parents were the principal culprits' in trafficking. The role of organized criminal network was not realized. This propaganda was mainly developed by a small group of 'novice researchers' from western countries. Based on this wrong assumption, a havoc of HIV/AIDS was created in the mind of 'common folks of villages'. Trafficking of women and girls was thus taken as 'HIV/AIDS'. This cheap propaganda of some NGOs effectively frustrated the idea of respect to and social reintegration of victims. 18. CeLRRd has completed basline Survey in 220 VDCs of 14 districts. Every village has instances of missing women and girls. This survey gives an insight that the 'problem of trafficking is active silently in many parts of the country. Having nexus with increasing rural to urban and hill to Terai migration process, the trafficking of women and girls is 'largely diluted', and often is not obviously apparent. Revelation of 2116 girls and women missing from 39 VDCs with average population of 5000 (at least 50% females), is competently enough to project the seriousness of the problem. 19. Study of stories covered by print media revealed that trafficking problem of was active in Nnuwakot, Jhapa, Sindhuplachok, Chitwan, Makwanpur, Illam, Sunsari, Morang, Khotang, Rauthat, Rupendhi, Dhankuta, Kailali, Banke, Parsa, Kaski, Gorkha, Saangjya, Dolakha, Sindhuli, Bara, Sarlahi, Ramechap, Panchathar, Tanahau, Dang, Kapilavastu, Bardia, Rasuwa, Nawalparasi, Palpa, Bhaktapur, Kathmandu and Patan. Hundreds of women and girls from these districts had been rescued in 1999 on the way to India. The district of Jhapa, Morang, Nuwakot, Makwanpur, Udayapur, and Rupendhi are found as highest risk areas. For detail of Stories of girls and women rescued, see the following newspapers. Deshantar Saptahik (2056/8/12 and 2055/1/14), Kantipur (2056/8/3, 2056/7/10, 2056/6/10, 2056/5/21, 2056/5/11, 2056/4/19, 2056/4/12, 2056/3/23, 2056/2/19) Saptahik Janasata (2055/12/14, 2056/415) Gorkhapatra (2056/2/23, 2056/2/15, 2056/5/31), Chalphal(2056/4/23), Patrika Satdine (2055/12/19), and Prabatkalin (2056/1/16) 20. Kathmandu, Bhaktapur, Lalitpur, Jhapa, Sunsari, Dolakha, Kailali, Kanchanpur,

Sindhupalchok, Nuwakot, Rasuwa, Makwanpur, Chitwan, Parsa, Ramechap, Sindhuli, Nawalparasi, Kapilavastu, Nawalparasi, Morang and Udayapur are identified as districts having at least one judicial trial of trafficking offence. 21. Allegedly, there are 10 million prostitutes in India (Friedman, 1996). Of them 3, 00,000 to 5, 00,000 are children (McGirk, 1997). Everyday, about 200 girls and women enter prostitution (TOI, * April 1996).

January, 1997. l CEDPA and PRIDE 1997. 'Devadashi System Continues to Legitimize Prostitution:

Devadashi Tradition and Prostitution' in Times of India, 4 December, 1997. l CATW Asia-Pacific, 1997. Trafficking in Women and Prostitution in the Asia Pacific. l The Indian Express, 21 November, 1997. l Susan Maskey, (2047 B.S.) 'Nepalese Girls in the Indian Sex Market', Asmita Vol. 3, No.

10: Kathmandu, 1991. References l IIDS/UNIFEM, 2004. Status and Dimensions of Trafficking With Nepalese Context. Institute of Integrated Development Studies and United Nations Development Fund for Women, Kathmandu, Nepal. l Joyti Sanghera, 'A Broad Assessment of Anti-Trafficking Initiatives in Nepal, Bangladesh and India'. Study jointly sponsored by UNICEF-ROSA and Save the Children Alliance, ( 2000). l Radhika Coomaraswamy (Special Rapporteur on Violence against Women). Report on Trafficking in Women, Women's Migration and Violence Against Women, 29th February 2000. UN Doc. E/CN.4/2000/68 (The Special Rapporteur's Report) at <http://www.unhchr.ch.html/menu2/7/b/mwom.htm> l 'Combating Trafficking in Human Beings',OSCE, 2004. <http://www.osce.org/odihr/?page=democratization&div=antitrafficking> l Dr. Janice Raymond, 'Testimony Submitted to the Hearings on Trafficking, Sub Committee on International Operations and Human Rights'. 14th September 1999. l UNIFEM, 1998. Trade in Human Misery: Trafficking in Women and Children- Asia Region. l United Nations Office for Drug Control and Crime Prevention, 1998. 'Global Program Against Trafficking in Human Beings: An Outline for Actions. l Francis T. Miko and Grace Park, 'Trafficking in Women and Children: The U.S. and International Response'. CRS Report for Congress. 2002. l IOM, 2001. Quarterly Bulletin, No. 23. l United Nations Population Fund (UNPF), 2003. Appendix II, A Conceptual Framework for Integrating the Prevention of Trafficking In Women and Children in Population and Development Programmes: New York. l Margot Hornblower, 'The Skin Trade', TIME, June 21, 1993. l Nicholas D. Kristof, 'China Sees 'Market-Leninism' as Way to Future', N.Y. Times, Sept. 6, 1993. l Marlise Simons, 'The Sex Market: Scourge on the World's Children', N.Y. Times, April 9, 1993. l Susan Jeanne Toefper and Bryan Stuart Wells, 'The Worldwide Market for Sex: A Review of International Regional Legal Prohibitions Regarding Trafficking in Women', Michigan Journal of Gender and Law (2 Mich.J.Gender &L. 83). 1984 l Kulachanda Chaipipat, 'New Law Targets Human Trafficking', Nation, Bangkok. Nov. 30, 1997. l Human Rights Watch, Modern Form of Slavery. l Mechai Veravidhya, 'Address to the International Conference on HIV/AIDS', Chiang Mai, September, 1995. l Meena Menon, 'The Unknown Faces', Donna M. Hughes, et. al. (Eds.) Factbook on Global Sexual Exploitation, Coalition Against Trafficking in Women. l Robert I. Friedman, 'India's Sham: Sexual Slavery and Political Corruption are Leading to an IDDS Catastrophe', The Nation, 8 April, 1996. l Frederick Moronha, India Abroad News Service, 9 August 1997. l Rahul Bedi, 'Bid to Protect Children as Sex Tourism Spreads', Daily Telegraph, 23 August, 1997. l Tim McGirk, 'Nepal's Lost Daughters, India's Soiled Goods', Nepal/India News, 27

l Times of India, 1989. January 2, New Delhi. l Puline O'Dea, Gender Exploitation and Violence: The Market in Women, Girls and Sex in

Nepal: An Overview of the Situation and Review of the Literature. (Kathmandu: UNICEF, 1993) l Gauri Pradhan, 'Road to Bombay', Voice of Child Workers, Issue No. 15/16, December 1992. CWIN: Kathmandu. l 30. Asian Development Bank (ADB) 2001. Country Strategy and Program Update (20022004), Nepal. l Radhika Coomaraswamy, 1997. IPS, 2 April, 1997. l 'Devadashi System Continues to Legitimize Prostitution: The Devadashi Tradition and Prostitution', TOI, 4 December. 1997. l Soma Wadhwa, 'For Sale Childhood', Outlook, 1998. l Human Rights Watch/Asia, 2000. 'Rape for Profit: Trafficking of Nepali Girls and Women to Indian Brothels'. Vol. 12, No. 5 (A). l S. Seethalakshimi, 'Karnataka Girls Being Sold to Goa Brothels', Times of India, 28 May, 1998. l Malka Marcovich- Quoted from 'Prostitution is Violence Against Women' in <http://www.uri.edu/artsci/wms/huges> (Women Studies Program, University of Rhode Island) l Raymond Janice G. et al, 2002 A Comparative Study of Women Trafficked in the Migration Process: Patterns, Profiles and Health Consequences of Sexual Exploitation in Five Countries (Indonesia, the Philippines, Thailand, Venezuela and the United States available at <http://www.catwinternational.org> l International Organization of Migration (IOM), 1995. Trafficking and Prostitution: the Growing Exploitation of Migrant Women from Central Europe. Budapest. l Suzanne Daley, 'New Rights for Dutch Prostitutes, but no Gain', New York Times, 2001. l Lean Lin, The Sex Sector, (Geneva, Switzerland: International Labor Office, 1998) l Margaret A. Baldwin, 'Split at the Root: Prostitution and Feminist Discourse of Law Reform', Yale Journal of Law and Feminism. Vol. 5, pp. 47-120. 1992 l Kathleen Barry, Prostitution of Sexuality. (New York: New York University, 1995). l IIDS/UNIFEM, 2004. Status and Dimensions of Trafficking With Nepalese Context. Institute of Integrated Development Studies and United Nations Development Fund for Women, Kathmandu, Nepal.

l Labor was abundantly available and hence was not a constraint; the Harrod-

Rethinking Pakistan's Growth Strategy Dr Nadeem Ul Haque

Introduction In choosing a topic on Pakistan's growth strategy one runs the risk of being interpreted as critical of the incumbent government or of current policies. Indeed the focus of all economic and political discussion remains the critiquing of the current government and its policies. As argued elsewhere, Pakistanis make a limited investment in long term visionary thinking especially on systemic or economic issues1. Economist should have a larger role than merely commenting on fiscal policy and filling up junior ranks in the planning commission - two traditional roles that economists have been assigned2. Economists can and do play a role in determining long term strategy of the country including defining the institutional infrastructure of a country, its larger agenda for reform and its stance and interface with the global community. Without an economist's perspective, societies far fall short of the ultimate objective of economic welfare. This paper reviews Pakistan's long-term growth strategy and argues that it has basically remained unchanged over the years. It then attempts to identify the actors who influence and shape this strategy. This is followed by what changes should be made in that strategy based on more recent developments in economic thinking and experience in the world. The contention is that for long run sustained growth that will lead Pakistan to join the club of the more advanced countries, this new strategy and the reform agenda that it suggests must be adopted. Finally, it points to the factors that impede the adoption of such a strategy and especially to Pakistan owning such a strategy.

1. Post-independence Paradigm of Development a. Policy assumptions What then was the growth strategy that Pakistan followed? Haque and Khan (1997) have noted that expatriate economist filled the policy vacuum created by the lack of indigenous economists in our early days. The Harvard advisory group, which set the county's economic policies in its early days, based these policies on the economic thinking of the time. These were: l Given poverty levels, economic development must be given priority over all other

activities. Political social ordering of society was subservient to the needs of economic development. l That the economy worked on the lines of the Harrod-Domar growth model where growth was a simple process of capital accumulation based on a simple relationship between production and capital.

Domar model did not regard skills, as a constraint hence there was not much concern for education and skill development. l A poor agrarian economic base was mistaken for irrationality and an inability for the economy and economic actors to self-organise which is a fundamental principle of Smithian and neoclassical economics. These assumptions led to a model of economic development that would be based on three important actors that would determine the future of the country -- the government, the external donor and the external expert. The last would supply the policy thinking, the second the required funding and the last would be the implementing agency3. Given the view of backwardness, existing markets and economic relationships were looked on with suspicion though later research did vindicated these many years later4. b. An overlarge role of government The combination of the external donor and government and a deep suspicion of the market led to the development of the planning model that formed the basis of our economic policy for many decades. In this scheme, markets, civil society and openness played little or no role. Because the population and the infrastructure was so backward, government would have to play a leading role in economic development even if it was at the expense of the government's ability to develop social contract goods. In actual fact, social contract goods, justice, law and order, security of person and contract all suffered. External assistance was required at many levels. Most importantly, investible resources which domestic savers would not be able to provide because of their myopia or poverty would need to be provided through foreign loans and grants5. Not immediately obvious but more important over the long run was the role of the expert in providing us with ideas and technology for policy and organisation of society and markets. Foreign technical assistance would be required to overcome domestic residents information and institutional shortcomings. Over time all policy formulation functions were transferred to the donor6. New governments or ministers who are seeking fresh initiatives appeal to donors now for assistance in conducting research for the formulation of policy. In this model, the government took on more and more of the market and social functions in the economy. The planners happily found that the British war economy had already put in a large number of constraints on the economy. These included capital and current account controls, financial repression, constraints on movements of goods especially food and a system of agricultural procurement. The new planning model instead of relaxing these controls intensified them in the name of conserving resources. There was a secular decline in governance to which the new socalled 'developmental' government and there advisors remained blissfully unaware till the 1990s.

Meanwhile the new 'big push for development' claimed more and more resources for development activitiesthe many infrastructure boards, the mushrooming educational institutions, the many offices of development, and not to mention the various nation building and defense establishments. The government grew rapidly both in size and influence; it became the largest employer in the country. Fiscal resources began to be thinly spread and the governance sectorsjustice, law and order and securitywere further squeezed. Thus began the new game of the government attempting to squeeze more resources from the population through many clever schemes of taxation, which the people resisted by moving into informal sectors that lay beyond the pale of the government. This continuous tussle between the government hungry for resources to spend on goods that society did not value and people who attempting to escape that 'unjust' taxation eroded the social contract and faith in the government. As the fiscal crunch deepened, across the board cuts were employed often to the detriment of organisational efficiency. Maintenance and development expenditures were reduced; real wages were frozen; and at times employment growth was frozen. While organisations began to look depreciated with cuts in maintenance budgets, government servants began to claw for a living wage and more (Haque and Sahay (1995)). They responded to the situation by expanding their perks, by legitimising rentseeking and corruption and reducing accountability standards. The bulk of a government servant's earnings over time were derived from non-income sources such as perks and her pension depended purely on the acquisition of offbalance sheet, state subsidised assets. This was done through making land development a major activity of the state, and marketing land through a subsidised sale to government functionaries7. In the same vein, public sector corporations were means of maximising fiefdoms and perks. The result is government machinery that lacked high-powered incentives8, a distorted land and goods markets and reduced standards of work and accountability in the country9. Basically, the 'big push for economic development' led to an overextended government manned by an unmotivated manpower that increasingly became unaccountable and engaged in rentseeking and perk maximisation. As these trends took hold, the quality of governance declined and market development and regulation increasingly became hostage to public sector rentseeking. Merit, which even the colonials recognised, was now totally disregarded leading to a flight of human capital from the government. c. Business and enterprise development The two-gap model, which was in vogue then argued that the investment required for the big push would exceed local savings. This argument would be further strengthened by the fact that measured savings have always been low for Pakistanmuch lower than comparator countries such as India. For years this inadequacy of Pakistani savings has haunted our policy and our economist and all manner of government savings schemes were dreamt up for increasing savings further exacerbating the fiscal deficit. People reacted to an expanding government looking for

resources, with large amounts of capital flight and informal savings especially in real estate. Nevertheless the assumed short supply of savings was to be made up with large amounts of foreign borrowing. The government was the borrower (on behalf of the people) and of course used the money to expand itself further. The second gap that the two-gap model assumed was that between the supply and demand for foreign exchange. It was assumed that the country had limited foreign exchange earning capacity while the needs of the 'big push for industrialisation' required large amounts of imported inputs. Policy was configured to earn foreign exchange by encouraging exports and to conserve it through curbs on imports and capital outflows. Thus developed paranoia toward openness and a desire for control: even foreign travel and education abroad was a privilege to be severely restricted. Given the two gaps -- the savings and foreign exchange -- it was natural for policy to prioritise the use of resources. There was also a theory that suggested development to be a sequenced phenomenon where no stage can be jumped. The government and the expert of course knew the sequencing and considered it important to develop industry for export as well as import substitution. Infant industry arguments led to ample and extensive protection being offered for these objectives. Given the imperative of developing industry, licensing, concessional financing schemes and other subsidy regimes were offered. These restrictions created a licensee businessman who got used to being spoilt by concessions and protection. Such businessmen were not hardworking or capable of taking risks or innovating! Since there was no bankruptcy law, the government essentially took over industries that ran into difficulties under the rubric of 'sick industries.' Thus began an era of where entrepreneurship was stifled as rentseeking was also established in business. This class of licensee businessmen acquired wealth and learnt to manipulate government and get policy set in their favor10. All spontaneous business was discouraged as informal and 'illegal,' increasing their costs of business and the uncertainty facing them. The uncertainty for these enterprises and their cost of doing business increases as a result11. It is no wonder that indigenous enterprise does not grow and wealth remains concentrated in hands of those that the government favors. Consequently, even in enterprise merit gave way to government discretion. Social mobility was ultimately arrested.12 The early planning model focused entirely on industrial development through protection and subsidies. The terms of trade were fixed toward industrial production by the policymaker. Within industry, policy tried to foster export through subsidy regimes and protect import substitution industry. Import for consumption was always discouraged. Essentially this approach mounts to the eighteenth century 'mercantilism.'

An interesting ramification of this industry focused mercantilist approach was the neglect of the service sector and internal commerce. Retail sector which was probably the largest employer in the country was really not regarded as contributing to growth and production. Many internal commercial activities were severely constrained because of the view favoring industrial production. City regulation came to offer space only to housing -- that too for the very rich -- small shops, government offices in city centers and large industrial areas on the outskirts. Even schooling was an afterthought. There was no room for entertainment, hotels, shopping malls, even other commercial activities, such as offices, warehouses, storage and wholesale activities. The result was that growth of a host of activities was stunted: for example, construction, warehousing, hotelling, entertainment and retail. Growth, entrepreneurship and social mobility were arrested. d. The neglect of thinking and research Recall that the growth model that was being assumed for policy purposes indicated that capital was the major constraint for which considerable foreign borrowing was to be resorted to. Labor was in abundant supply and at the first stage of simple industrialisation where countries like Pakistan were only to set up industries that the more advanced countries were giving up. Human development was not of major priority; socially desirable but not necessary for the growth model for the 'big push.' As is well known and it remains true even today, as a percentage of GDP Pakistan allocates far less for education than the average for developing countries. Many human development policies planned primarily for spread of universal literacy, a goal that still remains elusive. Expert advice also maintained that higher education and research were considered luxury goods, activities to be pursued by more advanced countries. First such countries must develop literacy, then move on to secondary education to be followed by technical and vocational education and only then move on tertiary education. Research remained in the far future. From this viewpoint, education was a simple planning and bureaucratic activity. It remained an afterthought in policy. Unlike India, where the IITs and the IIMs were set up as harsh merticocracies with a serious intent to compete with the advanced countries in research and learning, the bureaucracy effectively colonised Paksitani universities. Even today, no public sector university has any autonomy; government nominees and secretaries continue to serve on governing bodies and the government determines appointments and transfers of university professors and management13. All academic and university appointments are regarded as part of the bureaucracy. All government servants -- and academia were regarded as such, a colonial legacy -- were subject to the traditional human resource management and slotted into the uniform national pay-scales. The former rewarded seniority blindly and the latter slotted people into predefined relativity. Thus an academic could win international research awards but could only be promoted when the right seniority could be attained and even then according to the national pay-scales a professor could never rise to the level of secretary, the senior-most rank in the bureaucracy. Needless

to say, talent flew out of the academic sector. e. Summing up the early themes Thus, several themes were established in the early design of policy in Pakistan. l A domineering government relying on controls l A reliance on external factors. For thinking for policy ideas with no attempt to

develop domestic capacity. A dependence on external capital which was to be rationed through some government policy l A production focused economy seeking to industrialise l A mercantilist approach relying on export promotion, protection of import substitution industry, and high priced consumer imports l The establishment of a rentseeking, non-entreprenuerial culture which with its resources would seek to perpetuate itself l A rentseeking bureaucracy, which is not a modernising and reform force. l A neglect of thinking and education l Finally, a neglect of merit and professionalism l It is these themes that Pakistani society and government would later have to contend with. Much of what happened later was the response of society to these themes. 2. Path of Dependence: The Slow Pace of Reform Many Pakistanis would say that these early themes continue to stay with us today and perhaps in a more intensified form. As expected, from time to time, economic inefficiencies show up in terms of a buildup of macroeconomic imbalances such as an unserviceable debt buildup, rising inflation, slowing growth. In such periods, the government tries intensifying controls and other administrative measures. When these fail and a sort of a crisis emerges, IFIs are called upon to help. It is at such times that the agenda for reform moves up to the point where the crisis is averted and a comfort zone has been reached. Thus motivated by crises, IFIs conditionality has been moving the agenda for reform. But this reform has been mainly concerned with improving the macroeconomic situation. Although the scope of the conditionality has been expanded to deal with more fundamental problems when the crisis conditions proved to be stubborn, there has been little departure from the fundamental design established in earlier times. l Despite privatisation, government remains dominant, as regulation and market intervention continue to grow. l Protection remains in tact; the basic mercantilist approach remains in place. l Faith in openness and the market remains weak though opposition is slowly being eroded. l The framework of governance, including the bureaucracy, judiciary and politics remains virtually unreformed. l Merit, research and professionalism remain unrecognised and unrewarded. Pakistani media and intelligentsia still cling to an excessively large role of the government, a suspicion of the market, a bias toward industry backed by excessive

protection, limited social mobility, little role for merit and professionalism and a an acceptance of rent seeking. Cries of reform continue to beat on earlier themes of planning and government directives and frown upon openness and competition. Clearly thinking remains path dependant and the constituency for reform seems to be very small. Let us examine why. There is limited ideological challenge to these early themes. One explanation could lie in the stunted development of the economics profession meant that there was no research and debate that evolved the framework of policymaking of the early years. As noted by Haque and Khan (1997) the economics profession was started by scholarships and government jobs according to the design of the donor experts. Primarily it was hosted in the Planning Commission and the Pakistan Institute of Development Economics as an adjunct to the government bureaucracy, which would deliver development. The role of economics in this model was considered to be mainly the assistance of the bureaucracy in planning. Little investment was made in either theoretical economics or behavioral empiricism, which might overturn the assumptions of policy. This design did not deliver any independent research or discussion of policy. The declining standards of education especially at higher levels and the lack of emphasis on research resulted in an arrested development of economic thinking in the country. Economic faculties did not develop in universities, syllabi were not evolved and no research challenged the early thinking discussed above. Vested interests like the protected engineering goods lobby and the subsidised textile lobby also continued to feed the earlier thinking of a domineering government and mercantilism. Surprisingly despite the fall of the Soviet Union, the extended Japanese recession, as well as the East Asian crisis, the Pakistani economist and the debate in Pakistan continued to argue for a large government role, a planned economy, and mercantilism. They cling dearly to their suspicion of the market despite much evidence on efficient markets and the information aggregation and signaling role of markets that the economics profession has been developing internationally. Another important factor determining path dependence in our long-term growth strategy is the continuation of the colonial bureaucracy without reform and modernisation. The colonial civil service system was designed to maintain administrative order if a colony. With new development and national functions -project management, market regulation, media operation and management, operating economic units -- added on it required new skills and management approaches. These new demands on government required professionalisation, specialisation, and technical analysis. The civil service system, however, continued to develop generalists who were fungible in all government business. A rapid and mandatory transfer system was maintained at the cost of specialisation and as a disciplining device that served to politicise the civil service. The generalist fungible bureaucracy which as argued above was incentivised by perk and rent management in all likelihood would resist reform which would erode

their power as well as their incentives. Reform of the civil service, wider governance reform, as well as deeper structural reform required for economic efficiency has been discussed from time to time especially at times of regime change. For example, decentralisation, privatisation, public corporation reform, building autonomous institutions, development of property rights, law and security reform have all been discussed. Donors who had initially not thought these areas to be of importance have put such reform on their list. One reason that progress has been slow is that the civil service was not invested in, nor was it technically capable of undertaking such reform. Another reason for the inability to substantially reform the original design may lie in the dominance of the government. The design of development based on planning, licensing, and controls meant that the government determined market competition and success. As accountability and quality standards declined in government, economic and political success came to be measured in terms of whimsical benefits, such as land allotments, procurement contracts, monopolies, arbitrary protection, derived from government regulation and dispensations. Competition for these has intensified over time raising the cost of criticism and a demand for reform. Even well intentioned political change finds the spoils of success quite tempting and often abandons reform.

3. Paradigm Shift: A New Strategy a. A brief review of the new developments in economics In thinking of a new strategy, we must draw upon fresh developments in economic thinking around the world. While path dependence seems to be dominant in Pakistan, economic thinking has changed as a result of the large amount of research being done internationally14. This new thinking may be summarised as follows. 1. 2. 3.

Important determinants of economic growth are knowledge, creativity and innovation. Societies that progress foster such activities. For economic growth to take place, institutions must be configured to foster security of life, property and contract and to facilitate market development. Economic activity grows in open competitive markets. Economic activity and innovation is chaotic and cannot be planned by government and hence must be left to markets. Growth takes place in creative cities where individual liberty and economic freedom is maximised and community space developed to allow individuals to come together. Such cities are based on limited regulation since they encourage mixed use and commerce. Such cities foster knowledge clusters. The role of government is not to plan and attempt mercantilist sector and industry picking but to provide the institutions that will foster the 4 activities outlined above.

The new economics defines very clearly the distinct roles of the government and the market place. By managing its role well, the government defines incentives within society for creativity and innovation. Social mobility is not restricted as it is currently. Policy instead of rewarding rent seekers seeks to reward talent and

innovation. Clearly 'the early design' that has been adhered to -- a domineering role of the government, planning, and mercantilism -- is inimical to the new economics. One major flaw in the path dependant growth policies that we have been following has been the neglect of institutions and governance. Clearly the new developments in economics require our strategy to be changed and for the path dependence in 'the early design' to be broken. We will here consider what the elements of the new strategy are. Then we will try to identify the sequencing of the actions to be taken. In doing so, we will have to consider aspects of the political economy of moving from the earlier strategy to that which is now required. b. Accepting markets and globalisation Ample evidence exists in the benefits of markets and globalisation and Pakistan at every level -- policymaker, academic, journalist -- must debate, understand and accept this evidence15. If this becomes the cornerstone of government policy all must be invested in developing markets and an interface with globalisation. The key point to note is that an acceptance of globalisation means that we must build linkages with the world at every level and not choose areas that we wish to engage in which is our current approach. This will mean reviewing our protection policy at every level from protection of production, to the protection of our airports, our leisure, retail and service industries. Eventually it will mean a cultural acceptance of foreigners without any pressure to conforming to local standards in our cities16. Benefits from globalisation can only be realised through market development. Globalisation is the linkages of markets across national boundaries. Government must give space to market development and exit from activities that are affecting markets. For example, agricultural procurement and storage currently remains dominated by government; subsidies to industry or exorbitant protection to some leads to a distortion in the market place. Every government intervention in the marketplace, including revenue initiatives, must be carefully reviewed at the technical level by a broad group of professional economists, think tanks and universities to understand their market implications before they are implemented. All government intervention must be market neutral and minimal. The dictum that 'every market needs government regulation' is convenient for rent seeking and ignores all economic theory and empirical evidence. Often regulation is built on bureaucratic lines and run by generalist bureaucrats. Two important points on regulation need to be recognised. First, that markets are selforganising and self-regulating. Regulation only affects areas of market failure where self-regulation does not work. Second, each market is specialised and needs specialists with the requisite skills to regulate the market. Generalists being transferred from a government department most often will not do.

c. Realigning government to the social contract Public policy research has clarified the role of government to be that of correcting market failure and providing security to individuals and the market. All tasks of the government derive from this mandate of providing individual security and liberty and safeguarding contracts and transactions conducted by sovereign individuals. Development projects and arranging for welfare and distribution are dimensions of improving welfare. Government activity beyond the social contract must be viewed with a certain amount of cynicism. Government activity for the maintenance of the social contract -security and liberty -- are core governance activities and no 'big push' should compromise these. Enough evidence has accumulated form our own history to show us that compromising governance and developing law and order and security issues and limiting human liberty and economic freedom reduces long term economic prospects17. The role of the government is to provide governance first. Development can only be done by a government that can provide governance. Even government activities within the social contract must be conducted with as much transparency and accountability as possible. Government efficiency and output must be always monitored. 18 19 Government should move away from planning and interference in the market place. In particular strategies that pick sectors or that emphasise any one activity such as industry over others should be seen as distortionary. That development is a chaotic and messy business best developed through the market taking its own head is well understood and has to be accepted. Policy must give this process space and be ready to help clean up where it can in an informed manner. d. Building institutions and governance There is now widespread acceptance that institutions and governance need to be built for growth. However, in reality this has remained little more than wishful thinking since no real progress has been made. Most often very expensive donor funded projects relying upon very expensive consultants and end with limited impact on the efficiency or the quality of governance or institutions. The focus of most of this work is the importing of 'best practice' through a consultant using the incumbents with their current incentives. Institutions are the rules and norms that society accepts and operates under. Needless to say one important institution is the constitution and its checks and balances which will define the basic incentives under which society functions. These must be carefully examined from the point of view of economic efficiency, individual liberty and maximum welfare of all. The constitutional thinking that emerged from the enlightenment regarded limiting the power of the executive through checks and balances as the most important element of the constitution21. Civilisation is based on two very important institutions -- property rights and the rule of law -- that need to be carefully developed and nurtured. The state

guarantees property rights the definition of which is continuously expanding with technology and population density. The former creates new goods and services as well as new uses for existing goods and services leading to possible rights conflicts or redefinitions and re-interpretations. Related contracting mechanisms also seek to define property rights and claims that again require informed and appropriate state intervention. Similarly with increasing population density property rights become more involved with the tradeoff between community welfare and individual rights as crowding increases social externalities that individuals place on each other. Space and environmental has to be shared such that individual freedom and privacy are maximised while the increasing community welfare. Public goods infrastructure, such as roads, sewers, wiring will require the assertion of eminent domain. Unless an informed and thinking approach is used, eminent domain can convey too much power on the executive and be used for rentseeking22.

5. An important ingredient for building governance is the establishment of the rule of law, which means an end of privilege and 'network rentseeking23.' The principle of 'equality before law' must be maintained by an independent, competent and quality judiciary. The law must also show its responsiveness to change in society. Hence the legal system must also be capable of reform and innovation. The legal process must lend itself rapid enactment of needed laws and not be always dependant on crisis or the external donor forcing a change. Experience of development in many countries has shown that ensuring justice and the rule of law ensures good market development and hence enhances growth. Establishing the rule of law and a good system of justice has now become a matter of priority. A resource constrained government must therefore use its resources wisely and ensure that the key institutions of governance that are required for security and market development must be properly developed. e. Developing creativity and social mobility In building institutions on the principles required by modern economic and legal thinking, we must make sure that competent research is undertaken and widely debated to enable a consensus for a well understood reform to be developed. Much recent research has emphasised that the key difference between developing and advanced countries to be the creation and use of knowledge and creativity. To create such an environment, policy must move to fostering merit at every level through a new set of incentives. Incentives and the reform of public service 1. Reform government service civil service, judiciary, education, research, regulation etcshould take place with incentives, merit and mobility at the heart of such reform. Reform must also be centered on competent professionals who must own it and lead it. Donor led reforms are too focussed on procedural changes, expensive consultant interventions and training the usefulness of which is very questionable.

Unified national pay scales and the pre-eminence of the central secretariat should be eliminated while building decentralisation and autonomy of key organisations such as universities, think tanks, regulatory bodies, security services. Decentralisation cannot be built around the current system of a federal civil service being loaned to local and provincial services and depending on their placements, promotions and increments on their parent organisation. Obviously the allegiance of the 'on loan' civil servants is to the federal service where they get their long term benefits from. Autonomy means no government representation on boards and no interference in the running of the organisation. All universities and think tanks to be totally independent owning their own resources and personnel and in competition with each other. All government subsidies to be directed through a voucher scheme. Perks and transfers must be eliminated. The former is non-transparent and leads to perk-management, while the latter is either a control device or inimical to specialisation and learning. No protection of employment. While tenure could be offered as part of contracting but the current method of a lifetime monopoly of the civil service with no threat of external competition obviously is inefficient. Merit-based and professional recruiting, HRM and training that base all promotions, emoluments and honors on merit and performance alone. Research and innovation within professional development to be rewarded.

Incentives would be strongly realigned if as suggested the role of government is realigned, globalisation is accepted and institutions built. What sort of institutions will allow this creativity to be unleashed? 1. Shift to a consumer oriented society. Creativity can be built with a change in policy stance and regulation that sees all activityand not just production -- as equally valuable. This will require a change in emphasis from the current focus of policymakers on supporting producers through essentially mercantilist policies to an economy that allows consumers more choices and greater weight in the economy. Policy will then have to allow more space, both metaphorically and physically, to services and especially domestic commerce which currently is stifled. With better retail, warehousing and leisure activities, markets, output and employment will expand. In an open economy, consumers will exert their preferences to the market through these activities. Economic activity will then take place according to the price signals conveyed by final consumer demand (Hayek (1956)). Products will be developed to satisfy consumer demand. Chances of a high quality products and brand names being developed will increase. And it is these products that will move overseas to increase domestic wealth. 2. Urban regulation for creative cities: For this consumer focused broader model, policy and regulation must change to accommodate the market development even though at times it may not be as orderly as planners might like it. Most important, regulation for city and land development and utilization will have to be more accommodative of more city activities than are currently allowed. Currently, cities primarily allow for high income single-family housing, small retail and some

industry. This approach also shuns urban density and values large open spaces with suburban housing. In the new model, much more density will need to be accommodated, including multiple family dwellings. In addition, for the future city regulation should allow far more room for hotels, leisure activities, large retail, event management, office and other commercial space (see Appendix 1 for more details). f. Sequencing of reform and political economy With this deregulation and reorientation of the role of the government, a huge growth dividend awaits. Reallocation of land resources within cities alone will open up so many opportunities. New commercial activities, leisure, hotelling and land development will absorb large amounts of investment which multinationals will hungrily provide. Yet there will be opponents of this reform. To be realistic, we must understand the political economy of reform and identify what the critical reform might be that will help unleash other reform. It is obvious that reform will be opposed by those who benefit from the current situation. This would be those who are favored by policy, through protection, through conferring of monopoly, or through subsidies. Obviously they are going to fight to safeguard their privilege. Thus the current set of industrialists and government functionaries would not favor reform of the kind suggested here. Complete opening up and wholesale deregulation that develops strong competition will be one important approach to moving in the direction of the new strategy. But the two most powerful groups -- current favored industrialists and government machinery -- will strongly resist such a move and will convert a dejure liberalisation into a defacto closure. To get anywhere near opening out, we need to change the incentives of a key group. An important key group that needs to be vested in reform is the government employee who should in the interests of improving her productivity seek innovative approaches to make progress. Given the prevalence of rentseeking/perk-management in government, incumbents probably self-select themselves on the basis of their ability to play this game. To such individuals, gains from reform may not outweigh those from rentseeking/perk-management. The approach should then to change the rules such to allow people who are more invested in reform to come into positions where reform can be made. To break their hold, incentives have to be changed to allow individuals who would choose reform over rentseeking to enter key public positions. This can only happen if: a. b. c.

The current closed civil service is opened up at all levels ie. all positions face external competition The generalist approach is discarded and appointments of professionals with the requisite skills are made. Reasonable security of tenure is given, ie, transfer is discarded as weapon of control.

d. e.

Mobility into and out of the public sector is encouraged. Perks are abolished and all payment is in cash and totally transparent. Performance based bonuses should be used. Payments should be competitive with the private sector. Reform should be rewarded with honors and payment

With this approach, the government employees (judges, civil servants, public service delivery employees) can all hope to invest in reform and gain from it. Over time, the incumbents engaged in rentseeking will be outnumbered. Such a public service will be able to take on the vested interests and align society's incentives with economic efficiency and growth. From a political economy standpoint, it seems that the critical measure to trigger wider economic efficiency reform would be reform of the public sector on lines suggested here. A complimentary reform would be catalyzing thinking and debate on reform. This can best be done through a vibrant academia. Academia is currently subservient to the bureaucracy because technically they are government employees, because all public universities have officials on their governing bodies and on the national pay scales they can never be promoted. If autonomy is strengthened through no government representation on boards or in the appointment process, while also strengthening HRM and professionalism, on the lines suggested above, ac academia could be revitalised over time24 25. Unfortunately, the Pakistani media cannot be counted on the side of reform and progress. Contrary to Sen's famous argument that media is always an ally of reform and progress, the media in Pakistan has always been controlled by the government to more or less freeze out any debate especially on alternative strategies or reform. Through the country's history, the government has found ways of controlling the media. Overt controlslicensing and direct censorship-- were in place for many years. When these were given up, rationing of newsprint was used as a control device. When the media gained independence, the government had also grown to be the largest advertiser and hence retained control on the media26. In Pakistan, academia through their interface with globalisation will probably through creating awareness lead the media into publicising reform.

Conclusion This paper argues that there is an urgent need to shift the growth paradigm in Pakistan. Much has been learnt about the growth process in the world and this knowledge needs to be applied in Pakistan. The earlier approach based on government-centered planning, reliance on foreign resources, and mercantilism, has not worked because the structure of incentives that resulted from this approach led to the neglect of governance, development of rentseeking, and society that did not nurture talent. Economists are now emphasising that for self-sustaining growth, institutions of individual economic and social security and markets need to be built along with markets which facilitate market transactions among these individual. Government

merely provides these institutions allowing markets to determine where economic activity goes. This is a meritocratic framework where success is determined purely by the market place and where government efficiency is also judged by how well it develops the governance infrastructure that facilitates the market. The paper also claims that political economy analysis suggests that current vested interests have locked-in the current system leaving little room for change. The change has to take place at the level of acceptance of this new thinking, which can perhaps best happen through academic freedom and the development of a research culture. That will only happen when the education system which currently is subservient to the government machinery is completely autonomised and professionalised. For reform to take hold, however, public service which stands at the heart of the system will need to be modernised in a manner that invests it in reform and takes it away from rent and perk-management. The author's contention has been that the crux of this reform of government will lie in the management of public service personnel to allow open competition of a professional kind to be established.

(Dr. Nadeem-ul-Haque is a Consultant at Pakistan's Ministry of Commerce)

14.

15. 16. 17.

18. 19.

20.

End Notes 1. 2. 3.

5. 6.

7. 8. 9.

10. 11.

12. 13.

See Haque and Shaikh (1993) and Samad (1993). Recently, SBP was headed by an economist but it is not clear whether that tradition is to be continued. Recall these were also the days of socialist and Marxist thinking where the market was held under suspicion. It is not surprising then that markets and openness played little role in those days. Thus, for example, T. W. Schultze and D. Mcloskey showed that the peasant was rational even in land fragmentation and Stiglitz and Akerlof showed that the moneylender was not the monopolist that he was normally assumed to be. Papnek (1967) argues for the need to generate inequality to enable the rich to generate savings. The civil service, which did engage in some research and inquiry in colonial and immediate post colonial times, (see Braibanti (1957)) now appears to be quite limited in such activities. The army has learnt it well and uses this device effectively to keep its people happy. High-powered incentives are those that relate payment directly to job objectives. While the new tasks of economic development and market regulation required many new professional skills, the old civil service continued to operate on lifetime tenures to general administrators who are then rotated in various positions. Costs of business surveys have been pointing to the amount of time and resources that business is using to interface with government. Since our cities have no real space for small or big retail and service, street hawkers often move into encroached public property or on streets. When roads need widening for increasing car traffic, these informal shops are cleaned out rendering many impoverished. Alternatives of public transport provision are never seriously considered. Neither is the possibility of allowing more density in urban centers which currently are occupied by large houses. To his credit Dr. Mahbub ul Haq, the only Pakistani economist to develop a public image, saw increasing inequality and rising monopolies and raised the slogan of 22 families. The World Bank argued in the seventies and eighties that the social rates of return to

21.

22.

23.

24.

25. 26.

primary education were higher than those obtained in university education. There was a strong policy bias toward primary education away from higher education. See Psacharopoulos and Woodhall (1986) In many developing countries, considerable inertia in thinking is displayed despite attempts at liberalisation and advancing global communication. Inderjit Comarswamy, of the Commonwealth secretariat says, 'we seem to have liberalised our economies but not our minds.' The knee jerk approach to cite the few critics that exist without any serious examination of the issue must be discouraged. Most Muslim countries are very friendly to foreigners for the sake of tourist dollars. An interesting example of this would be provided by research into the economic costs of government supported fundamentalism during our era of supporting Taliban and adopting a narrower definition of Islam than prevails in most Muslim countries. Much economic activity and investment was curtailed. One important function of parliament from its inception has been the monitoring of government. An important part of the new governance movement started by Thatcher and the New Zealand reform has been the measurement of the quality of government and the continuous reporting of such governance. Of course this assumes an open and transparent government where citizens have a right to know. Constitutional economics is an important subject and should be taken into account at moments of constitutional deliberations. One reason that we run into a constitutional hiatus is because in both the framing of the constitution and its amendments, no expert of this field was consulted. The federalist papers' has a very good discussion of constitutional issues. Lord Acton's famous dictum: 'power corrupts' remains true and hence an important role of the constitution is to distribute power through checks and balances that it does not concentrate anywhere. There is another interesting area for research and reform here. Currently, land development takes place under the cooperative society act and the land acquisition act. The former has no legal entity or assets to give claimants any recourse while the latter should not used for development of housing for the rich. There is little sociological research in Pakistan even though much work is required. One area that has important ramifications for our economy as well as polity is what I would term as 'Network rent-seeking.' People are now working very hard to be a part of an important network to be able to engage in rent-seeking. Not only is this wasteful activity but it also destroys the socio-political fabric of the country and destroys the rule of law. Since academia has been discounted for such a long period of time, quite possibly a premium might need to be given. In addition, faculty need not be purely of Pakistani origin. This is not the case in any advanced country. The revitalised academia and the professional public service could compliment each other and strengthen reform. The media is far freer than it used to be but now because of the fear of losing advertising revenues, there is a fair amount of self-censorship.

References l George Psacharopoulos and Maureen Woodhall, Education for Development - An Analysis of Investment Choices (OUP, 1986)

l Joseph E. Stiglitz, Globalization and Its Discontents, (Paperback - April 2003) l Jagdish N. Bhagwati, In Defense of Globalization (Hardcover - January 2004) l Thomas L. Friedman, The Lexus and the Olive Tree: Understanding Globalization (Paperback - May 2000)

l Martin Wolf, Why Globalization Works (Hardcover) l Hayek, Use of knowledge

Appendix 1 4.

The Creative City 'Cities,' writes Charles Landry, in a recent book called 'The Creative City', have one crucial resource -- their people. Human cleverness, desires, motivations, imagination and creativity are replacing location, natural resources and market access as urban resources. The creativity of those who live in and run cities will determine future success.'

Cities can redesign themselves to attract those who are creative contributors to society. Whether or not cities will capitalise on these advantages will hinge on the creativity they can bring to bear on reorganising themselves for the new challenges. What this new research is showing is that the continual macro/national approach to thinking about policy and development should perhaps be strongly appended by a fresh and a creative urban development and management approach. In 1985, Partners for Livable Places assessed the links between quality of life and the economic success of cities and concluded, 'cities that are not livable places are not likely to perform important economic functions in the future. Enhancing livability, therefore, should be a central objective in every city's economic transition strategy, and the elements of livability should be employed as economic development toolsâ&#x20AC;Śfew cities that do not offer an attractive quality of life can expect their fair share of the growth that will occur in the nation's economy over the coming years.' Between 1985 and 2000, the link between quality of life and economic success has grown much stronger, largely because of the revolutionary effects of the development of the Internet and worldwide telecommunications. What are the key new economy characteristics and what are the challenges that they pose for cities? I would emphasise the following: 1. Location less important. Central locations that strengthened the centrifugal forces in metropolitan areas are no longer as important. The bigger challenge for cities is to find ways to hold and attract creative and taletned residents, workers and businesses. To do so the quality of life offered by a city must be rich: low crime rates, rich cultural life, and a large measure of freedom for creative individualism to express itself. 2. Primacy of human capital. In the new digital economy factors such as human capital and research institutions are much more significant. The new economy requires a well-educated, skilled and adaptable workforce. The challenge for cities is to strengthen school systems and develop and strengthen the education institutions that respond directly to the needs of new economy employers. The new economy increases the importance of higher education and research institutions for local economic development. The challenge for cities is to work with these institutions and the business community to develop good working relationships. 'The New Economy,' declares the Progressive Policy Institute in its 2000 report, 'requires higher levels of education up front, including high-tech skills, and also opportunities for lifelong learning so that workers can keep pace with the high speed of developments in technology, globalisation, and new business practices.' 3. Cities to be globally integrated. The new economy is global. The challenge for cities is to support and expand opportunities to link efficiently with the national and international economies. The new economy demands a new infrastructure. The challenge for cities is to provide state-of-the-art digital infrastructure while upgrading

traditional infrastructure. Speed and flexibility. The new economy puts a premium on speed, responsiveness and flexibility. The challenge for cities is to reform local institutions and processes that that may be too slow and rigid to take advantage of new economy opportunities. Help the poor. The new economy threatens to leave behind those who were at the bottom of the ladder in the old economy. The challenge for cities is to make sure that all of their residents have the opportunity to succeed in the new economy. Prepare for continuous change. The new economy is constantly changing at a rate unmatched in previous history. The challenge for cities is to develop the capacity to keep abreast of change and maintain a clear understanding of the implications for their own prospects.

How can these challenges be met? The new urban thinking has the following to suggest: 1. Developing round the clock city centers and Downtowns. 'A Successful downtown,' as described in a 1998 Urban Land Institute report, 'requires a twenty-four-hour environment, a place where people live, work, and play throughout the day and night.' Creativity is encouraged by work and living environments that allow for a lot of interaction among people. Vital centers are typically filled with the kinds of places conducive to planned meetings as well as chance encountersplaces to eat and drink, conference and meeting facilities, creation space and facilities, parks and plazas, business service centers.'

According to ULI, 'Creating, sustaining, or reclaiming a twentyfour- hour center city requires the political supportand almost always the financial supportof the entire community. Twenty-four-hour downtown strategies recognise that developing office space is not enough. Instead, cities must consider other types of economic activity and, must consider, especially, what happens in the downtown once offices and other businesses close for the day. Twenty-four-hour downtown strategies continue to support office development but target other types of businesses as well, and integrate additional facets to make downtowns places where workers, residents and visitors want to be. Developing assets and creating destinations: Cities develop their natural assets such as waterfront, mountains and history as centers of activity and as destinations for tourism. In addition, cities look to develop modern activities such as convention centers, sports facilities, festival malls and urban entertainment centers, cultural districts, gaming casinos. Allowing for networks and clusters. The new economy is unpredictable and ever changing. New industries and new skills are emerging that require shifting alliances and partnerships. Consequently, cities must allow these emerge and develop naturally. This may require regional, cross-city clusters and networks to be developed. Cities administrations must foster such activities and create space for such interaction. Fostering cyberspace and connectivity. Connection to globalisation must not be a national policy alone. So much of city development will depend on this connectivity that it should fight to get its autonomy in this. If PTCL or national policy is to develop uniformity in connectivity, city development will be choked off. The means are available for Lahore, Gujranwala and Jacobabad to compete for connectivity and compete for the new creative class and they should. Invest in human capital: the city is a learning center. The key insight in this new literature is that the city creates the synergies for continuous learning and creativity.. Ever-shortening product lives and rapid transformations of companies reflect the need

100

for the current labor force to be equipped for change. Education and training, more than ever, must now be prepared for continuous change and for continuing lifetime education of workers. Continuous change also requires that city administration and policy must be informed of new development at home as well as elsewhere in the world , Constantly, at the forefront of city life should be the learning and the creative enterprise Quality University and research must lead this enterprise. Thanks purely to private initiative and despite the opposition of city administration, we have now a reasonable network of private schools and universities. But cities in Pakistan do not own and manage their own schools, colleges and universities. Nor do they own their think tanks if any. How can they then compete with human capital which is centrally controlled by Islamabad? The largest educational institutions are still in the hands of the bureaucracy and not in the hand of the citizens of Lahore. For the city to develop, the Punjab University and its constituent colleges, as well as the schools of Lahore should be in the hands of the city and its citizens. Moreover, for the learning center to be activated, we must network these institutions on the basis of ideas and research. There are 2 important implications that emerge from these ideas from the new thinking in urban development. 1.

Participatory, open governance. The new creative city, with its highly creative and educated population will demand a more of a say in their community. Otherwise they will vote with their feet. A city governance structure must be built that allows them in and hears their voices. Flexible zoning: A by-product of the 5 action items presented above is that the old model of rigid zoning that separates housing from commercial space needs to be revisited. Most old cities that we admire (such as London and Paris) have been based on a mixed use model. This allows for the kind of lifestyle as well as the networking and clustering functions that the new economy demands. In a more flexible zoning model, warehouses and old factories have become locations of choice for housing and new offices in many cities of the west.

It is clear that we need to move fast to transform our city management from its current colonial form to a new enlightened one for the coming new economy. For the city of today to meet these ultimate challenges, a whole new vision of learning, creative cities that are fully autonomous in managing their destinies.

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Organised Sector Employment in India Pravakar Sahoo Rajesh Kumar I. Introduction The economic policies in India before and after 1991 have been pursued with the objective of achieving higher economic growth leading to increase in employment. The philosophy of growth centres around increasing employment or reducing unemployment through trickle down effect i.e. through maximisation of economic growth and fragmented employment schemes. However, unemployment eradication has received less priority while the emphasis has majorly been on economic growth. Overall, total employment growth in the post-reform period declined to around 1 per cent compared to 2.75 per cent in the pre-reform period (Bhattacharya et al, 2004). There are only a few influential and significant studies on the impact of economic reforms on employment/unemployment in the country (Visaria, 1996; Mathur, 1999; Sundaram, 2001a and 2001b; Chadha and Sahu, 2002; Bhaumik, 2003; Bhattacharya and Sakthivel, 2004). Over all these studies have reached the conclusion that there is a declining trend in workforce growth in post-reforms period as compared to the prereforms period. Sundaram's (2001) study estimated that workforce grew at a slow rate of (0.81 per cent) than the projected rate of growth of population at (1.7 per cent) per annum. Based on these results, the Planning Commission set up a task force, which endorsed the declining trend in employment or increase in unemployment. The task force estimated that employment growth stood at 0.98 per cent per annum during the period 1993-94 to 1999-2000 against 2.04 per cent during the period 1983 to 1993-94 on the basis of Usual Principal and Subsidiary Status (UPSS). From this, one can say that the Indian economy is witnessing a 'jobless growth' in the post-reform period. Organised sector employment constitutes only 8-10 per cent of the total employment but organised sector contributes around 3/4th to the GDP. There are few studies which have analysed organised sector employment in the past. Bhattacharya and Mitra (1994) have shown that organised sector employment is dominated by the public sector in both the 1980s and 1990s. However, their analysis stresses on the dominance of private sector in manufacturing industry but with a downward trend (80 per cent during the 1980s to 70 per cent during the 1990s). Supporting Bhattacharya and Mitra, Shariff and Gumber (1999) reveal that private and public segment of organised sector witnessed discouraging trends in employment due to drastic fall in public sector employment. Further, Mitra (2001) also argues that employment in the public sector has decelerated over the years and there is no evidence of any rise in the employment elasticities of public sector after 1991. In the present study, the organized sector employment in total and industry wise, organised sector employment elasticity till latest data period available, i.e 2003-04 is analysed. Further, the employment trends in organized manufacturing industry during pre and

102

post-reforms period are also examined.

economy (Manning,1992). There are studies showing stable, long-run employmentGDP relationship (Kelly, 2000 and Padalino and Vevaralli, 1997) in developed countries. In contrast, higher employment implies higher human capital and that contributes to growth in the long-run (Daveri and Tabelleni, 2000). Therefore, economic performance and employment are positively related provided policies are designed properly. There are controversial views regarding increase in macroeconomic performance due to economic reforms and employment generation. Economic reforms resulted in disappointing labour performance (job creation) and increase in average wage levels (ECLAC, 1997) in Latin American countries. Similarly, Lora and Olivera (1998), also reveal that labour indicators have not been more positive despite better macro and microeconomics performance of Latin American countries. However, an ILO study (1996) finds that outcome was more positive for labour for the countries that applied economic reforms early1 than for those that reformed more recently. Further, it is also found that rapid growth of employment in the manufacturing sector output in Asia (Felip, 2000) was due to the rapid expansion of manufacturing sector output which was liberalized much earlier than other developing countries.

II. Macroeconomic Reforms and Employment The neoclassical theory states that distortions in the factor and goods market constrain economic growth and employment. Therefore economic reforms eliminating such distortion would lead to a higher level of growth and employment. Further, macroeconomic reforms viz., macroeconomic discipline, market economy and opening the domestic economy (at least with respect to trade and FDI) were advocated, particularly to developing countries. Though liberalisation was emphasised in different sectors to integrate the domestic economy with World economy, labour reforms were neglected keeping in view that it would hurt the labour market. However, there is very little evidence in the literature which suggests that employment protection and rigid labour laws help employment growth (Nickel and Layard, 1999). Regulations and rigid labour laws raise the cost of labour and other inputs in the market and these policies lead to reduction in employment as they promote use of labour-saving technology to stop the increase in the cost of production. Labour market reforms along with macro-economic reforms benefits employment in the long-run. However in these matters, the government should be willing to bear a political cost in the short-run (Bean, 1998).

Though there have been several studies showing contradictory results regarding impact of economic reforms, particularly labour reforms on employment and unemployment, it is generally believed that reforms reduce distortion and rigidities in an economy leading to improvement in over all economic performance and employment opportunities. However, it needs to be supported by proper institutions and right policies. This paper examines the organised sector employment in India during post refoms period.

Further, labour reforms by themselves help employment creation if they are not supported by reforms in other sectors supporting it. An important reason for pushing labour reforms is to make labour market more dynamic, flexible, efficient and less rigid especially in a era that is characterised by globalisation and where labour is less mobile than capital and more susceptible to be affected by crisis. Success of East Asian Countries in employment is due to non-participation of government in business (Felip, 2000). There is also a counter view point that a protective labour market policy, measured in terms of greater market regulations and standards has not resulted in poor economic and employment conditions (Freeman, 1993).

Figure-1: Public Sector, Private Sector and Total Organised Employment in India, 1970-71 to 2001-2002 (in millions) 30

25 E m p lo y m e n t

Another important factor affecting employment is the investment by both public and private sector, which generates jobs through multiplier effects. This is more applicable in developing countries (Servan and Solimans, 1994). Supporting this, an ILO study advocates public investment on infrastructure as it generates more employment in the short-run (ILO, 1999). However, the chain between investment and employment is intermediate technology which determines the pattern of labour use.

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Public sector

Private sector

2 0 0 1 -0 2

2 0 0 0 -0 1

1 9 9 9 -0 0

1 9 9 8 -9 9

1 9 9 7 -9 8

1 9 9 6 -9 7

1 9 9 5 -9 6

1 9 9 4 -9 5

1 9 9 3 -9 4

1 9 9 2 -9 3

1 9 9 1 -9 2

1 9 9 0 -9 1

1 9 8 9 -9 0

1 9 8 8 -8 9

1 9 8 7 -8 8

1 9 8 6 -8 7

1 9 8 5 -8 6

1 9 8 4 -8 5

1 9 8 3 -8 4

1 9 8 2 -8 3

1 9 8 1 -8 2

1 9 8 0 -8 1

1 9 7 9 -8 0

1 9 7 8 -7 9

1 9 7 7 -7 8

1 9 7 6 -7 7

1 9 7 5 -7 6

1 9 7 4 -7 5

1 9 7 3 -7 4

1 9 7 2 -7 3

1 9 7 1 -7 2

The basic philosophy of macroeconomic reforms is to achieve higher productivity and growth and they are the best ways to reduce poverty and unemployment. Theoretically, growth is the most important factor for reducing poverty and creating jobs provided policies are designed properly given the socioeconomic conditions of an economy. Supporting this hypothesis, studies show (Adema, 2002) that the weakness in Germany's economic performance in the last decade is mainly reflected in weak employment generation. Higher growth means higher wages in future. Therefore, employers are likely to moderate their wages to reduce the risk of lay offs. In the process, equilibrium employment prevails in the

1 9 7 0 -7 1

Total

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Table-1 Employment in Organised Public and Private Sectors (Lakh persons) Total 223.05 228.79 234.93 240.08 242.14 245.78 250.04 253.89 257.13 258.97 263.53 267.33 270.56 271.77 273.75 275.25 279.41 282.45 281.66 281.13 279.6 277.89 272.06 270

Figure-2: Annual Rates of Growth of Employment in India 8.00

III. Organised Sector Employment In general, organised sector employment has been dominated by the public sector,

2 0 0 1 -0 2

1 9 9 9 -0 0

1 9 9 7 -9 8

1 9 9 5 -9 6

1 9 9 3 -9 4

1 9 9 1 -9 2

1 9 8 9 -9 0

0.00

1 9 8 7 -8 8

(i) Includes all establishments in the Public Sector irrespective of size of employment and non -agricultural establishments in the Private Sector employing 10 or more persons. (ii) Excludes Sikkim, Arunachal Pradesh, Dadra & Nagar Haveli and La kshadweep, as these are not yet covered under the programme. (iii) Growth rate here implies Compound Growth Rates (Iv) Year 1980 implies 1980 -81 Source: Ministry of Labour, (DGE&T).

1 9 8 5 -8 6

Note:

2.00 1 9 8 3 -8 4

0.91

1 9 8 1 -8 2

-0.77

0.78

1 9 7 9 -8 0

-0.61

0.91

4.00

1 9 7 7 -7 8

-0.84

6.00

1 9 7 5 -7 6

Total 1.60 0.16

1 9 7 3 -7 4

Share% Private Sector Share% 67.60 72.27 32.40 67.68 73.95 32.32 67.88 85.47 36.38 68.54 75.52 31.46 69.67 73.45 30.33 70.26 73.09 29.74 72.09 73.74 29.49 72.16 73.64 29.00 71.73 73.92 28.75 72.49 74.53 28.78 71.23 75.82 28.77 71.29 76.76 28.71 71.00 78.46 29.00 71.11 78.51 28.89 71.03 79.3 28.97 70.72 80.59 29.28 69.54 85.12 30.46 69.25 86.86 30.75 68.94 87.48 31.06 69.06 86.98 30.94 69.08 86.46 30.92 68.87 86.52 31.13 69.00 84.32 30.99 68.81 84.21 31.19 Growth rate of Organised Sector Employment Public Sector Private Sector 2.38 -0.19 -0.18 0.96

1 9 7 1 -7 2

1980-1990 1991-2003 1997-2003 1980-2003

Public Sector 150.78 154.84 159.46 164.56 168.69 172.69 180.25 183.21 184.44 187.72 187.72 190.57 192.1 193.26 194.45 194.66 194.29 195.59 194.18 194.15 193.14 191.38 187.73 185.8

E m p lo y m e n t

Years 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

negative from pre-reforms to post-reforms period in different sectors particularly in manufacturing (2.74 per cent to -3.09 per cent), agriculture, hunting etc. (2.62 per cent to -1.18 per cent), mining and quarrying (1.91 per cent to -1.48 per cent), community, transport, storage & communications (1.29 per cent to -0.17 per cent), and Construction (0.88 per cent to -1.27 per cent). In addition to this, there is also a deceleration in employment growth rates in social and personal services (2.24 per cent to 0.46 per cent)), wholesale and retail trade (3.11 per cent to 0.89 per cent), and finance, insurance, real estate (5.23 per cent to 0.60 per cent), electricity, gas and water industries (3.06 per cent to 0.11 per cent). There is an overall drop in industrywise employment growth rates in the organised public sector during the post-reform period. Therefore, the total growth rate for all these public sector industries taken together has dropped drastically from 2.24 per cent during 1980-90 to -0.18 per cent in 1990-2003.

-2.00

-4.00 Public sector

Private sector

Total

Figure-3: GDP Growth and Organisaed Sector Employment 20 15 Growth rates 19 81 -8 19 2 82 -8 19 3 83 -8 19 4 84 -8 19 5 85 -8 19 6 86 -8 19 7 87 -8 19 8 88 -8 19 9 89 -9 19 0 90 -9 19 1 91 -9 19 2 92 -9 19 3 93 -9 19 4 94 -9 19 5 95 -9 19 6 96 -9 19 7 97 -9 19 8 98 -9 19 9 99 -0 20 0 00 -0 20 1 01 -0 20 2 02 -0 20 3 03 -0 4

10 5 0

-5

-10 -15 GDP

105

Public

Private

Total

106

In organised private sector employment, there is an increase in employment growth rates in wholesale and retail trade (0.48 per cent to 1.42 per cent), manufacturing (-0.27 per cent to 0.82 per cent), transport, storage and communication (-2.77 per cent to 3.63 per cent) and finance, insurance, real estate etc. (1.95 per cent to 4.16 per cent) during post reforms period (see appendix table-3). Although there is an overall improvement in growth rates in these industries (0.96 per cent during 1990-2003), the employment growth rate for all industries taken together has slowed down for the whole period (0.78 per cent for 1980-2003) due to drastic and continuous fall in employment growth rates in industries like mining and quarrying (-3.36 per cent and -3.61 per cent), and construction sectors (-1.62 per cent and -2.41 per cent). Rather, the overall improvement in growth rates is mainly driven by a startling positive employment growth rates during post-reforms period in transport, storage and communication (-2.77 per cent to 3.63 per cent), and finance, Table-2 insurance, real estate industries (1.95 per cent to 4.16 per cent). Spectacular growth Growth Rate of Employment the Organised Sector -This by Industry rates have been observed in finance,ininsurance andPublic real estate. was expected and itYear shows the positive relationship between performance of the service sector 1980-1990 1991-2003 1980-2003and employment in these related sub-sectors. Some of the industries which have Agriculture, hunting etc. 2.62 -1.18 0.38 been Mining and quarrying 1.91 -1.48 0.20 consistently showing discouraging trend in employment during pre and post-reforms Manufacturing 2.74 -3.09 -0.57 period are agriculture and hunting (0.13 per cent to -0.13 per cent), mining and Electricity, gas(-3.36 and water 3.06 0.11 per cent and 1.57-2.42 quarrying per cent to -3.61 per cent) and construction (-1.62 Construction 0.88 -1.27 -0.27 per cent). Wholesale and retail trade Transport, storage & communications Finance, insurance, real estate etc. Community, Social & personal services Total

3.11 1.29 5.23 2.24 2.24

0.89 -0.17 0.60 0.46 -0.18

government level (1.28 per cent). At the quasi-government level, there is a decline in employment growth during post-reforms period (3.54 per cent to -0.51 per cent) but the overall growth rate is 1.32 per cent for the whole period which is better than other levels of governments. At the local levelTable-3 governments, the trend of employment Growth Rate of Employment in the Organised Private Sector - By Industry growth rate is similar to that at quasi-governmental level. This indicates that there is a worsening of employment generation at all levels of government in general and the Year 1980-1990 1991-2003 1980-2003 Central government level, in particular, in India during post-reforms period. Over all, Agriculture, hunting etc. 0.13 -0.13 0.38 discouraging trends in public sector employment at different -3.61 levels of government Mining and Quarrying -3.36 -2.13 could be attributed to factors like downsizing of government departments, voluntary Manufacturing -0.27 0.86 0.64 retirement expenditure. Electricity, Gasschemes and Water and decrease in over all government 1.65 1.64 1.03 Construction -1.62 -2.41 -1.14 III.3. Organised Sector Employment - Gender Wholesale and Retail trade and compound growth rate0.48 1.42 1.10 The absolute number of male and female employment in Transport, Storage & Communication -2.77 3.63 1.05 The public, private, and total organised sector employment is presented in Table-5. Finance, Insurance,ofReal Estate,employment etc. 1.95 total number male shows an increasing trend4.16from 1990 3.30 to 1997 Community, Social & Personal Services 2.07 1.38 1.82 (227.09 lakhs to 236.08 lakhs) and thereafter a declining trend has persisted (see FigTotal 0.48 0.96 0.78 4). InVarious contrast, totalsurveys, number of female Source: Issues ofthe Economic Government of India. (36.44 lakhs in 1990 to 49.08 lakhs in 2003) workers has continuously increased since 1990. Therefore, the compound growth rate of these two different groups of gender employment shows negative trend (-0.29 per cent) for males and positive (2.49 per cent) for females.

1.85 0.49 2.50 1.33 0.93

Source: Various Issues of Economic surveys, Gover nment of India.

III.2. Government-level Organised Sector Employment Table 4 reflects the employment growth rates at different levels of government, where declining employment growth at the Central Government level is observed. The employment growth rate was 0.70 per cent in pre-reforms period, which turned negative to -0.66 per cent during the post-reform period leading to an overall negative growth rate of employment (-0.02 per cent) for the whole period at the central government level. Although, the situation is similar at the state government level (2.44 per cent to 0.28 per cent) but the growth rate is found to be positive during the post-reforms period. Thus, overall growth rate of employment is positive at the state

107

Table-4 Growth Rate of Public Sector Employment - By Different Government Levels Year 1980-1990 1991-2003 1980-2003

Central Government State Governments Quasi-Governments Local Bodies 0.70 2.44 3.54 0.91 -0.66 0.28 -0.51 -0.04 -0.02 1.28 1.32 0.28

Total 2.24 -0.18 0.93

Note: Growth rate here implies Compound Growth Rates Source: Ministry of Labour, (DGE&T).

108

Table-5 Male and Female Employment in Organised Sector Years 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1991-2003

Public Sector Male Female 165.22 22.50 167.10 23.47 167.81 24.29 168.49 24.77 168.80 25.65 168.66 26.00 167.94 26.35 168.31 27.28 166.55 27.63 166.04 28.11 164.57 28.57 162.79 28.59 158.86 28.87 156.75 29.05 -0.50

1.80

Private Sector Male Female 61.88 13.94 62.42 14.34 63.67 14.79 63.01 15.50 63.41 15.89 64.31 16.28 67.20 17.92 67.77 19.09 67.37 20.11 66.80 20.18 65.80 20.66 65.62 20.90 63.83 20.49 63.57 20.64 Growth Rate 0.26 3.55

Source: Various Issues of Economic surveys, Government of India.

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(In lakhs) Total Male 227.09 229.52 231.48 231.51 232.21 232.97 235.14 236.08 233.92 232.84 230.37 228.40 222.71 220.32

Female 36.44 37.81 39.08 40.26 41.54 42.28 44.26 46.37 47.74 48.29 49.23 49.49 49.35 49.68

-0.29

2.49

worker growth between 1990-91 to 2000-01. Similar is the situation with labour productivity where, labour productivity index has a higher percentage change from 1980-81 to 1990-91 than 1990-91 to 2000-01. However, there is one striking change in the 1990s i.e. capital stock per worker is much higher between 1990-91 to 2000-01 than 1980-81 to 1990-91. There, implicitly, it reflects that manufacturing sector has been using more capital intensive or labour saving technology improving productivity but slowing down the employment growth. Table-10 reports the employment share of different industries in total and manufacturing employment. Taking index number of employment as 100 in 1990-91, we observe that 10 out of 15 major industries, representing 80 per cent of total organised manufacturing employment, witnessed a fall in the employment from 1995Table-6 96 to 2000-01. sectorand employment in By 13 out Growth RateIn of Table-11, Employmentmanufacturing in the Organised Public Private Sectorhas anddeclined GDP Growthof 17 major states comprising of close to 90 per cent workforce in organised Industry manufacturing employment. But observing the trends in manufacturing sector, it is GDP Employment Growth very clear that there has been break in most of the series and manufacturing sector Year 1980- 1991- 1980- 1980- 1991- 1980has shown poor performance after 1997-98 onwards. 1990 2003 2003 1990 2003 2003 3.43 2.71 3.16 1.04 -0.52 0.37 Agriculture & allied activities 7.74 4.27in nineties, 6.07 1.32the -1.66 -0.04 Mining &Looking quarrying at the break in the employment trend employment Manufacturing 7.02different 6.57 6.67 0.54viz.,-0.15 0.34 growth (both workers and supervisors) in three periods 1974-1989, Electricity, gas & water supply 8.99 5.86 7.59 3.00 0.18 1.55 1990-97, and 1998-2002 (presented in table 12-15) is analysed. Comparing growth of Construction 3.94 5.39 5.08 0.75 -1.34 -0.31 number of supervisors during pre-reforms period and post Trade, hotels, transport & communication 5.81 (1974-1989) 8.29 6.83 1.22 0.09 reforms 0.61 period (1990-1997), find that 10services out of 15 industries had higher growth rate during Financing, insurance, realwe estate & business 9.55 8.12 9.13 4.59 1.32 2.67 1990-97 compared to 1974-1989. Further, all 6.16 the industries Community, social & personal services 7.17 6.23 experienced 2.22 0.60 positive 1.40 Source: Economic surveys, Government India. and of Statistics on the Indianof Economy, Reserve Bank of(13 India,out of growth (see table-12) duringof 1990 toHandbook 1997 However, most the industries Various issues 15) experienced either negative growth rate or slow growth rate during 1998-2002 compared to 1990-97 period. Similar is the situation with the growth of workers where 11 out of 15 industries had higher growth rate during 1990-1997 compared to 1974-89 (see table-13). However, again 14 out of 15 industries showed either negative growth rate or slow growth rates during 1998-2002 compared to 1990-97. Comparing industry-wise productivity, 8 out of 15 industries witnessed increase in productivity during 1990-97 but productivity gain disappeared during 1998-2002 as most of the industries experienced either negative productivity growth or slow growth (see table14). Thus, over all, the organised manufacturing sector performed well during post reforms till 1996-97. Some of the indicators of the manufacturing sector are presented in fig-6 to fig-11. But since 1996-97, manufacturing sector has been performing poorly. Though it is difficult to find out any direct factor for the poor performance, it could be due to political instability (coalition government during 1997-99), slow down in overall growth, industrial sector growth, East Asian crisis, and tight monetary policy in 995-96 and slow down of world economy. VI. Concluding Remarks There has been a sharp decline in total organized sector employment during postreforms period compared to pre-reforms period. Though private sector employment increased during post-reforms period, total employment fell sharply due to fall in public sector employment, which constitutes 2/3rds of the total organised sector employment. In public sector, all the industries have witnessed a fall in employment

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Table-7 Employment Elasticity in Organised Sector Employment Elasticity 1980-1990 1991-2003 0.30 0.03 0.33 0.06 0.24 -0.20 0.17 -0.40 0.08 -0.00 0.34 0.035 0.15 -0.26 0.21 0.01 0.48 0.16 0.36 0.08

Employment Total Services Agriculture & allied activities Mining & quarrying Manufacturing Electricity, gas & water supply Construction Trade, hotels, transport & communication Financing, insurance, real estate & business services Community, social & personal services

Source: Economic surveys, Government of India. and Handbook of Statistics on the Indian Economy, Reserve Bank of India, Various issues Note: Employment elasticity is calculated by Regressing employment on growth (all in LN values). Here service sector employment includes Construction, Trade, Hotel, Transport and Communication, Financing, insurance, real estate & business services and Communi ty, social & personal services.

Table-8 Growth, Gross Domestic Capital Formation and Organized Sector Employment

1980-1990 1991-2003 1980-2003

Public Sector 2.38 -0.18 0.91

Private Sector -0.19 0.96 0.78

Total 1.60 0.16 0.91

GDCF 6.21 6.86 6.82

GDP 5.43 5.97 5.68

Source: Ministry of Labour, (DGE&T) and Economic Surveys, various Issues.

growth. Major industries like manufacturing, agriculture, construction and mining and quarrying have witnessed a sharp fall during post reforms period. However, in the private sector some industries like Finance, insurance, real estate etc, and transport, storage and communication and wholesale and retail trade showed a rise in employment during post-reforms period as compared to pre-liberalisation period. But for industries such as agriculture and hunting, mining and quarrying and construction in private sector continued to have negative growth rates in employment during postreforms period. Employment growth rate turned negative for different levels of government except states governments during pre-reforms period. There has been a jobless growth with respect to organised sector employment during the 1990s where sectors such as: construction; trade, hotels, transports and Table 9 Performance of Organized Manufacturing Sector, Some Selected Indicators, 1980-81 to 2000-01

No. of workers (millions) Real wages/worker (index) Product wage/workers (index) Wage-rental ratio (index) Labour productivity (index) Capital Stock/worker (index) Memo: Per capita net national product

1980-81

1990-91

2000-01

5.5 100.0 100.0 100.0 100.0 100.0 145.2

5.7 118.2 165.4 80.6 219.1 183.3 198.5

5.7 134.0 210.0 60.6 395.7 423.8 278.1

Percentage change 1981-91 1991-01 3.6 18.2 13.1 65.4 27.2 (-) 19.4 (-) 24.8 119.1 80.6 83.3 131.2 36.7 40.1

Notes: All relevant variables are at constant prices. Capital stock refers to net fixed capital stock at 1 993-94 prices for total manufacturing. Product wage per worker divided the deflator for machinery and equipment (proxy for cost of capital) is the wage rental ratio. In principal, it is perhaps more appropriate measure of relative cost of labour than the w idely product wage per worker. Source: Adopted from Nagaraj, 2005

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communication; finance, insurance and community; social and personal services witnessed higher growth during post-reforms period but lower employment growth. Though all industries have performed well except agriculture and allied activities, employment growth rates declined dramatically in these sectors. Further, there was a significant decline in total organised sector employment during the post-reforms period. Though the service sector performed very well and witnessed higher employment growth during post-reforms period, the service sector organised employment elasticity (both public and private) is low during post-reforms period. Employment elasticity turned negative in sectors such as agriculture, manufacturing and construction. Over all, the higher growth in nineties at aggregate and at industry level has not been favourable for organised sector employment in India. Table 10 Employment of Workers in Organised Manufacturing by 2-Digit Industry Group, 1991-92 to 2000-01 NIC code

Industry group

Employment share in 1991-92 (Per cent)

Index number of employment with 1991-92 as 100

1995-96

2000-01

20-21 Food Products 15.7 117.0 111.1 22 Beverages, tobacco 8.7 103.3 107.5 23-25 Textiles 19.9 116.1 86.8 26 Textile products 2.7 189.4 287.9 27 Wood, furniture 0.9 120.3 109.3 28 Paper, printing 4.0 119.5 98.0 29 Leather 1.6 121.7 128.5 30 Chemicals 7.3 127.9 136.1 31 Rubber, Petroleum 3.4 129.3 124.8 32 Non-metallic products 6.7 104.0 94.2 33 Basic metals 8.1 123.8 94.0 34 Metal products 3.1 123.1 118.4 35-36 Machinery 10.1 116.3 97.1 37 Transport equipment 6.6 125.4 88.7 38 Other manufacturing 1.3 149.4 157.0 Source: various issues of Annual Survey of Industries , CSO, India,. Adopted from R. Nagarajs paper presented at IHD, 2005.

Table 11 Employment of Workers in Organised Manufacturing by Major States, 1991-92 to 2000-01 States

Employment share in 199192 (Per cent)

Index number of employment with 1991-92 as 100

1995-96 2000-01 Andhra Pradesh 12.4 119.2 107.4 Assam 1.8 112.2 93.2 Bihar 4.5 91.3 73.1 Gujarat 9.1 124.7 109.5 Haryana 3.1 129.2 129.0 Himachal Pradesh 0.3 146.8 174.7 Jammu and Kashmir 0.2 167.2 159.2 Karnataka 5.2 121.5 120.5 Kerala 3.9 117.8 122.2 Madhya Pradesh 4.3 137.3 100.6 Maharashtra 14.4 125.2 99.2 Orissa 1.6 128.7 107.5 Punjab 4.1 121.6 121.0 Rajasthan 2.7 122.6 112.5 Tamil Nadu 13.4 128.3 123.0 Uttar Pradesh 9.1 105.6 83.3 West Bengal 9.7 111.8 83.4 Note: Newly formed states of Chattisgarh, Jharkhand and Uttaranchal have been merged with the states they were part of before their formation. Source: Annual Survey of Industries, various issues.

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Table-13 Growth of Number of Workers in Organized Manufacturing

Mixed results have been observed for both male and female employment in Code 20+21 22 23+24+25 26 27 28 29 30 31 32 33 34 35+36 37 38

Industry Food Products Beverages, tobacco Textiles Textile products Wood, furniture Paper, printing Leather Chemicals Rubber, Petroleum Non-metallic products Basic metals Metal products Machinery Transport equipment Other manufacturing

1974-75 to 1989-90 -0.50 4.22 -1.03 3.98 -0.34 0.83 5.85 3.23 4.12 3.32 2.50 1.04 1.77 2.30 1.96

1990-91 to 1997-98 2.71 2.73 1.53 13.61 2.87 2.50 3.28 5.35 5.38 0.08 1.68 4.04 1.80 3.28 8.05

1998-99 to 2001-02 -1.22 2.89 -4.59 6.91 0.75 -0.47 4.23 -0.12 -4.65 2.13 -5.33 1.52 -9.94 -10.13 -1.58

Source: Annual Survey of Industries, India (CD -ROM version).

Table-14 Productivity in Organised Manufacturing Industrywise (Real Gross Value Added / No of workers)

Table-12 Growth of Number of Supervisor in Organized Manufacturing Code 20+21 22 23+24+25 26 27 28 29 30 31 32 33 34 35+36 37 38

Industry

Food Products Beverages, tobacco Textiles Textile products Wood, furniture Paper, printing Leather Chemicals Rubber, Petroleum Non-metallic products Basic metals Metal products Machinery Transport equipment Other manufacturing

1974-75 to 1989-90 -0.68 3.61 -0.98 3.81 -0.65 1.04 5.45 3.33 3.93 3.25 2.11 0.87 2.19 2.34 2.01

Source: Annual Survey of Industries, India (CD-ROM version)

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1990-91 to 1997-98 2.87 2.60 1.80 13.45 2.66 2.96 3.29 5.57 5.50 0.51 1.58 4.33 1.62 3.39 8.08

1998-99 to 2001-02 -1.85 3.10 -5.38 6.67 1.66 -0.66 3.70 -0.61 -6.21 1.56 -5.20 -0.42 -13.92 -9.52 -0.53

Code 20+21 22 23+24+25 26 27 28 29 30 31 32 33 34 35+36 37 38

1974-75 to 1989-90 8.04 1.19 3.17 4.88 3.19 3.41 2.26 3.12 6.32 5.98 3.56 4.13 4.73 4.51 5.80

1990-91 to 1997-98 6.60 5.50 4.15 0.29 3.14 3.15 1.57 6.76 2.37 4.86 10.07 5.73 5.27 8.10 7.29

1998-99 to 2001-02 -0.78 4.96 1.41 -2.83 10.15 9.57 -20.01 -5.31 13.63 8.34 -5.23 -0.06 4.70 14.09 6.93

Source: Annual Survey of Industries, India (CD -ROM version)

Labour Economics, Vol. 46,no.1, 2003. = C. Bean, 'The Interaction of Aggregate- Demand Policies and Labor Market Reform', Swedish Economic Policy Review 5, 1998. = B.B Bhattacharya and S. Sakthivel, 'Economic Reforms and Jobles Growth in India in the 1990's', Working paper-245, Institute of Economic Growth, 2004. = B.B Bhattacharya & Arup Mitra, 'Employment & Structural Adjustment-A Look at 1991 Census Data', Economic & Political Weekly, May 25,pp.1998-2026. = G.K. Chadha & P.P Sahu, 'Post-Reform Setbacks in rural Employment: Issues that need

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Figure-9: Gross Fixed Capital and Nos. of workers in Organised manufacturing Sector

Figure-4: Male and Female organised Employment (Lakhs) 250

500 450 400 350 300 250 200 150 100 50 0

200 150 100 50 0 1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Female

male

80 19 -81 81 19 -82 82 19 -83 83 19 -84 84 19 -85 85 19 -86 86 19 -87 87 19 -88 88 19 -89 89 19 -90 90 19 -91 91 19 -92 92 19 -93 93 19 -94 94 19 -95 95 19 -96 96 19 -97 97 19 -98 19 9899 99 20 -20 00 00 20 -20 01 01 -2 00 2

1990

GFC ('000 crore)

Workers('000 Lakhs)

Figure-6: Number of Employees in Org-Manufacuring Figure 10: Gross Value Added and Employment Growth

10000000

35.00 30.00

8000000

25.00 20.00

Per cent

N u m b er

12000000

6000000

15.00 10.00

4000000 2000000

5.00 0.00

-10.00

2002

1 99 9

Figure 11: Mandaysd lost by Disputes

10000.00 9000.00 8000.00 7000.00

80000

6000.00 5000.00 4000.00

70000 60000 50000

200 1

199 8

199 5

Figure-8: Productivity in Organised manufacturing Sector

199 2

198 9

20000 10000 198 6

2002

1999

30000

198 3

Wages to Workers

40000

198 0

Year ending

19 96

19 93

199 0

198 7

1 984

3000.00 2000.00 1000.00 0.00

GVA per Worker (in Crore)

Gross value added

Figure-7: Real Wages to Workers in Org-manufacuring

1 981

C o n s ta n t ru p e e

Employment

1 99 6

1 99 3

1990

1 98 7

-20.00

1 98 4

-15.00 1 98 1

2 0 0 2

1 9 9 9

No. of Employees

1 9 9 6

1 9 9 3

1 9 9 0

1 9 8 7

1 9 8 4

1 9 8 1

-5.00

Mandays lost

30 25 20 15 10 5 0 Productivity

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Further Scrutiny', Economic & Political Weekly, Vol.37, No.21, May 25-31, 2002. = F. Daveri and Tabellini, 'Unemployment, Growth and Taxation in Industrial Countries', Economic Policy 15, 2000. = Jesus Felipe, 'Convergence, Catch Up and Growth Sustainability in Asia', Oxford Development Studies, Vol28, No-1:51-69, 2000. = R. Freeman, 'Labor Market Institutions and Polices: Help or Hinderance to Economic Development?', World Bank Annual Conference on DevelopmentEconomics1992. (Washington ,D.C.. :World Bank, 1993). = Biswanath Goldar, 'Employment Growth in Organized Manufacturing in India', Economic

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and Political Weekly , Vol. 35, No.14,april 1-7, 2000. = Government of India, Report of Task Force on Employment Opportunities, Planning Commission , July, 2001. = ILO.1999. 'Project Document for Technical Support and Training targeting the Creation of 1.2 million Jobs, in Collaboration with AusAID'. Geneva and Bangkok, ILO, Canberra, AusAID. = G. M. Kelly, 'Employment and Concepts of Work in the New Global Economy', International Labor Review (Geneva), Vol 139, No1,pp.5-32, 2000. = E. Lora and M. Olivera, 'Macro Policy and Employment Problems in Latin America', 1998, WP-372, IADB. = Robert E. B.Lucas, 'India`s Industrial Policy', E B and Gutav Papanek (Eds), The Indian Economy: Recent Development and Future Prospects, ( New Delhi: Oxford University Press , 1998). = Ashok Mathur, 'Economic Reforms, Employment & Non-Employment: Theory, Evidences & Policy', Conference Volume of the Indian Economic Association, 80th IEA Conference, Chandigarh, 1999. = R. Nagraj, 'Organized Manufacturing Employment', Economic and Political Weekly, September 16, 2000. = R. Nagraj, 'Fall in Organized Manufacturing Employment', Economic and Political Weekly, July 24, 2004. = R. Nagraj, 'Fall in Organized Manufacturing Employment', paper presented in national seminar on Income and employment, Institute of Human development, 2005. = S. Nickel and Layard,'Labor Market Institutions and Economic Performance', O.Ashenfelter and D .Card (Eds.), Handbook of Labor economics. Vol 3 (nort Holland, Amsterdam, 1999). = Samanta Padalino and Marco Viverarelli, 'The Employment Intensity of Economic Growth in G-7 Countries', International Labour Review (Geneva) VOL.136 No.2 pp.191-213, 1997. = S. Roy, 'Job Security Regulations and Worker Turnover: A study of Indian Manufacturing Sector', Indian Economic Review, Vol.7, No.1, 2002. = Anders Serven and G. Solimano, 'Link Between Public and Private Investment',(Washington D. C.: the World Bank, 1994). = Abusaleh Shariff and Anil Gumber, 'Employment and Wage in India: Pre and Post Reform Scenario', Indian Journal of Labour Economics, Vol. 42, No. 2, pp. 195-214, 1999. = K. Sundaram, 'Employment-Unemployment Situation in Nineties: Some Results from NSS 55th Round Survey', Economic & Political Weekly, March 17,2001. = K. Sundaram, 'Employment Unemployment Situation in the Nineties Some Results from NSS 55th Round Survey', Economic and Political Weekly, March 17, pp. 931-940, 2001. = K. Sundaram, 'Employment Unemployment Situation in the Nineties -- Some Results from NSS 55th Round Survey', Economic and Political Weekly, March 17,pp. 931-940, 2001. = Pravin Visaria, 'Structure of Indian Work Force, 1961-1994', Indian Journal of Labor Economics, Vol. 39, No.4., 1996, pp.725-739.

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Entertaining the Inevitable: Earthquakes in South Asia Roger Bilham and Dr. Susan Hough During the past five years the Indian subcontinent has been hit hard by massive earthquakes that have left a trail of ruin on its west, northwest and eastern boundaries. Like an alarm clock that won't be silenced, this is a cruel wake-up call that points to future disasters of unprecedented magnitude in the new millennium unless the reinforcement of cities is taken seriously. Earthquakes are as inevitable as the autumnal fall of fruit from a tree, but while the precise timing of earthquakes in the Himalaya, as elsewhere, remains unpredictable, catastrophic loss of life, such as that following the 8 October 2005 Kashmir earthquake, is neither inevitable nor defensible. When the earth shook, half a million dwellings, including schools and hospitals, offered little or no resistance to the quake, leaving over 73,000 people dead and 1.5 million homeless. Not all casualties and deaths were caused by building damage; landslides and rockfalls added to the ruin. Still, the roots of the tragedy lie not so much in an Act of God as in the inaction of man. There has been woefully little awareness of earthquake hazard among the peoples and governments of the Himalaya region, and correspondingly little action taken to mitigate risk. The blame for this falls as much on the seismologist as on the politician. Those who have best understood the potential threat from earthquakes in the world's highly active seismic zones have done little to communicate their understanding to the growing numbers of people who live in those zones. This article attempts to bridge that gap.

Earthquakes as Bombs: Release of Nuclear Energy Ultimately, earthquakes owe their origin to the escape of heat generated by nuclear decay deep within the earth. This heat keeps much of planet plastic, its rock in motion just as heated soup bubbles in a pot, but far more slowly. The earth's colder, harder outer shell, or crust, is broken into enormous jigsaw puzzle pieces scientists call plates. These plates ride atop the cauldron that continues to churn underneath, conveyed hither and thither, ponderously but with determination. Geologists can now trace the past motion of continents back many millions of years; the motion of the continents has remained largely unchanged during this time. Abundant geologic evidence tells us that India was once in the southern hemisphere and attached to present-day Antarctica. It broke away from Antarctica 180 million years ago and rafted into its current position at speeds of 5-15 centimeters per year, about as fast as a human hair grows.

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Roughly 50 million years ago, the island of India began to collide with the southern shores of Asia and through this prolonged process of collision, the Himalaya was born. With the advent of the Global Positioning System (GPS), scientists have measured the continuing northward motion of India at approximately 4 centimeters per year. That is, the northward migration of India has slowed but not stopped. This continuing motion places the Himalaya in a vice grip. The collision of India into Asia would be of little consequence if the earth's crust were able to warp gradually in response to the resulting pressure. Unfortunately for the inhabitants of India, Pakistan, Tibet, Nepal, Bangladesh, Bhutan, and Burma, the earth's plates remain tightly locked at their boundaries, moving in the abrupt paroxysm of an earthquake only when the forces have developed sufficiently to overcome enormous frictional forces that keep the plate boundaries locked. When this happens, huge blocks of crust lurch along surfaces known as faults. Thus, while India as a whole continues to move relentlessly northward, its edges remain stuck. Just as a water reservoir can collect a steady flow of water that eventually has the capability to release a large flood, the boundary between plates acts as an energy reservoir, deforming the rocks until their stored energy is released in large earthquakes. The collision of India and Asia squeezes and wrenches many thousand cubic kilometers of rock. Because of this, the process stores up, and eventually releases, enormous energies. The energy released by earthquakes in Indonesia and India just since the start of the new millennium is close to that of a 400 Megaton bomb. The magnitude 9.2 Sumatra earthquake of December 2004 alone released the equivalent of a 250 Megaton bomb. The magnitude 8.7 earthquake that struck the following March released a further 80 Megatons, while the 2001 Bhuj and 2005 Kashmir earthquakes released about 30 Megatons apiece. Large earthquakes not only release more energy than smaller shocks, they also involve the motion of larger segments of faults, and so spread their destructive wrath over larger regions. The occurrence of four portentous earthquakes in just four years leads to obvious questions. Has the spate of activity come to an end, or will still more energy be released in coming years? Are any of the previous earthquakes related, and, if so, how? Many such questions cannot be answered because, while scientists understand the long-term forces that build the Himalaya, we do not understand the short-term processes that control the timing of individual earthquakes. Some earthquakes do appear to trigger other large earthquakes, but the delay can range from very short (seconds-minutes) to much longer (years-decades), for reasons that scientists do not fully understand.

materials by biological decay. Despite the frustratingly patchy nature of historical data, the very largest earthquakes tend to leave notice of their passage: chronicles of widespread and simultaneous destruction of cities, sometimes written down and sometimes preserved in oral traditions and legends. Sometimes the chronicle of earthquakes can mislead investigators through muddled information. For example, an earthquake in AD893 Armenia was placed accidently in the Indus delta through a confusion in place names, and another in 1668 near Tatta may have been much smaller than hitherto believed (Ambraseys, 2004). Similarly, a translation error placed an enormous, though quite fictitious earthquake in Calcutta in 1737 (Bilham, 1994). Figure 1 shows the most recent earthquakes that have struck along India's highly active plate boundaries and the locations where earthquakes are expected to occur in the future. In places like Kashmir, where no massive earthquake had occurred for 450 years prior to 2005, a measure of the size of the pending earthquake had been obtained by estimating the amount of energy stored since the last similar earthquake in that region (Bilham et al, 2001; Bilham and Wallace, 2005). However, to estimate the potential size of future earthquakes seismologists must know two things: the amount of energy that has been stored and the size of the fault on which that energy would eventually be released. For example, in the 2005 Kashmir earthquake, had the motion of the mountains near Muzafferabad extended all the way to the Kangra region of Himachel Pradesh, the earthquake would have exceeded magnitude 8.2. Prior to last October 8, scientists would have been unable to predict where a large earthquake would stop once it started. The history of Kashmir shows that the region, in common with the entire Himalaya, is visited regularly by moderate earthquakes, and much less frequently by savage ones. Massive earthquakes, with magnitudes approaching or even exceeding 8.0, will be centuries apart along any given segment of the plate boundary. The potentially devastating effects of such events are therefore forgotten by successive generations. In Kashmir we have an especially long historical record: earthquakes of various degrees of severity occurred in 883, 1123, 1501, 1555, 1669, 1736, 1779, 1784 and 1885 (Iyenger and Sharma, 1993). Of concern to historians and seismologists is that the Kashmir region is unique only in that a written record of earthquakes has survived there. The historical record throughout the Himalaya, though patchy prior to 1500, suggests that no part of the Himalaya can be considered immune from future earthquakes (Figure 1).The 8 October earthquake could have struck in any one of a dozen locations between Afghanistan and Assam, with equal or even worse effects.

But where present science fails to frame a certain future, past history can provide some clues about what the earth might hold in store for us. We can, for example, look to history to seek patterns of past earthquakes that resemble those occurring in recent times. Geologists can also look to history to determine how often, on average, large earthquakes have struck a given region. The tools for historical earthquake investigations are often incomplete because so much data have been lost in wars, fires, or by the destruction of written

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and cities more than 100 kilometers from the foothills. Three notable earthquakes struck in the 19th century: a magnitude 8.2 earthquake north of Delhi in 1803, a sequence of three earthquakes with a magnitude 7.9 mainshock in northern Nepal in 1833, and a magnitude 8.1 earthquake beneath the Shillong Plateau in 1897. Earthquakes in the 17th and 18th centuries are insufficiently well documented for us to estimate magnitudes or locations. The earliest great (M>8) Himalayan earthquake for which we have detailed information occurred at dawn on 6 June 1505. Descriptions of the earthquake come from survivors in Tibet who wrote of damage to monasteries scattered along a 600kilometer swath of the southern edge of the Tibetan plateau and the Mustang province of Nepal. Although this earthquake is not recorded in Kathmandu, accounts tell of damage to several cities in India, notably Agra, then a prominent economic center. Agra was rebuilt after the earthquake as the capital of the Lodi administration. The length of the 1505 earthquake appears to have been roughly 3-4 times larger than that of the magnitude 8.2 Bihar-Nepal earthquake of 1934. Simple calculations suggest that the 1505 event may have been in the range 8.4-8.6.

Figure 1 The collision between the Indian Plate and the EuroAsian plate is marked by a continuous belt of earthquakes between them, and by buckling of the Indian plate. Recent earthquakes (M>7.5) are shown as black bars. Historical earthquakes (date indicated), and/or regions where future damaging earthquakes 7.5<M<8.5 can now be expected are shown as white rectangles. The Sumatra earthquakes are shown as grey shading. India's northward movement has a slight counter-clockwise spin resulting in earthquake productivity increasing eastward. The collision buckles India into a 450 m high bulge in central India, with a trough to the north where India is forced to descend beneath the Tibetan plateau, and a minor trough to the south. Earthquakes within the subcontinent (e.g. Latur, 1993; Seeber et al., 1996) release stresses arising from these bending forces (Bilham et al., 2003)

An earthquake struck Afghanistan exactly a month later, on 6 July 1505. Some accounts have confused the dates of these two earthquakes, leading some scientists to conclude that a single massive earthquake occurred. A careful reading of available accounts, however, points to two separate earthquakes, not a single event extending all the way from Afghanistan to Nepal (Ambraseys and Jackson, 2003) . The Kashmir region, which lies between the two large events, appears to have experienced a fairly modest earthquake in 1501 and a larger event in 1555 (Iyengar and Sharma, 1998).

Earthquakes Between 1500-1950

Earthquakes in Medieval and Earlier Times

The largest Himalaya earthquake in modern times was the magnitude 8.7 Assam earthquake of 1950. Its effects were not well studied because it struck a remote and mountainous corner of India, Myanmar, and Tibet, but it damaged houses in a large region in the Medog province on the Tibetan plateau. The severity of its effects in Tibet were reported recently in Chinese translations of Tibetan texts. Two other 20th century earthquakes occurred in the Himalaya the first near Kangra in 1905 and the second in 1934 in eastern Nepal. The severity of shaking in the Bihar provide in 1934 led to the supposition that the earthquake was centered beneath the northern Ganges. However, a detailed study of seismograms placed the epicenter, or starting point, of this earthquake a few hundred kilometers south of Mt. Everest, and Nepalese accounts of the event tell of massive shaking in the mountains.

When the historical trail grows faint, geologists instead look to the signature that great earthquakes leave behind not on people and structures, but on the earth itself. Geological excavations of the faults along the base of the Himalayas indicate that earthquakes allowed parts of the northern edge of India to slide abruptly more than 15 meters beneath the Himalaya in eastern Nepal around 1100 AD and north of Delhi around 1400 AD. No historical accounts confirm these earthquakes, the dates of which have been determined using Carbon-14 dating and other methods, and may be off by as much as 100 years. But while their dates are not precisely known, the motion that attended these earthquakes may have in places exceeded 20 meters, with rupture lengths much longer than any since the 18th century. This suggests that these earthquakes were probably also larger in magnitude than any of the recent historical earthquakes. The uncertainty in dating admits the possibility that the 1400 AD earthquake may have in fact been the 1505 event described in the historic record. The 1100 AD earthquake, however, was clearly a separate - and enormous - event (Bilham, 2004)

The 1905 and 1934 earthquakes also tell us that damage from Himalayan earthquakes is not confined to the mountains. Once an earthquake strikes, the waves travel throughout the Ganga, Punjab, and Brahmaputra plains, causing especially severe shaking of the thick layers of soft sediments that underlie these regions. Waves traveling to the southern edge of the plains can shoal and crest in amplitude, much like ocean waves do when they approach the shore, causing severe damage to villages

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The geological results are ominous. If the historical record of large earthquakes in the Himalaya is complete since 1400 AD, the geological record tells us

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that, especially in the western Himalaya, a much larger earthquake could occur than any witnessed in the last 200 years. In this region enough energy has been stored to

large earthquakes. The death toll from historical earthquakes, however, is a very poor guide to the future death toll from future earthquakes. The last century has witnessed very significant changes in not only demographics, but also in the style and density of building construction--changes that, tragically, leave recent structures far more vulnerable to damage than those that were common a few centuries ago. The singlestory timber, reed and thatch dwelling has been largely replaced by poorly assembled multistory concrete and steel structures. When the earth shakes, the simple traditional dwelling is far more forgiving, and far less lethal to its inhabitants, than the newer structures. The demographic changes are alarming as well. Not only have populations increased by a factor of ten, but the shift of these populations to urban agglomerations has resulted in unprecedented population densities, in cities of unprecedented size. A single large earthquake could thus imperil far more structures and lives. A dozen megacities are found close to the earthquake belts of the subcontinent, and although some of these cities look comfortably distant from the epicenters of future earthquakes, they line the rivers of the Punjab, Ganges and Brahmaputra where shaking from distant earthquakes has been especially severe in the past due to the loose sediments found in major river valleys. Increasing populations, increasing urbanisation, and the construction of buildings vulnerable to earthquake damage is a fatal combination. Its effects on cumulative fatalities in the subcontinent are evident in the exponential growth of earthquake fatalities with time in Figure 2b. The increments in this graph are erratic and have, therefore, no predictive value. It is nevertheless possible to come to some grim conclusions from our brief review: 1. Although past earthquakes have scored 'direct hits' on cities of less than 100,000 people in the Indian subcontinent (Kathmandu, 1934,Quetta 1935, Muzafferabad 2006 etc) there is no historical example of a major earthquake near or beneath a megacity with a population exceeding 5 million. 2. Earthquakes that have occurred near urban agglomerations consisting of predominantly weak multi-story concrete frame buildings in India, Pakistan, Turkey and China, have resulted in the death of 10-30 per cent of the local population. An unprecedented 500,000-1.5 million death toll could occur were an earthquake to occur near a megacity of 5 million people. 3. With a few exceptions, existing earthquake resistant building codes are not applied uniformly to new construction. Unsafe building practices are favored, especially in the private sector, because they may reduce building costs by 10-20 per cent. They can occur because of indifference or corruption in public offices, or simply because an insufficient number of building inspectors are available to enforce a safe construction code. 4. Contractors and workers in the construction trade (as opposed to the earthquake

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engineering community) are frequently uneducated in often quite simple methods that can help ensure the integrity of concrete frame dwellings. 5. Between 1950 and 2001, a time during which a building boom was fueled by urban population doubling and redoubling, there were no massive earthquakes. This lulled the building industry into a state of ignorance and apathy concerning the reality of earthquakes in the Himalaya and elsewhere.

response has shocked them more: the need designate vast trash dumps to accept the concrete and steel from the ruined city, the need to reinforce hospitals and schools so that some fraction survive as shelter for the injured, and homeless survivors, and the need to construct several additional crematoria for those who do not survive. Karachi is a city, that like Los Angeles, was a village less than a century ago. Like Los Angeles it lies near and within the path of future earthquakes, but unlike Los Angeles it has no clear example of what a moderate earthquake can do to its urban setting. The four belts of seismicity near Karachi paint an ominous X on the map near this city of 15 million. Whether one considers a progression of earthquakes westward from Bhuj or southward from Quetta one might reasonably conclude that Karachi should be building in readiness for an earthquake close to Mw=7.5 within 100 km of its suburbs. A five times more hazardous repeat of the Makran Mw>8 earthquake may be further from its immediate present, but will almost certainly happen some day. Recent earthquake hazard maps inexplicably place Karachi in a lower intensity shaking zone than evaluations done just a few decades ago.

The Fix

The recent Kashmir earthquake is the third major earthquake in 5 years to illustrate the catastrophe that can happen when large earthquakes and large populations coincide. In Kashmir, many of the buildings that collapsed had been constructed in the previous 2-4 decades. This provides both a warning and a clue to the necessary "fix" for future earthquakes. The warning is that the building stock of Kashmir differs very little from the building stock along every other segment of the Himalaya. Urban Bhutan is a prominent exception, where building construction in the capital undergoes stringent earthquake resistant design and inspection. In other Kingdoms and administrations in the Himalaya, dwellings, schools and hospitals are constructed often to a code of minimum cost. Kathmandu has a building code but much new construction, and nearly all existing construction, will be severely tested should a repeat of the 1833 or 1934 earthquakes occur. Estimated fatalities exceed 200,000 in some scenarios and have shocked local authorities unused to disasters of this magnitude. But the requested preparedness

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The certainty of earthquake location, but ignorance of earthquake time, points to a simple solution for governments concerned with the safety of their citizens. Cities must be made more resilient. In many cases cities must be substantially re-built. This sounds impossible but it is indeed possible if the task is spread over several decades. The lifespan of most buildings extends no more than a half a century, and many structures succumb after 30 years to the pressure for denser or more efficient or more luxurious dwellings in the centers of growing cities. With mandatory earthquake resistance on all new construction, cities on the Indian subcontinent can Figure 2a toward Earthquakesafety fatalitieswith worldwide since 1900 as a function of earthquake with earthquakes since 2000no evolve minimal effort. In many casesmagnitude, this evolution will require shown asthan open circles. 2b shows the increase in population on theWe Indianenvisage subcontinenta and the recent alarming rate ofback more the enforcement of existing laws. time when, looking increase of fatalities from earthquakes. For the 2004 event all fatalities are included in 2a, but only Coromandel coast and at the 19th to 21st centuries, people will marvel at the waste and short-sightedness of Nicobar fatalities are included in 2b. governments that allowed their people to construct, and then live in, buildings that fall down in earthquakes. Were a more enlightened policy adopted there would still be earthquakes in the next half century that strike before some cities have fully implemented earthquake resistance. These will be perceived as a failure of policy, although recriminations could be much reduced by a program of education that might accelerate the retrofit or replacement of unsafe structures. But for those countries that do not implement a program to gradually strengthen their cities and villages, the economic penalty and the lives lost will be catastrophic. Kashmir was caught unprepared, and is currently having to rebuild, not from choice, but from necessity. Side by side, in plain view of owners and builders alike are clear examples of how to build (standing structures), and how not to build (collapsed ruins). Ongoing aftershocks are frequent reminders that this is an earthquake zone, and that it would foolish indeed to replicate poor construction practices. After reconstruction survivors in areas that have recently been severely damaged by an earthquake typically live in safer structures than those in adjoining regions. Ironically, a region that has recently been shaken is less likely to be shaken

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soon compared to adjoining regions. In Iran, despite a half century of earthquake resistance applied to the reconstruction of earthquake damaged cities, the risk to

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India: Regional Language Press and Cross-Border Themes Radha Vij 'For, the direction of the dialogue process depends on how news media presents them' - Dr. Baskara Rao, CMS Report Media Coverage of India's Neighbors In this seemingly postmodern era of globalisation, multiplicity and participation where linear, unilateral and top-down approaches for solutions have proven antiquated and ineffectual the issue of representation in media has not kept up with the times. The power to depict issues, individuals and nations must be realised for the potential it exerts over the masses: the news media must cease to become accessories in the daily-waged wars of representation. In an interview on the Kosovo War, prominent French cultural theorist, Paul Virilio, says war consists of the organisation of a field of perception. Virilio goes on to note that today's media handles information as if it were religious artifact; more concerned with what their audience feels rather than thinks1. His assertions, though made in a Western context, allude to the powerful space media all over the world dominates within the creation of a national discourse. Yet, in issues of war and peace, conflict and resolution, break up and make-up, how does the media form this field of perception? And, more importantly, what does this field of perception tell us about the peacemaking role which the media can achieve? This paper both assesses and departs from the CMS Media Lab2 study in order to analyze the degree to which one can feasibly consider the Indian news media a presence in cross-border conflict resolution. To a large extent, answering this question relies upon how the media not only represents multidimensional perspectives from all players involved but also defines deeper structural issues of conflict. Throughout the West and Israel, the advent of 'peace journalism' and the works of scholars such as John Gultung, G Wolfsfeld, Danny Schechter and Chanan Naveh have all categorically assessed the news media's power to manipulate the environment in which public opinion is formed and policy is affected. On the contrary, despite a handful of conferences and programs sponsored by IREX (International Research and Exchange Board), SAARC (South Asian Association for Regional Cooperation), the Malaysian Information Ministry and the Asia-Pacific Institute for Broadcasting Development, there have been surprisingly fewer endeavors to analyze the South Asian news media in relation to conflict resolution and no attempts to analyze the Indian news media in this arena (apart from the Kashmir crisis). However, before one begins to analyze such representation, we must realise

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the media's role as a privileged interlocutor of public perception. Dr N. Bhaskara Rao writes, 'As credibility or trust between parties to a conflict decreases and the volume of direct communication falls, the countries increasingly use their respective mass media through which to put out their feelings of frustration and hostility.3' The airing of national tensions in conjunction with the important role mass media plays informing public sentiment combines to form dangerous potential for conflict escalation as opposed to conflict resolution. We must also diagnose the current state of Indian news media in terms of semantic objectives regarding its field of perception. What are the categories for making contemporary cross-border news? What are the pulls and pushes affecting news coverage? Finally, why should the news media prioritise coverage of its neighbors?

Indian News Media Despite slackening fourth-estate debates surrounding an increasingly commercialised press, the Indian news media, as RS Sarkaria states, is an instrument of public service4 in that it undeniably sets the tone for popular opinion. The Indian news media has roots in regional, locally focused newspapers such as those newspapers started in Rajhasthan, Madhya Pradesh and Andhra Pradesh post 1977. As the success of the local papers boomed, national-outlook papers began to ape regional strategies, especially in the case of newspapers in Uttar Pradesh. With the triumph of the Indian language news media, State newspapers continued to engage the market by opening up Delhi editions and then, later, ventured into international-coverage terrain. This pattern of continual market expansion has continued into the advent of Indian 24 hour TV news channels, although this medium is neither as popular nor as accessible as Indian print news media5. When it comes to covering neighbor countries, the preoccupations of current Indian news media can be broken down into the following general groupings: security concerns, event-based tragedies, technology/economy stories and cross-border (cultural and non-cultural) commonalities. The Indian news media uses these themes to further break down cross-border coverage of its neighbors by geo-political region. For example, countries such as Pakistan, Myanmar, Sri Lanka, Nepal and Bangladesh are covered mostly in terms of security concerns and event-based tragedies, whereas coverage of South India, China, Korea, Japan and Malaysia will have a globalisation or technology/economy focus. Cross-border news can further be assessed in terms of regional/ state geographic biases. The Northern and Northeastern regional press will, respectively, focus more on news of Pakistan and Bangladesh security concerns than will Southern regional press. Sometimes, both national and international interests coincide due to geographic proximity. This is the case with the areas of Northeast India & Nepal and in the case of West Bengal & Bangladesh. Regional focus is placed on shared crossborder migration issues as well as on cultural affinities like arts and cultural celebrations.

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Geopolitical, regional and interest-based categories invariably cater to both public and private sector interests and help describe vast areas of coverage with time and space efficiency, making news easier to sell. The reductive process of news categorisation and selection is all part of a way to pragmatically incorporate news into the market. The intent to sell is, after all, the underlying motive of the media. As MV Desai writes, '...newspapers have come to have influence with readers. This begins with the very process of selecting news, which is supposed to cater to reader interest. So weeding out uninteresting and insignificant information is as essential to newspaper business as displaying it in an arrestingway. The newspaper's circulation and ability to carry conviction add to its power. Its influence depends on credibility and reach...6' Furthermore, news coverage, itself, certainly varies from nation to nation. This is because, despite academic assertions of postmodernism, the Indian news media (or news media of any South Asian country for that matter) still remains very much ensconced in the national moment. As Rajiv Gandhi told the Indian Newspaper Society, 'we are both on the same sideâ&#x20AC;ŚThe constituency of the press is the whole of our society7.' The Indian news media is a national press, which functions as an instrument of information-dissemination for the country and not the globe. Consequently, nation-to-nation coverage of cross-border news is wrought with complexities, given that the press of each country advances its own national interests and concerns. The issue of border fencing in Bangladesh, for instance, is complicated by migration patterns, tribal customs and religious sentiments, yet the Indian news media will often forsake these complexities in order to present a national interest story on security threats to India. In the same way, border fencing will be seen as necessity in India but will be taken as encroachment in Bangladesh vindicating each nation's interest but not necessarily encompassing a holistic or multidimensional viewpoint. In this way, the Indian news media pursues coverage of cross-border news as an extension of the unilateral national-interest story.

CMS Study Adding to the complexities that color the scope of cross-border coverage, is a recent study conducted by the Center for Media Studies (CMS) Media Lab in New Delhi8. The CMS analyzed how the regional language news media presents news in five neighbor countries: Pakistan, Bangladesh, Nepal, Sri Lanka and Afghanistan. CMS analyzed the five most prominent Hindi newspaper dailies (accounting for over 50% of Hindi news readership, nationally) and the three most prominent Telegu newspaper dailies (accounting for 90% of Telegu news readership, nationally) for 45 days from December 2005 to January 2006. For a benchmark, the study examined news bulletins of six major national news channels for four months (accounting for over 66% of Hindi news watchers, nationally) and two major Telegu news channels for three months. Articles and stories were assessed for quantity, subject matter, sourceplacement, positioning and display. The study's intent was to see how often the 'peaceprocess and peace-related issues' arose in the regional language news media. Though the work does not explicitly define a criterion for 'peace,' some examples it gives as

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'peace stories' are the following: Amritsar-Lahore bus begins, Special on 1971 Indopak war and present day status, India-Pakistan composite dialogue- 3rd round begins 17 January 2006, India releases 8 Pakistani prisoners.

A COMPARISION OF COVERAGE OF PEACE PROCESS WITH INTERNAL VIOLECE*

In terms of layout, less than 7 per cent of stories concerning the five countries appeared as front-page news. Only 3 per cent of all news on the five neighbors was in editorial matter, out of which over 50 per cent was on Pakistan. In terms of the regionally disparate Telegu print media - operating from Hyderabad, a city with historic links to the Muslim community - CMS similarly found 70-80 per cent of stories to be about sports. The study found absolutely no peace-related editorial matter. Furthermore, over 80 % of Telegu news stories were shockingly devoid of sources, jeopardising their content credibility.

TV News Media The benchmark of this study, 24-hour Hindi news channels, revealed only 7 per cent of their news bulletin coverage on international news. Of this, 50 60 per cent of international news was on the five neighbor countries. When the October 2005 earthquake overwhelmed news coverage, it was found that 292 stories on the matter focused on India (Kashmir and Indian border) versus only 58 news items, which focused on both India and Pakistan simultaneously. The findings claim Doordarshan News channel covers the most neighbor country news as well as the most peacerelated news with greatest depth.

Coverage of Internal violence/ related

and priority

items and priority

Dec

Jan

Dec

Jan

1-15

16-31

1 15

1-15

16-31

1 - 15

Punjab Kesari

Hindustan

Dainik Jagran

Nav Bharat Times

Dainik Bhaskar

Front page

Edit page

Other page

Single column

Double column

Multiple column

Print News Media It was found that those Hindi newspapers operating in the border regions of India had the most coverage of 5 neighbor countries. The Dainik Bhaskar, Punjab Kesari and Dainik Jagran (in that order) printed more stories than the Delhi-based Hindustan or Nav Bharat Times. Pakistan received the most overall coverage, followed by Sri Lanka, Nepal, Bangladesh and, lastly, Afghanistan. However, more than 50 percent of total subject matter regarding the five neighbors dealt with sports, followed by bilateral trade news, internal violence news, and then peace-related issues. Furthermore, 70 per cent of all stories had no named sources but rather were attributed to nebulous 'News Agencies,' and that 68 per cent of all neighboring country news originated in India itself.

Coverage of Peace process related items

Positioning:

Space

*Source : CMS Media Lab

In Pakistan's case, it was found that the peace process, internal violence (and earthquakes) and sports get most covered by the Indian news channels in that order. Whereas, for Bangladesh, priority reads: internal violence, earthquakes and then peace talks. Nepal news focused on internal violence and internal politics and Sri Lankan emphasis was mostly placed on sports, followed by internal Tamil-Sinhala politics. Afghanistan was hardly covered at all. The most surprising finding revealed that all peace-process stories originated in India and coverage was limited to VIP talks and events. The majority of non-VIP stories focused on the opening of a bus route between Amritsar and Lahore. Contrasting this, Telegu channels ETV-2 and TV-9 (both which present foreign news broadcasts as separate from their primetime news bulletins) covered the five neighbors only in sports. The study shows only one item on peace (ETV-2), a oneminute story on the Sri Lankan Tamil Tigers agreeing to peace talks.

NEWS ITEMS ON PEACE PROCESS* Channel

October 2005

November 2005

December 2005

Aaj Tak

DD News

NDTV India

Star News

Sahara Samay

Zee News

*Source : CMS Media Lab

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Conclusions

withhold 'sensitive information.'

In addition to drawing attention to a much-needed debate, this study succeeds in its Re-orienting national interest: what does it all mean? In a working paper entitled 'The Role of the Media in Conflict Resolution' conducted by Christopher Young of the Canadian Institute for Peace and Security, Young says the media can contribute to conflict escalation, either directly or indirectly. Young asserts that the media (especially the visual media) have a propensity to concentrate on violence and dramatic events. This 'tendency to focus on violence and conflict, and to further sensationalise violent events can distort the public's perceptions of the situation.13' His findings in Canada bear striking resemblance to the situation of media in India. In many ways, this brings us back to Virilio's field of perception polemic. Indeed, the Indian media seems dangerously close to escalating conflict as opposed to resolving it. Consequently, solutions must be found to remedy current parameters of representation. As the CMS study illuminates, there is a dearth, across the board, of attributed foreign-based sources. The reliance on News Agencies only complicates this issue. As GG Mirchandani writes in an essay glorifying the role of the agency, 'Yet another obligation, and to a certain extent commercial compulsion of a news agency is speed.14' Though seen as something positive for Mirchandani, the constraints of speed come with sacrifices such as unaccountable sources, overly simplified perspectives and factual error. Further, as globalisation propels the direction of media into ever-faster realms of individualised information inundation, the limitations of speed in producing objective and multidimensional representative news will surely be felt. While a future study will help us explore this issue further, the findings at present show a lack of civilian voices in the Indian news media. Rather, most peace news dealt with VIPs and government accords. Not attributing professional diverse sources and unilaterally defining peace issues through top-down means enables much room for public misinterpretation, perpetuation of stereotypes, growing tensions between disparate citizenries, stubborn social adherence to linear perspectives and homogenous truths. Thus, editors must instruct journalists to seek news from all social classes and must encourage their press organisations to hire local reporters in foreign contexts and to work interactively with SAARC journalists. Scholar Pradip Thomas writes on this necessity when he calls for a resurgence of the theme of rural journalism of the 1970s. Thomas says the news media must use more local writers, as they are the best agents to represent their own realities15. For two-thirds of India, newspapers and TV news continue to be the major sources of information and understanding of world events. If - instead of focusing on internal violence and top-level politics - the press focused on cultural events, personal perspectives from minority citizens, labor success stories, complexity of socioreligious histories, etc - the news could be a place of possibility for intercultural understanding. It is time to bridge the gap between postmodern academic theory and the national mainstream news media. The words of scholars like Paolo Freire, messages of media activists like Bandana Rana and reporting prowess of those such as P. Sainath must be applied to increase multidimensional and local participatory

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representation in the Indian news media's cross-border news coverage.

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National Integration in Bangladesh Lailufar Yasmin In the South Asian region, where major countries are struggling with national integration, Bangladesh possesses much more cultural and linguistic homogeneity. However, this apparent homogeneity sometimes conceals the deep seeded fragments within the Bangladeshi nation. Despite their linguistic, cultural and ethnic homogeneity and shared history, even the identity of the majority of Bangladesh remains contested. There are also smaller indigenous groups whose identities are often subsumed within a broader framework of majoritarian nationalism. Bangladesh is a relatively smaller country, with 144,000 sq. kilometers of land and a large population of 140 millions. According to the 1991 census, Muslims constitute 88.3 per cent of the population, Hindus are 10.5 per cent, Buddhists are 0.6 per cent, Christians are 0.3 per cent and people belonging to other faiths constitute 0.3 per cent of the total population. In terms of ethnic makeup of the country, almost 99 per cent of the population is of ethnic Bengali origin. According to the 1991 census, the ethnic population of Bangladesh is 1.13 per cent of the total population. This article deals with the problem of national integration in Bangladesh. As a part of Pakistan, the problem of establishing national integration between the former East and West Pakistan is discussed here in the context of understanding the overall national integration process of Bangladesh. While discussing national integration in post-independent Bangladesh, there are two aspects of such understanding. On one hand, there is this political division between the two major political parties of Bangladesh over fundamental issues such as the identity of the nation (Bangali or Bangladeshi) or the role of Sheikh Mujibur Rahman (leader of Awami League, henceforth referred to as Sheikh Mujib) and Ziaur Rahman (the military dictator turned politician and the founder of the Bangladesh Nationalist Party, BNP) in the war of independence of 1971. On the other hand, there is a problem of national integration in terms of ethnic composition of the country, where the majoritarian Bengalis try to dominate and establish their control over the minority indegenous people. This two-fold dilemma poses a challenge to establishing national integration in a seemingly homogenous country like Bangladesh.

East and West Pakistan: Problem of National Integration The state of Pakistan was created in 1947 on the basis of religion, with geographically separated two wings, East and West Pakistan. Even though there was no apparent congruity between the two wings in terms of language, ethnicity or shared historythe elements necessary for national integrationit was thought that common religion would do the groundwork for establishing national cohesion in truncated Pakistan.

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With the passage of time, it was unfolded that religion alone cannot act as the sole factor to sustain bondage between the two wings amidst an array of cultural, linguistic and historical dissimilarities. Moreover, power was centered in West Pakistan even though more than 50 per cent of the total population of Pakistan resided in the Eastern wing, 98 per cent of whom were Bengalis. The centralisation of power led towards the first contention over deciding the state language of the country. Even though Bengali was the mother tongue of the majority Bengali people of East Pakistan, Urdu was declared as the state language in 1948. This was the very first issue that showed a clear division between the people of the two wings. In 1952, after massive mobilisation and students' protests in East Pakistan, Bengali was given the status of one of the official languages of Pakistan. Gradually it became apparent that there were massive disparities between the two wings in terms of economic and political power sharing. For example, there was only five per cent representation of commissioned officers from East Pakistan in the military of the country1. An almost similar situation existed in the Air Force and Navy. Bengali representation in the civil service and other job sectors was also low. In the power structure and policy-making level of Pakistan, again there was a clear dominance of West Pakistan2. At the economic sector, already there was a buzzing of 'two economies', where West Pakistan's economy received more attention from the central government than that of East Pakistan3. Ultimately, it is contended that East Pakistan merely served as an 'internal colony' of West Pakistan. In such a context, Bengali nationalism started to emerge with a distinct cultural and linguistic base.

Rise of Bengali Nationalism Amidst the disillusionment towards West Pakistan, a Bengali voice started to emerge even though its roots can be traced as far back as in the early nineteenth century. The attempt of Banga Bhanga (Partition of Bengal) in 1905 was the first landmark that raised political consciousness among the Muslims of East Bengal about their identity. Muslims of the East Bengal region started to perceive themselves as a separate community with political aspirations, despite their adherence to a broader religious identity as Muslims. Even during the movement for Pakistan, there existed a national Bengali identity among the Bengalis of East Bengal who were members of All India Muslim League (AIML). As Professor Harun-or-Rashid pointed out '(T)hey were fully alive to their distinct Bengali loyalties4.' Lahore Resolution was seen as a basis to establish not one independent Muslim state but for two separate Muslim states, one in the Western India and another one 'comprising the whole of Bengal and Assam and some portion of Purnea district in Bihar5.' However, history shows that even though Muhammad Ali Jinnah was agreeable to such a proposal, due to the veto exercised by the Congress High Command, it was made null and void. In a newly independent country, due to a lack of leadership that could articulate and represent their demands in the Muslim League, the Bengalis of East Pakistan stopped actively participating in any sphere. All the important business centers and political institutions of the newly formed country were based in West Pakistan. Businesses were controlled by the West Pakistani elites. At the decision making level, very few from East Pakistan were represented. Therefore, East Pakistan's fate was transferred from a previously Hindu-dominated region to a West

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Pakistan dominated province. Under these circumstances, there was a rise of political awareness among the Bengalis in East Pakistan against the domination of West Pakistan. At the political front, a new political party -- the Awami Muslim League6 -was established specifically as a protest against West Pakistani domination with the aim of attaining regional autonomy. The Awami League played a pivotal role in articulating the Bengali's demand of its rightful share in the politics of Pakistan. The Six Point Program presented in 1966, mainly to achieve regional autonomy of the East Pakistan, generated a mass support among all the people of East Pakistan. When a nation emerges, there are certain symbols, myths that create bondage among the members of the nation and help to envision their nationhood. Benedict Anderson therefore ingenuously pointed out nations as 'imagined communities7'. At the cultural front, the language movement of 1952 was such a symbol that united the Bengalis and identified their distinctness vis-Ă -vis the West Pakistanis both linguistically and culturally. At yet another level, other nationalist symbols appeared and were made popular by politicians, artists, filmmakers and singers. In this context, the myth of 'Sonar Bangla' (Golden Bengal) is worth mentioning. In different political speeches, Sheikh Mujib recurrently pointed out 'Sonar Bangla shoshan keno?' ('Why the golden Bengal is turned into a graveyard?') This emerged as a very popular phrase that questioned the economic policy of West Pakistan towards the Eastern wing. Another manifestation of recreating the 'Sonar Bangla' was in art when 'Zainul Abedin produced a scroll of twenty feet long entitled 'Nabanno' (Harvest) where he recorded the golden past and the present miseries8.' This was also the period when Rabindranath Tagore's songs were identified as an essential part of Bengali nationalism. His song titled 'Amar Sonar Bangla' (My golden Bengal)9 was used widely in different cultural programs as well as in movies made in East Pakistan. During the 1960s, a number of movies were produced that portrayed nationalist feelings in symbolic ways, most important of which was 'Jeevan theke neya' (Taken from Life; produced in 1969). Thus, B.K. Jahangir argued that the 'representations of Sonar Bangla are sensitive to (and answer to) the social political theories produced by the Pakistani centerâ&#x20AC;ŚSonar Bangla constitutes a future, therefore this future constitutes a realm of possibility10.' As the decade of the 1960s proceeded, the sharp division between the Western and Eastern wings of Pakistan started to become apparent. While Awami League emerged as an exclusive political party for the Eastern wing, Muslim League had a similar standing in the Western wing. The 1970 general election was the decisive one for the fate of united Pakistan. The result of the election clearly showed that the voters of East Pakistan had rejected the West Pakistani political parties and vice versa. With a comfortable majority at the center, the Awami League waited for the President's invitation to form the government. However, Awami League's win also meant the transfer of power from West to East Pakistan, which was not welcomed by West Pakistani political elites at any cost. Therefore, while General Yahya initiated talks with the Awami League, thousands of military personnel were transported from West Pakistan to the Eastern wing. As the talks were not apparently bringing any results, the Awami League practiced an economic non-cooperation with the center, though they also took part in the President's initiative to hold talks. On 25 March,

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1971, General Yahya unilaterally declared the failure of the talks, Sheikh Mujib was incarcerated and flown to West Pakistan and a military crackdown was carried out against the unarmed people of East Pakistan. After nine-months of resistance by the East Pakistanis and with the help from the Indian forces, Bangladesh was born on 16 December of the same year.

1971: Secularism and its Discontents The 1970's election proved the unquestionable popularity of the Awami League and whole-hearted support towards the identity creation that was proposed by the Awami League. The basis of this national identity was essentially Bengali identity, which was based on secularism as one of the major ingredients. When the party was formed, the Awami League contained the title of 'Awami Muslim League' but the word 'Muslim' was deliberately dropped to accommodate people belonging to different faiths. But this secular Bengali identity, which was one of the strong bases of independent Bangladesh movement, was losing its appeal soon after the independence war. The question is, what went wrong? During the 1971 independence war, people from all sects, creeds and with varied ideologies took part in fighting against the Pakistan army. Though Sheikh Mujib was not physically present, he was considered the undoubted leader of the country during that time. The liberation war was fought on two fronts: at one end, the members of Awami League (who mostly fled and took refuge in India) were working to garner support in favor of an independent Bangladesh cause. On the other end, there was Mukti Bahini (Freedom Fighters) who were actively fighting against the Pakistani soldiers. These two forces were mostly independent of each other. In fact, as Rounaq Jahan pointed out, '(T)here was little coordination between these two sets of leadership, and, at the later stage of the movement, conflict arose between the two. The League leadership came under fire from the Mukti Bahini which claimed that the former was a do-nothing-group living in luxury in Calcutta11.' Therefore, it was assumed that it would be difficult for the Awami League, especially for Sheikh Mujib to establish control over a newly born country, where almost every system virtually collapsed. However, Sheikh Mujib overcame the problems with his personal charisma and a new and firm government by the Awami League was established on the basis of secularism, democracy and socialism. Though initially, people were enthusiastic about Awami League's rule and particularly about Sheikh Mujib, opposition to the regime started as early as 1972. Several incidents illustrated discontent of the people towards the Awami regime, which was translated towards the discontent towards the League's principle of secularism. Though the Indian army left Bangladesh very quickly, the consequent failure of the Awami administration disillusioned people towards the regime and this disillusionment quickly turned towards anti-Indian feelings due to Awami regime's closeness with India. For example, one of the leading men of the Mukti Bahini was arrested for criticizing the role of the Indian army in Bangladesh12. There was a wide spread rumor during 1974 that the massive smuggling of food grains from Bangladesh to India in the border region, the famine of 1974 could not be checked by the government13. The massive corruption that started to take place also went unchecked. Even though Mujib was not directly associated with corruption, it was regarded that he was protecting the corrupt officials. All these failings of the

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government were associated personally with Sheikh Mujib and his ideals. Secularism, therefore, was also attacked as a state ideal. At one hand, even though Sheikh Mujib proclaimed to transform Bangladesh as a Switzerland of Asia, by maintaining a neutral foreign policy, the regime was considered to be too close with India. From this point of view, the concept of secularism in Bangladesh was also identified as a prototype concept of Indian propagated secularism. Promoting secularism in Bangladesh looked like being a part of a dominant Indian secular ideal. Therefore, with the rise of anti-Indian feeling in the country, people started rejecting this concept. Also, embracing secularism would mean rejecting the religious identity of the majority of people who were Muslims. During this time, there was large apprehension among the people of Bangladesh that embracing secular ideals would mean absolute rejection of Muslim practices. A renowned politician Abul Mansur Ahmed described these widespread rumors as early as December 1971 in his autobiography. He mentioned that news came about that Muajjins (the person who calls for prayers in mosques) were being prevented to call for prayers in some mosques. He mentioned that even if these were not authenticated reports, these issues were being discussed in mass media14. He also mentioned that in places of typical Muslim greetings, Bengali greetings were being used to promote the secular ideals which made the general Muslim people suspicious about the fate of Islam in the country15. Then came the question of how to separate Muslim Bengalis of Bangladesh from Hindu Bengalis living in West Bengal of India. Thus, even though secularism was a popular idea initially proposed by the Awami League, with the mismanagement of the regime and in view of the growing anti-Indian feeling among the population of Bangladesh, this started losing its appeal from as early as 1972. In a coup by junior army officers in 1975, Sheikh Mujib, along with most of his family members, was killed in August 1975. After his death, the political overtone in Bangladesh started to change towards an almost opposite direction. When General Ziaur Rahman came to power after a series of military coups in 1976, he proposed a new identity for the people of Bangladesh, which was more territory and religionbased. He proposed that the identity of the people of Bangladesh would be 'Bangladeshi' instead of 'Bengalee' as stipulated in the 1972 constitution. This policy provided a territorial rather than an ethno-linguistic identity to the people so that a clear differentiation existed between the people of Bangladesh and that of West Bengal, India. Moreover, he promoted the religious identity of the people and amended the constitution for this purpose. In place of secularism, 'absolute trust and faith in the Almighty Allah' was put in the constitution. As one author has put it, '(B)y renouncing secularism he attempted to bring back Bangladesh to the fold of Islamic world and designed to formulate an independent foreign policy to India's sway16.' Zia later created his own political party, Bangladesh Nationalist Party (BNP), which attempted to incorporate anti-secular and anti-Indian ideals in its politics. The foreign policy of Bangladesh also changed accordingly, establishing strong relations with Pakistan, China and as a whole with the Muslim world. After the assassination of President Zia, General Ershad assumed control of the country in 1982. He later went even further by proclaiming Islam as the State religion in the late 1980s. The politics of Bangladesh has thus been the contradiction between two

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different brands of assertion: Bengali versus Bangladeshi national identity formation. Since the restoration of democracy in 1990 and the return to civilian rule since 1991, the two major political parties, the Awami League and the BNP are continuously at odds with each other in asserting whose version of national identity creation is the correct version. What is interesting is that this controversy regarding the national identity creation has remained at the elite level politics of Bangladesh. The inability of the two major political parties with regard to solving the basic identity of the people of Bangladesh has rather created a vacuum, where we can see that the identity politics have taken a new turn. We can see there is an identity formation at the subaltern, grassroots level that has been exploited by the conservative religious extremist groups. The fear here is that this new construction of identity is not nationalist per se. At one hand, it rejects the secularist Bengali identity and on the other hand, even though it resembles religious identity, it does not equate Bangladeshi identity as well. The manifestation of a religious extremism can be observed, which denies the state structure completely and is more concerned with the transnational discourse about Islam. If the major political parties of Bangladesh do not address this problem at the earliest, this trend is going to emerge as a new threat amidst already existing Bengali/Bangladeshi nationalist debate.

Problem of National Integration: the Ethnic Issue Bangladesh has a greater homogeneity in terms of ethnicity than many other Third world countries but that has not been able to avert armed conflict in the country. As has been mentioned before, the indigenous people constitute 1.13 per cent of the total population of the country though they occupy about 10 per cent of the total land in the southeastern portion of Bangladesh, which is known as Chittagong Hill Tracts (CHT). This area is inhabited by at least 27 different ethnic groups whose collective assertion of identity is known as jumma17. The CHT region was created to establish a buffer zone between India and Myanmar by the British in the post-1860 period. During the partition of the subcontinent in 1947, this region was a part of East Pakistan and after the independence of Bangladesh, it remained with the latter. Even though the CHT region enjoyed relative freedom during the British rule and some time during the Pakistan rule, from the mid-1960s, the situation started to change. The building of the Karnafuli Multi-purpose project paved the way for settlement of Bengalis in the CHT region. In fact, the project inundated 400 square miles, including 54, 000 acres of cultivable land, which was about 40 per cent of the total acreage of CHT. The grievances that were caused during this time were never properly addressed by the then Pakistani regime. The successive Bangladesh governments also took assimilationist policies towards the ethnic communities. Even though the major leaders of the CHT region supported the liberation war, the Awami League rather called for a 'total integration of the tribal areas' after the liberation, totally disregarding the rise of 'a new wave of Chakma and Marma political identity and consciousness18'. However, the rise of Bengali/Bangladeshi nationalism was viewed as another attempt to suppress the interest of the ethnic communities. While attempts to attain a political solution of the issue increasingly failed, the CHT ethnic groups organised themselves to challenge the Bangladesh authority. In 15 February 1972, the

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Parbattya Chattogram Jana Sanghati Samiti (PCJSS-the Chittagong Hill Tracts People's Solidarity Association) was formed as a political front with M.N. Larma as its head. On 7 January 1973, Shanti Bahini (SB-Peace Force) emerged as the armed wing of the PCJSS, which began armed insurgency some time in the beginning of 1975. After the killing of Sheikh Mujib, M.N. Larma went underground and crossed over to India to lead the armed insurgency. Successive governments in Bangladesh tried to demolish indigenous people's demand for autonomy through military measures. But at the same time, initiatives to bring peace in the region were also taken by both parties to conflict, i.e. the government of Bangladesh and the PCJSS. The nearly two decades long insurgency in the CHT came to end on 2 December 1997 with the signing of the historic peace accord between the Bangladesh National Committee on the Chittagong Hill Tracts (NCCHT), representing the Government of Bangladesh, and the PCJSS, representing the political wing of the insurgent Shanti Bahini. The two sides affirmed in the accord their full and firm allegiance to Bangladesh's territorial integrity, sovereignty and the Constitution of Bangladesh. Even after the signing of the treaty, there are several issues that remain as unresolved like the repatriation and resettlement of the refugees and internally displaced people, the proper functioning of the land commission and the regional council among others. Moreover, there has been a rise of new actors in the CHT politics like Hill Women Federation, Pahari Chatra Parishad and the Parbattya Gona Parishad who consider the Peace Accord as a compromise with the Bengalis. Conclusion The apparent homogeneity that exists in Bangladesh, if examined critically, we can see the existence of fragments in it. The nature of these fragments is twofold. At one hand, we can see the majority-minority fragments over the establishment of majority's control over the minority in the CHT region. It has been discussed that this problem has been addressed to an extent and more or less dormant in the present day politics of Bangladesh. On the other hand, amidst the majority Bengali population, another tension exists that apparently looks like a struggle for political power but is actually a deeper contention in the formation of national identity. Since the independence, there were two trends in the construction of the identity of the people of Bangladesh -- one was more secular and the other one was religion-based identity. In the secular trend or Bengali nationalism, components like the Bengali language and culture took predominance where in the later version or Bangladeshi nationalism, Bangladeshi citizenship and religious identity took predominance. However, there is a deeper politics that worked in the creation of such fragments in Bangladesh. The turns and twists of relationship between India and Bangladesh immediately after the independence has been the major factor in the construction of the fragments. Even though the whole Bangladesh movement was based on a secularist idea, the mismanagement of the Awami administration after the independence made the party unpopular and consequently charges of Indian influence in Bangladesh was translated as Awami-Indian nexus in Bangladesh politics. However, utilising such anti-Indian feelings, later a new Bangladeshi national identity was proposed. Amidst the debate between Bengali and Bangladeshi nationalism, a new extremist religious identity formation has been exploiting the masses. This new extremist identity not only rejects

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both Bengali and Bangladeshi national identities, but also refutes the state structure of the country altogether. As has been argued in this article, it goes beyond the nationalist identity of Bangladesh. If this trend is strengthened, then there will be more fragments created within the country. So far, even though there was tension and contestation between the two competing Bengali and Bangladeshi nationalisms, if the extremist religious identity is strengthened, this would bring much more devastating reality for Bangladesh.

(Lailufar Yasmin is Assistant Professor at the Department of International Relations, University of Dhaka, Bangladesh and currently an ASIA Fellow in the Institute of World Economics and Politics, Chinese Academy of Social Sciences (CASS), Beijing, China). End Notes 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

14. 15. 16. 17. 18.

Rounaq Jahan, Bangladesh Politics: Problems and Issues, (Dhaka: UPL, 2005) p-22. For details, see Rounaq Jahan, Pakistan: Failure of National Integration, (Dhaka: UPL, 1994). Nurul Islam, Making of a Nation Bangladesh: An Economist's Tale, (Dhaka: UPL, 2003) p-23. Harun-or-Rashid, The Foreshadowing of Bangladesh: Bengal Muslim League and Muslim Politics 1906-1947, ( Dhaka: UPL, 2003) p-326. Harun-Or-Rashid (2003). Ibid, p-326. In 1955, the word 'Muslim' was dropped from its title. For details, see Benedict Anderson (1991). Imagined Communities: Reflections on the Origin and Spread of Nationalism; Verso Publications, New York. B. K. Jahangir, Nationalism, Fundamentalism and Democracy in Bangladesh, (Dhaka: ICBS, 2002) p-99. This song was later selected as independent Bangladesh's national anthem. B.K.Jahangir (2002). Ibid, p-102-3. Rounaq Jahan (2005). Bangladesh Politics: Problems and Issues; UPL (Dhaka), p-104. Rounaq Jahan (2005). Ibid, p-111. Professor Nurul Islam, 'What was it about the 1974 Famine?, http://www.scholarsbangladesh.com/nurulislam1.php?PHPSESSID=7d411ce2721331e0648 c0d07fa6e94b4 <accessed on 21.02.06>. Abul Mansur Ahmed, Amar Dekha Rajnitir Ponchash Bochor (50 Years of Politics as I have Seen it), (Nowroze Kitabisthan, 1975) pp. 759-60. Abul Mansur Ahmed. Ibid, p-759. Aminur Rahman, Politics and National Formation in Bangladesh; (Dhaka: UPL, 1997) p. 246. Mark Levene, 'The Chittagong Hill Tracts: a case study in the political economy of 'creeping' genocide', Third World Quarterly; Vol. 20, No. 2, 1999. p.340. G. H. Peiris, 'Political Conflict in Bangladesh' Ethnic Studies Report, Vol. XVI, No. 1, January 1998; pp. 36-7.

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