15 - Poverty in South Asia by South Asian Media Net

S O U T H

A S I A N

Editor Imtiaz Alam Senior Assistant Editor Maheen Pracha Consulting Editors Bangladesh Reazuddin Ahmed India K K Katyal Nepal Yubaraj Ghimire Pakistan I A Rehman Sri Lanka Sharmini Boyle Publisher Free Media Foundation Facilitator South Asian Free Media Association (SAFMA) Designed by DESIGN 8 Printer Qaumi Press Editorâ&#x20AC;&#x2122;s Post E-mail: sajournal@gmail.com

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Contents Editorial: Growth and Poverty in South Asia In This Issue Pro-Poor Growth in Pakistan Dr Akmal Hussain Macroeconomic Policies in South Asia Dr A R Kemal Achieving Development with Equity Dr Ponna Wignaraja Economic Empowerment of South Asian Women Dr Preet Rustagi Poverty Alleviation in India Wilima Wadhwa Achieving the MDGs in Bangladesh Dr Mizanur Rahman Shelley China in South Asia M R Josse India and WTO: Regionalism and Multilateralism Geethanjali Nataraj and Pravakar Sahoo Political Impasse in Bangladesh Sayeed Iftekhar Ahmed The Death Penalty in Pakistan Dr Anne-Christine Habbard 2006: South Asia in Review Lailufar Yasmin Prateek Pradha Paranjoy Guha Thakurta Waqar Mustafa Book Review: From Behind the Curtain: A Study of a Girls' Madrasa in India Yoginder Sikand

regions. Not only are these regions poorer, but their growth rates are substantially slower than the better-off regions, the report indicates.

Growth and Poverty in South Asia South Asia has experienced an impressive economic growth during the last decade, projects a latest World Bank Report on South Asia, resulting in reduction in poverty due to, the report claims, economic reforms in the last decade. Inspired by around six per cent growth rate in the last three years, the economic managers in most countries of South Asia boast to have East Asian growth rates of seven to 10 per cent. But, the authors of the WB report are quite skeptical not only about further increase in growth rates, but also maintaining the current rates, unless the countries of the region address major shortcomings and implement appropriate policy responses to the challenges faced by them to join the ranks of highly growing East Asian economies. However, the assumption that higher growth rate will automatically result in reduction of poverty has not been validated by the ground realities. Not every pattern of development and growth model, as currently prevalent in the region, has helped alleviate the sufferings of the largest mass of poor in our part of the world. The poverty in both relative and absolute terms has perpetuated. According to the WB report, “South Asia's economic growth in the last five years has been impressive. Bangladesh, Bhutan, India, Maldives and Pakistan have all grown on an average of over 5 per cent per year, Sri Lanka at 4.7 per cent and Nepal at 2.5 per cent. In 2003-4, shortly before the Tsunami hit the region, all countries other than Nepal averaged above 5 per cent GDP growth. India, Maldives and Pakistan performed especially well, averaging GDP growth of nearly 7 per cent”. The economic growth of the last decade, the report reveals, has contributed to marked reduction in poverty. In Bangladesh, India and Nepal, poverty fell by 9, 10 and 11 per cents, respectively, in Sri Lanka it fell by 6 per cent. Only in Pakistan did poverty increase by 8 per cent. South Asia could bring down poverty to less than ten per cent in the next 10 years, if it succeeded in accelerating its annual growth rate to 10 per cent, the WB report predicts. The Bank forecasts, “if the required changes are made and the higher growth rates are sustained for a decade, South Asia will see a substantial reduction in poverty, from the current range of 23 per cent (India, Sri Lanka) to 50 per cent (Bangladesh) to a much lower range of 4 to 13 per cent. Poverty in Pakistan is likely to fall dramatically from the current 35.2 percent to 12.4 percent because of its high elasticity of poverty reduction with respect to income. But neither required changes are that easy, nor are the current rates of growth sustainable. The economists differ that higher growth rates do not necessarily translate into poverty reduction and macro-economic reforms have in fact increased the gulf between the rich and the poor in all countries of the region. South Asia still has nearly 400 million poor people in a population of 1.37 billion. Poverty is not just endemic, but increasingly concentrated, in particular, lagging

Unemployment remained at the same level while wages fell, despite higher growth rates. For instance, despite high growth rates in India during the 1990s, rate of employment growth remained as low as one per cent, gap in income distribution widened and reduction in poverty was far less than the growth rate. The fiscal stabilization policies and macroeconomic structural reforms undertaken by the countries of the region have in fact not helped reduction in poverty. As a consequence, on $2 per day criterion, more than 80 per cent of the population in India, Bangladesh and Nepal, 73.6 per cent in Pakistan and 41.6 per cent in Sri Lanka is poor. Such a large scale of poverty still persists despite large remittances ($22 billion in 2004-5) from non-resident nationals that mitigated balance of payment crisis and current account deficit besides stimulating demand-driven economic growth. Most glaring aspect of poverty is that it is increasingly concentrating in the regions that have been left behind in the course of an unequal development and growth. The phrase “two India(s)” exemplifies this difference in regional development outcomes. In 2002-2003, all-India per capita GDP was $480; the poorest seven states (accounting for 55 percent of the population) had a per-capita GDP that was two thirds the national average, while in the richest seven states (33 percent of the population) per-capita GDP was nearly double that of the poorest seven states. In the two largest and poorest northern states (Bihar and Uttar Pradesh, 25 percent of total population) per-capita GDP was less than half the national average and only a third of the richest 7 states. The four southern states, Andhra Pradesh, Karnataka, Kerala and Tamil Nadu (21 percent of the total population), at an average, enjoyed more than twice the GDP per capita of the quarter of the population concentrated in the two poorest northern states. With average GDP growth rate of 5 percent, the southern states are galloping ahead of the poorest but populous northern states with growth rate of only two per cent. Consequently, the poverty gap between the poorest northern states and the better off southern states has doubled: there are 35 per cent poor in the north and 18 per cent in the south. Same is true about Pakistan, Sri Lanka and Nepal. This growing inequality is often reflective of the domination of one ethnic/caste group or the other who then perpetuates the system of its dominance by various discriminatory means. Many of India's lagging states, such as Bihar and UP, Balochistan and NWFP in Pakistan, northern and north-eastern regions of Sri Lanka explain this unequal development. South Asia achieved relatively high growth in the past decade despite numerous obstacles, such as conflict in Sri Lanka and Nepal, corruption in Bangladesh and many Indian states, political uncertainty and terrorism in Pakistan and Bangladesh and high fiscal deficits in India and Sri Lanka. While these constraints may not have obstructed growth for some time, due to certain exogenous factors, they certainly will not help accelerate or sustain current growth rates. A lot remains to be done to achieve and sustain high growth rates.

In the past decade, economic growth has resulted in a growing gap between the rich and the poor which will put a break on the prospects of growth. As inter and intra state conflicts, corruption and high fiscal deficits are likely to adversely affect growth. Without increasing investment, productivity, efficiency, improved human resources, good governance, much improved human and physical infrastructures, greater priority to empowering and enabling poor though their own organizations and giving top preference to backward regions and women, neither will high growth sustain, nor will poverty go down. The issues related to poverty are all-sided and can't be tackled in isolation. A wholist strategy has to be evolved to empower have-nots, especially women, by directly providing them with the means of income, education, healthcare, skills and resources and, above all, by breaking the anti-poor power nexus at all levels. South Asia lags behind even Sub Sahran Africa on crucial human indicators. It can benefit, not from interstate conformation, but cooperation in jointly combating poverty, building human security, trade, tourism, water, education, health and energy, among other things.

In This Issue (The views expressed in the South Asian Journal are solely those of the authors)

Pro-Poor Growth in Pakistan

Dr Akmal Hussain, a senior Pakistani economist, puts forward a broad strategy for pro-poor growth in Pakistan designed to achieve higher GDP growth with relatively low investment, generate higher employment and exports, and achieve greater equity and poverty reduction. He identifies some of the major structural features of the economy and the poverty processes that need to be addressed to achieve poverty reduction, while suggesting a participatory development approach and drawing on lessons from the experience of decentralisation reforms in other South Asian countries.

Macroeconomic Policies in South Asia

Dr A R Kemal, a senior Pakistani economist and former director of the Pakistan Institute of Development Economics (PIDE), examines the recent macroeconomic policies being pursued by South Asian countries, in terms of their implications for growth and redistribution of income. He presents a comparative picture of the impact of these policies on strategic economic variables, and asks why attempts at structural adjustment and stabilisation have led to higher growth at the expense of increasing poverty and unemployment.

Achieving Development with Equity

Dr Ponna Wignaraja, chairperson of the South Asian Perspectives Network Association (SAPNA) in Sri Lanka, argues that the challenge of development with equity needs to be rethought by linking political democracy with economic democracy. Drawing on studies carried out by SAPNA over the last three decades, he provides a conceptual analysis of rural mass poverty, the crisis of development, women's poverty, participatory approaches to development, and pro-poor planning and growth in South Asia.

Economic Empowerment of South Asian Women

iii

Dr Preet Rustagi, a senior fellow at the Institute for Human Development in India, examines the changing work profiles of South Asian women, identifying the inherent contradictions of doubling their burdens while 'empowering' them. She asks whether the newer avenues for women's employment created after post-economic reforms reflect shifting gender relations and suggest improvements in socioeconomic gender balances. Dr Rustagi considers how progressive changes witnessed in certain spheres are changing the lives of some women while the majority remain subjugated even when their economic participation enhances.

Poverty Alleviation in India

Achievingthe MDGsin Bangladesh

China in South Asia

India and WTO: Regionalism and Multilateralism

Political Impasse in Bangladesh

Wilima Wadhwa, an economist based at the Society for Economic Research and Financial Analysis (SERFA) in India, examines a range of poverty alleviation programmes being implemented with a view to gaining insights into the poverty reduction process in India. Ms Wadhwa looks at poverty trends and characteristics of the poor, and discusses the relationship between poverty reduction and growth. She points out that poverty alleviation programmes are only an interim solution, and that the poor must have access to human and physical assets to overcome poverty. Dr Mizanur Rahman Shelley, chairman of the Centre for Development Research in Bangladesh, examines options for poverty reduction in the country against the backdrop of the Millennium Development Goals (MDGs). He analyses each of the MDGs in detail - including aspects such as investment, energy resources, governance, biodiversity, and gender reviewing the current state of each indicator, and recommending measures to improve it. M R Josse, consultant editor of The People's Review in Kathmandu, makes a strong case for China's connectivity and proximity to South Asia as it borders five member countries of SAARC. Giving credit to the Nepalese king for fighting to bring China into the SAARC fold as an observer, the author tries to portray apprehensions that New Delhi was reluctant to allow China's entry into SAARC, even if it had become an observer in the Shanghai Cooperation Organisation and was aspiring to become a full member. China's inclusion in SAARC as an observer however, could be a welcome development for the region. Geethanjali Nataraj and Pravakar Sahoo, faculty at the National Council of Applied Economic Research (NCAER) and the Institute of Economic Growth (IEG) in India, respectively, make a comprehensive analysis of the mushrooming of regional trading agreements (RTAs) in recent times. They discuss the recent trends in RTAs along with a detailed analysis of RTA provisions in the WTO. The authors also highlight issues in the debate on regionalism vs. multilateralism from the perspective of India, which is not a part of any major trading bloc, and ask whether regionalism and multilateralism can complement each other.

arguing that, instead of sharing their national imagery, the country's elite has fragmented on the issue of identity, giving rise to a dual “nation-building” process that is unique in South Asian history.

The Death Penalty in Pakistan

Dr Anne-Christine Habbard, professor of philosophy at the Lahore University of Management Sciences (LUMS), and chargé de mission for the International Federation for Human Rights, examines the extent to which the death penalty in Pakistan conforms to relevant international standards. Citing instances in Pakistani case law, she points out serious flaws in the investigative and judicial processes (lack of judicial independence, erosion of the rule of law, and corruption among investigative agencies) that lead to the application of the death penalty, as well as in the law itself. Dr Habbard argues that this makes the death penalty an arbitrary and socially discriminatory punishment.

2006: South Asia in Review

Leading journalists and political analysts comment on the year 2006 in terms of what it has meant for their countries. Lailufar Yasmin, an academic at the University of Dhaka, comments on political instability in Bangladesh; Prateek Pradhan, a Kathmandu-based journalist, reviews the outcome of the April revolution and its implications for Nepal's future; Paranjoy Guha Thakurta, a leading Indian journalist, looks at India's state elections, issues of communalism, foreign policy, and agrarian crisis, among others. The Journal also includes an overview of important events and developments in the countries of South Asia.

Book Review

Yoginder Sikand, reader at the Department of Islamic Studies at Hamdard University in India, reviews Mareike Jule Winkelmann's book, From Behind the Curtain: A Study of a Girls' Madrasa in India. As one of the first published works on girls' madrasas in India, the book examines the role of such madrasas in developing concepts such as “Islamic womanhood” from a Deobandi perspective.

Sayeed Iftekhar Ahmed, a doctoral student of political science at Northern Arizona University, USA, gauges the political deadlock in Bangladesh between the Awami Leagueled alliance and Bangladesh Nationalist Party prior to the upcoming parliamentary elections. He points to the reinvention of Bangladeshi nationalism as the source of the current crisis,

in both the agriculture and industrial sector (see tables 1, 2, and 3). At the same time the economic burden of the poor intensified in the 1990s due to serious lapses in three major aspects of governance:

(i) Due to poor financial management by successive governments, both the level of development expenditure and the efficiency of its use declined. This contributed to the decay in the already inadequate social infrastructure, a slowdown in GDP growth, and rising poverty. (ii) The failure to control budget deficits combined with the attempt to finance them through indirect taxation also contributed to the increase in poverty, since the adverse impact of such taxation had a relatively greater impact on the poor.2 (iii) During the 1990s the unprecedented level of corruption in the government had a significant, adverse impact on economic growth and poverty. The cost of such corruption to the banking sector alone has been estimated at around 10%15% of GDP in 1996-1997; and the overall cost to the country of corruption at the highest level of government was 20% 25% of GDP, which was approximately US$15 billion in the same period.3

This paper articulates a broad strategy of pro poor growth designed to optimise four parameters: (i) achieve higher GDP growth with a relatively low investment (i.e. have a low incremental capital output ratio); (ii) generate higher employment for given growth rates of GDP; (iii) generate higher exports; and (iv) achieve greater equity and poverty reduction.

Widespread corruption in government may have contributed to increasing poverty in three ways: (i) The rising magnitude of corruption over time and at different levels of decision making in the government may have been a major factor in the uncertain policy environment and a constraint to estimating accurate project feasibilities. This would be expected to slow down investment growth and employment; (ii) The transfer of resources to corrupt politicians and government officials to be used at their discretion, and the resulting misuse and misappropriation, rather than productive investment, could also be a factor in the slowing down of GDP growth; (iii) The financial cost of individual projects increased, thereby simultaneously

A Policy for Pro-Poor Growth Dr. Akmal Hussain esigning a policy for pro-poor growth involves addressing the structural features of Pakistan's growth process which constrain its capacity at the macro level for poverty reduction. At the same time it is necessary to come to grips with the nature of the poverty process at the local level. Poverty occurs when the individual is isolated from the community and is locked into a nexus of power, which deprives the poor of their actual and potential income. The poor face a structure of markets, state and institutions which discriminate against their access to resources, public services and government decision-making.1 In this context overcoming poverty means empowering the poor at the local level. The challenge of pro poor growth therefore is to re-orient both the structure of the economy as well as the local structures of power in favour of the poor.

The paper is organised into five sections. Section I summarises some of the major structural features of the economy and the poverty process that need to be addressed in such a strategy. Section II outlines a strategy that can achieve both faster growth and faster poverty reduction. Section III gives an outline of an approach for a direct attack on poverty through participatory development at the local level. This constitutes a vital element not only in alleviating poverty but also faster GDP growth: participatory development enables poor communities to acquire new skills and increase their productivity, incomes and investment. This allows them to overcome their poverty and simultaneously contribute to a faster and more equitable GDP growth. In section IV we draw on some lessons from the experience of decentralisation reforms from South Asian countries in the context of poverty, growth and empowerment. And finally, section V summarises the main policy conclusions of the paper.

TABLE 1: INCIDENCE OF POVERTY DURING THE 1990s POVERTY INDEX

1992-93 HIES

1993-94 HIES

1996-97 HIES

1998-99 PIHS

Head-count

26.6

29.3

26.3

32.2

Poverty gap

4.5

5.5

4.5

6.9

Severity of poverty

1.2

1.5

1.2

2.2

SOURCE: Federal Bureau of Statistics, April 2001. TABLE 2 INCOME INEQUALITY (GINI INDEX) DURING THE 1990s

1. Structural Factors in Slow Growth and Rising Poverty We begin by identifying the major features of the crisis in the real economy that need to be addressed. These are: 1.1 Governance, Poverty and Unemployment Poverty and inequality increased during the 1990s due to the decline in GDP growth, coupled with a decline in employment flexibility, labour productivity, and real wages

REGION AND PROVINCE

1992-93 HIES

1993-94 HIES

1996-97 HIES

1998-99 PIHS

Pakistan

26.85

27.09

25.85

30.19

Urban areas

31.70

30.70

28.77

35.96

Rural areas

23.89

23.45

22.65

25.21

SOURCE: Federal Bureau of Statistics, April 2001.

TABLE 3 : GROWTH OF GDP, EMPLOYMENT AND PRODUCTIVITY IN TWO DECADES GROWTH

1980s

Percent 1990s

1. GDP GROWTH

6.3

4.2

2. EMPLOYMENT GROWTH (TOTAL) (i) Agriculture (ii) Manufacturing

2.4 1.9 1.4

2.4 1.6 -0.4

3. PRODUCTIVITY GROWTH (TOTAL) (i) Agriculture (ii) Manufacturing

3.9 2 7

1.8 1.7 4.6

SOURCE: Nomaan Majid, Pakistan: An Employment Strategy, ILO/SAAT, December 1997 (Mimeo), Table A5, Page 58.

slowing down GDP growth for given levels of investment and also reducing employment elasticities with respect to investment. 1.1.1 Policy Implications: Our analysis in this section shows that the most important underlying factors in rising poverty during the 1990s were slower growth, rising capital output ratios, falling employment elasticities, increased corruption and inefficiency of public expenditure. Therefore a pro poor growth policy should aim to (i) induce higher investment, reduce incremental capital output ratios, and increase employment elasticities with respect to both output and capital in order to increase employment; (ii) increase the level and efficiency of government development expenditure to increase employment; (iii) increase transparency of governance and reduce corruption to alleviate poverty; and (iv) improve the efficiency of institutions responsible for delivering public services to alleviate poverty. 1.2 Health and Poverty Research for the National Human Development Report (NHDR) suggests that the high prevalence of disease amongst those who are slightly above the poverty line is a major factor in pushing them into poverty. Those who are already poor get pushed into deeper poverty as a result of loss of income and high medical costs resulting from illness. The data show that on average 65% of the extremely poor were ill at the time of the survey, and they had on average suffered from their illness for 95 days. The survey data also show that the poor predominantly go to private allopathic practitioners rather than to basic health units or government hospitals. Private medical facilities in rural areas and small towns have grossly inadequate diagnostic facilities and there is widespread prevalence of spurious drugs in private sector retail outlets. Consequently when the poor fall ill, they suffer for a protracted period and get locked into a high cost source of medical treatment. This erodes whatever little asset base they have, and pushes them into indebtedness and deeper poverty.4 The NHDR data on the widespread prevalence of disease in Pakistan is supported by evidence from the National Health Survey of Pakistan,5 which shows that in rural areas the prevalence of fair plus poor health for females above 25 years is as high as 75%, while that for males in the same age group is 45%. The curative health care system has expanded substantially during the last decade (for example, the population

per doctor has fallen from 2,082 in 1990 to 1,529 in 2000), yet the high incidence of disease points to both the inadequate coverage and poor quality of the health care system in Pakistan. 1.2.1 Policy Implications: Since the UNDP, NHDR study shows that health is a major factor that pushes people into poverty, improved nutrition and health conditions are clearly important for poverty reduction. Improving nutrition, preventive hygiene, provision of safe drinking water, improving the service delivery of basic health units, and improved diagnostic and treatment capabilities of tehsil and district hospitals are urgent imperatives to deal with the crisis of health and poverty. 1.3 Asymmetric Markets, Local Power Structures and Poverty The NHDR/PIDE survey data6 shows that poor peasants face adverse input and output markets. They have to pay higher prices for their inputs and get lower prices for their outputs than large farmers. At the same time, due to the lack of access to formal credit markets, poor peasants often have to borrow from the landlord. As a consequence they are obliged to work on the landlord's farm at less than market wage rates. The NHDR study shows that poor peasants could be losing one third of their income due to asymmetric markets for inputs and outputs. In urban and semi urban areas where the poor households are predominantly involved in micro enterprises, the data shows that low incomes are primarily due to the low productivity and profitability of these micro enterprises. 1.3.1 Policy Implications: The evidence shows that asymmetric markets and local power structures constitute structural factors in persistent poverty. They siphon off as much as one third of the actual incomes of the poor, deprive them of their potential savings and keep their productivity and incomes at a low level. A pro poor policy must address these structural factors if poverty is to be overcome on a sustainable basis. Better access for the poor to the markets for labour, land, agricultural inputs and outputs, means changing the balance of power in favour of the poor at the local level. This requires facilitating emergence of autonomous organisations of the poor, particularly poor women, at the village, union council, tehsil and district levels. It also means enabling the poor to access credit, training, and technical support for increased employment, productivity and incomes. 1.4 Institutional Factors in Slow and Unstable Crop Sector Growth7 In agriculture the average annual growth rate of major crops declined from 3.34% during the 1980s to 2.38% in the 1990s. At the same time, the frequency of negative growth years in some of the major crops has increased. The slowdown in growth and increased instability of output in major crops has resulted in a sharp increase in rural poverty on the one hand, and a slowdown in export growth on the other. Underlying this phenomenon are five major institutional constraints: (i) Reduced water availability at the farm gate due to poor maintenance of irrigation system and low irrigation efficiencies, of about 37%. While availability of irrigation water has been reduced, the requirement of water at farm level has increased due to increased deposits of salts on topsoil and

the the the the

consequent need for leaching. About 33 million tonnes of salts are annually brought into the Indus basin irrigation system, out of which 24 million tonnes are being retained.8 (ii) What makes improved efficiency of irrigation even more important is that the extensive margin of irrigated acreage has been reached, so future agricultural growth will have to rely on improving the efficiency of water use and other inputs. Thus the rehabilitation of Pakistan's irrigation system for improving irrigation efficiency has become a crucial policy challenge for sustainable agriculture growth. (iii) It is well known that high yielding varieties of seeds gradually lose their potency through re-use, changing micro structure of soils, and changing ecology of micro organisms in the topsoil. Therefore, breeding of more vigorous seed varieties adapted to local environmental conditions, and their diffusion amongst farmers through an effective research and extension programme is necessary. Yet there is no organised seed industry in Pakistan to meet the needs of farmers for the supply of vigorous varieties of seeds even in the major crops. In wheat, for example, the average age of seeds in Pakistan is eleven years compared to an average of seven years for all developing countries. It has been shown that compared to India, there was a sharp decline in growth of total factor productivity in Pakistan after 1975, which can be attributed to the poorer level of research and extension in Pakistan compared, for example, to India.9 (iv) A new dimension to the imperative of improving research capability in the crop sector is indicated by the possibility of declining yields per acre related with global warming. The wheat seed is extremely sensitive to temperature increaseseven a 2-degree centigrade increase in average summer temperatures during the 21st century could mean an absolute yield decline of between 10% and 16%.10 With a 2.8% population growth rate, even a decline of 5% in yield per acre associated with global warming could mean serious food deficits for Pakistan. It is, therefore, necessary to develop heat resistant varieties of food grains. The current ineffectiveness of agriculture research and poor diffusion amongst farmers is a cause for concern. This is particularly so in a situation where future agriculture growth and labour absorption will have to depend more on input efficiency than on enlargement of irrigated acreage and input intensification, which were the major sources of agriculture growth in the past. (v) One of the most important constraints to sustainable growth in the crop sector is the degradation of soils, resulting from improper agricultural practices such as: (a) lack of crop rotation and the resultant loss of humus in the topsoil; (b) stripping of topsoil and resultant loss of fertility associated with over grazing; and (c) water erosion along hill sides and river banks due to cutting down of trees and depletion of natural vegetation. According to one estimate, over 11 million hectares have been affected by water erosion and 5 million hectares by wind erosion.11

TABLE 4: AVERAGE ANNUAL GROWTH RATE OF THE MANUFACTURING SECTOR (VARIOUS PERIODS) Period

Small Scale Manufacturing

LSM 12.43

Total Manufacturing

1959/60 to 1969/70

2.85

1970/71 to 1979/80

7.21

4.84

9.24 5.50

1980/81 to 1989/90

8.40

8.16

8.21

1990/91 to 1995/96

7.88

4.40

5.59

1996/97 to 1999/2000

5.31

2.21

1.29

Source: Federal Bureau of Statistics, GOP.(Various Years) and Economic Survey of Pakistan 2000-2001, Economic Advisorâ&#x20AC;&#x2122;s Wing, Ministry of Finance, GOP.

1.5 Some Constraints to the Growth of the Large Scale Manufacturing Sector The growth rate of the large scale manufacturing sector was 12.43% in the period 1959/60 to 1969/70, and fell to 2.21% in the period 1996/97 to 1999/2000. (See table 4). The factors underlying this dramatic decline include the following: (i) A fundamental structural constraint to industrial growth, as indeed the underlying factor in slow export growth is the failure to diversify exports. Large scale manufacturing output, particularly exports, are concentrated in the traditional low value added end of textiles. (ii) A changed pattern of global demand for industrial products with a shift towards higher value added and knowledge intensive products. Pakistan's industrial structure was not positioned to respond quickly to these changed market conditions. (iii) An erosion of the domestic framework within which investment and growth is sustained. This includes: (a) a continued threat to the life and property of citizens due to the persistently poor law and order situation; (b) high electricity tariffs and relatively high interest rates (though the latter have fallen this year); (c) lack of trained professionals, especially in the high skill sector; (d) an inadequate technological base through which industry can respond in a flexible way to changing patterns of demand; (e) an adverse policy environment in the past within which tariff and export incentives were distorted to the detriment of entrepreneurs who were seeking to improve quality and productivity for export growth; (f) dumping of smuggled, poor quality and extremely low priced imported goods which are in many cases counterfeit copies of branded Pakistani manufactured goods. 2. Restructuring Growth for Faster Poverty Reduction12 A four-pronged revival strategy needs to be undertaken in the light of the structural constraints to growth and poverty alleviation discussed in Section I. 2.1 Improving the Supply of Irrigation Water Pakistan's irrigation system is currently in a state of acute disrepair due to decades of poor maintenance. The first element of the growth strategy should be a national campaign on a war footing to rehabilitate it. Such a campaign would involve organising semi skilled labour for (i) the desilting of canals; (ii) strengthening of

banks; (iii) organising villagers to make pucca khaalas (concrete lined water courses); and (iv) improving the gradient of water courses and farmlands to improve both the delivery and application efficiencies of irrigation. Such a campaign, being inherently labour intensive, would not only generate employment rapidly but also help to improve water availability and yields per acre at the farm level. If the campaign is professionally designed and managed, the funding for wage payments to the newly employed labour force could be sought from multilateral agencies, some of which have poverty alleviation and sustainable agricultural growth as their priority concerns. The district level development institutions in the local government system could coordinate with union councils, village development councils, and autonomous farmers associations to implement such a campaign. 2.2 Infrastructure Development In addition to the campaign for improved maintenance of the irrigation system, other labour intensive infrastructure projects should also be undertaken to simultaneously generate employment and stimulate aggregate demand in the economy. These include (i) building farm to market roads; (ii) building national highways and ports; (iii) upgrading the railway system and enlarging its transport capacity for bulk cargo; (iv) improving the communication system, and (iv) increasing production of cheaper energy through domestically available coal rather than imported furnace oil.13 2.3 Milk, Marine Fisheries and High Value Added Agriculture Products The third element of the revival strategy is to rapidly develop export led production capacity for milk, fisheries, and high value added agricultural products such as fruits, vegetables, and flowers. Let us illustrate this initiative by using the example of milk. Pakistan currently produces about Rs177 billion worth of milk annually for domestic consumption. This makes milk the largest agricultural product because Pakistan's largest crop, wheat, has an annual production value of about Rs 111 billion. Unlike wheat however, the output of milk can be accelerated sharply within a couple of years. Currently Pakistan's milch cattle yield per animal is one-fifth of the European average. Demonstrable experience in the field has shown that milk yields per animal in Pakistan can be doubled within two years through scientific feeding, breeding, and marketing. If the institutional framework could be established for training farmers in scientific feeding and breeding, and if the logistics could be set up to collect milk from the farm door by means of refrigerated transport, milk output in Pakistan could be doubled. This would have a dramatic impact not only on the incomes of the rural poor, but also on exports and overall GDP growth. Pakistan lies at the hub of milk deficit regions such as Central Asia, West Asia and South East Asia. Hence it could be argued that if milk output in Pakistan were doubled, export earnings would increase to such an extent that they would make a major contribution to overcoming the balance of trade deficit. Such an initiative, therefore, could lead to accelerated exports, higher GDP growth and improved income distribution in Pakistan. A possible institutional framework for such an initiative could be the establishment of dairy development boards at the provincial level linked

up with development institutions at the district and union council levels in the local government structure. Marine fisheries also have significant potential for improving foreign exchange earnings, although not as much as milk. Here again, what is required is improved institutional support and better management rather than huge investments by the Government. Expansion in the export of marine fisheries is constrained because storage facilities for transport do not match international quality standards. Currently, alternate layers of fish and hard sharp edged ice are placed in containers on boats. Under the weight of the upper layers of fish and sharp edged ice, fish at the lower layers are crushed, and the resultant bleeding causes putrefaction. To avoid this, it is necessary to provide shelves for layered storage of fish in boats, topped by dry ice, with fibreglass covers to maintain the European Union standards of minus 7oC temperature during transportation. An export potential of $300 million exists over the next three years if such improved management of the marine fisheries industry is achieved. Similarly, high value added production and export of fruits, vegetables, and flowers would require (i) institutional support for improved quality of output; (ii) improved grading and packaging; and (iii) refrigerated transport right up to cargo terminals for air freight to the export market. 2.4 Rapid Growth of Small Scale Enterprises The fourth element of the strategy would be to provide the institutional support necessary for the rapid growth of small scale enterprises (SSE). These SSEs include high value added units in light engineering automotive parts, moulds, dyes, machine tools and electronics and computer software. Training a large number of software experts with requisite support in credit and marketing could quickly induce a significant increase in software exports from Pakistan. Building a pool of software experts could give Pakistan a large increase in export earnings. This would of course require a proactive government to establish joint ventures between large software companies such as Microsoft and private Pakistani institutions such as LUMS and INFORMATICS. The Ministry of Science and Technology is already moving rapidly in facilitating the growth of information technology in Pakistan. In this sub-section, however, we will focus on small scale manufacturing enterprises. Small scale industries have a low gestation period, are labour intensive, and can generate a larger output per unit of investment than the large scale manufacturing sector. Therefore the rapid growth of small scale enterprises would not only accelerate economic growth in the medium term at relatively low levels of investment, but would also increase employment and exports for given levels of GDP growth. The key strategic issue in accelerating the growth of SSEs is to enable them to shift to the high value added, high growth end of the product market. A large number of SSEs in the Punjab and the North West Frontier Province (NWFP) have considerable potential for growth and high value added production, such as

components for engineering goods or components for high quality farm implements for the large scale manufacturing sector.14 Yet in many cases they are producing low value added items like steel shutters or car exhaust pipes, resulting in low profitability, low savings and slow growth. 2.4.1 Constraints to the Rapid Growth of SSEs Small scale enterprises in small towns of Pakistan face the following major constraints: l Inability of small units to get vending contracts for the manufacture of components from the large-scale manufacturing (LSM) sector. l Lack of expertise in production management and the frequent inability to achieve quality control makes it difficult to meet tight delivery schedules. l Lack of specific skills like advanced mill work, metal fabrication and precision welding, all of which are needed for producing quality products with low tolerances and precise dimensional control. In other cases, accounting and management skills may be inadequate. l Small units find it difficult to get good quality raw materials, which often can only be ordered in bulk (for which the small entrepreneurs do not have the working capital), and from distant large cities. l Lack of specialised equipment. l Absence of fabrication facilities such as forging, heat treatment and surface treatment which are required for manufacture of high value added products, but are too expensive for any one small unit to set up. l Lack of capital for investment and absence of credit facilities. Overcoming the Constraints to the Growth of SSEs: Overcoming the aforementioned constraints would involve providing institutional support in terms of credit, quality control management, skill training and marketing. This could be done by facilitating the establishment of industrial support centres (ISC) in the specified growth nodes in selected towns where the entrepreneurial and technical potential as well as markets already exist. Such support institutions, while being facilitated by the government and autonomous organisations such as the Small and Medium Enterprise Development Authority (SMEDA), can and should be in the private sector and market driven. The concept of ISCs is based on the fact that small scale industrialists in Pakistan have already demonstrated a high degree of entrepreneurship, innovation and efficient use of capital. The ISCs would provide an opportunity for rapid growth to SSEs through local participation in extension services, prototype development, and diffusion of improved technologies, equipment, and management procedures. The ISCs would constitute a decentralised system which ensures continuous easy access to a comprehensive package of support services such as credit, skill training, managerial advice and technical assistance. The ISCs could also be linked up with national research centres and donor agencies for drawing upon technical expertise and financial resources of these agencies in the service of small scale industries(SSI). The ISCs could have the following functional dimensions:

Marketing Provision of orders from the large scale manufacturing sector for components, and from farmers for farm implements. These orders would then be sub-contracted to the cluster of SSI units that the ISC is supposed to serve. The individual order would be sub-contracted to the SSI on the basis of the skills and potential strengths of the unit concerned. Monitoring and Quality Control Having given the sub-contract, the ISC would then monitor the units closely and help pinpoint and overcome unit specific bottlenecks to ensure timely delivery and quality control of the manufactured products. These bottlenecks may be specialised skills, equipment, good quality raw material or credit. Skill Training and Product Development. Skill training for technicians could be provided by the new, good quality vocational training institutes (VTIs) established by the Vocational Training Council of Punjab. Similar VTIs could be established in other provinces. The ISC would provide specialised supplementary skill training on its premises to workers in the satellite SSI units when required. At the same time, it would provide advice on jigs, fixtures, special tools and product development where required. Forging and Heat Treatment Facilities The ISCs would establish at their premises plants for forging, heat treatment and surface treatment. The SSI units could come to the ISC to get such fabrication done on the products they are manufacturing on sub-contract, and pay the ISC a mutually agreed price for this job. Credit The ISC would provide credit to the SSIs for purchase of new equipment and raw materials. In cases where raw materials are available in bulk supply, the ISC could buy it from the source, stock it on its premises and sell at a reasonable price to units as and when they need them. 3. Direct Attack on Poverty Establishing the institutional basis for enabling the poor to increase their incomes, savings and investment, would not only constitute a direct attack on poverty but would also contribute to a faster and more equitable economic growth process. In this section we examine the issue of empowerment of the poor, with special reference to women. In this context we will explore the institutional imperatives of making the newly emerging local government structures more effective in achieving the empowerment of poor women. 3.1 Empowerment and Autonomous Organisations of the Poor (i) The Meaning of Empowerment: Since the term empowerment has been loosely used in much of the literature on development, it may be helpful to specify its meaning in the context of this paper. Empowerment means enabling the poor to build their human capabilities and economic resource base for breaking out of the poverty nexus. It is a process of reconstructing a group identity, of raising

consciousness, of acquiring new skills and of achieving better access to markets and institutions for a sustainable increase in incomes. Such a process progressively imparts to the poor a new power over the economic and social forces that fashion their daily lives. It is through this power that the poor shift out of the perception of being passive victims of the process that perpetuates their poverty. Thus they become active subjects in initiating interventions that progressively improve their economic and social condition to overcome poverty. (ii) Empowering the Poor, Particularly Women: The fact that poor women in Pakistan suffer from a double burden, of being poor and being women, the economic strategy should require a national campaign to empower the poor at the level of village/mohallah, union council, tehsil and district. The idea is to facilitate the growth of community organisations of the poor at the village/mohallah level and to enable poor women to form their own autonomous community organisations to be able to break out of both the poverty nexus and gender-based discrimination. Through these community organisations, the poor can identify income generating projects, initially at the household level; acquire skill training from a variety of sources such as government line departments, autonomous institutions, private sector firms, NGOs and donors; and access credit for micro enterprise projects through apex organisations such as the PPAF, Khushali Bank, Small Business Finance Corporation (SBFC), and commercial banks. Special organisational arrangements would need to be made in these apex institutions to take credit to poor women and women's community organisations, since poor women have even less access to institutional credit than poor men. It is important that such village level community based organisations (CBOs) be autonomous and be permitted to form cluster apex organisations with other CBOs. Autonomous CBOs would begin a process of localised capital accumulation by means of social mobilisation, increased productivity through skill training, and increased income, savings and investment. Such a process, which we have called participatory development,15 would be integrally linked with the emergence of a new consciousness of empowerment. The poor could begin to take autonomous initiatives to improve their material conditions of life. They would thus break out of the poverty nexus and shift from being victims to active subjects of social and economic change. Such a process of village level increases in productivity, incomes and savings would not only constitute a direct attack on the poverty problem, but also contribute to a faster and more equitable macro economic growth.16 Such autonomous organisations of the poor could become not only a framework for grassroots economic growth, but would also constitute countervailing power to that of the power structures of local elites. At the same time, these autonomous organisations of the poor would enable the individual poor household to get better access to input and output markets. Facilitating the emergence of autonomous organisations of the poor, particularly organisations of poor women, could enable the newly established local government institutions to function in a more equitable and effective manner. The equity would be

with respect to class as well as gender. This would require establishing institutionalised links between autonomous organisations of the poor and local government bodies at the village, union council, tehsil and district levels. These institutional links between organisations of the poor and elected local bodies would enable a more participatory and equitable processes of project identification, design and implementation for local level development. 4. Devolution for Empowerment Versus Decentralisation Almost every country in South Asia has undertaken decentralisation reforms with the stated purpose of empowering the poor and thereby achieving good governance. Yet there are a number of pitfalls in the implementation of these reforms. As Pakistan embarks on its own programme of devolution, it may be useful to point out that devolution cannot simply be seen in terms of a decentralisation of administrative functions within existing government structures. Rather, decentralisation has to create the space within which an institutionalised relationship can begin between autonomous organisations of the poor and various tiers of local government. A number of pitfalls could emerge in the implementation of devolution reforms. Unless they are addressed at an early stage these reforms may not achieve the desired objectives. The following four lessons may be drawn on the basis of case studies of decentralisation reforms in South Asian countries:17 (i) Formal decentralisation of administrative power in itself does not necessarily help the poor, as pointed out by Upadhyay18 in the context of Nepal, empowerment of the poor, he argues, requires that formal decentralisation must be accompanied by a rigorous process of social mobilisation. This involves raising consciousness, conscientisation (would sensitisation be a substitute for this) and building organisations of the poor. It is only such a process that will enable the poor to acquire countervailing power. Without this dimension of countervailing power, decentralisation would merely result in the appropriation by elites of the â&#x20AC;&#x153;fruits of decentralisation for their own narrow benefitâ&#x20AC;?. In this context, Ali19 makes an important distinction between decentralisation of administrative power in favour of its regional/local offices as opposed to decentralisation in favour of local people in the case of Bangladesh. Apart from this, it could be argued that in areas where asymmetric structures of power prevail (for example, coalitions of rich peasants/landlords, local influentials such as traders, revenue and police officials) mere decentralisation of administrative power could intensify the oppression of the poor. (ii) The second lesson emerging from the case studies is that if decentralisation is to enable empowerment of the poor, it must be holistic. That is, it must incorporate political power, enhanced confidence, emergence of social consciousness, and administrative and fiscal devolution. At the same time, it must reach down to the grassroots through various intermediate levels, with institutionalised participation of the poor in governance at every level. Upadhyay refers to this holism and multi layered devolution in the Nepal case study.

(iii) The political dimension of decentralisation must be inclusive and capable of absorbing what Upadhyay calls â&#x20AC;&#x153;diverse ethnic and other identity groups as equal partners occupying spaces in the polityâ&#x20AC;?. He argues that the centralised polity excludes such identities which may be a factor in ethnic strife and social polarisation. While the poor once organised are able to generate new resources at the local level, internally generated resources may be insufficient as participatory development is scaled up. Therefore, externally generated resources become necessary, but these have to be carefully applied through a sensitive support system that strengthens rather than weakens the autonomy of the organisations of the poor. Such a support system could be provided by a combination of apex NGOs, state institutions, banks and local governments. Upadhyay emphasises the importance of such support organisations being sensitised to a pro poor perspective. (iv) In the case of urban areas, it appears that communities who have developed their own funds and managed development themselves are able to establish a more equitable relationship with local government institutions.20 It can be argued that to enable urban communities to manage their own development, it is necessary to provide technical advice and managerial guidance. At the same time, an institutionalised process of consultation and coordination may be necessary between urban community organisations and local government institutions to prevent them from working at cross purposes. Policy Conclusions (1) This paper proposes a policy of pro poor growth, which involves restructuring the macro economic growth process on the one hand and local structures of power in favour of the poor on the other. The poor at the local level are locked into a nexus of power represented by markets, social groups and institutions which deprive them of as much as one third of their income. It has been argued that empowerment of the poor requires facilitating the emergence of autonomous CBOs of the poor which enable them to acquire improved access to markets, institutions, and public resources. These CBOs need to be institutionally linked with various tiers of local government so that the poor can participate in decisions regarding the allocation of public resources at the local level, and in the design and implementation of community level social infrastructure projects. (2) On the basis of the latest empirical evidence available, it is seen that widespread ill health in Pakistan is a major trigger that pushes people into poverty and the poor into deeper poverty. It was proposed that urgent initiatives need to be undertaken for preventive hygiene, provision of safe drinking water, improving the service delivery of basic health units and improved diagnostic and treatment capabilities of tehsil and district hospitals. (3) At the macro level, restructuring growth to enhance poverty reduction capability involves addressing four parameters: (i) achieve higher GDP growth with a relatively low investment (i.e., have a low incremental capital output ratio); (ii) generate higher employment for given growth rates of GDP; (iii) generate higher exports; and (iv) achieve greater equity and poverty reduction.

Specifically, a four-pronged policy initiative is suggested to address these parameters for pro poor growth: (i) Start a national campaign to rehabilitate Pakistan's irrigation system to increase irrigation efficiencies so as to provide more water at the farm level. Specifically, this would involve building more dams, desilting and lining of canals wherever possible, and building pucca khaalas. This would provide more water to farmers and increase employment; (ii) Initiate infrastructure projects such as farm to market roads, national highways and ports, upgrade the railway system and increase production of cheaper energy through domestically available coal rather than furnace oil. Since such projects have high employment elasticities, they would help to generate both employment and aggregate demand. (iii) Facilitate the increased production and exports of milk, marine fisheries and high value added agriculture products. (iv) Accelerate the growth of small-scale industries through the establishment of ISCs in the context of public/private partnership. These centres would aim at providing unit specific support for marketing, quality control, skill and product development, specialised fabrication facilities and credit. This paper was presented at the UNDP/PIDE Symposium on Pro-Poor Growth Policies, The Marriott, Islamabad, 17th March 2003 and later on published in: Towards Pro Poor Growth Policies in Pakistan, (A joint publication of UNDP/PIDE), Islamabad, 2003. Note: The author wishes to thank Dr. Faiz Bilquees for helpful suggestions on an earlier draft of the paper. Endnotes 1 For a more detailed analysis of this phenomenon, See: Akmal Hussain: Pro Poor Growth, Participatory Development and Decentralization: Paradigms and Praxis, chapter in: P. Wignaraja et.al. (ed): Pro-Poor Growth and Governance in South Asia, Case Profiles, Oxford University Press (forthcoming). 2 For example, the tax burden as a percentage of income was highest at 6.8% for the lowest income group and lowest at 4.3% for the highest income group. See: Overcoming Poverty, The Report of the Task Force on Poverty Eradication, May 1997. 3 Burki, Pakistan: Fifty Years of Nationhood, Vanguard Books, Lahore, Page 174. 4 Poverty, Growth and Governance, NHDR, UNDP, (Forthcoming). 5 National Health Survey of Pakistan, Pakistan Medical Research Council, Federal Bureau of Statistics, Pakistan and the Department of Health and Human Services, USA, 1998, Page 127. Food note 5 appears to be three references, if so please give their dates and publication refer to, as well as the publishing agency. 6 This survey was part of the study embodied in the National Human Development Report, UNDP, Forthcoming. 7 This sub-section is based on research paper by Akmal Hussain: (Employment Generation, Poverty Alleviation and Growth in Pakistan's Rural Sector: Policies for Institutional Change, Report prepared for the ILO/CEPR, (Mimeo), March 1999. 8 Interim Poverty Reduction Strategy Paper, Government of Pakistan, November 2001, Page 23. 9 Mark W. Rosegrant and Robert Evenson: "Agricultural Productivity Growth in Pakistan and India: A comparative Analysis", presented at Pakistan Institute of Development Economists Ninth Annual General Meeting, Islamabad, 1993. 10 If atmospheric carbon is doubled, the average summer temperatures in Pakistan are

11 12

14 15

18 19 20

expected to increase by 1.5 C to 4.5 C (base average of 2.5 C), over the next 70 years. This could lead to a decline in wheat yields from 10 percent to 60 percent, depending on the type of wheat seed, planting time, related atmospheric/weather conditions. See: Qureshi, Ata and Iglesias: Implications of Global Climate Change for Pakistan Agriculture: Impacts on Simulated Wheat Production, Climate Institute, Washington, D. C. USA, 1992. Alim Mian and Yasin Mirza: Pakistan Soil Resources, National Conservation Strategy, Sector Paper IV, Environment and Urban Affairs Division, with IUCN, 1993. This section is based on a paper presented to the Federal Finance Minister in the Economic Advisory Board, by Akmal Hussain: A Medium Term Strategy of Economic Revival, 15th November 1999. (Also published in the daily Dawn on November 25 and 26, 1999). In this regard the Planning Commission has formulated a valuable set of policy proposals for energy development, See: Government of Pakistan, Planning Commission: Ten Year Perspective Plan and Three Year Development Programme, Islamabad, September 1, 2001. Akmal Hussain: Labour Absorption in Pakistan's Rural Sector, Final Report, ILO/ARTEP (Mimeo), 20th September 1989, Pages 21 to 23. The concept of Participatory Development is formulated in: Akmal Hussain: Pakistan, A Strategy for Poverty Alleviation, Vanguard, Lahore, 1994, Pages 26 to 29. Also see: P. Wignaraja, A. Hussain, H. Sethi & G. Wignaraja: Participatory Development: Learning from South Asia, O.U.P, 1991. For a more detailed discussion of this issue, See: Akmal Hussain: Poverty, Growth and Governance, Chapter in, V.A. Pai Panandiker (ed.): Problems of Governance in South Asia, Centre for Policy Research, New Delhi, 2000. See Akmal Hussain: Pro-Poor Growth, Participatory Development and Decentralization: Paradigms and Praxis, Part-III of the forthcoming book: P. Wignaraja and S. Sirivardana (ed.) Pro Poor Growth and Governance in South Asia Case Profiles of Participatory Development and Decentralization Reforms, Zed Press, London (Forthcoming) See: S.K. Upadhyay, The Nepal Case Study, in P. Wignaraja and S. Sirivardana (ed.) Pro Poor Growth and Governance in South Asia, op.cit. Annexure to Part-III. See: Dr. Shaikh Maqsood Ali, The Bangladesh Case Study, in P. Wignaraja and S. Sirivardana (ed.), op.cit., Annexure to Part-III. See: Arif Hassan, The Pakistan Case Study, in P. Wignaraja and S. Sirivardana (ed.), op.cit., Annexure to Part-III.

Panandiker (ed.): Problems of Governance in South Asia, Centre for Policy Research, New Delhi. l Hussain, Akmal, (forthcoming), “Pro Poor Growth, Participatory Development and Decentralization: Paradigms and Praxis”, Chapter in: P. Wignaraja et.al. (ed): Pro-Poor Growth and Governance in South Asia, Case Profiles, Oxford University Press. l Hussain, Akmal, et al., (1997), Overcoming Poverty: The Report of the Task Force on Poverty Eradication. l Hussain, Akmal with Kemal, A.R., Hamid, A.I., Mumtaz, K., Ali, Imran, and Qutub, A., (forthcoming), Poverty, Growth and Governance, NHDR, UNDP, OUP. l Mian, Alim and Mirza, Yasin, (1993), Pakistan Soil Resources, National Conservation Strategy, Sector Paper IV, Environment and Urban Affairs Division, with IUCN. l National Health Survey of Pakistan, (1998), Pakistan Medical Research Council. l Qureshi, Ata and Iglesias, (1992), Implications of Global Climate Change for Pakistan Agriculture: Impacts on Simulated Wheat Production, Climate Institute, Washington, D. C. USA. l Rosegrant, Mark W. and Evenson, Robert, (1993), Agricultural Productivity Growth in Pakistan and India: A comparative Analysis, Paper presented at Pakistan Institute of Development Economists, Ninth Annual General Meeting, Islamabad. l Upadhyay, S.K., (forthcoming), The Nepal Case Study, in P. Wignaraja and S. Sirivardana (ed.), Pro Poor Growth and Governance in South Asia, Case Profiles, Oxford University Press. l Wignaraja, Ponna, Hussain, Akmal, Sethi, Harsh, and Wignaraja, Ganeshan, (1991), Participatory Development, Learning from South Asia, United Nations University, Oxford University Press.

References l Ali, S.M., (forthcoming), The Bangladesh Case Study, in P. Wignaraja and S. Sirivardana (ed.), Pro-Poor Growth and Governance in South Asia, Case Profiles, Oxford University Press. l Burki, S.J., (1999), Pakistan: Fifty Years of Nationhood, Vanguard Books, Lahore l Government of Pakistan, (2001), Interim Poverty Reduction Strategy Paper, Policy Wing, Finance Division, Islamabad. l Government of Pakistan, (2001), Ten Year Perspective Plan and Three Year Development Programme, Planning Commission, Islamabad. l Hassan, Arif, (forthcoming), The Pakistan Case Study, in P. Wignaraja and S. Sirivardana (ed.), Pro-poor Growth and Governance in South Asia, Case Profiles, Oxford University Press. l Hussain, Akmal, (1989), Labour Absorption in Pakistan's Rural Sector, ILO/ARTEP. l Hussain, Akmal, (1994), Poverty Alleviation in Pakistan, Vanguard Books, Lahore. l Hussain, Akmal, (1999), Employment Generation, Poverty Alleviation and Growth in Pakistan's Rural Sector: Policies for Institutional Change, Report prepared for the ILO/CEPR (Mimeo). l Hussain, Akmal, (1999), A Medium Term Strategy of Economic Revival, Paper presented to the Federal Finance Minister of Pakistan, Islamabad. l Hussain, Akmal, (2000), “Poverty, Growth and Governance”, Chapter in: V.A. Pai

Macroeconomic Policies in South Asia Dr A.R.Kemal

ver the last two decades the macro economic policies of South Asian countries have focused on economic stabilisation and structural changes in the economy. This was necessitated by rising fiscal and balance of payments deficits. However, the reforms were not initiated by the governments themselves; they were part of the International Monetary Fund (IMF) Structural Adjustment and Stabilisation Programmes. While some South Asian countries implemented the programmes fully, the others abandoned them midway due to difficulties in implementation. Some of them have understood the benefits of stabilisation and continued the reforms even when they had no programme with the IMF except Article IV consultations; the others have failed to continue the reforms once the programme was over. In almost all South Asian countries the reform process started by liberalising trade regimes that had been rather restrictive. Not only were tariff rates high, but imports were also restricted through various non-tariff barriers including quota restrictions, procedural requirements, and even outright bans. Subsequently, reforms have been introduced in almost all sectors of the economy, particularly in fiscal and monetary policies and foreign exchange regimes. The countries have also implemented deregulation and privatisation policies with varying degrees of success. While in each country economic policies are much more liberal than they were a decade earlier, much more needs to be done. The structural adjustment and stabilisation policies are expected to bring about higher growth over the medium and long run but also have social implications in terms of an increase in unemployment and poverty. For example, India had high GDP growth rates throughout the 1990s but the employment growth rate was only 1%, the income distribution worsened and poverty, if it declined at all, declined little in proportion to growth. In Pakistan, growth declined and poverty increased in the 1990s due to stabilisation policies and many other factors, though the growth rate accelerated in the 1980s. Other countries have also had similar experiences. In this study we examine recent macroeconomic policies of South Asia with a view to examining their implications for growth and redistribution. In the following sections we examine recent macroeconomic policies of various South Asian countries and in the last section present a comparative picture of the impact of the policies on strategic economic variables.

Macro Economic Policies of Bangladesh Trade Policy Bangladesh initiated trade reforms in 1992-93 and the maximum tariff rate has been gradually reduced from 300 percent in 1992-93 to 37.5 percent in 1999-00 and to 25 percent at present. There is no duty on the import of cotton, textile machinery, equipment used in agriculture and irrigation, animal feed, and certain pharmaceuticals and medical equipment. Bangladesh has also progressively eliminated quantitative restrictions on imports and curtailed the number of banned or restricted items: only 2% of items are subject to quantitative restrictions, and products that are either banned or restricted account for 11.7% of tariff lines. Along with tariff rationalisation, a number of measures have been taken to boost exports. The Special Bonded Warehouse (SBW) and the Duty Drawback System aim at providing exporters access to duty-free inputs. Exporters are allowed access to financial resources through the 'Export Development Fund' and the Export Credit Guarantee Scheme. Export processing zones have been set up in Dhaka and Chittagong to encourage export-related investment. These zones are characterised by better infrastructure and other support facilities, and enterprises located in these zones are provided preferential access to imported inputs and other financial incentives. In 1996, the Government of Bangladesh granted permission for the establishment of private export processing zones. Nevertheless, exports of some agricultural commodities (wheat, pulses, onion, jute seed, prawn, and unfrozen shrimp) are prohibited. Fiscal Policy Bangladesh's revenue to GDP ratio and tax base remains among the lowest in the world. As a result, public investment in infrastructure and human capital development has been inadequate compared to most countries in the region. The budget relies heavily on trade taxes and the development surcharge on energy products, contributing to high production costs for domestic firms and to the weak financial position of energy sector SOEs. Financial Reforms Up to the early 1990s monetary policies were conducted with direct control on interest rates and also on the volumes and directions of credit flows. The situation began changing in the 1990s with the abolition of directed lending and gradual liberalisation of interest rates. In this fully market based regime, ex-ante pronouncement of monetary policy stance has assumed importance in anchoring inflation expectations, and in influencing interest rate trends towards growth paths of monetary aggregates consistent with pre-announced target ranges for output growth and inflation. Financial sector reforms also included opening up of private banks and privatisation of banks with a view to improving efficiency. In place of arbitrarily fixed interest rates, a flexible, market-oriented interest rate structure was introduced in January 1990. Interest rate bands were abolished except for export, agriculture, and rates of interest and terms of loans have been on the basis of risk and maturity period. At present, banks are free to fix their deposit rates on the basis of market forces. A Credit Information Bureau (CIB) has been created to strengthen the credit discipline and to

provide adequate and reliable credit information to banks to facilitate loan sanctioning. Bangladesh bank is constantly monitoring the bank's performance {this could be: Bangladesh's central bank is constantly monitoring the banks' performance) and improvement on the issue of provision and capital shortfall. Loan classification criteria have been made more stringent: provision requirements have been raised to 20% for substandard, 50% for doubtful and 100% for loans that are almost lost. Restructuring also involved closures of ailing and/or nonviable insolvent banks, an increase in the minimum assets of a bank, the collection and distribution of fiscal funds to rescue non-viable banks, government investment in banks, strong support to healthy banks and strict prudential regulations. Monetary policies in Bangladesh have the objective of maintaining price stability underpinned by the highest sustainable output growth, and are therefore formulated around inflation and output growth rates as the basic policy targets. Levels and growth paths of relevant monetary aggregates such as reserve money, broad money and domestic credit are also projected and monitored as intermediate targets in conducting monetary policies. The inflation target is set on the basis of past long run inflation performance and the domestic and external factors driving the current trend of domestic inflation. Apart from a brief spell of relatively high instability in prices in the mid 1970s, inflation in Bangladesh has always been contained at moderate levels. From the early 1990s, annual average inflation has consistently been in single digits, reaching a low of 1.94 percent in fiscal year (FY) 2001, and since then has increased somewhat. Other than the administered energy prices, consumer prices in Bangladesh are market driven and trends of domestic prices of tradables in the open economy are increasingly mirroring global price trends, the divergence between domestic and global inflation arising largely from the price trends of the non-tradables. The main factors behind the poor banking sector include: l External and domestic macroeconomic volatility. l Lending booms, asset prices collapse and surges on capital flows. l Increasing bank liabilities with a large maturity/currency mismatch. l Inadequate preparation for financial liberalisation. l Heavy government involvement and loose control on connected loans. l Weakness in accounting, disclosure and legal framework. l Distorted incentives. l Exchange rate regime. l Poor corporate governance.

Exchange Rates Bangladesh follows a managed float exchange rate system: the market sets the exchange rate instead of Bangladesh Bank. Banks give forward cover for their own foreign exchange transactions. An important landmark in the exchange rate regime has been the convertibility of the taka for all current account transactions from March 24 1994. Allowing the operation of about 400 money changers or exchange houses in addition to authorised foreign exchange dealers has further facilitated foreign

exchange transactions. Capital Markets A number of reforms have been introduced in the capital market. These include fiscal incentives, regulatory matters, liberal policies to issue licences to new merchant banks and non-bank financial institutions NBFIs, updating and rationalisation of the Securities & Exchange Commission (SEC) and establishment of the SEC as a statutory regulatory body. Growth Outlook In view of good post-flood recovery of agricultural output, stable manufacturing growth supported by continuing strong export demand for knit garments, robust service sector growth, and steady growth of remittances offsetting the deficit in trade balance, real GDP growth in FY 2006 is expected to be 6.3%6.8%. Overall growth for the agricultural sector is likely to be 3.8%4.3%, the principal contribution coming from the crop sub-sector. Industrial output growth for FY 2006 is expected to be from 8.0% to 8.5%, which is a little lower than the 8.6% growth in FY 2005, but well in excess of the average recorded over the past five years. The service sector is expected to build on the previous year's performance to attain growth in the range of 6.5%7.0% in FY 2006. Meaningful poverty reduction will hinge on achieving a sustained and faster economic growth, with an improved investment climate. The Bangladesh government has shown the resolve to continue macroeconomic policies geared to support low inflation and an orderly exchange market, underpinned by prudent fiscal and monetary policies, while ensuring adequate scope for private sector growth and to pursue further with structural reforms focused on four key areas over the medium term. Inflation Outlook There is likelihood of another round of upward revision in the administered energy tariffs. However, in view of the bumper aman harvest, the food component of the consumer price index (CPI) is unlikely to register much further increase in the coming months. On balance, with the tightened monetary policy stance, average inflation is expected to be around 7.0%. In view of the continuing inflationary pressure, Bangladesh Bank remains alert to the necessity of further monetary measures, and shall also seek a coordinated fiscal stance warranted by developments in the real and monetary sectors, with a view to containing inflationary expectations and facilitating smooth credit flow for productive pursuits in support of the targeted real output growth. Macroeconomic Policies of India India accessed the Compensatory and Contingency Financing Facility of the IMF in January 1991 and negotiations were initiated for loans under the Stand-by Arrangement lending facility in June in 1991, as India was on the verge of an economic disaster with a colossal balance of payment problem and foreign exchange reserves at an all-time low, just enough to meet 15 days worth of imports. Since India was close to defaulting on its external account obligations, it implemented the conventional IMFWorld Bank prescription of short-term stabilisation consisting of currency

devaluation, temporary import controls and fiscal and monetary firmness with a concomitant rise in interest rates. But it also implemented a structural adjustment programme (SAP) which sought to restructure the economy, redesign the architecture of the Indian financial system and open it up to global competition. Trade Policy The hallmark of India's economic reforms has been an outward looking and liberal trade policy characterised by removal of quantitative restrictions, rationalisation of tariffs, removal of licences for setting up industrial units and removal of licences and quotas for exports and imports. The reforms have marked a paradigm shift from India's policy of import substitution and export pessimism towards an outwardoriented, trade-led economy. The average tariff level of around 110% in 1991 has been brought down to 20%, though para tariffs and specific duties have been added, thus increasing the incidence of tariffs. Most goods are freely importable without any licensing requirements. A small number of goods fall in the 'restrictive list' of imports, the restrictions being principally on account of security, health and environment protection issues. There are some import restrictions on goods reserved for production by small-scale sector units in the country, or are home or village-based requiring low skills and employing a large number of people. However, the reserved list of products for the small-scale sector is also shrinking. Except for a few items on the negative list of exports, all other items are allowed for exports. The New Economic Policy of the Government of India provides huge incentives for industrial units engaged in production for export purposes. A large number of export promotion zones (EPZ) and special economic zones (SEZ) are being established to provide firms incentives to establish industrial units for export purposes. Firms in these SEZs can import all items free of duty for export production, except for items on the prohibited list. Import of capital goods, either new or second hand, is also permitted at concessionary customs duties (at times duty free) under the Export Promotion Capital Goods (EPCG) scheme, subject to fulfilment of time-bound export obligations. Firms operating in the SEZs get a 100% income tax exemption for the first five years of operation in an SEZ, 50% tax exemption for the next five years, and 50% on the ploughed back profits for the next five years. Fiscal Policy Despite government efforts over the last 15 years of reforms, the fiscal deficit has not come down below 4.5% of GDP. Military expenditure in India is very high. As a percentage of GDP, India's defence expenditure of 2.41% is higher than the 1.24% for Latin America, and 2.19% for East Asia and the Pacific. There is a need to create an environment in the South Asian region that promotes peace and harmony. While India's average tax revenue is low by international standards, marginal rates are high. High tax rates depress employment, investment and growth. To improve the tax intake and savings and investment rates, which are low by regional standards, a series of tax reforms have been considered in India. Their main thrust is to combine lower statutory rates with base broadening, to realise more revenues while lowering the marginal tax burden and removing distortions. This in turn should foster growth, leading to an “expansionary” fiscal adjustment.

India still has a high dependence on indirect taxes, low average effective tax rates and tax productivity, and high marginal tax rates and tax-induced distortions on marginal investment and financing decisions. Tax incentives are used to encourage new industry to locate in “backward” regions; to promote exports; and to promote investment in sectors including hotels, power, telecommunications, and infrastructure. India's general government tax revenue has declined since the 1990s, to under 14% of GDP in 2002/03. This is all the more striking because it has declined during a period when major tax reforms have been implemented, aimed at improving the buoyancy of revenues and increasing the share of direct taxes in total revenues. Direct tax revenues increased, but indirect tax collections declined, mainly due to tariff reductions. Recent reforms were moderately successful in reversing the declining trend of revenues. Despite reforms, the tax structure remains dominated by indirect taxes. State taxes on commodities and services are the largest source of general government revenue (representing more than a third of the total tax intake), followed by central government excises (one-fifth of the total). The government's principal fiscal policy objectives over the medium term remain raising the revenue-to-GDP ratio, improving the efficiency of public spending, and reducing domestic borrowing. The medium-term fiscal framework aims to raise the revenue-to-GDP ratio to 13.5% of GDP by 2006/07. Over this period, expenditure is projected to rise to 20% of GDP. This path of budget financing will help to stabilise and then reduce the public debt ratio and create room to meet contingent liabilities from the ongoing banking sector and public enterprise reforms. Financial Sector Reforms There have been major reforms in the financial sector and market-based instruments are being employed to control credit and interest rates. Steps are being taken to improve the banking framework and loan recovery, further NRB re-engineering, and restructure troubled commercial and development banks. Bank supervision, accounting, and auditing are to be further strengthened. External managers will continue to prepare NBL and RBB for privatisation. The government has extended external management at NBL, and expects to do the same for RBB. Monetary policy is being conducted to support the exchange rate peg. Consistent with this objective and the 2004/05 monetary policy statement, 12-month broad money growth is projected to be around 12%13% by end-2004/05, assuming real GDP growth of 4%4.5% and a small decline in velocity. This growth would accommodate domestic financing needs of the budget while allowing private sector credit growth of about 9% in real terms. Reserve money growth is projected at 9%10%, with a targeted increase in the NFA of the NRB by US$95 million. The current level of the peg remains appropriate. The monetary policy statement also outlines steps to improve policy implementation, and foreign exchange reserves and public debt management. The ADBN is to be restructured by January 15 2005, including through introduction of professional management and staff reduction, and actions will be taken to place the

bank on a sound commercial footing. Despite the poor financial condition of the NIDC, the government has, for the time being, decided to attempt a restructuring as specified in the TMUvigorous loan recovery, no gross lending, closure of regional offices, and a VRS introduced mid-July to achieve a significant staff reduction with the aim of privatisation. However, should privatisation not be possible by the end of 2004/05, liquidation proceedings will be initiated. In the meantime, no further capital injections will be made in NIDC.

rate has increased to around 25% of GDP, and the fiscal deficit reduced to around 5% of GDP. Investors have responded positively to the process of economic liberalisation in the country and foreign private investment has increased significantly. In the postreform period, the economy has shown a secular {Is this supposed to be a pun on the Hindu rate of growth?}growth path of more than 6% on average, with growth rates in the last few years being upwards of 7%7.5% per annum. For the fiscal year 2005-06, GDP growth is expected to be more than 8% with inflation at around 4.5%.

Foreign Direct Investment The major FDI policy initiatives between 2000 and 2005 included the opening up of new sectors for FDI. One hundred percent FDI is permitted in development of new townships, e-commerce, and Internet services providers (ISP). In June 2004, the Government took a host of initiatives to attract FDI to the country. FDI allowed in domestic airlines was increased from 40% to 49% and the automatic route of FDI was allowed. The foreign investment limit in telecoms was increased to 74% (despite strong resistance from the Left parties in the UPA government).

The demographic dividend has implications in terms of creation of a large pool of labour that can support industrial growth without putting excessive pressure on wages. The demographic dividend can be realised through rapid expansion of employment opportunities and imparting of education and skills to the vast pool of young workers.

FDI flows into India have risen since the 1990s, but remain low compared to other emerging markets. In 2002 India received FDI inflows of less than 1% of GDP whereas China received FDI worth 3.7% of GDP. In dollar terms, China received 15 times the FDI India received in 2002. At the same time, investor surveys point to a strong interest in India as a destination for FDI. Surveys by UNCTAD and AT Kearney in 2004 rank India as the second and third most attractive destinations for FDI respectively. This indicates that while India is on investors' radar screens, the interest has not yet translated into actual FDI. The investment climate in other emerging markets in Asia appears to be more conducive to attracting FDI inflows. Compared to selected Asian countries, India's overall infrastructure quality ranks low. The significant burden of bureaucratic red tape and regulation in India further worsens the investment climate. For instance, it takes 89 days to start a business in India, whereas the average for the sample is 43 days. The enforcement of contracts takes longer in India (425 days) than average (286 days). Also, once in business, firms find it difficult to exit. The most important factors influencing FDI into India are not FDI-specific policies, but broader economic policies including corporate taxes, trade openness, and other business climate issues, such as regulatory quality and burden. India has made considerable progress in liberalising its FDI regime, which is a necessary but not a sufficient condition to attract significant FDI inflows. The differences across Indian states in attracting FDI further underscore the importance of business climate in determining FDI rather than FDI-specific incentives. With the current international attention on India's tremendous potential for FDI, it would be an opportune time to push for rapid progress on structural reform to drastically increase FDI inflows. Drivers of Growth Reforms have helped greatly transform the Indian economy. Economic growth has accelerated significantly. The current account deficit has been maintained at sustainable levels (2%3% of GDP), inflation has been kept under check, the savings

India's competitive advantage lies in the strengths of its human capital. There is a vast labour pool in information technology, research and development, and biotechnology and pharmaceuticals. From 1983 to 1999, per capita real expenditure on education increased by more than 6.5% per annum. The poor, which used to spend a mere 0.32% of their income on education in 1983, were spending more than 2.32% of their income on education in 1999. This increase in private spending on education by the poor has come despite the government making free education facilities available. There is a growing realisation among the poor that they must impart education to their children to break the vicious cycle of poverty. Private expenses on education showed an increase for the rich as well-from 1.60% of their income in 1983 to 4.35% in 1999. Poverty continues to be the major challenge for the Indian economy. Though the poverty percentage in the country has been declining consistently, in absolute numbers the problem of poverty is still very pronounced. The poverty ratio in India has declined from 54.9% in 1973-74 to 44.5% in 1983, 38.9% in 1988, 36% in 1993 and 26.1% in 2000. Today, close to 250 million people in India are below the poverty line based on minimum calorie norms (intake of 2,000 calories of food per day). By the definition of the poverty line as a dollar a day, more than 350 million people in the country live below the poverty line. While there are areas or pockets in the country which are growing at a very fast rate, such as the National Capital Region and the Bangalore-Hyderabad region, there are many areas in the country where there has been practically no growth at all. In fact, growth has been rather slow for most of the states in the eastern and the north-eastern regions of the country, especially Uttar Pradesh and Bihar. This is partly due to poor governance and deteriorating infrastructure. Maintaining a regional balance in development is important in order to keep the federal structure of the economy intact. Although the unemployment rate in the country is only around 7% of the labour force, there are serious issues pertaining to the quality of employment. Given that the organised workforce in the country accounts for a total employment of around 30million35 million, most of the workforce in the country takes recourse to employment in the informal sector. The informal sector in India is typically characterised by poor working conditions, low wages, long working hours and a complete absence of a social security system.

Trend growth in India has been on a decelerating path since the late 1990s. A levelling-off in trend growth most likely reflects a decline in investment. Since the mid-1990s, total investment in India has declined from 26% of GDP to under 22% of GDP, reflecting fiscal crowding out in part. The rate of public investment almost halved over the 1990s, as rising interest rates and recurrent outlays took an increasing share of government revenues. Private investment has also declined by about 1.6 percentage points of GDP from its mid-1990s peak. The decline in trend growth is primarily concentrated in the industrial and agricultural sectors, where investment was sharply curtailed. Until recently, growth in private fixed investment and capital per worker in the manufacturing sector was negative. Agricultural trend growth fell from about 3.75% in the early 1980s to about 2.5% in recent years, reflecting falling public and private investment in the sector. The potential of both these sectors is also hampered by restrictions on the size of investments in certain sectors (small-scale industrial reservations), labour regulations, and continuing constraints on internal and external trade, especially for agricultural produce. Nevertheless, recent indicators suggest there are reasons for optimism regarding India's ability to move to higher trend growth in the near future. This is because the corporate sector appears to be embarking on a new investment cycle; India is rapidly integrating into global and regional production chains; and the labour force is forecast to expand rapidly. India's economic performance in 2003/04 placed it amongst the fastest growing countries in the world. Growth accelerated to a decade high and was broad-based across all sectors. However, conventional measures of trend growth and estimates of rain-adjusted GDP suggest that the acceleration in growth was mainly cyclical, led by the rebound in agriculture from drought because of good rainfall, and there is little evidence to suggest that India has yet moved into a new phase of higher trend growth. Nevertheless, more recent indicators provide ground for optimism, and suggest that more rapid sustainable growth is within reach, especially with progress on structural reforms. There are reasons for optimism that India could be poised for a sustained takeoff in growth. For the first time in many years, there are signs of a recovery in domestic and external investment in India, and exports of goods and services are growing rapidly as it becomes more integrated into the global economy. India is also set to benefit from a rapid expansion in its labour force. The challenge ahead will be to capitalise on these promising beginnings by accelerating the structural reform process. Macroeconomic Policies of Nepal Frequent shifts in government appear to have slowed the pace of reforms, although the direction of policies has remained broadly unchanged. Overall, macroeconomic policies have remained stable. Fiscal policies have been prudent. The exchange rate peg has helped to import stable monetary conditions and keep inflation in line with price developments in India. Nepal also undertook significant trade liberalisation in the 1990s. Since 2003, the Poverty Reduction Strategy Paper (PRSP) has provided an

overall framework for policies and reforms. Since the PRSP was prepared by a series of governments, with extensive consultation with stakeholders, the overall direction of reforms has been constant. Nevertheless, political instability and the insurgency have impeded the pace at which it has been possible to undertake structural reforms, with adverse consequences for growth. Trade Policy In the 1990s, a series of market oriented reforms opened up the economy to trade in goods and services, technology and investment. These included a reduction of import duties and elimination of most quantitative restrictions and licensing requirements. The unweighted average tariff fell from about 40% in 1990 to its current level of around 14%. Nepal is closely integrated with India. Transit and preferential trading treaties have existed between the two countries since 1950. A long porous border permits free movement of labour. The Nepalese rupee is pegged to the Indian rupee. Trade with India averaged about 28% of Nepal's total trade in the first half of the 1990s but has doubled to 56% since the beginning of this millennium. India accounts for approximately 40% of total foreign investment in Nepal, with a significant share of Nepal's exports related to these investments. Approximately half of all remittances are from India, including pension payments to ex-servicemen in the Indian army. Trade remains highly concentrated and Nepal's share of exports in world markets is still very low. Manufactured goods account for close to 50% of total merchandise exports. Nonetheless, Nepal remains dependent on a few exports and markets, making it vulnerable to external demand and policy shocks. Three exportsgarments, Pashmina, and carpetsaccount for 23% of total merchandise exports and about 90% of exports outside India. Dependence on a small group of markets has been increasing with the US, Indian and German markets accounting for 90% of exports. FDI Nepal maintains restrictions on capital account transactions. Only specified borrowers may borrow or invest in international capital markets, and residents are prohibited from outward FDI. Net foreign direct investment in Nepal is negligible, reflecting poor infrastructure, rigid labour markets, and a weak business climate. These flows are typically higher in countries with stronger policy environments and governance. Higher FDI can offer significant benefits to Nepal. These benefits include a relatively less volatile source of finance-â&#x20AC;&#x153;greenfieldâ&#x20AC;? investments in subsidiaries which could offer transfer of technology with possible spillovers to domestic firms and serve as conduits for export market access-higher wages and training opportunities for labour, and greater market competition. Nepal needs to undertake a range of reforms, improvements in governance and institutions, and investments in education and infrastructure to attract and retain FDI. Improvements in the business climate are key to attracting FDI. Firm level surveys in Nepal reveal that poor reform implementation, bureaucratic burden, and continued political and policy uncertainty are important constraints on doing business Further reforms are required to facilitate trade through customs modernisation. Donor

technical assistance has identified a wide-ranging agenda for customs reform, including for compliance with WTO commitments on trade facilitation. The current three-year customs modernisation plan has effected some improvements in the adoption of transactions values and computerisation of some functions, although problems remain. These include poor infrastructure and facilities, complicated procedures and excessive documentation which are poorly harmonised with neighbouring economies, and weak governance and human resource management. Critical short-term measures required include improved customs valuation, introduction of risk based clearance procedures, computerisation, development of a value database, more effective use of ASYCUDA, better training in customs valuation, and rationalisation of exemptions Macroeconomic Policies of Pakistan Trade Liberalisation Pakistan has also liberalised its foreign exchange and trade regimes. Removing nontariff barriers and reducing tariffs along with exchange rates has increased the economy's degree of openness to 29.9%. In 1983-84 Pakistan switched to the negative list system and by the end of the 1980s only a handful of products were still on the negative list. Quota restrictions were removed. The few products still on the negative list are there for security, health and religious reasons. The tariff rate have been rationalised and the maximum import duty is 25%, with the import weighted average rate only 8.6%. Even though Pakistan's trade policy still has an anti-export bias, the bias has declined over time; export duties and other restrictions on exports have been withdrawn and exports are actively encouraged. Exporters are provided concessional credit, income tax rebates and duty drawbacks. However, despite duty drawbacks, bonded warehousing, export processing units and no-duty-no-drawback schemes, exporters feel that they have been unable to get imported inputs at competitive rates. In the 2005-06 budget, the Government allowed imports of all raw materials and machinery duty free for the five major export oriented industries. Exchange Rate Policy During the 1990s, the exchange rate remained overvalued despite several adjustments. Residents and non-residents were allowed to open foreign currency accounts and moneychangers were allowed to buy and sell foreign currency. However, after the nuclear blasts in 1998, capital inflow stopped as sanctions were imposed and Pakistan abandoned liberalisation of the foreign exchange regime and introduced a two-tier system: the official exchange rate and inter-bank rate. The composite rate was an average of the market and bank rate. The official rate remained fixed while the floating inter-bank rate was determined by the forces of demand and supply of foreign exchange. The two-tier system was abandoned on May 19 1999 and was replaced by a unified exchange rate system. The inter-bank rate was introduced and there is no longer any official exchange rate. While the banks sell and buy foreign exchange, they are not required to surrender it to the State Bank of Pakistan (SBP). However, the SBP intervened in the market to adjust the exchange rate by sale and purchase of foreign

exchange; the exchange rate system was essentially managed by the SBP. In July 2001 a free float exchange rate system was adopted with a view to eliminating the current account imbalances through automatic changes in exchange rates. The foreign exchange market has been liberalised in the sense that Pakistanis are allowed to maintain foreign currency accounts, rules governing private sector's foreign borrowing have been liberalised, and moneychangers are allowed to deal in foreign currency. The rupee was made convertible on the current account in the early 1990s. The balance of payments deficit ranged between $2 billion and $4.6 billion up to 2000-01. It turned into surpluses in 2001-02 and in the following two years despite a sharp growth in imports, because of a huge increase in workers' remittances. The current account balance, after remaining positive for three years, turned negative in 2004-05 because of a sharp increase in the trade deficit. Pakistan shall have to make a concerted effort to increase exports, both traditional and non-traditional, to keep the balance of payments in line with long run foreign aid commitments. For rapid growth of exports there is a need to reduce concentration of exports on a few products and countries, improve technology and quality of products and allow increased access to export credit. Fiscal Policy Since Pakistan signed the IMF Structural Adjustment and Stabilisation Programme in 1988 when the fiscal deficit had grown to 8.5% of GDP, fiscal policy has been governed by four major considerations: reducing the fiscal deficit to a sustainable level through demand management; reducing the growth of public debt; making structural changes to the tax system and improving the tax administration; and restructuring public expenditure. The fiscal deficit did decline somewhat between 1987 and 1998, though it showed wide fluctuations. But since 1998 it has consistently declined and it was 3.0% in 2004-05, while the target for the current year is 3.8% of GDP. The recent decline in the fiscal deficit is due to a sharp reduction in interest payments from 6.3% to 3.8% as a result of debt reprofiling, lower fiscal deficit and low rates of interest. There have been significant changes in the tax structure. Even though the increase in share of direct taxes from just 13.2% to 30% may be illusionary as withholding taxes are essentially indirect taxes, there have been significant changes within the structure of indirect taxes. The share of domestic taxes has increased and that of tariffs declined. The share of customs duty declined from more than 40% to 15.6%; that of sales taxes increased from 9.3% in 1987-88 to 38.2% in 2004-05; and that of excise taxes declined from 20% to just 7.3%. Tariffs are used for protection purposes, sales tax for revenues purposes and excise duties on those products whose consumption is to be curtailed. The changes in the pattern of current expenditure are interesting. Firstly, the share of defence expenditure has declined from 35.5% in 1990-91 to just 22.3%; the share of interest payments increased sharply from 25.6% in 1990-91 to 41.9% by 1999-2000, but since then it has declined to 27% due to debt rescheduling, slower growth of debt and lower rates of interest; current subsidies declined sharply up to 1997-98 but increased subsequently to meet the losses of public utilities; general administration

expenditure increased up to 2000-01 but has declined since then; and most importantly, other expenditures including spending on the social sector declined significantly, with serious implications for human resource development. Financial Liberalisation and Monetary Policy Until 1990, Pakistan's financial sector was suppressed. Mandatory allocations of bank credit for priority sectors without regard for their efficiency levels and a regime of concessionary interest rates created distortions in the market and undermined the strength of the financial system. The policy of monetary control adversely impacted banks' ability to respond to the credit demands of the economy. Availability of credit at lower interest rates also slowed the development of the equity market, as easy availability of credit made debt the preferred instrument over equity. The external sector was also characterised by restrictions on capital and current transactions. The foreign exchange market lacked a market-based price mechanism and could not respond to changes in demand and supply in the external sector. Financial restructuring has resulted in autonomy for the SBP in monetary management; replacement of the system of administrative control of credit ceiling with marketbased instruments such as bank rates and open market operations; de-regulation of interest rates and rationalisation of the interest rate structure including auctioning of treasury bills, eliminating subsidised credit such as special financial schemes including concessional loans on exports of locally manufactured products, exports financing schemes, and removal of restrictions on banks' maximum limit of lending credit except for concessionary finance schemes; reforms in prudential regulations and the supervision system; competition in the financial system, strengthening of financial institutions and development of efficient financial markets with marketbased instruments; development of capital markets; effective catering to the needs of both public and private sector demand for funds; and reformation of the clearing and settlement system for payments. Private sector participation has gradually increased since 1991. With a view to ensuring greater competition in the banking sector, foreign banks have been allowed to operate in Pakistan, permission has been granted to set up a number of private banks, and all but one public sector banks have been privatised. Moreover, to lessen the dependence on banks for credit, various non-bank financial institutions were also allowed to open. Mergers between non-bank financial institutions were allowed with a view to reducing inefficiencies. The money supply had been increasing by 15%20% {when?}, but in 1997-98 it declined to below 15% and in the next three years this slowed to single digit growth. Despite reduction in the fiscal deficit, the money supply has increased rapidly by 18%20% because of the huge amount of remittances received and purchases by the SBP. The high liquidity with banks was squeezed by the central bank through open market operations with the cost to the central bank. The banks had liquid assets and they were allowed consumer financing, which resulted in a further increase in money supply. Interest rates increased in the 1990s and the average interest rates have been around

15%. However, the average conceals significant differences across various types of loans. Interest rates to marginal manufacturers had been as high as 22%, while in certain years export finances were available at around 6%. The average nominal interest rates since 2000 show a declining trend and in December 2004 it was 7.0%. Three points need to be underscored regarding interest rates.. Firstly, the decline in nominal interest does not necessarily imply that real interest rates have also declined. Real interest rates in fact have gone up. Even though the nominal rate declined from 13.7% in June 1995 to 7.3% in June 2004, real rates went up from 0.7% to 10% in June 2002 and then declined to 2.7% in June 2004. Second, the real rate of return on deposits in most years has been negative or very low. Third, the spread in deposit and lending rates has been rather high. The spread widened from 5.5% in June 1995 to 7.9% in June 2002 and then declined to 5.7% by December 2004. A number of factors have been responsible for the high spread including the over manning of banks and high proportion of non-performing loans (NPL). Pakistan introduced prudential regulations in 1993 to ensure that credit is not misused and the infected portfolio diminishes. However, the infected portfolio had increased to significant proportions by 2000-01. On June 30 2001, NPLs amounted to Rs279 billion, i.e., 6.7% of GDP, 18.6% of domestic assets, and 32.5% of total credit made available to private sector and public enterprises. However, NPLs and defaulted loans have declined since 2000-01. It is estimated that in June 2005, NPLs were Rs220 billion and defaulted loans were Rs147.8 billion, which is approximately 3.98% and 2.67% of GDP. It represents 8.8% of total advances, and 32.5% of the total credit extended to the private sector. By March 2005, NPLs had fallen further to Rs203.7 billion. Pakistan has launched special programmes for micro and small and medium enterprises. Pakistan set up the Poverty Alleviation Fund and Khushhali (microfinance) Bank for micro enterprise and the Small and Medium Enterprises (SME) Bank for the relatively larger enterprises. They have been able to lend to a large number of households small loans ranging between Rs10,000 and Rs100,000. So far there has not been any evaluation of the effective use of loans. The SME Bank has not been able to operate effectively because of a lack of finances. Between 1988 and 1997, inflation rates were in the double digits. It has since been in single digits and was around 4%5% from 2001 to 2004, but increased to 9.3% in 2004-05. The sharp growth in money supply over 2001-04 did not result in a very high inflation rate because of the lagged impact of money supply on inflation as well as an increase in money demand due to the low rate of interest. The huge inflationary gap resulted in the increase in the inflation rate to 9.3% in 2004-05. Deregulation and Privatisation Pakistan's economy has been considerably deregulated over the last 20 years. The Government no longer administers prices except for power, gas and oil, and even in these cases the Government has appointed various regulatory agencies. There are no longer any investment sanctions and any investor can set up any factory anywhere as long as it does not damage the environment. Interest rates have been deregulated and the banks pursue their own interest rate policies and advances of credit as long as they

are in accordance with prudential regulations. There is no quota on imports, nor is there any negative list for protection purposes. The foreign exchange system has been liberalised, as noted in the previous chapter. During the 1970s Pakistan nationalised various manufacturing enterprises, banks, insurance companies and shipping companies. By the early 1980s it realised that the efficiency of these enterprises was low and their divestiture would help improve efficiency levels. Though earlier efforts filed {failed?} in privatising public enterprises, a large number of manufacturing enterprises and two banks were privatised in 1881 {1981?}. After that privatisation was abandoned and only 12% of Pakistan Telecommunications Company Limited (PTCL) shares were divested. However, over the last couple of years it has gathered pace once again. Two major banks, the Karachi Electric Supply Company, PTCL and certain other assets have been partly divested. So far 147 firms have been privatised; 95 firms up to 1999-2000 and 42 firms after that, which included banks and other financial institutions, energy, oil, fertiliser, cement and chemical factories, and telecommunications. Growth Rates, Savings and Investments Pakistan has recently witnessed strong growth and in 2004-05 the growth rate was 8.4%. The growth rates have been broad based; the agriculture sector has grown at a rate of 7.5% and the manufacturing sector has registered double digit growth over the last couple of years. The target for the current year is 7% but growth is expected to be around 6%6.5% due to poor crops. On average, savings were around 14% percent in the 1990s and with a change in the base the savings in the current decade is around 16% of GDP. Two aspects of the savings behaviour in Pakistan need to be noted. Firstly, the strong influence of remittances on savings. During the period remittances are high the savings rates are also higher and national savings exceed domestic savings and vice-versa. Second, savings rates are significantly affected by terms of trade. The decline in savings rate in 2003-04 and 2004-05 was due to a sharp increase in oil prices, which resulted in deterioration in terms of trade. The terms of trade with the base of 1990-91 declined from 90.8 in 2001-02 to 76.5 in 2004-05. While public revenues failed to rise, restrictions on the maximum fiscal deficit did not leave much room for greater public sector development. Besides, low profitability of public enterprises also meant limited resources for investment. From 1988 to 1997, fiscal incentives were granted under various schemes including special industrial zones, industrial estates and rural industrialisation, but were later withdrawn making most mills sick and wasting resources, resulting in unemployment and poverty. The 1997 investment does not provide any tax holidays but provides fiscal incentives in the form of initial depreciation allowances and concessions in import duties on machinery and equipment. While hi-tech and export oriented industries and those having 40% value addition are provided maximum incentives, incentives for other industries have also been specified. However, the fiscal incentives may not necessarily be consistent with the protection implicit in the tariff structure. There is a need to ensure consistency between the two policies for ensuring resource allocation in accordance with the comparative advantage of the country.

Over the 1987-88 to 2004-05 period, investment levels showed divergent trends. From 1988 to 1993, investment rose because of the continuity of liberal economic policies; as a percentage of GDP it increased from 17.3% to 20.6%. Since then it has shown a declining trend and at present is just 16.9%. Since the early 1990s the Government has actively encouraged foreign private investment and taken various initiatives to attract foreign investors. These include issuance of a negative list of industrial activities for private investment; removal of restrictions on maximum holding of equity by foreigners; remittances of dividends and disinvestment proceeds no longer requiring the State Bank's permission; removal of restriction on raising loans from the domestic market; permission to foreign firms to raise equity capital from the domestic market; permission for investment in the stock exchange to be repatriated; removal of restrictions on royalties and technical fees; guarantees to foreign investors relating to remittances of profit, capital, and appreciation of capital investment; introduction of a rule that foreign private investment shall not be subject to more taxes on income than those applicable to investment made in similar circumstances by citizens of Pakistan; relief from double taxation for foreign investors from countries with which Pakistan has an agreement for avoidance of double taxation; and incentives to assembly-cum-manufacturing companies through lower import duties on components if the producers agree to a programme of indigenisation. However, the indigenisation programmes will no longer exist with the implementation of the TRIMs agreement. These initiatives did result in a significant increase in both direct and portfolio investment. Foreign private investment increased from $177 million in 1987-88 to $1,532 million in 1994-95 and remained at around the same level for the next few years. When sanctions were imposed following the nuclear blasts in 1998, foreign investment declined sharply and by 2000-01 it had reached just $182 million. After the events of 9/11, the sanctions on Pakistan were removed and investment gradually increased, reaching $1.62 billion in 2004-05. Future Outlook Whereas reforms in macro economic policies have resulted in high growth rates with stability, the key challenges facing Pakistan are to sustain the strong growth and stability. The MTDF suggests an average growth rate of 7.6% over the next five years. However, that calls for substantial public infrastructure investments to remove key bottlenecks in the areas of transportation, irrigation, and energy. Moreover, reforms to improve the business and investment climate such as streamlining the tax and judicial systems, and overhauling regulations and procedures that slow private sector development, need to be implemented. Similarly, for emerging skill shortages, higher education and technical training need to be strengthened. Moreover, public sector governance remains an irritant to some private investors. The 2005/06 budget targets an increase in the overall deficit to 3.8% of GDP. This reflects a drop in non-tax revenues, which is only partly offset by expenditure restraint. Central Board of Revenue (CBR) collection is projected to remain almost flat as a percentage of GDP because a number of tax relief measures for exporters and manufacturing were introduced in the budget. Expenditures are envisaged to decline

relative to GDP in several categories, including defence and subsidies, which may be ambitious while development outlays remain unchanged. Even with the increase in the fiscal deficit, government debt would fall to 53% of GDP, given a very favourable growth-interest differential and substantial privatisation receipts. Pakistan relies on monetary policy to contain inflation, with fiscal policy laying the basis for medium-term growth, though inflation may not decrease soon and tighter monetary and fiscal policies would be required. Debt dynamics appear favourable over the medium term. The trajectory of debt reduction, however, gradually flattens as the growth-interest rate differential narrows from the currently highly favourable gap. Also, the debt-to-revenues and debt-to-exports ratios remain high, reflecting the relatively small values of the Pakistan Government's revenues and exports. However, rollover and interest rate risks are modest and exchange rate risk is comparable to other emerging markets. A large exchange rate depreciation would raise the debt-toGDP ratio, though, subsequently, it would return to its downward trend. The current international reserves level is adequate and there is no sustained pressure on the exchange rate. The Government would like to maintain its market presence and continue tapping international capital markets once per year. However, given the availability of concessional financing and privatisation receipts, Pakistan does not need market financing. Nevertheless, external bonds should be designed to minimise the build-up of rollover, exchange rate, and interest rate risks. Tax buoyancy has been disappointingly low despite ongoing CBR reforms. CBR revenue declined as a percentage of GDP in 2004/05 and is expected to remain roughly flat in 2005/06. The decline reflects the transition costs of streamlining the tax system to improve the business climate. The CBR is focusing on enhancing compliance of existing tax payers. Raising investment is key to maintaining high rates of growth, though estimates of the trend growth prepared by IMF suggest that the Pakistani economy has entered another period of strong growth. It also suggests that growth is currently above trend level. However, recent growth acceleration was not preceded or accompanied by a similar increase in the investment ratio. The recent growth acceleration has come largely from an increase in TFP, mainly reflecting better utilisation of idle capacity. With many sectors of the economy approaching full capacity, it now becomes necessary to move the production frontier outward through new investments. Meanwhile, inflation has picked up and, if left unchecked, could undermine confidence and thus investment and growth. The key challenge facing Pakistan is to continue building on the impressive economic gains of the last half decade. Persistent implementation of reforms has paid off: growth in 2004/05 was amongst the highest in the world; vulnerabilities have been reduced; and Pakistan has regained access to international capital markets. While the acceleration of inflation and the emergence of a current account deficit are to some extent the â&#x20AC;&#x153;price of success,â&#x20AC;? they point to the need for careful macroeconomic management, including to deal with the oil price shock. Pakistan is better placed than at any time in the recent past to sustain growth over the medium term and achieve a

lasting reduction in poverty. Macroeconomic Policies of Sri Lanka Trade Policy Sri Lanka was probably the first South Asian country to start reforming its trade regime. There are no longer any non-tariff barriers and tariff rates have gradually been reduced to low levels. Recent ad hoc changes in import surcharges and fees have complicated the system and send mixed signals to the private sector. The system needs to be rationalised with the current tariff structure and the remaining 10% surcharge on imports removed. Sri Lanka's commitment to an open trade regime needs to be maintained to benefit from strong global and regional growth. The balance of payments deficit was $205 million in 2004, from a surplus of $502 million in 2003. Despite a robust export performance, the current account deficit of 3% of GDP reflects the effects of both oil price increases and strong demand for investment goods. By the end of 2004, the rupee had lost 8% of its value against the dollar, despite central bank intervention, and gross official reserves had fallen to $1.8 billion (equivalent to 2.1 months of imports). Exchange Regime While macroeconomic conditions have stabilised somewhat since the tsunami, the situation remains vulnerable. The rupee ended its downward slide on the expectation of aid inflows and has appreciated 5% against the US dollar through end-May, and gross reserves increased by about $240 million. Sri Lanka is committed to a flexible exchange rate regime. The foreign exchange market should be limited to moderating short-term fluctuations in the rate, or increasing reserves to targeted levels when market conditions are conducive. Fiscal Policy The fiscal deficit averaged close to 9.5% of GDP from the mid-1970s until 2004. High deficits have raised the level of public debt to more than 100% of GDP, hampering private investment by raising expectations of higher future taxes and heightening macroeconomic risks. Interest payments have become the largest expenditure item in the government budget and have crowded out public investment. Despite large and continuing expenditure pressures, revenue yield has been declining in recent years. Overall government revenue has fallen from 19% of GDP in 1996 to 15.3% in 2004. Although progress has been made in streamlining the tax structure through the introduction of value added tax (VAT) and some rationalisation of the grounds for granting tax holidays and exemptions, the Sri Lankan tax base remains extremely narrow. This reflects weak administration and a widespread network of exemptions and preferences. All of these issues need to be addressed to improve revenue performance. The 2005 budget envisaged a reduction in the deficit to 7.5% of GDP. The budget aimed to improve economic conditions for the rural poor, increase spending on health and education, phase out numerous subsidies, including on petrol and diesel, and reaffirmed the government's commitment to meet the targets of the Fiscal

Management (Responsibility) Act, albeit on a delayed timetable. While the 2005 budget targets represent a welcome step toward putting government debt on a declining path relative to GDP, budget estimates appeared overly optimistic, particularly for revenue. More effective enforcement of the existing tax structure is crucial in improving revenue performance. Although additional tax policy measures are essential to improve the buoyancy and efficiency of the revenue system, these will only be effective if existing and new polices are properly implemented. This requires improved revenue administration focused on improved registration, to ensure the effective base is as close as possible to the legislated one, and enforcement, to ensure that assessed taxes are collected. Improvements in administration are, however, not enough to meet the authorities' ambitious revenue targets. There is substantial scope for policy reforms to improve both the yield and efficiency of the current tax system. Financial Restructuring Bank financing of burgeoning fiscal deficits more than offset the increase in deposits, leading to a decline in private sector credit-to-GDP until 2001. High interest spreads have undermined financial intermediation. While the level of the interest spread is broadly consistent with countries at the same level of development, the spread has increased somewhat in recent years. High spreads drive a wedge between the interest received by savers and paid by investors, render many investment projects unprofitable, and are likely to render transmission of monetary policy impulses to the economy ineffective. In 2003, for example, the loosening of monetary policy could have been diluted by the increase in spreads that took place in that year. Inefficient state banks still account for a significant share of the banking sector. Remaining inefficiencies and past legacies of state banks prevent a reduction in their interest spreads. There are few alternatives to commercial bank financing. This limits competition and keeps spreads high. Concentration in the banking sector is in line with international standards, and falling. However, price competition seems to be largely absent. Low operating costs translate into higher bank profits, rather than lower interest spreads. Similarly, lower NPLratios are not passed on to consumers, but increase bank profits. Banks with lower NPLs need to provision less. Profit margins of efficient banks appear high by international standards. Statutory reserve requirements cannot explain the unfavourable interest spreads. Taxation may have a part in explaining high interest spreads. In the absence of competition, the problem of high spreads will not disappear on its own. Reforms in the state-owned banks need to continue to bring down the average spread. Banking supervision needs to be strengthened, to restore and maintain the health of banks not owned by the Government. Reforms and Growth Rates The first wave of liberalisation paid handsome dividends to Sri Lanka with private investment doubling to 21% of GDP and growth rate rising above 6% from 1978 to 1982. When simmering ethnic tensions, however, developed into full-scale civil war in 1983, private confidence took a severe blow and the Government's focus of attention

shifted away from economic reforms. GDP growth declined to an average of 3.75% in the period from 1983 to 1989. Despite the continuation of the civil conflict, a pickup in reforms in the first half of the 1990s raised average growth to 5.5%. While reform efforts lost steam, the war escalated following a brief ceasefire and an attempt at peace talks in 1995. In 2000, higher oil prices and large imports of military equipment brought the country to the brink of a foreign exchange crisis and the following year, hit by a terrorist attack on the Colombo airport, political instability, a severe drought, and the global slowdown, the economy suffered its first recession in decades. The average growth from 1995 to 2001 fell below 4%. The ceasefire that has held since 2002 has contributed to the pickup in growth above 5% in the period between 2002 and 2004, despite the lack of progress in the peace process. At the same time, political instability has hampered the implementation of structural reforms. The long-term average growth rate in agriculture has barely exceeded the rate of population growth, which has contributed to the persistence of poverty (the headcount ratio stood at 23% in 2002, which is relatively high for Sri Lanka's per capita income). Manufacturing was the main source of growth during the 1990s, when the apparel industry took off. In the 2000s, the expansion in telecoms (largely fulfilling pent-up demand for fixed line and cellular telephone services) has made the largest contribution to growth while more recently port services have grown strongly. Both of these sectors - telecoms and ports - have benefited from deregulation and privatisation in recent years Sri Lanka's medium term macroeconomic framework assumes that GDP growth will rise above its historical average of 6%7% percent a year. The fact that only on one occasion since 1950 has Sri Lanka enjoyed growth above 6% for two years in a row underscores that this is an ambitious goal. Achieving it will require major changes in the investment environment and in the macroeconomic policies that have hampered economic growth. In particular, a durable solution to the civil conflict will have to be reached; the fiscal deficit and inflation reduced, while increasing spending on infrastructure; the political environment will have to improve and a broad consensus on the policies that have to be sustained over time developed; and structural reforms in the electricity sector, financial sector, the labour market and the agriculture sector that relax the constraints highlighted in the previous section have to be implemented. In the absence of reforms, growth could remain below 5%. Impact of Reforms on South Asia GROWTH RATES OF GDP South Asian countries have liberalised their economies and seem to have gained in growth rates. A comparison of growth rates of the 1990s with those of the 1980s indicates a slight increase except for Pakistan, where the growth rate fell due to a number of factors not necessarily relating to the reform process. The unconstrained supply of inputs after their elimination from the negative and restricted list has been responsible for high growth rates. Pakistan also benefited from this in the 1980s. Efforts made to reduce the anti-export bias in South Asia have borne fruit in the sense that exports have grown sharply. Pakistan is the only exception. Otherwise, growth

Table 1: Growth Rates of GDP Country 1980-90 Bangladesh 4.3 India 5.8 Nepal 4.6 Pakistan 6.3 Sri Lanka 4.0

1990-98 4.8 6.1 4.8 4.1 5.3

2000-04 5.1 6.2 2.6 4.1 3.8

Capital flows across borders are one of the main integrating factors but they have been relatively unimportant in South Asia. From 1987 to 1992, the entire South Asia received only $346 million on average. While it has started rising, and growth rates are deceptively high, the total inflows did not exceed $5 billion in 1997. The flows actually fell in 1998 because of international sanctions against Pakistan and India (see Table 5). These volumes compare rather unfavourably with total capital flows in the world.

2003-04 3.7 5.4 1.6 3.9 4.8

Source: World Development Report 2006.

rates of all South Asian countries more than doubled in the 1990s as compared to the1980s. This has also led to a very sharp increase in exports as a percentage of GDP (see Table 2). Table 2: Growth Rates of Exports Growth of Exports of Goods & Services Country 1980-90 1990-98 2003-04 Bangladesh 7.7 13.7 19.50 India 5.9 12.4 32.50 Nepal 3.9 16.8 16.31 Pakistan 8.4 3.2 12.0 Sri Lanka 4.0 9.0 14.62 Source: World Development Report 2006

Percentage of GDP 1980 1998 4 14 6 12 12 23 12 16 32 36

2004 14.3 10.5 11.3 13.9 28.9

The degree of openness varies across countries, and not surprisingly, the maximum degree of openness is observed in Sri Lanka, and the minimum in India. Nevertheless, it is important to note that the degree of openness has increased over time. Roughly speaking, the degree of openness has increased by about 50%. Both exports and imports have been contributing factors (see Table 3). Table 3: Degree of Openness (% per year) Degree of Openness

Degree of Openness

(Trade/GDP)*100

(Exports/GDP)*100

Degree of Openness (Imports/GDP)*100

Country

1991

1995

1997

2004

1991

1995

1997

1991

1995

1997

2004

12.30

2004 14.3

Bangladesh

21.69

36.67

30.84

35.6

7.19

14.19

14.50

22.48

18.53

India

13.94

27.22

27.08

24.2

6.50

21.3

12.24

11.56

10.5

7.44

14.98

15.52

Nepal

30.60

62.00

63.91

39.3

13.8

7.99

25.24

26.27

11.3

22.61

36.77

37.63

Pakistan

34.96

31.94

39.95

32.5

28.0

15.23

13.70

16.14

13.9

19.73

18.24

23.80

18.6

34.01

44.07

43.52

39.6

28.9 Sri Lanka 56.10 79.91 80.06 68.6 22.08 35.85 36.53 Note: Figures of Exports, Imports, and GDP for 1991 in local currency. All other figures in million US $. Source: International Financial Statistics, IMF, 1998. World Development Indicators, 1997, 1998, 1999.

Table 5: FDI Inflows in South Asia (Million $) Country 1987-92 1993 Bangladesh 2 14 India 58 550 Nepal 2 4 Pakistan 227 347 Sri Lanka 57 194 Source: World Investment Report, 1998-99.

1994 11 973 6 419 166

1995 2 2144 5 720 56

1996 14 2426 19 919 120

1997 141 3351 23 714 430

1998 317 2258 9 497 345

Despite high growth rates, unemployment remained at the same levels but wages fell. Consequently, we find that in Bangladesh, India and Nepal, more than 80% of the population is still poor, and in Pakistan almost three fourths and in Sri Lanka more than two fifths are poor if the $2 per day criterion of the World Bank is applied (see Table 6). Table 6: Population in Poverty

Countries $ 1 per day Bangladesh 36 (2000) India 35.3 (1999-2000) Nepal 39.1 (1995-96) Pakistan 17 (2001) Sri Lanka 5.6 (2002) Source: World Development Report 2006

$ 2 per day 82.8 (2000) 80.6 (1999-2000) 80.9 (1995-96) 73.6 (2001) 41.6 (2002)

The degree of openness has widened the balance of payments gap. This is worrying because if the gap widens to an unsustainable degree, there is a danger that liberalisation efforts will be stalled. Pakistan is already facing a problem and unless South Asia is provided access to the world market for textiles in a meaningful way, this problem will persist. Table 4: Current Account Deficit ($ million) Country 1980 1997 2004 Bangladesh 844 902 -132 India 2897 5811 -6853 Nepal 93 460 -171 Pakistan 868 3675 808 Sri Lanka 655 388 131 Source: World Development Report, 2006.

Achieving Development with Equity

Since a few other institutions and individual scholars were already working on the issue of liberalisation and global competitiveness, SAPNA decided that its “entry point” and point of departure would be “How to meet the challenge of evolving a sustainable and culturally rooted paradigm for development with equity which could eradicate the worst forms of poverty in South Asia in a sustained manner”. This was the priority issue which would also permit looking at the other interrelated governance issues of democracy, security and human rights in a holistic manner.

Dr. Ponna Wignaraja

he South Asian region faces a multi-dimensional crisis and sharpening contradictions. South Asian countries are yet to articulate a holistic vision or a coherent framework of macro and micro policies for action, rooted in its civilisational rhythm and culture or on the hard lessons of experience from the ground which have emerged, to manage these contradictions. It is clear that no South Asian country can resolve its governance problems, including development and poverty issues, on its own, or even complete the unfinished governance agenda within countries initiated after World War II and the decolonisation process that followed. Several institutional arrangements for effective regional cooperation, including the SAARC processes, are still fragile and inadequate. To move from the multi-dimensional crisis and the sharp contradictions that have emerged in the politico economic reality, a significant point of departure has to be identified and elements in a paradigm shift clearly thought through. Further, there is a new emerging realisation that these three interrelated challenges that South Asia is facing need to be re-visited with state of the art interdisciplinary analytical methodologies. This would permit constructive dissent from conventional development thinking and received wisdom, leading to the formulation of a new undogmatic vision and framework for thinking and innovative action towards the vision of a South Asian union. This has to be accompanied by a great deal of unlearning and new learning, if we are to move forward towards the new vision. This paper will identify some of the elements of the South Asian Perspectives Network Association (SAPNA), which was initiated three decades ago for the establishment of a South Asian vision and policy analysis platform. When SAPNA set out to form a network, while the vision of a South Asian union was a part of the long term objective, there was a conscious decision to start the process of analysing a critical “entry point” in depth. In the mid 1970s, South Asia faced the same three critical interrelated challenges. They related to: i) Achievement of sustainable development with equity. ii) Liberalisation and global competitiveness for incorporation into the global system in new terms. iii) Evolving a coherent vision for linking development with equity, security and human rights within a broader democratic framework that is relevant to the South Asian reality and culture as well as ensuring that political democracy went hand in hand with economic democracy.

The warning signals were very clear, even then, that unless this challenge was addressed with a new school of thought, the other governance challenges could not be responded to. Lessons from SAPNA's Intellectual Quest for Holistic Concepts and Policy1 Faced with the multifaceted crisis in South Asia and the growing awareness that the conventional development paradigm--neo-classical and Marxist--has failed to address, in a sustainable manner, even the basic needs of the majority of the people of South Asia over the past 50 years, SAPNA attempted to understand the reality by learning from the ground, rather than by a priori theorising. From this three-decade exercise, the SAPNA Network has identified and conceptualised critical elements of an alternative pluralistic and democratic development paradigm that could be further deepened. SAPNA's effort has been a sustained step-by-step search for coherent strategic options for development, rooted in South Asian cultures where political democracy and economic democracy were intrinsically intertwined. This was undertaken through probing in-depth the lessons from the ground. There are seven studies which share the results with wider stakeholders. The key truth that emerged fairly early in this intellectual quest was that the poor were not the problem, but could be part of the solution when they were 'subjects' and not 'objects' of development. This fundamental truth led to the recognition that the release of the creative energies of the poor and strengthening their capacity, initially to use local resources and knowledge, was also an integral part of the poverty eradication process on a sustainable basis. A corollary was that a pro poor growth oriented strategy could help mediate the tensions and sharpening contradictions resulting from simplistic ideologically oriented strategies which were not rooted in fundamental cultural values and transformative processes. The lessons learned from the seven interrelated in-depth studies are summarised in the following sections of the paper. Towards a Theory of Rural Development2 This first study represents an innovative approach to analysing rural mass poverty. It attempts to identify the necessary elements of a conceptual framework for a sustainable alternative approach to rural development. It also pioneered, in the 1970s, the approach of participatory action research (PAR) in South Asia, i.e., of going directly to the field and learning through a deep critical dialogue with the poor communities. This theoretical approach--which is firmly based on the idea that there

should be a constant interplay between action and reflection, practice and theory, and that every theoretical insight should be tested on the ground with the results being reincorporated into the theory--gave form to the methodology of praxis and PAR. In this study, activists and cadres of Bhoomi Sena, a social movement in Maharashtra, India, joined a small group of South Asian scholars as partners in action research. This partnership has given an intersection of perceptions and knowledge generated from two different life streams interacting with each other to create knowledge jointly. It addressed the question of how a mobilised people and people's power initiated through praxis and PAR could bring about social transformation and sustainable social change. This action research methodology totally differs from a 'quick fix' addition of 'participation' to a 'top down' process of 'delivered' poverty alleviation. Throughout the study, descriptions of ground experiences in Bangladesh, India and Sri Lanka were contrasted with China (socialism under non-classical conditions) and South Korea (capitalism under non-classical conditions). The third study of the Bhoomi Sena case probed in depth was used to illustrate how the creativity of the poor people of rural Maharashtra was released and mobilised for the all-round development of their lives. From these insights an attempt has been made to systematise the beginning of 'another' theory of rural development and of development with equity in the South Asian context. A peer review of this study by the Dag Hammerskoljd Foundation, Sweden, highlighted another methodological innovation by the authors. It stated that: The studies were also interesting from another point of view, namely, as examples of efforts towards what may be called 'collective creativity' between the authors themselves, between the authors and the Bhoomi Sena activists. Attempts to engage in such creativity are, however, not without problems. One of the problems stems from the fact that working collectively to achieve this creativity seems to go against the very ethos of the academic tradition of the West with its many ramifications in other parts of the world. This western research tradition in turn reflects the hierarchical organisation of society in general, emphasising individual research and performance and success and suppressing collectivist orientations. People who are engaged in development thinking too are generally products of this western academic tradition, and their writings reflect this fact (which is not to say that they are therefore bad). Collective creativity is however, a complicated matter; it presupposes that one abandons the prevailing non-collectivist orientation and fears of new ways of perceiving and functioning. Collective creativity--like true interdisciplinarity--is not just a matter of simple addition, where a group of creative people are brought together and the inputs are added in a mini-computer fashion with a radiant grand total as a result. Collective creativity is something much more profound and it can only function if the members of the group have common fundamental values and are able to enter into a process of collective reflection. The intense and collective interchange and reflections of the study team not only deepened their analysis of the reality but also enhanced their understanding of available alternatives and hence the possibilities for acting.

Development, Democracy and Regional Co-operation3 This second study probes further the crisis of development, the associated crisis of South Asian states, the implication of incorporation into an iniquitous global system and its implications for South Asian regional cooperation and union. The foreword to the book stated the challenge as follows: Four decades after the end of the colonial period, South Asia is in the midst of a crisis that threatens not only some of the existing state structures but the very fabric of society. SAPNA has highlighted three interrelated dimensions of the present crisis: i)

The growing polarisation of society along ethnic, linguistic or religious lines. Associated with this, the undermining of social values through which diverse communities lived together in a pluralistic society. ii) The perceived failure of highly centralised structures of political power to give effective political representation to all strata of society and the growing militarisation associated with the use of coercive state power to quell resurgent sub-nationalism. iii) The collapse of the approach to development adopted in the post-colonial period in South Asia. The growth process associated with this approach has generated endemic poverty, growing interpersonal and interregional disparities, erosion of the ecological environment and finally, growing dependence on foreign aid in the case of a number of countries in South Asia. The study was divided into two parts. Within the broad framework of a critical look at the conventional macro framework of development, the present crisis of governance and within South Asian state structures, the first part attempted to see how to revive failing states and re-invigorate the very fabric of society. It also proposed the beginnings of an alternative macro approach to support and reinforce participatory development from the base. Four countries' experiences--Bangladesh, India, Pakistan, and Sri Lanka--were analysed to demonstrate how sustainable development has been undermined by the inadequacy of the post independence process. In the second part, the crisis of state power and the inability of the centralised nation states to cope individually with the multifaceted crisis were examined. Centralised political power has weakened already fragile, democratic structures and marginalised large sections of the population. Societies have fragmented along ethnic, religious and linguistic lines. In this context, the question is raised as to whether culture has a role to play in building sustainable development and democratic polities in South Asia. The book ends with arguing the case for regional cooperation to promote common goals, meet common needs and resolve common problems, in a region fraught with crisis; the positive side being the natural resource base in South Asia, which needs to be collectively exploited at a regional level for the benefit of all states; and the cultural propensity towards tolerance and overarching humanism, within which pluralistic societies could flower in a regional vision and consciousness based on unity in diversity.

Women, Poverty and Resources4 This study was an attempt to understand the issue of alleviation of women's poverty and the relationship between gender and equity issues, in the context of women having to bear the double burden of being poor and women. A selected number of studies of 'success cases' of women led experiments in poverty eradication in South Asia were presented. They illustrated the reality that poor women have great creative energies that could be mobilised for sustainable human development. Poor women all over the world have organised themselves around issues of common concern and met the challenge of poverty eradication. In many instances, in South Asia, these experiments in organisations of poor women have gone to scale and serve as models for adaptation in other situations in Africa and Latin America. Underlying the success of these micro-level cases through participatory action research is the fact that sustainable development can be based on local accumulation processes and these processes can be multiplied. This double burden can only be overcome by poor women organising themselves and the empowerment that comes from these women's groups. As individuals they cannot address their problems. The provision of credit alone to poor individual women has little impact on their poverty or status as women. A holistic approach is required. The study ends with a critical re-examination of the role of donor agencies in poverty alleviation. This analysis serves to highlight the growing realisation that the conventional aid relationship needs restructuring in order to effectively support the poor. Some guidelines for sensitive donor partnership have been provided on the basis of lessons from best practices. Participatory Development: Learning from South Asia5 This study was a harder critique of the dominant development paradigm that has been adopted in various South Asian countries. The failure of mainstream economics to resolve the deepening multifaceted crisis facing the people, particularly the poor, of this region demands an even deeper learning process from the ground to find holistic alternatives in economic, political and human terms. Through the analysis of sustainable 'success cases' drawn from different South Asian countries---Bangladesh, India, Pakistan and Sri Lanka---with different actor groups, partnerships and levels of action, the methodology of praxis and participatory action research was unambiguously presented as a means of initiating positive social change, particularly at the micro-level. The underlying premise was that a pro poor strategy with social mobilisation and participatory development that goes with it can avoid many of the imbalances and contradictions created by past development strategies on the poor. This study dealt in greater depth with the methodology of social praxis, social mobilisation and participatory development. The knowledge system and role of the facilitator/animator reinforcing these processes and raising the consciousness of the poor and strengthening their capacity to assert their right to resources to which they are entitled, was also analysed. Even in narrow economic terms there is a need for a new accumulation process for resource mobilisation and resource use. The analysis showed that this was an

economically viable and cost effective approach to poverty eradication. The poor need not be the problem and can contribute to the solution through their efficiency and knowledge system. They could provide an additional growth path. New Social Movements in the South: Empowering the People6 The four previous studies set the stage for a penetrating insight into the new social movements, i.e. the women's movement, ecological movements, etc, that are seeking to transform the lives of poor people in the South. The new social movements are differentiated from the old movements such as trade unions, political parties and peasant movements. Part-I of the book conceptualised common experiences of new social movements which have gone to scale in Asia, Africa and Latin America. These range from large collective protest movements to small-scale development actions which have formed partnerships all reinforcing the lessons for rethinking past approaches to development and democracy and the paradigms that informed these approaches. This provided the material basis for stronger generalisations on macro and micro policy options for poverty eradication. The papers gave greater coherence to the emerging new pluralistic paradigm and a synthesis of ideas for another pattern of development with social praxis and grassroots democracy. The link between real political democracy and economic democracy became clearer. The cases showed the process of social change in its totality, with development and democracy as integral parts. The papers introduced to the conceptual framework the missing elements in conventional development paradigms: culture, values, democracy, participation and people's mobilisation and the link between these issues. They all raise the question of how structural changes reflected in these 'best practices' within can be multiplied in a comprehensive and systematic way, and of the role of political commitment and support from new coalitions and partnerships. The participation of the poor and other vulnerable groups, under a variety of sociopolitical circumstances, are an essential component in the partnership. Part-II gave specific and detailed case profiles of the new elements in the emerging paradigm. The book also offered a new research agenda, which could in turn lead to further coherence in innovative thinking and action. Readings on Pro-Poor Planning through Social Mobilisation in South Asia The sixth SAPNA study attempted to summarise the lessons of the â&#x20AC;&#x153;Howâ&#x20AC;? of sustainable poverty eradication through a coherent strategic pro-poor planning option with social mobilisation in a given time frame, leaving only residual numbers of the poor to be carried by welfare and safety nets, and the management of social transformation in South Asia. This was an attempt to further mainstream this thinking and provide training material for capacity building among various stakeholders. It advocated the perspective and framework for poverty eradication through further analysis of macro 'best practices' and micro 'success cases' and the process of strategic pro poor planning with social mobilisation. The elements of the

methodology whereby the poor can initiate the process by which the worst forms of poverty can be eradicated, were further elaborated. When supported sensitively by the state, NGOs, donors and others, this process can become even more effective. The book concludes on the note that unless this approach is followed, not only is democracy at risk, but South Asian countries will become even more unmanageable. The format of this sixth book is that of a reader. It is equally relevant as a class text, field text, action research guide or a more general commentary on development strategy. Pro-Poor Growth and Governance: Decentralisation and Participatory Development8 The seventh and most recent SAPNA study is a further contribution to clarifying the theory and practice of participatory development and participatory democracy and the link between the two processes and governance. From the mid 1970s, it was becoming increasingly clear to small groups of South Asian scholars and action researchers that on balance, the quarter century of development experience since political independence from colonial rule in the late 1940s, was showing more negative than positive results. Whether in narrow economic or in wider political terms, the balance sheet showed sharpening contradictions and, with a few exceptions, the creation of “soft” societies. The major antagonistic contradiction was poverty. The region as a whole and individual countries had lost the vision, the values and the momentum for social change rooted in the culture generated by political independence. The earlier SAPNA studies had shown that with decolonisation after World War II, the region had untapped natural and human resources, a knowledge system that had scientific validation and permitted the building of further institutional and technological capabilities for growth, human development and social transformation, led by these culturally rooted values. The danger signals that were emerging in the mid 1970s have now matured in the new millennium. South Asian countries are locked into a deeper multifaceted crisis--national and regional--exacerbated by the global crisis resulting from the contradictions at that level. It is also clear that South Asia has little influence over the global recession or other aspects of the global crisis. However, at the national and regional levels, despite the erosion of South Asia's natural and human resource base over fifty years, there are still some positive elements on which a manageable national and regional social transition can be built. This study probed some of these positive elements and identified ways in which the people and states are attempting to re-connect with South Asia's civilisational rhythm, using these positive elements. The three positive core elements that have emerged from this study are: l The efficiency of the poor, whose creativity can contribute directly to pro poor

growth, through an accumulation process where the pattern of growth, human development and equity are not trade offs. l The strategic option is based not on re-distributive justice, but on a different pattern of growth which starts with the poor as subjects, not merely objects. l The attempts of most South Asian countries at re-orienting decentralisation

reforms, in relation to participatory development and democracy. Clearly identified fundamentals have now emerged for a holistic approach and paradigm shift in cost effectively eradicating the worst forms of poverty, which can be a catalyst for good governance and help mediate the antagonistic contradictions. What is called for is devolution, not mere decentralisation in a given time frame. The analysis and conclusions in this study are completely different from the conventional thinking and action on economic development with a human face and representative democracy of the Westminster Model. They can help close major gaps in the intellectual discourse, as well as, give great coherence to micro and macro policy and practice. This kind of interdisciplinary macro and micro analysis does not currently exist. This study is structured in three parts. Part-I has a brief introduction and the conceptual framework. This part looks back and reflects critically not only on the inadequacy of conventional development thinking and actions, but also postulates the fundamentals on which a transitional pro poor development strategy should be built. These fundamentals have not been derived from a priory theorising, but on the basis of lessons learned from the ground in South Asia. Part-II consists of six case studies from selected locations in India (Kerala and Gujarat), Pakistan, Sri Lanka, Bangladesh and Nepal, which demonstrate different models, but with commonalities and differences, of the link between pro poor growth, decentralisation reforms and poverty eradication, which can lead to both political and economic democracy and to good governance processes. These cases cover both rural and urban experiences which have been scaled up. The lessons show an emerging strategic coherence, arising from the use of the core methodology of social mobilisation and participation. What is called for is not just decentralisation but devolution. All papers show a movement towards the participatory paradigm and the establishment of innovative partnerships among political and development actors. Part-III draws some critical lessons from these illustrative cases for value driven macro and micro policy which can support and reinforce the processes and practices-both short term and longer term--that are being rooted on the ground. The peer reviewer of the study, the former South Asian representative of the Ford Foundation, looking at the messages from an international stakeholder view, stated that “the pursuit of good governance has become a widely shared goal among various development actors since the early 1990s. While there is consensus on broad goals in terms of fostering greater transparency, accountability and openness in government organisations there is considerable variation in approaches and objectives. For some good governance is a means of ensuring effective macro-economic management through downsizing of the state and reduced scope for bureaucratic interference. Others emphasise the opportunities presented for increasing participation in decisionmaking and resource allocations, especially for the poor.” He adds that “two other agendas have also become increasingly important in recent

years, namely those of poverty reduction and decentralisation, though not always in tandem with good governance. Poverty reduction is rightly considered as the primary purpose of development aid and the OECD development targets for 2015 represent a clear commitment from among governments and donors to this end. Decentralisation is another focal point for donor policy and many governments around the world are making efforts to devolve powers and resources to lower tiers.” What is significant is the following comment: “Despite their high visibility and scope for complementarity, these three agendas centred on governance, poverty reduction and decentralisation are rarely brought together in a systematic fashion. This is where the present study makes its particular contribution, in recognising that the governance agenda, with an emphasis on participatory development, can be combined with systematic decentralisation of power and resources to the grassroots in order to lay the basis for sustained poverty reduction.” What is equally significant is that this most recent SAPNA study states that for over five decades since South Asian countries got independence, South Asian states have been absorbed in cluster after cluster of policies based on a priori theorising and eclecticism, which have precluded a relevant response to the South Asian reality on the basis of the success achieved by the poor, who represent a major and indispensable resource of generating growth through a new accumulation process. Reformists of conventional capitalist or socialist paradigms and transitions have also failed to transcend this mishmash of theory and practice. Even in purely economic terms, five critical elements thrown up by the cases studied in this book are a holistic participatory process, empowerment of the poor, raised consciousness of the poor, a socially responsible support system and a three-sector growth model with a new accumulation process at the base. The key issue, therefore, with respect to economic initiatives by the poor in the participatory development paradigm is to enable the poor to break out of this local nexus of power, keep their surpluses in their own hands and assert the right to resources included for them. The next step in the participatory development paradigm is empowerment, which involves shifting the location of the poor from the margins of the existing structures of power into the mainstream through building of countervailing power. The conventional paradigm conceives of decentralisation as a set of formal administrative measures without changing the balance of power at the local level. Participatory development implies devolution and a provision of space for empowerment. Therefore, in this paradigm an institutional partnership is required between local government structures and autonomous organisations of the poor. Models of Engagement with High Level Policy Makers, Scholars and the Media SAARC: Moving Towards Core Areas of Co-operation 9 It was not until 1990 that SAPNA's constructive dissent and coherent macro and micro policy options for an alternative modernity, greater self-reliance, pro poor

growth in development and a participatory democratic approach could be brought squarely into the mainstream of policy and debate/dialogue on governance and the need for linking economic and political democracy. It was clear that no individual SAARC country could initiate the social transformation and the required social mobilisation process by itself. A collective regional effort was also required. In 1990, the heads of states of SAARC at their Maldives Summit had themselves begun to sense the sharpening contradictions and polarisation between rich and poor in South Asia, the link between poverty and violence and inadequacy of conventional thinking and action to respond to the realities within and outside the region. By then the multifaceted crisis was increasingly visible and the compulsions for a shift in strategic thinking were strong. In 1984, SAARC started with a vision but moved cautiously through a series of purely inter-governmental activities, based on fragmented, ad hoc and sectoral issues, many of them already on the global inter-governmental agenda. They were perceived as an Integrated Programme of Action (IPA). The IPA and the annual, mostly ceremonial, Heads of State Summits dominated much of the official SAARC attention in the first six years. There was insufficient attention given to emerging national, regional or global changes and realities, with a view to evolving a rigorous and comprehensive strategic response to them. The intellectual underpinnings for vigorous South Asian regional cooperation were weak. At their Male Summit in 1990, however, the heads of state took two important decisions recognising that SAARC, as it was evolving, was unprepared for the globalisation scenario, the new challenges posed by "Europe 1992" and other regional groupings, and the emerging multifaceted crisis of governance and development in South Asia itself, which could not be ignored any longer. The first decision was that SAARC should focus on core areas of economic cooperation. Secondly, it was also decided that scholars, professionals, NGOs and the media should help reinforce the official SAARC process in moving into these core areas. The second decision, regarding the need for a new partnership between the official SAARC process and independent actors, reflected concern amongst the heads of state that SAARC could not move forward purely as an official inter-governmental process. Both these decisions reflected the political awareness that there was a potential for a South Asian economic community, but it required an intellectual stimulus, a real process of learning from the ground and translating the lessons into a coherent agenda for action. The SAPNA Network responded immediately to the first decision, which called upon SAARC to move into core areas of regional cooperation. It was recognised that this was possible only if there was recognition of the cultural diversity in South Asia, within which a framework of “Unity in Diversity” could be identified, on the basis of SAPNA's action research to date. 10

The Messages South Asia has a common history, common eco-system and shared fundamental values, which could provide a vision of a South Asian community based on unity in diversity. The unity came from an indivisible eco-system, common history and culture, subordination and fragmentation of the economies, and the common ordeal of decolonisation. These could be the building blocks for a common future.

work programmes in the transition. Poverty eradication and the right to food go handin-hand and could be combined with the right to work by the poor. For trade cooperation, payments arrangements are essential. In Europe, the Payments Union preceded economic cooperation. The mobilisation of external resources is necessary both for poverty eradication as well as for industrialisation and building South Asia's technological capabilities.

Today, South Asia is facing a multifaceted crisis of poverty, slow economic growth, uneven development, population pressure, natural resource erosion, high defence expenditure and an internal arms race, social polarisation, religious fundamentalism, youth alienation, ethnic and other conflicts. These conflicts and problems are becoming unmanageable. Together with external trends, they are pushing South Asia further and further to the margins of both the world economy and the international political arena.

In 1994, a follow-up enquiry was initiated by SAPNA to look deeper into the monetary and financial aspects of trade cooperation, decentralised industrialisation, food security and of moving towards a South Asian Economic Community. Representatives of central banks of the region and some leading South Asian economists collaborated in this enquiry. This complementary report to the IGSAC Report entitled “Towards a Regional Monetary and Financial System in South Asia” urged that the SAARC look at a coherent vision for trade, payments, monetary and financial cooperation and then proceed to implement the strategy in a step-by-step well-researched manner. This report made clear that financial cooperation and payments arrangements did not require anything like a common currency. However, it required going much further than the pure book keeping arrangements of the Asian Clearing Union. This report too was widely disseminated to the official SAARC process.

A more complex sustainable politico development strategy than hitherto adopted, one that includes greater decentralisation, social mobilisation and empowerment of the poor, could provide a transitional response to the region's immediate need. It could mediate the sharp contradictions that had arisen in the political economy of South Asia. The Recommendation The IGSAC Report stated that SAARC had come to stay, but the compulsions for closer economic and political cooperation were strong and left no choice for South Asia. The report concluded that no South Asian country could solve the multifaceted crisis individually and collective regional cooperation must be vigorously pursued for the region's collective benefit, by creating a vibrant value led culturally rooted Economic Community of South Asia (ECSA). The Agenda for Immediate Action recommended: l The establishment of a high level Independent South Asia Commission on Poverty Alleviation (ISACPA). l The establishment of a food security system, with the right to food for the poor in South Asia. l The establishment of a South Asian Free Trade Area (SAFTA). l The establishment of a South Asian Payments Union to be managed by the central banks of the region. l The establishment of a South Asian Development Fund initiated by SAARC countries, initially with their own contributions. The five core areas--poverty eradication, food security, trade cooperation, payments union and external resource mobilisation--are not only closely inter-related, but also necessary pre-requisites for achieving the vision of a South Asian Economic Community with sustainable human development, real democratic political formations, good governance and poverty eradication. Without the eradication of the worst forms of poverty, however, SAARC could not establish the one-billion-strong South Asian mass market. Food security is the other side of the poverty coin in a region which has a food surplus and further potential for food production and food for

The official SAARC process followed up at subsequent summits on the recommendations on poverty and trade. The poverty issue has yet to be linked to the South Asian Development Fund and the trade issue to appropriate payments arrangements. The implementation processes to the recommendation have yet to transcend bureaucratic and technocratic approaches and transform into a real political process and real commitment. Report of the Independent South Asian Commission on Poverty Alleviation12 Of the five interrelated core areas for action, it was the establishment of ISACPA in 1991 that provided a common ground for stimulating regional cooperation on the basis of “Unity in Diversity” and “Development with Equity”. In effect, it was a commission not merely on poverty, but also on larger governance and development issues, to sort out the contradictions between the reality and conventional development thinking and action, and provide practical solutions which could be implemented politically in a given time frame. ISACPA was an innovative collaborative partnership between SAARC governments and an independent group of southern scholars and civil society activists. The inclusion of several SAPNA Network members in the commission and in its advisory group provided SAPNA with the ability to make a coherent intellectual contribution from its three-decade intellectual quest. The report of the commission, which emerged from an enquiry and wide-ranging dialogue with a range of stakeholders over an eightmonth period in 1992, explored the complementarities between measures of economic reform and participatory development, by the poor themselves. It helped to mainstream ideas that were at the margins and reinforce the debate/dialogue towards practice of decentralised participatory democracy and development with equity and to

macro and micro policy options and institution building for cost effective sustainable eradication of the worst forms of poverty in a given timeframe. The report that emerged was unanimous.

the poor to reach a growth rate of approximately 9 percent, through the three complementary sectors and the accompanying new accumulation process, with increased savings.

The report took the form of three coherent messages and one composite, but multidimensional, strategic recommendation. 13

At the Seventh SAARC Summit in Dhaka, in April 1993, South Asian heads of state unanimously endorsed the 1992 Poverty Commission recommendations and reiterated this in the SAARC Summits of 1995 and 1997. This consensus of the heads of state of SAARC constituted at that time a major coherent response in an era of inequalities and globalisation and to critical elements in the multifaceted crisis in South Asia, as well as reflecting the strong compulsions to bring poverty to the centre stage of national and regional concern with innovative action.

Message No.1 The number of people living in poverty in the region, in 1991, based on the conventional 'poverty line' estimates would be 440 million.14 The structural adjustment policies which accompany the open-economy industrialisation strategy currently being adopted by most SAARC countries are likely to put further strains on the poor, particularly in the shorter term. The conclusion was inescapable that the magnitude and complexity of the problem of poverty in South Asian countries not only puts democracy at risk, but also poses a threat to the very fabric of South Asian societies. Message No.2 The conventional development interventions with their faith in “trickle down” and administrative redistribution to the poor, over the past 50 years, are inadequate. The role of the State had to change from that of a highly centralised doer to that of an enabler and supporter of growth in a three-sector growth model. Message No.3 The eradication of poverty in South Asia would require a major political rather than a technocratic approach in which social mobilisation and empowerment of the poor play a critical role. Where the poor participate as subjects and not as objects of the development process, it is possible for them also to generate additional growth. In this pattern of growth human development and greater equity are not mutually exclusive trade-offs, but are complementary elements in the same process. Recommendation There should be a pro poor development strategy based on a three-sector growth oriented approach which is un-ambiguously reflected in a coherent plan for the poor. This pro poor plan has to ensure a net transfer of resources to the poor. The new premise for action is an overall pattern of development, which in a transitional time frame moves on two fronts: l A cautious open-economy industrialisation front with pro poor reforms; and l The pro poor poverty eradication front with rigorous social mobilisation and

participation These two parallel strategic thrusts, having long and short-term time frames, can be harmonised as the two processes evolve to provide a transitional response to both poverty and the global problematique. The recommendation elaborated how a pro poor plan can generate pro poor growth, with a lower capital output ratio, food security and increased work for the poor. Growth in the formal public and private sectors of 6% to 7% will be complemented by 2% to 3% generated by organisations of

A critical mass of South Asian policy makers, scholars and even civil society leaders have yet to fully internalise the contents of the report and the coherent macro and micro options available. They are continuing to underestimate the magnitude and complexity of the problem and continuing with marginal reforms to centralised decision making processes, mesmerised by generalities on human development and equating it with poverty eradication, and continuing to provide reformist options in terms of two-sector growth models and fragmented safety nets, welfare and charity, with a view to tranquillising the poor. The international development community for all its rhetoric, with few exceptions, is still locked into a priori theorising, and narrow and fragmented ideologically-oriented solutions and “tool kit” approaches to development and poverty, which by and large help only the 10% less poor at best. Policy Dialogues with Other Stakeholders including Media15 The first dialogue was organised with the World Bank in 1993. Members of the SAARC Standing Committee officially approved the World Bank's invitation to discuss the ISACPA report at a high level workshop on poverty reduction in South Asia, with the participation of the SAARC secretary-general and members of the poverty commission. Representatives of the World Bank, International Monetary Fund, Asian Development Bank, UNDP, IFAD and UNICEF participated. The World Bank is currently talking of pro poor growth and going beyond mere “delivery of services” to the poor. The process was repeated in a second dialogue with the Government of the Federal Republic of Germany, in 1995, which is now a leading advocate of the global Copenhagen Plus Five Declaration on poverty reduction by 50% by 2015. Apart from these two formal dialogues, SAPNA continued to advocate its strategic thrust in several national, regional and international fora. In addition, SAPNA continuously engages in policy dialogues with national planning commissions, finance ministries, civil society, scholars and the media, as well as with the poor. This is part of SAPNA's attempt to reorient and build capacities and raise awareness to meet the challenge of development with equity and establish new partnerships and stakeholders to move the holistic process towards a new paradigm. A New School of Thought on the Development with Equity Discourse The emerging coherence was not sudden and can be detected in the persistent efforts of SAPNA over three decades. Through its policy dialogues and publications, SAPNA

had not only warned South Asian governments, scholars and civil society organisations that the mainstream development strategies and decision making instrumentalities followed since independence from colonial rule in the late 1940s were sharpening contradictions, but also that the institutions which are in place and the highly centralised decision making processes, both of the state and the private sector board rooms, were inadequate in dealing with them, including the polarisation that was taking place in South Asia between rich and poor. There was a positive side; these lessons also helped identify the options and alternatives emerging and which could now be formulated into a school of thought for a transitional time frame. This emerging school of thought has crystallised at a time when the interrelated governance issues linking development with equity and human rights, in wider terms, are beginning to emerge as the main concern in the political discourse both within South Asia and internationally. There are two sides to governance processes addressed by this paper. One relates to participatory democracy and the other to sustainable development. There are many studies on the emergence of democracy in South Asia, the decentralisation reforms that are being attempted and the hesitant movement towards establishment or real participatory democracy. There are other studies dealing with fragmented attempts at sustainable development. Insufficient attempts have been made to link these processes and look at these separate processes holistically. Looking at the models of industrial countries does not provide adequate guidance, nor does the confused, fragmented and historical imitation of the 'social charter' from the European Union provide coherence for either a new vision or action. Neither the material nor historical conditions that led to the European experiences are currently present in South Asia. Therefore, South Asia has to look for new holistic inspirations and positive forces for change. What was innovative about SAPNA was that right from its inception, it went beyond critique and dissent from mainstream thinking and action on development and democracy to articulating, even in a rudimentary but focussed manner, constructive alternatives, in which the processes of development and democracy were inter-twined, so that the links between political economic democracy are consistent with a growth oriented strategy and new accumulation process and good governance. The studies systematically illustrated further the two sides of the same coin and the “holism”. SAPNA investigated the South Asian reality from a South Asian perspective and began on the basis of lessons from the ground to identify undogmatic critical elements which could be a basis for an alternative paradigm for a culturally rooted pattern of development and democracy in South Asia. In this process, the eradication of the worst forms of poverty in South Asia in a transitional time frame became the “entry point” for good governance and the vision of a South Asian Union based on unity in diversity, to be achieved through a series of transitions. SAPNA's approach to poverty eradication was not technocratic but a value led and political. It was not a priori theorising and repeating generalities on governance and human development. Nor was it moulding pseudo “participation” into “tool kit” approaches like PRA/RRA,

which would not help find solutions to the challenge of governance, sustainable development and democracy. To repeat, the holistic methodology used by SAPNA to probe the South Asian reality in moving towards good governance through a transitional strategy involved interdisciplinary action research, collective creativity and social praxis. A fundamental and substantive difference in the SAPNA process to poverty eradication was that it did not consider the poor as the problem, but considered them as part of the solution. The second difference is that the SAPNA strategy for poverty eradication is based on an a pro poor growth strategy and not on a re-distributive strategy of welfare, safety nets and charity, which are not sustainable and at best can only be residual. The pro poor growth strategy is based on the observable evidence of the efficiency of the poor and a three-sector growth model: public, private and the poor. To bring out this efficiency the poor had to be empowered and be a countervailing power to the system as it worked. The interrelationship between the three sectors would evolve and be mediated by new governance institutions. Some of these were already firmly located within South Asian cultures, others were beginning to emerge, albeit in rudimentary forms, from new social movements and decentralisation reforms and gender equity and natural resource conservation and new social movements. The new social movements emerging from the ground in every South Asian country in the past twenty five years can provide the material bases for both the new school of thought and a new social contract which are called for.16 These new social movements differ from the old social movements which were engaged in anti-colonial struggles, trade union action and party politics. These new movements represent a new group of actors interested not in state power as such, but in creating people's power where a participatory democratic society is the persistent quest. Larger and larger numbers of people are no longer willing to accept fatalistic, exploitative, alienating or repressive regimes and state structures, or a development paradigm that excludes them and deprives them of dignity. These movements represent a form of countervailing power. In these new movements they are also demonstrating ways to humanise the larger macro processes and asserting that the terms of incorporation into the mainstream can be changed at all levels. This intellectual quest led SAPNA to probe the way in which institutions, both state and non-state, exercise power. It was clear that while the role of the state was important, it was not the only governance actor in society. Nor was it possible for market forces alone to lead the way. Civil society also needed to grow, move and exercise countervailing power. Organisations of the poor, which had a cutting edge role to play in institutional re-structuring, generating growth and mediations in the polity, needed to evolve more coherent strategic approaches and practices. The international community also has a role and can provide sensitive support. As this work proceeded within SAPNA over the years, it led to an enquiry on how the poor participated in development and the practice of decentralised participatory

democracy. These probings then led to an understanding of the magnitude and complexity of these issues, which policy makers, scholars and many NGOs in the field had under-estimated and now need unravelling both intellectually and in practice. It is now essential that all stakeholders attempt to understand and build on these positive lessons from the ground and agree on a few critical elements which can form the basis of the new school of thought. This paper also tries to show how SAPNA has attempted to advocate the new school of thought and learn from engagement with various stakeholders in national, regional and international dialogues. The Underlying Fundamentals There are five interrelated fundamentals on which SAPNA's approach to governance, participatory democracy and development have been constructed. SAPNA's approach is not one of marginal tinkering and ad hoc reforms with palliatives and rhetoric of a social charter. The fundamentals are: The Long Revolution and Social Transformation The first premise that needs to be internalised is that a social transformation and structural changes are required. It has to go beyond the simplistic growth and redistribution and human face models. Structural change is more than mere financial and budgetary discipline and ad hoc redistributive justice. This social transformation has to be conceived as a long revolution implying a complex chain of long and short time frames--not a oneshot, 'big bang' revolution. A second fundamental transformative issue is the issue of self-reliance. South Asia has too long depended on external inspiration and hegemonies. In retrospect these initiatives have ended up with 'soft' societies, where the majority of people including the poor and young persons become alienated. The welfare societies we tried to create are unsustainable. We ignored the creativity, innovativeness and problem-solving approach to life which has always been a characteristic of South Asian societies. De-alienation of people has to be an important dimension in the process of building self-reliance. Perspective and Values The structural changes at the macro and micro levels outlined above have to start with a clear perspective and be value-led. This is fundamental for correct action. Before action is taken, the underlying values need to be made explicit. The perspective from which the search for the underlying paradigm begins is that participatory democracy and development are two sides of the same holistic vision that has inspired human endeavour in different South Asian socio-cultural settings over the past 2,000 years and more of recorded history. Several fundamental values which existed in traditional South Asian societies must be identified and re-examined in this connection. Some critical values relate to looking at life in its totality and all its richness; participation of the people in decisions that affect their lives; sharing and caring for the community; co-operative activities beyond individual self-interest; trust, innocence, simplicity and thrift; a work ethic with a fine-tuned balance between work and leisure; harmony with nature and a rational use of both natural and financial resources; communal ownership of the commons; and complementarity between men and women, as well as gender equity.

Countervailing Power: a Political Approach to the Transition Another fundamental in rethinking past paradigms of development and democracy relates to the question of participatory democracy. In this regard, devolution of power and empowerment of the poor and vulnerable groups, as opposed to representative democracy and highly centralised elite power, requires clarification. Conventional thinking on both development and democracy was based on a harmony model. This needs to be demystified. The assumption of harmonious communities in a conflictfree social framework for change has no basis in reality, whether at the local or national levels in South Asia or at global levels. In South Asia deep-seated contradictions exist between different groups with conflicts of interests, which have to be recognised, particularly in the transition. Any meaningful approach to social change must be both political and transformative. It should not be a purely technocratic, fragmented or purely sectoral approach. The project approach with 'tool kits' is inadequate. A political process has to be initiated. The political space for a political approach exists already in some countries, while in others it needs to be created. A great deal of social mobilisation is required. This involves re-moulding of elites as well as mobilising and raising the consciousness of the poor and helping them to build their own organisations. Where formal power is in the hands of a few and power is not shared, but grossly misused, participation in the first instance results in building countervailing forms of power, leading ultimately to a healthier participatory democracy as opposed to representative democracy in the Westminster model. Countervailing power does not preclude new partnerships with sensitive institutions, state or others in the support system like government entities, banks, and NGOs of donors. Growth, Human Development and Equity: no Trade-offs As the multifaceted crisis in South Asia deepened, the accumulation process set in motion either by means of private capital accumulation or of state capital accumulation, a process that was basic to the old concept of economic development and its reformist option, turned out to be insufficient, and the pressures mounted for an alternative accumulation process. It was not a matter of growth first and equity afterwards. Redistributive justice and 'trickle down' were simply not the issues. A fundamental difference in the SAPNA approach to poverty eradication and other approaches was that SAPNA did not consider the poor as the problem, but considered them as part of the solution. The second element in the difference is that SAPNA's strategy for poverty eradication is based on a pro poor growth strategy and not on a redistributive strategy of welfare, safety nets and charity, which at best can only be residual. The pro poor growth strategy is based on the observable evidence of the efficiency of the poor and a three sector growth model--public, private and that generated by organisations of the poor as subjects in the process. A sustainable development strategy for the present needs to search for alternative driving forces for a self-sustaining accumulation process. The accumulation process on which it was based required increased savings. The compulsion of seeking alternative driving forces for accumulation, even in this narrower conception is, therefore, mounting. This is not a matter of giving credit to

the poor. It is a matter of embarking on a new pattern of growth with the poor where even the poor save initially and invest. Growth, human development and equity are in the pattern of development, not trade-offs, but part of the same complementary process. This patter of growth then provides the link between political democracy and economic democracy through pro poor growth, initially at the micro level. It also seems necessary for South Asian countries to adopt a more complex development strategy that combines development, growth, equity and technological change with more creative use of local resources and knowledge. In such a strategy, the people's creativity, locally available resources and local knowledge systems, and savings become critical instruments. Imported capital and technology, the factors in short supply, can be supplementary. In this transition all countries, however, will need to pursue internally a two-pronged strategy that will permit them to maintain the gains from past attempts at modernisation and industrialisation and trade with appropriate damage limitation and to make a direct attack on poverty in all its manifestations, an attack in which the poor themselves are the subjects and not the objects of the process. Initially, the two prongs of the strategy may have different time horizons and some contradictions, but over time they can be harmonised. South Asian regional cooperation can reinforce national efforts. This kind of regional cooperation will also permit South Asian countries to adjust to the global system on more favourable terms. Refocusing Praxis and Managing the Knowledge System Another fundamental that requires further elaboration is the methodology of praxis and management of the knowledge system. Some systematic efforts are now being made to break out of the conventional social science methodologies into participatory action research by groups of South Asian scholars and activists working together. Social praxis and participatory action research, which goes with it, takes off from the cultural and historical experiences in South Asia. It critiques a predetermined universalism and stresses pluralism, including geocultural specificity. As has been stated in the past, social sciences have evolved through the study of Western societies. Hypotheses and value judgements have emerged from that historical cultural world and continue to influence a major part of the academic community and through it the educational, technical and administrative systems. In the new participatory democracy and accumulation and growth process for development with equity, the knowledge system inherent in the culture must inform the whole process. The nature of knowledge and the method of the utilisation of the wider stocks of knowledge and choice of technology have to be probed further. This then could help bridge the gap between real knowledge and wisdom and catalyse the process of social change and development action in new terms, linking knowledge with power and action. These five interrelated fundamentals are critical to achieving social justice, greater self-reliance and participation. They have been stated “simply” without being “simplistic” or dogmatic.

At the same time SAPNA has advocated strongly that without vigorous and informed/well researched regional cooperation, no individual country can effectively manage the transition out of the unmanageable polity to which it is descending. A New Social Contract The second critical element relates to the need for a new social contract between the state and the poor in South Asia. The failures of the past and disarray in development thinking and action require a major new inspirational drive and dynamic which can create a basis for bringing diverse social forces and communities into new partnerships. The social contract between South Asian states and the poor provide the inclusivity and pluralism in a universal sense in the ownership of the vision at the national and regional levels. It is the only instrument which can help regenerate the trust which has been eroded. This social contract is premised on going beyond the old social contract between management and labour, the Keynesian Consensus, which led to the welfare state. The design will be quite different from the proposal for a SAARC social charter. It should be carved in stone and have the moral and legal authority stemming from international law and new global discussion on the link between development with equity, security and human rights in wider terms. The Dhaka Consensus on Eradication of Poverty by the Year 2002 reached at the Dhaka SAARC Summit of 1993 and repeated at the SAARC Summits of 1995 and 1997 was not an end in itself. It was the first step in the new social contract between the state and the poor in South Asia. It was envisaged that this social contract should incorporate culturally relevant values such as 'sharing and caring' and also the right to food and the right to work. Such a social contract would enable the states of South Asia to replace the welfare state concept with a more inspiring concept which could also help to mitigate the violence and multifaceted crises in the region and within individual SAARC countries. Knowledge, Action, Power To move in this transition from the dominant macro-framework of development and democracy towards the new school of thought based on the interrelated fundamental premises and micro-level development praxis, it is important to probe deeper and be unambiguous about the available knowledge system and its management. What knowledge and whose knowledge is to be involved? How is culturally relevant knowledge to be used in South Asia in catalysing the transition to rigorous social transformation, sustainable development and eradication of the worst forms of poverty, in a given time frame? This then becomes a third element in the new school of thought. Without being "simplistic", the concept of knowledge as an instrumentality in relation to power and development action would need to be analysed in-depth. In the South Asian cultural context this is not an easy task, because the metaphysical perennial philosophies which provide the valuational framework, integrity and the intellectual underpinnings for the culture and knowledge system are deep and complex. There are no simplistic dogmas or dialectics alone. It cannot be done in the Cartesian mould or on values and visions from distant situations. The need for a relevant development with equity

school of thought, rooted in the culture, compels an enunciation of several relationships, relating to knowledge, power and action. Three propositions are posed in the form of simple assertions. They are: l The crisis of the modern knowledge system confirms the need for devising new

methods of scientific inquiry for the next transition. l The availability of many stocks of knowledge in South Asia also means a greater

choice of technology for sustainable development and poverty eradication.

macro or philosophical terms. Before homogenisation can be replaced by pluralism, globalism by localism, economism by humanism, unlimited progress by notions of self-control, restraint and simplicity, there are specific elements which need to be demystified. It was assumed that the world had only a single stock of knowledge and technology. The knowledge systems and technological choices available to South Asia and its people, including the poor, are in reality much wider. The technical assistance programmes of the post World War II period and the extension worker concept are both part of this approach.

l The traditional knowledge system of the poor now assumes greater validity and

relevance in relation to sustainable development with equity. The modern knowledge system, incorporated into mainstream development thinking and action, was deeply wedded initially to economics and single discipline analysis, with most of it unrelated to wider to human needs. The concept and practice of modern economic development has now been questioned. Politically, it is inconsistent with its claims of equality and justice by disrupting local communities and polarising society into those with access to resources and power, and those without. Knowledge and technology was a critical element in this process. Knowledge and choice of technology also becomes a critical element in reversing this process. Knowledge is power. The relationship between knowledge, the development action that flows from it and power then becomes a critical issue The claim of modern knowledge was that the kind of development it generates could be extended to cover all situations and the entire globe. This has not happened. The cultural dislocations that have been created alongside economic development have confirmed that culture, knowledge and development are intertwined. This was highlighted as early as the 1950s, when the major "economic development" intervention and the aid relationship were initiated.17 Further, the modern Cartesian knowledge system being inherently fragmenting and having in-built obsolescence, creates an alienation of wisdom from technology and dispenses with the wisdom. In its pre-occupation with quantitative analysis, it further distorts reality and disregards aesthetic and human dimensions, experiential learning and intuitive insights.18 A positivist orientation cannot provide cognitive validation (let alone connective or total validation) to all people in all situations. The scope of the problems in South Asia is too vast and complex. Further, to disregard the knowledge people have, derived from aesthetic, experiential and intuitive insights, is to disregard the essential links between knowledge, culture and development. This linkage does not permit intellectual processes to be divorced from values and will under the guise of objectivity that only results in a narrow technocratic approach. In South Asia, social scientists of different disciplines are trying collectively to locate this knowledge that is responsive to their socio-cultural realities. To move from the single disciple economic development model to a framework of development in holistic terms that is participatory and sustainable, it is not sufficient to merely critique the old model and the knowledge system on which it was based in general

Given the intrinsic interconnectedness of knowledge and power in each culture, it is necessary to examine the social basis of different knowledge systems that are available. People in South Asia have a great deal of scientific knowledge which can be applied to their daily lives and problems. This knowledge has been acquired intuitively or by trial and error. It is not mere traditional romanticism or religious mysticism. Much of the available traditional knowledge and technology can be used as it is. Some of this traditional knowledge is half-forgotten and would need to be revived. Revival of this traditional knowledge can only be undertaken through a participatory process within the culture. Some traditional technology would need to be upgraded in its own environment, and not in research institutes abroad where the adaptation process itself is biased by different values. Further, when repatriated, its use in the country of origin becomes very costly. Appropriate research and development systems which do not now exist or exist in a very fragile form are also required for upgrading this knowledge and giving it further scientific validation. As this knowledge is upgraded it also has to be returned to the people in the same cost effective participatory process and in an idiom they can understand. It is also now possible to assert that a new process is emerging and is observable in the South Asian reality. As a result of a two-way interaction between committed South Asian "experts" and the people during participatory action research, a new technology is gradually being created in these countries which does not exist in the categories referred to earlier, i.e. modern, intermediate and traditional. The new technology results from another variant of the new and still fragile research and development system, gradually being built up by committed experts and the people in South Asian countries living and working together over time to evolve a more humane society, using initially locally available resources and knowledge. This process also reflects the interception of different perceptions of life and knowledge between these two groups. It results from the committed expert or deprofessionalised intellectuals identifying with the people and committing themselves to bringing sustainable development and social change.19 These are the new kind of facilitators of the people's praxis whose role will be analysed later, along with that of the animator. Likewise, in industrial countries themselves, as a result of alternative life style experiments, the energy crisis, ecological concerns, youth alienation and the search for human values, individuals and groups are experimenting with new technologies. These technologies are related to new values, and not to those which emanate from

the market. In the process they themselves are creating a new knowledge base on renewable resources, food habits and health. Sometimes, this represents reviving traditional knowledge in those cultures. Sometimes it represents taking knowledge from South Asian (and other poor) countries and adapting it. This technology may in the long run be more relevant for development in South Asia than the un-adapted transfers from the modern sector in those countries. The fundamental argument here synoptically presented is that for sustainable development and poverty eradication there is a plurality of "stocks" of knowledge and a greater choice of technology than was available in the old framework of development. However, without a participatory process this knowledge will not surface. It also implies the possibility of a different and two-way knowledge transfer between rich and poor countries as structural and valuational changes in industrial countries themselves take place and a new international order in a positive sum game shapes up. Endnotes 1. Thus the SAPNA mission was not merely to critique the existing process of economic growth as it had been unfolding in the previous quarter century or the evolving processes of centralised governance. It was to pursue a pioneering intellectual quest to identify critical micro macro elements of a coherent conceptual framework, which could inform a relevant transitional response to the multifaceted crisis of Governance and Poverty in South Asia. To do this, it was necessary simultaneously, not only to question mainstream strategies but also some of the fundamental premises and certainties resulting from the social science discourse that was in use. As mentioned earlier the SAPNA Network started this quest in a systematic manner in the mid 1970's and has persisted to date. There was no attempt to take eclectically fragmented elements in the process of development and democracy and force the reality to fit into existing paradigms. There was no embracing of marginal reformist options or moving from one international fad to another in a cartesian mould. The parting of ways had clearly arrived. The twin challenges of questioning the dominant paradigms, as well as social science discourse were undertaken simultaneously. They were inseparable. There began a process, where the lessons learned from the ground through participatory action research and social praxis, were collectively analysed and conceptualised. In depth policy dialogues were used to identify macro options and framework conditions. The results were published for wider dissemination of the emerging state of the art and practice. Each publication contained the seeds of the next. The critical elements in each of the seven studies covering a quarter century of SAPNA's collective creativity and action from the mid 1970's to the present, represent the pioneering work of a network of committed South Asians. The challenge was to develop even in a rudimentary way a school of thought pointing to a vision and a transitional pathway. This was a long process of unraveling through praxis the complexities of the South Asian crisis and options. 2. See: Towards a Theory of Rural Development - G.V.S. De Silva, Wahid-ul-Haque, Niranjan Mehtha Anisur Rahman, Ponna Wignaraja - Dag Hammarskoljd Foundation, Sweden 1977 and Progressive Publishers, Pakistan 1988 3. See: The Challenge in South Asia: Development, Democracy and Regional Cooperation Ponna Wignaraja , Akmal Hussain (eds.) Sage Publications, India 1989 4. See: Women Poverty and Resources - Ponna Wignaraja Sage Publications, India, 1990. 5. See: Participatory Development: Learning from South Asia - Ponna Wignaraja, Akmal Hussain, Harsh Sethi, Ganeshan Wignaraja - Oxford University Press & United Nations University Press 1991 6. See: New Social Movements in the South: Empowering the People - Ponna Wignaraja (ed.)

8. 9.

10.

11.

12.

13.

14.

15.

16. 17.

- ZED Books, U.K. & Sage Publications, India 1993 See: Readings on Pro-Poor Planning Through Social Mobilisation in South Asia: The Strategic Option for Poverty Eradication (Vol. 1) - Ponna Wignaraja & Susil Sirivardana (eds.) Vikas Publications, India 1998. See: Pro Poor Growth and Governance in South Asia: Decentralisation and Participatory Development - Ponna Wignaraja & Susil Sirivardana (eds.) Sage Publications, India 2004. “SAARC: Moving Towards Core Areas of Co-operation”, Report of the Independent Group on South Asian Co-operation SAPNA Center, September 1991. Members of the group were Lyonpo Dawa Tsering, Ibrahim Hussain Zaki, M. Rasgotra, Bhekh Bahadur Thapa, A.K.H. Morshed, Akmal Hussain, Ponna Wignaraja, Ashok Parthasarathi, Ravindra Kumar, Syed Ayub Kutub, Ahmed Latheef, Rajiv Kumar and Moazam Mahmood. “SAARC: Moving Towards Core Areas of Co-operation”, Report of the Independent Group on South Asian Co-operation SAPNA Center, September 1991.. Members of the group were Lyonpo Dawa Tsering, Ibrahim Hussain Zaki, M. Rasgotra, Bhekh Bahadur Thapa, A.K.H. Morshed, Akmal Hussain, Ponna Wignaraja, Ashok Parthasarathi, Ravindra Kumar, Syed Ayub Kutub, Ahmed Latheef, Rajiv Kumar and Moazam Mahmood. See “Towards a Regional Monetary and Financial System in South Asia Consensus among the South Asian Expert Group”, Report of the Expert Group Meeting on South Asian Financial and Payments Co-operation, New Delhi, India, August 1994. Contributors to the report included Muchkund Dubey (Co-Chairman), Ponna Wignaraja (Co-Chairman), K.K. Bhargava, S.S. Colombage, S.D. Datar, Kunzang D. Dorji, Ismail Fathhy, Ashfaque H. Khan, A.I. Khan, Mahendra P. Lama, Abul Maal A. Muhith, I.N. Mukherji, V.R. Panchamukhi, Vijay G. Pande, Nirmal Prasad Pandey, M.D. Patra, Nado Rinchhen and. Ratna Sudarshan. Report of the Independent South Asian Commission on Poverty Alleviation, “Meeting the Challenge”, SAARC Secretariat, Kathmandu, November 1992. Members of the Commission were Krishna Prased Bhattarai (Chairman), Ponna Wignaraja (Vice Chairman), Shaikh Maqsood Ali, Fazle Hasan Abed, Sangay Ngedup, Jigmi Singay, K.R. Venugopal, S.R. Hashim, Abdul Sattar Moosa Didi, Hassan Sobir, Shreekrishna Upadhyay, Madhukar S.J.B. Rana, Safdar Hussain Kazmi, Sohaib Sultan Khan and Warnasena Rasaputram. The three messages are elaborated in great detail in chapters 1, 2 and 3 and the recommendation in Chapter 4 of the Report of the Independent South Asian Commission on Poverty Alleviation, 1992, SAARC Secretariat, Kathmandu, Nepal. This figure computed on the basis of available surveys showed 40% of the people in South Asia were below the poverty line, as conceived then. Today, new methodological calculations are showing that the figures are more like to be 60% to 70% (see Utsa Patnaik Theorizing Food Security and Poverty in the Era of Economic Reforms, public lecture series, India International Centre, New Delhi 2005; Mohan Guruswamy & Ronald Joseph Abraham “Redefining Poverty a new poverty line for a new India”, Centre for Policy Alternatives, New Delhi, 2006.) The US$ 1 indicator is dismissed as a “starvation poverty” of little relevance to current Government challenges. See: Poverty Reduction in South Asia, report of workshop co-sponsored by the World Bank and SAARC Annapolis, USA October 1993. See also: Poverty Alleviation in South Asia report of the International Round Table organized by the German Foundation for International Development and Federal Ministry of Economic Cooperation and Development Konigswinter, Germany March 1995. The dialogues in South Asia were deepend during launches of the SAPNA publications and Seminars. E.g. Reports of launches of the study “Pro Poor Growth and Governance in South Asia” in Sri Lanka with the Finance Ministry (2004) and in India with the Planning Commission (2005). Unpublished reports of capacity building exercises with other stakeholders including media, are also available. New Social Movements in the South (1993) ibid. Wignaraja, P. "The Conflict Between Economic Rationality and Cultural Values", p.53, Civilisations, Vol.3, No.1, Brussels, 1953. His article states that: “While considerable

thought has been expended in recent years in attempting solutions to the numerous immediate problems confronting developing countries, very little attention has been placed on the reality that development takes places within an established cultural pattern. The process of culture change that is set in motion during economic development tends for most part to be ignored. When it is recognised, it is merely hoped that time will bring about the necessary adjustments.â&#x20AC;? 18. Shiva, Vandana "Two Kinds of Rationality", p.29, Staying Alive, Zed Books, New Delhi, 1989. 19. Ibid.

Economic Empowerment of South Asian Women Dr Preet Rustagi

his paper examines the changing work profiles of women in the South Asian region, with all elements of contradictions, in terms of doubling their burdens or empowering them. Are the newer avenues for women's employment created post-economic reforms reflective of alterations in gender relations and suggest improvements in the socio-economic balances? There are very progressive and exhilarating changes witnessed in certain spheres that portray the development of women in the region. Export oriented manufacturing and services sectors have generated job openings for women's labour absorption. While these beneficial alterations are changing the lives of few women, the mass of them remain subjugated and subordinated even when their economic participation enhances. The significance of economic empowerment for women in South Asia poses multidimensional challenges while considering its potential as a transformative mechanism to achieve a gender balance in society. Can economic empowerment be viewed as employment generation and women's access to paid jobs, in the context of this region where women's contribution to the economy is concentrated in unpaid work spheres? The economic participation of women and their contribution is very often povertyinduced and hence assigned lower value rather than being viewed as a process towards alleviating poverty and thereby providing the opportunity for women to be considered as equal partners in improving well being. The internalisation of these perceptions of gender inequalities through socialisation processes prevent even women themselves from becoming agents of change, unless they are assisted for collective awareness and organisation to do so (Antony, 2001; Banerjee, 2004). The resilience to change noted in the prevalence of gender ideologies lies in the hierarchisation and power equations that define gender relations and persist in retention of women's relatively lower position, especially in certain domains that are generally prevented from being challenged (marriage, inheritance, divorce, control over women's bodies and sexuality) even while there may be alterations in other arenas that are being accepted relatively more easily (as in the case of women's education, employment, expansion of responsibility within the domestic spheres). The domination and pervasive prevalence of gender ideologies that subjugate women within families, and assign lower social status to them irrespective of their roles and responsibilities, and consider them as requiring male protection and guardianship militates against any autonomy enhancing processes that women may be involved in (Mathema, 1998; Mukhopadhyay and Sudarshan, 2003; MHHDC, 2000). The distinctiveness of gender ideologies prevalent in the region stem from the pluralities that influence patriarchy, thereby entangling with and producing complex

diversities that generate differences and overlaps among relationships between men and women across caste, class, region and religion. The principle of hierarchy derived from caste and social inequalities, that is the socio-cultural context of power and authority structures, their non-linearity, absence of bi-polarity and constantly changing nature defines the uniqueness of gender relationships in the South Asian region (Sangari, 1995; Kalpagam, 2000; Ganesh and Risseeuw, 1998). The recent economic policy changes induced phenomena present conflicting and contradictory scenarios, displaying progressive and retrogressive forces, in women's development, adding to the complexities of understanding the dynamic changes being witnessed in the South Asian region. The region comprises of seven independent nation-states,2 is predominantly rural (70 per cent), populous (one-fifth of all humanity), poor (40 per cent of world's poor), marked for its inequalities (especially gender based; complicated further by caste, religion, ethnicities) and human deprivations. The inequalities prevalent in this region provide an interesting kaleidoscope that simultaneously pose multidimensional challenges for development human and gender. The situation is further complicated by the fact that these countries are located at different junctures of their social and economic development. Women are governed by social values, customs and norms, subjugated to the power of the male heads of households that impose restrictions on their mobility, autonomy in terms of decision making, sexuality, health, reproduction and so on. Even the universality of marriage (with the absence of the right to choose one's own partner), along with the poor access to property (since inheritance in most cases follows patrimonial, patriarchal systems)3 constitutes segments of their lives wherein women are made to feel disempowered and dependent. Cultural pluralism in South Asia, which is home to several major religious groups, including Hindus, Muslims, Sikhs, Buddhists, Jains, Parsis and Christians as well as many smaller, more localised traditions followed among the multi-ethnic populations of the region define the customary values and form the basis very often for the legal systems followed in most countries of the region. The manner in which universal legal systems function and the simultaneous operation of community, religion based and personal laws that are followed for marriage, divorce, guardianship, inheritance and so on introduce conflicting situations that contest gender equalities despite the Constitutional provisions for it (UNIFEM, 2003; MHHDC, 2000). Legal universalism or standardization is clearly not the desired solution, since implementing equality a central objective to concerns of human development is not the same as implementing uniformity. As upheld in the HDR 2004 which focuses on the theme of cultural liberty, there is a need for “internal reform of all customary laws, upholding gender equality rather than imposing identical gender-biased, prejudicial laws across all communities” (p. 57; UNDP, 2004). The resilience to change and persistence of gender ideologies over generations witnessed in the region can be understood in the context of these divergences across institutional structures. Under these socio-cultural and patriarchal structures even

where women are economically active, the manner in which their contribution is treated by the various agents - within family, labour markets, the state as well as the women themselves - crucially impacts upon the extent of economic empowerment that is feasible. Participation of women in paid labour market spheres itself is facilitated by the increasing acceptance of their presence in public domains, which is in turn promoted as a result of enhancing educational attainments among them. Appearances of women in various roles of prominence within media, as political leaders, as senior officials of government bureaucracy, as executives within the corporate sector, as celebrities in the entertainment sector and various other capacities have facilitated the social change that is resulting in the readiness to accept women's employment. Albeit gradual and slow, this is making space for increasing labour force participation among women in addition to the growing economic pressures which have always compelled their work. Whether this is empowering for women is however subject to many other factors. The term 'empowerment' has multi-dimensional connotations which range from “development of personal instrumental competencies and skills, to the process of challenging existing power relations, to household decision-making, to gaining access and control over resources like credit, income, land, knowledge, etc. as well as to subjective variables like the sense of personal power of self-efficacy” (Mukhopadhyay and Sudarshan (eds.), 2003; p.4). As an hold-all term empowerment has evolved into a concept that can be invoked in virtually any context, be it human rights, basic or strategic needs, capacity building skill formation or overall economic security (Beteille, 1999; Karlekar, 2004). Economic empowerment of women considered as income earning or work participation serves to account for one element while neglecting other aspects thereby questioning the potential for empowerment itself. This paper discusses the varied experiences in South Asia, to highlight the similarities shared by women across the seven countries in terms of their vulnerabilities and survival based livelihood strategies that continue to be under deep influence of the prevalent gender ideologies even in the context of structural economic reforms and modernisation. The first section following the introduction provides the background context of the region, laying out the characteristic features that lend to the complexities witnessed. The second section focuses on women's work in the context of discussing issues relevant for economic empowerment of women. Elements of women's participation in the labour market are deliberated to elucidate the nature of such involvements. Finally, the concluding section observes that positive outcomes of the changes witnessed for women still remain minuscule, while they portend the power to bring about the desired transformation, the need to change resilient mindsets and people's perceptions towards women and their contribution to society, polity and economy remains a critical dimension to pursue for effective empowerment of women. Regional Characteristics South Asia is a predominantly rural, tradition bound, culturally diverse region inhabited by a vast population that is dependent on primary sector activities based on land, forests, livestock and water. The region consists of seven independent nation-

states with historical roots that are intertwined, geographical contiguity, socio-cultural similarities especially the patriarchal domination that subordinates women through kinship ordered structures and caste-class hierarchies, as well as economic linkages fostered through the South Asian Association for Regional Cooperation (SAARC) initiative that aims to propel trade across the region and work towards enhancing the well-being of its people. Most of the countries of the region have opened up their economies over the last two decades or so, having initiated economic policy reforms under the structural adjustment programmes at different points of time, that have intensified over the 1990s. Industrialisation, modernisation, technological innovations and changes have made inroads, affecting economic growth, structures and patterns of production and employment. By the turn of the century, although different countries were located at different levels of growth and development, the growth experienced has been low in labour absorption and resulted in increasing income and social inequalities (MHHDC, 2000; Mukhopadhyay, 1999). Each of the seven South Asian countries is at diverse junctures of economic and social development. Nepal and Bangladesh have the lowest per capita incomes, while Maldives and Sri Lanka record relatively higher per capita income (based on 2002 Gross Domestic Product calculations). Levels of urbanisation vary, with Pakistan having one-third of its population living in urban areas, while Bhutan has over 92 per cent of its people inhabiting rural areas. The levels of economically active female population vary across the countries, with Pakistan recording the lowest rate, while Bangladesh, Maldives are among the countries with relatively higher rates. The percentage of female workers among total workers however, is lowest in Maldives and Pakistan (see Table 1; ADB, 2000; UNDP, 2000, 2003). Education, early marriage and high fertility rates are often associated with changes in women's labour participation rates in the literature. Mukhopadhyay, 1999 in her study based on five larger South Asian countries, notes that the age specific labour force participation curve for women assumes a plateau-like shape suggesting continued involvement throughout the reproductive years as well. This is reflective of the necessity based participatory behaviour of women in the region marked by the peculiar characteristics of poverty, caste and gender. Despite positive indicators on gender equality in Sri Lanka stemming from the matrilineal and bilineal descent kinship (which allows for some degree of inheritance rights among women and provide considerable natal family support for daughters), late marriages, relatively high female education, indicators of women's economic roles show a less favourable picture (ADB, 1999a; Aturupane, 1996; Malhotra and DeGraff, 2000). Demographically, the peculiarity of South Asian population is that it is largely young with 35 per cent below the age of 15 years. This implies increasing proportions of expected future entrants into the labourforce.4 Already, most of the countries of the South Asian region are facing saturation in employment generation with growth patterns being low labour absorbing (MHHDC, 2003). The challenge of generating

Table 1: Adult Literacy Rates and Female Workers - South Asian Countries Countries

Adult Literacy Rate

Percentage of Female

(15 years and above)

workers

Female

Male

Maldives

97.2

97.3

Sri Lanka

89.6

94.7

India

46.4

69.0

Bhutan

Bangladesh

31.4

50.3

Nepal

26.4

61.6

Pakistan

28.5

53.4

Source: UNDP, 2004; MHHDC, 2000.

employment and providing access to sustainable livelihood under the changing socioeconomic environment wherein vulnerabilities are heightening and aspiration levels mismatch with prevailing conditions in the labour market are ominous dark clouds that need to be dispersed. Over the years, in a number of gender based development indicators, South Asian women are seen to be better off today than they were a few decades ago. Their survival in terms of life expectancy has been improving, more women are educated and working. Many of them have entered politics at least at the local governance levels5 (MHHDC, 2000; Rustagi, 2004). There is an increasing recognition of the need to address women's issues specifically, to understand gender relations and work towards equality and empowerment for women. Women located within households, with no ownership of economic assets, working mostly in unpaid family activities, are assigned lower economic worth. This, together with the already defined lower status they wield in social contexts within patriarchal, hierarchical structures, leaves them vulnerable and dis-empowered. Traditionally, women have had very poor access to and ownership rights of land resources. Even in the case of matrilineal and bilateral communities where women have had greater land rights, control and management of land has remained circumscribed (Agarwal, 1994). Land reforms, wherever they have been effective even to a limited extent, continue to leave gender gaps in actual ownership and effective control of land especially for women. Thus, the ability of women to benefit from legal changes is circumscribed by a complex set of interlinked factors influenced by socio-cultural institutions. Any effort towards empowerment of women must address these power and authority relations that define institutional processes and structures. As an achievement of the concerted efforts ongoing at international levels as well as the discourses on gender equality and empowerment world over, governments in all of the South Asian countries have evolved mechanisms to work towards empowerment of women (UNIFEM, 2003). These regional and national endeavours have gone though the processes of changing nomenclatures, making mandatory alterations in all concerned governance structures, government policy documents, plans and schemes.

These have accompanied a simultaneous parallel process of monitoring, evaluation and pointing out the 'token' nature of most of these efforts (Mathema, 1998; ADB, 1999b; 2001a). The policy documents in many South Asian countries drafted on empowerment of women have only initiated the first steps. The entrenched systems that defend the status quo against improving gender balances pose many hurdles for concrete actions to take shape. The gender ideologies that adversely impact upon women are predominant in the region in spite of the development noted by conventional well-being indicators. Thus, even in the most developed country in terms of female educational attainment, life expectancy, low fertility rates, better survival of girls and so on, Sri Lanka also witnesses certain resilient stereotypes. Many policymakers and administrators continue to view women as 'dependent wives' or 'supplementary earners' to be used as labour reserve (ADB, 1999a). Despite extension of women's economic roles, women's work participation increasing; the inequitable gender division of labour within households has changed very little. Household work is seen as 'women's work' and most women in the region tend to internalise these norms. The responsibility of household work that is almost entirely upon women often acts as a deterrent to their participation in paid economic activities. The work burden and time taken to undertake these domestic chores, often makes the kind of regular and timely participation required within a highly competitive labour market, difficult for women. Women, in negotiating the public and private domains are doubly burdened, and those belonging to the socio-economically backward sections of the population have an added burden borne out of caste based subjugation. The economically active women participating in paid work spheres but out of compulsion, for survival, may be empowered to some extent, however such changes do not generate alterations in other spaces, thereby not challenging or contesting the power position bestowed upon them under patriarchal structures. The poverty-induced, vulnerability-led economic participation of women in South Asian countries is often highlighted and the increasing feminisation tendencies noted were used as indicators of enhancing financial crisis experienced by households ever since the economic reforms pressures intensified. In India, women belonging to the economically backward communities that coincide with the Scheduled Castes, Scheduled Tribes and Other Backward Castes (OBCs) have a significantly larger proportion of workers among them as compared to the upper castes where women are not allowed to undertake manual paid labour activities generally. The lower social position occupied by these castes, their poorer access to land and productive resources as compared to other castes leaves these households and the women with few options other than supplying their labour services for a livelihood. The other relatively smaller segment of the organised sector employment in India where the share of women's participation has been rising over the years, even displacing men from these coveted job spheres is the result of the increasing educational attainment levels among women. Most of these working women belong to the socio-economically better-off sections of Indian population, while the bulk of

female employment remains in the unorganised, insecure and unprotected segments. The entry of women into paid work, the compulsions and voluntary elements that allow for its acceptance in erstwhile hostile socio-cultural environs trace the changes witnessed in the economic spheres that display seemingly more flexible regimes as compared to the complex institutions governing female bodies, marriage, reproduction, sexuality and so on. The non-linearity and disparate change in different domains the socio-cultural as compared to the economic, for instance add to the contradictory signals and defy simple explanations. This understanding, however, contests the notions of inflexibility and rigidity of norms and structures, and highlights the dynamism of these institutional processes and the non-fixity of how these evolve under different situations. Instances abound across the region to indicate how changes are occurring and the conflicting outcomes for gender equality and empowerment that are witnessed. In Maldives, the traditional participation of women in public spaces was marked by the absence of overt gender discrimination and women of the archipelago have been described as the â&#x20AC;&#x153;most emancipated in the Islamic worldâ&#x20AC;? since they did not practice purdah (veiling) or seclusion (ADB, 2001a). In the changing modern context with economic development, women's traditional roles are redefined and even in spite of educational attainment, their participation in the new sectors of employment such as tourism, entertainment, mechanised fish processing remains restricted (UNDP, 2000). Gender differences and stereotypes are beginning to be noted in the current scenario quite starkly.6 These patterns are visible in all the South Asian countries irrespective of the varied levels of social, cultural, political, legal and economic development. Women's Work in South Asia: Issues and Challenges for Empowerment Three basic issues define the vulnerability and lower status assigned to women's work in South Asia. First, is the issue of invisibility, the non-recognition of women's entire contribution to the economy, since it is conceptually viewed as directed towards the household or family and hence remains unaccounted. Secondly, women's excessive concentration in traditional or conventional tasks and occupations, many of which tend to intermingle with their non-economic or extended economic activities (that is, extended SNA (System of National Accounting) activities that have remained outside the purview of GDP calculations) are unpaid most of the times and this leaves such women unenumerated, that is, not counted as workers. Thirdly, the structure of the labour market and its operational dynamics which keeps women employed predominantly in unorganised sector, in low paid, low skilled, manual and monotonous jobs. The sex role based stereotyping and gender division of labour that is prevalent in all categories of employment, irrespective of educational and skill development, exhibits resilience that is a derivative and extension of socio-cultural gender subordination experienced by women. This explains why even policy makers and administrators continue to view women as 'secondary workers' and 'supplementary earners' very often discounting or affecting their access to government programme based employment, earnings and other benefits.

It is noteworthy that despite tremendous variations across the South Asian countries, these basic elements hold relevance for all women belonging to this region. Women are concentrated in primary sector activities, largely subsistence oriented and low in productivity. A large chunk of the women are self employed, unpaid family workers or home based contractual workers. The working environment is poor, and security or protection levels are non-existent. Except for a few women who are educated, professionally qualified, employed in formal sector jobs that are secure and protected, a large mass of women are struggling for a livelihood to survive in the unorganised segments of the economy. Before discussing the sector specific, area or country wise instances of women's economic work participation, it is worth mentioning the activities that involve women but do not get calculated as economic contribution. The role played by women in the care sector, predominantly their reproductive work (bearing, rearing, nurturing children and household maintenance), falls outside the national accounting systems that are followed by different countries. While these activities are crucial for household members' well-being and effective participation in different spheres economic, social and political, they continue to remain non-economic activities. By virtue of women performing these roles which are statistically not counted as economic and hence not monetarily valued, women's roles and their contribution are assigned a lower status. Efforts to prepare satellite accounts which can capture women's work through alternative methods such as time use surveys are ongoing to overcome the existing limitations. Nepal among the South Asian countries has pioneered in the preparation of such statistics as part of their national level labour force surveys (Acharya, 2000). India has also undertaken a pilot survey (CSO, 2000). HDSA 2000 based on some observations suggests that South Asian women work for 10 to 12 hours per day, which is 2 to 4 hours more than men's work. Women's contribution in activities that are recognised by definition as economic activities also remains unrecognised and non-enumerated. This is due to cultural and traditional values which constrain recognition of women's economic participation. In the South Asian countries, the historically derived gender roles, spaces and stereotypes of the 'public' male breadwinner (provider) and 'private' female care-giver are espoused even under changing situations. This is due to the association of household status with women's non-work that has been perpetuated by the circumstances of women having to supply their labour in the paid market work spheres under extreme economic stress and poverty. It is ironical that at times even the opposition to changing gender roles comes from women themselves who have internalised its social construction. In South Asia, the interaction between religious and cultural beliefs and economic forces reinforces patriarchal cultures. Clearly, value or self-worth of women might have been set very high, if measured based on their indispensability to the household. Hanna Papanek (1990) highlighting the outcome of such 'symbolic' work rather than its content, terms them as “family status-production work”. A shift from emphasising

upon women's worth or 'value' to others in the socialisation process, to focus upon their own sense of value to themselves their sense of self-worth - are crucial to understand the persistence of inequality and evolving basic strategies for change. Questioning why children (who are witness to the work undertaken and gender division of labour) as well as women do not unlearn these norms of inequality ingrained through the process of socialisation, Papanek explains these through what she calls the existence of “escalator hierarchies”. Age and gender differences confers power on some over others in societies such as those of South Asia, wherein the young and powerless must await their turn to enjoy control over others as they age. Rebellion endangers this possibility and hence unlearning is made more difficult (Papanek, 1990). A large proportion of women's work undertaken within the household, for the family as unpaid workers remains unaccounted due to the conceptual, methodological and definitional flaws. The percentage of women workers ranges from 22 per cent in Maldives to 42 per cent in Bangladesh. A large majority of South Asian labourforce is involved in primary sector activities agriculture, hunting, forestry and fisheries. As per the latest comparable figures used by Mukhopadhyay, 1999, nearly 94 per cent of women in Nepal, and between 70 to 80 per cent in Bangladesh, India and Pakistan are to be found in the primary sector. Women in South Asia participate in crop farming, animal husbandry and a host of off-farm activities. A substantial amount of time is spent by South Asian women in looking after livestock, from rearing to protecting animals, finding and collecting fodder and water, collecting eggs, milking, ensuring the health of animals, poultry, etc. Bhutan,7 a landlocked country, independent (never colonised), self contained rural economy that is seeking a sustainable relationship with nature, pursuing the goal of maximising people's happiness8 is operating on the Buddhist philosophy of 'need rather that greed'. Only 8 per cent of its land is cultivated, while 70 per cent is under forest cover. An estimated 65,000 farming families own, on average, 1.5 hectares of agricultural landholdings per household (RGOB, 2000). Women's participation in traditional roles has been vital, however, their participation in government jobs remains low due to educational constraints. The share of agriculture in GDP has been showing a declining trend in most countries of the region, however intensification in feminisation of agriculture over time is noted, except in Bangladesh where percentage share of women in agriculture declined from 50 per cent in 1991 to 47 per cent in 1995-96. In India, women workers as a percentage of total workers in agriculture rose from 37.6 per cent in 1972-73 to 39.4 per cent in 1993-94. In Pakistan, they rose from 14.3 per cent in 1984-85 to 21.1 per cent in 1993-94. In Sri Lanka, they increased from 27.6 per cent in 1953 to 34.6 per cent in 1990. In Nepal, there has been an increase of female share in the agricultural workforce, from 35.5 per cent in 1971 to a high of 45 per cent in 1991 (Mukhopadhyay, 1999). Male involvement in agriculture has undergone a rapid decline over the years. Women are entering subsistence farming activities to fill the void created by men who move to better job avenues or migrate in search of more lucrative employment.

Commercialisation of agriculture and changing cropping patterns that have impacted and altered the gender division of labour and increased female labour use are noted with operationwise changes. However, these changes have occurred strictly within the parameters of gender hierarchies. The diversification of cropping pattern, labour use systems involving women are not seen to be associated with greater control over earnings (ICIMOD, 1997). In the cotton cultivation undertaken in Pakistan, women predominantly do the job of picking cotton (UNDP, 2003). In Sri Lanka, most of the agricultural women workers are involved in the plantations sector (UNDP, 1998). Women's labour in traditional sectors such as post-harvest activities and fish processing have been affected by mechanisation, modernisation, and automation and very often they have been displaced. Instances of these abound across the South Asian countries. Mechanised rice mills in Bangladesh have displaced women involved in manual paddy pounding (dhenki) (Mukhopadhyay, 1999). Similar instances are available from India. Maldivian women known for their higher work participation were involved in the processing of 'Maldive fish' a delicacy exported to Sri Lanka as well. Downstream fish processing activities such as preparation of frozen, canned, chilled/fresh and salted/dried fish for export market occupy a bulk of local Maldivian labourforce. The point that has been highlighted and needs to be reemphasised is that the problem or fault does not per se lie in technology, but with the social context of women's work in traditional systems (Sen, 1984). Technological innovations occur in tasks that are generally undertaken by men; alternatively mechanised tasks displace women replacing men instead. Associated with these changes are skill impartation and higher wages for such tasks that in effect, go to men and are viewed as being usurped by them. These changes are definitely linked to the prevalent gender ideologies that undermine the significance and due returns of women's work. The transformation of economic structures in South Asia which have followed a shift or easing of dependence on agriculture, focusing on non-agricultural growth have had limited impact on employment patterns especially in rural areas and certainly in the context of women. The post-liberalisation period with increased emphasis on exportorientation and opening up the economy for trade have accompanied the shift of countries from being net exporters of foodgrains to net importers of larger quantities of foodgrains. The Nepal HDR, 2001, noted that 45 districts of Nepal have recently been officially declared as food deficit (UNDP, 2002). Given the household responsibility sharing, with women 'in-charge' of food preparation and home management, the inadequacy, shortage or constraints in the sphere of food consumption, often victimises women, even resulting in domestic violence towards them. The inequalities in land ownership, trends towards concentration of landholdings pushing small and marginal farmers into a state of landlessness, has implications for food security levels within poorer households and the heightening of vulnerabilities that define livelihood strategies for majority of the women. Traditional avenues in the off-farm and non-agricultural spheres that occupied women and served as buffers in

times of resource constraints, if not as regular income generation activities, have also been eroded in most areas. Shift to alternative cheaper, bulk produced commodities have affected handlooms, textiles, pottery and a range of handicrafts. Manufacturing activities in industrial enterprises and factory units under one roof or complex where workers came together to work are giving way to contractual, subcontractual, piece rated, home-based work. This has implications for women's recognition as workers, their organisation or possibility of a united voice, which in turn impact upon levels of economic empowerment. Since the 1980s, the aggregate growth of Bangladeshi economy has been steady but slow (UNDP, 1996). The share of non-agriculture in the total rural employed population rose from 29 per cent to 34 per cent (1981-1994). The rise in this share of non-agricultural employment has been higher for rural female employed population. A large number of women workers in Bangladesh are young, mainly single, although some are divorced, abandoned or married as well (ADB, 2001b). Such patterns of deployment are noted in the context of other sectors, such as fish processing, export processing zones, electronics and so on in India and Sri Lanka too. Even in these new export oriented industries, such as garments, footwear, electronics, pharmaceuticals, food processing sectors, gender discriminatory practices in terms of tasks and skill levels of women workers and their pay and working conditions, remains unchanged (Unni, 2001; MHHDC, 2000). Trading activities in certain countries, communities and specific areas within South Asia are undertaken by women (eg. Bhutan, Manipur in North-eastern region of India, fish sellers in Maldives and other fishing communities of India and so on). Among other services, an extension of socially acceptable and traditional role stereotypes is commonly noted, as in education, health and care sectors where women are concentrated. In Nepal, of the 7 per cent rural women workforce involved in non-agricultural activities, nearly half of them are in the services sector. Poor working environment and socially defined constraints and difficulties for women entrepreneurs is noted as an additional factor delimiting women's non-agricultural participation. Poor ownership and access to economically productive assets forms a strategic constraint affecting women's nature of economic participation in Nepal (ADB, 1999b). The unequal inheritance laws reinforced by social norms define women's limited access to productive assets. The socialisation into unpaid, low productivity, low skilled and low paid work begins early in women's lives since education of females is assigned low priority. The population of girl child labourers exceed as compared to boys (UNDP, 2002). The arguments that these are compulsions of poverty are challenged by the gender iniquitous patterns of child work participation. The impetus within governance structures to stress on economic participation of women initially began with an association to poverty reduction. The female headed

households being predominantly poverty ridden and the earnings of these women being utilised for better provisioning of basic needs, such as food, nutrition, education, health care as opposed to their male counterparts lends further support to encourage women undertaking paid work (Hoddinott, 1992; Kabeer, 1994). In the tiny idyllic archipelago of Maldives, nearly one-third to one-half of all households are reported to be female headed households. Women claim this is based on 'their desire to be in-charge'. Yet, the social norm that is applicable legally too, is that girls and women will have a legal guardian (normally the male head of the household). It is also a fact that large number of women are trapped in the quagmire of early marriage, with a majority of them having limited autonomy in household decision making. The islands are also known for one of the highest rates of divorces and remarriages in the entire region with no social taboos associated to these practices. The freedom to choose partners, the social sanction for remarriage under the changing circumstances of monetary relations and market based existences puts undue pressures that have the effect of negating the element of freedom in these choices. The labour force participation rates (LFPR) in Maldives fell from 72 per cent in 1977 to 20 percent in 1990. This decline can be partly explained by the reduction in women's involvement in fish preservation (dry fish) activities due to mechanisation and export of raw rather than dry fish as well as the limited opportunities for higher education due to both geographical and infrastructural constraints. There has been a drastic decline in female LFPR in agriculture, and women have not been able to benefit from the boom in tourism by direct employment due to socio-cultural constraints and gender biased mindsets. The poor access to higher education as well as the social taboos against work in the entertainment industry has limited the possibility of women benefiting from tourism sector that heavily employs expatriates from other South Asian countries (ADB, 2001a). The inaccessibility to own incomes often compels the women to opt for quicker remarriages for ensuring financial security.

market, paid fair wages, then this can impact to a certain extent upon their economic empowerment. However, the overall structural and institutional changes to move towards greater freedom to decide, autonomy and control over earnings for women requires an overhauling of the social perceptions and mindsets within families, labour markets, the state as well as women themselves, regarding their role, status, worth or value, all of which are constituents of the process inching towards empowerment. Concluding Remarks In today's world, value and worth are inevitably equated with monetary calculations and considerations. As mentioned by Kelkar, et al. (2004) in the context of redefining dignity ('samman') for women involved in the microcredit initiatives to help generate incomes for poor, needy rural Bangladeshis: “In a cash economy, it is earning of cash income that brings respect” (p.36-38). Various studies in the region and elsewhere have emphasised the importance of economic empowerment for improving women's status and enhancing their autonomy levels (Mukhopadhyay, 1999). A survey based study by PIDE, Pakistan on women's autonomy notes that paid employment and women's contribution to family income emerge as the most important determinants of women's intra-household decision making authority (Sathar and Kazi, 1997). Even women's own perceptions about their own work and contribution changes with income or organisational mobilisation and awareness generation (Antony, 2001; Kelkar, et al., 2004). This has even been linked and associated with estimations of stress and tiredness experienced by women to note that there seems to be a decline in mental distress levels (Sonpar and Kanbur, 2003). However, new market roles that are expected to involve women need not necessarily bring about greater empowerment, since “the old order of hierarchies may persist and new forms of subordination may surface, reinforcing the unequal power equations between the sexes” (p. 22; Mukhopadhyay and Sudarshan (eds.), 2003). Instances of these have been discussed in various spheres of women's lives across the countries of the region.

The employment based cooperatives such as in dairying, textiles, specific agro-based food items that operate with assistance from government and NGOs are other efforts that are increasingly being viewed from the angle of their potential for economic empowerment of women.

South Asian social structures are indeed very complex and uniquely hierarchical. They not only define status, power and dignity, but also impinge on decisions and nature of economic participation. Therefore, women belonging to certain sections of society will not enter the labour market at all, while many others abstain from working as paid employees. The overwhelming presence of women in South Asia working as home based informal sector workers or as self employed is partly a derivative of the social values stemming from patriarchal norms that put limitations on women's mobility and constrain their economic participation in public spheres. To encourage women's participation some of the South Asian countries have introduced policies of reservation in government jobs. In Bangladesh, 10 to 15 per cent and in Pakistan, 20 per cent government jobs are reserved for women (UNIFEM, 2003).

In the context of declining employment avenues, and women's participation being residual in nature, the challenge is to plan for pro-poor, labour absorbing growth avenues and address the problems of underemployment and unemployment. Another critical dimension is to effectively implement minimum and gender-equal wages along with social security measures. If women workers are treated equally in the labour

Economic empowerment clearly cannot be indicated on the basis of participation rates alone, neither is paid work by women in public spheres indicative of increasing freedom and choice for women. Education and skill development are two components that are often cited as essential for women's empowerment. In fact, the MDGs and various governmental efforts tend to delimit the approach to empowerment by

In Bangladesh, the government and NGO sector has helped create self- and contractual employment for nearly 15 per cent of rural women (above the age of 15 years) (ADB, 2001b). There are over 1000 local and national organisations in Bangladesh that generate self employment opportunities for over 8 million poor, mostly women, through micro-credit, training in literacy, technical skills, and legal rights. Similar efforts are ongoing in other parts of South Asia as well.

emphasising upon women's education. It is important to avoid perceiving empowerment of women as a goal or objective to be attained, since it is essentially a process and under the given circumstances within South Asia, requires multidimensional approaches to ensure movement towards the paths that lead to eliminating inequalities and discriminations faced by women. While there can be no denial of the positive offshoots of human capital development traits, these alone cannot transform the gender imbalances stemming from perceptions and mindsets that have not accepted women as equals in social, economic and political domains. Endnotes 1. This is a modified version of a paper presented at the International Seminar on Rural Women and Empowerment in South Asia, organized by Working Women's Forum and G.B.Pant Social Science Institute, Allahabad, October 7-9, 2004. 2. The seven countries are India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan and Maldives. 3. There are countries and communities across parts of South Asia where matriliny is followed. Among Muslims, women do inherit a share of ancestral and parental property, albeit unequal in comparison to men, who are also legal guardians of all other dependants in the family. 4. The HDSA, 2003 notes that in South Asia another 500 million persons will enter the labourforce in the next 5 years which is equivalent to the total population of the European Union (expanded with 25 countries). 5. Many of them have benefited from the reservations policy of their respective governments. 6. Prior to Maldives becoming a Republic, three Maldivian queens ruled among the several monarchs, however, today as per the constitution revised in 1998, being male is a necessary qualification for being elected as president or Vice-President of Maldives. On the other hand, in the year 2000, three women were given the authority to deliver religious sermons and counseling, a role they were not entitled to perform earlier (UNDP, 2002; ADB, 2001a). 7. Bhutan is one of the least researched upon area in the region and is often left out from analysis since there is relatively very little information available. 8. Bhutan introduced a new index in its national HDR (RGOB, 2000) called the Gross National Happiness (GNH) based on the conceptual frame that development does not mean a blind expansion of commodity production. Instead, a holistic view of life and development is called for that augments people's spiritual and emotional well-being as well.

Poverty Alleviation in India Wilima Wadhwa

outh Asia is home to the largest number of poor in the world, and India accounts for the largest percentage of the region's share. Recent progress in poverty reduction has been impressive in some countries, or regions within countries. At the same time, other parts of South Asia remain stagnant or are facing reversals in poverty rather than progress. Given its large population, the pattern of poverty reduction in India will have a significant bearing on whether the Millennium Development Goal (MDG) of halving global poverty by 2015 is achieved. By the end of the 1970s, India had acquired the reputation of being one of the most protected and heavily regulated economies in the world. In the early 1980s, a few steps were taken to liberalise the regulatory regime. In 1991, more extensive reforms followed. The past two decades (1980-2000) have been quite special in the course of Indian economic development. The GDP growth rate that had stayed at around 3.5% per annum for 20 years shot up to 5.79% in the 1980s and was sustained at around the same level in the 1990s. Moreover, the volatility in the growth rate came down considerably in the post-reform period. The proportion of the population below the poverty line declined from about 45% in 1983-84 to 26% in 1999-00. This suggests that growth may have also benefited the poor. Like a lot of other developing countries India has also implemented a variety of poverty alleviation programmes. It has often been argued that growth by itself is not sufficient to significantly reduce poverty, and that separate interventions are needed to include the poor in the growth process. In this paper, we look at poverty alleviation measures followed in India with a view to gaining some insights into the poverty reduction process. Poverty trends and characteristics of the poor are examined in Section 2. In Section 3 we look at different poverty alleviation programmes. Section 4 discusses the relationship between poverty reduction and growth and Section 5 presents our conclusions. 2. India's Poverty Profile Trends in Poverty Poverty estimates in India are based on the Household Consumer Expenditure Surveys conducted by the National Sample Survey (NSS) organisation. These large, nationally representative surveys are available at intervals of approximately five years. The surveys use a stratified two-stage sampling design, first sampling clusters (which are villages in rural areas and urban blocks in urban areas) and then selecting 10 (or 12 as in the case of the latest round conducted in 1999-00) households within each

cluster (called first-stage sampling units). The survey elicits consumption expenditures and consumption quantity for the household for the month preceding the date of survey.

inequality as measured by the Gini coefficient had not changed significantly, even as late as 1999-00. In the rural sector it had come down by 2 percentage points, while in the urban sector it had actually increased (Table 2).

The estimates of poverty that are derived from the NSS data use the urban and rural poverty lines developed by the Planning Commission. These poverty lines are chosen to ensure that predetermined nutritional requirements are met. These nutritional requirements are 2400 and 2100 calories per person per day, for rural and urban areas, respectively. These calorific norms were translated into a rural poverty line of Rs49 per month at 1973-74 prices and the urban poverty line was set about 15% higher, at Rs57 per month. Over time, these official poverty lines have been updated for each state by the Planning Commission using the consumer price index for agricultural labourers for rural areas and the consumer price index for industrial workers for urban areas.

At the state level (Table 3), although the general pattern is that of declining poverty over the period, there is substantial heterogeneity in poverty reduction experiences across states. Bihar and Orissa remain the poorest states, while Punjab continues to have the lowest proportion of poor. In general, the southern states have performed well. Of the states that were above the national average in 1973-74, only Maharashtra, Kerala and Tamil Nadu were able to reduce poverty below the national average by 1999-00.

There are several measures suggested in the literature to study relative poverty (Sen 1976, 1983; Foster, Greer and Thorbecke, 1984). The indicator developed by Foster, et. al., (FGT) has become a standard in the literature. It has a number of useful properties. For one, it generalises a number of already existing poverty measures. Moreover, it allows easy decomposability of the aggregate index. The generalised FGT measure is given as

where P is the index, n is the total population, q is the number of poor, xi is the consumption expenditure of the ith individual and z is the poverty line. When =0, we have the familiar head count ratio (HCR). The HCR is the most common measure of poverty. It estimates the proportion of population living in households with consumption or income below the poverty line. However, it does not differentiate between individuals who are close to the poverty line and those who are far below it. At =1, we get the second measure of poverty, called the Poverty Gap Index (PGI) which captures the “depth” of poverty. The PGI gives the average distance below the line expressed as a proportion of the poverty line, where the average is formed over the whole population. It, therefore, takes into account how far individuals are from the poverty line. For all values of > 1, the FGT reflects the “severity” of poverty. We can get a whole class of poverty indices by varying the values of. Tables 1-3 give poverty estimates and some measures of inequality. Till 1973-74, no serious dent had been made in poverty at the all-India level (Table 1). The number of poor rose each year and the HCR was higher in both the rural and urban sectors than in the 1950s and 1960s. After 1973-74, poverty declined steadily in both sectors, though the absolute number of poor continued to rise, especially in the urban sector, till 1999-00.1 Similarly, the PGI did not improve significantly till 1993-94 (Table 2). This implies that in the first two decades since 1973-74, poverty decline probably resulted from people close to the poverty line moving above it. It is only after 1993-94 that the process of poverty alleviation has affected the depth of poverty. However,

Who are the Poor? Even though the pace of poverty decline has been impressive in India, the sheer magnitude of the problem continues to demand attention. One approach might be to let growth take care of the problem. However, despite the fact that India has been growing in excess of an average 5% per year for the last 25 years, more than 250 million people remain below the poverty line. Hence, the current growth process needs to be combined with a concerted poverty alleviation effort. Indeed, India, like most developing economies, has had a plethora of poverty alleviation programmes since its independence. These programmes are often targeted at the poor and some others like public works programmes affect the poor through a self selection process. A crucial input into the design of poverty alleviation programmes, therefore, is the identification of the target group, namely the poor. What causes a household to become poor? The income of a household depends on the assets--land, labour, physical and human capital--it owns and the returns it can generate on these assets. Poverty, therefore, results from either a paucity of assets and/or from the inability to generate sufficient returns from the assets. The problem is further compounded by a lack of access to social services and capital markets. This lack of access means that the poor cannot suitably deploy even the assets that they have.2 For instance, a landless household need not necessarily be poor if its members could earn a high (enough) return on their labour. However, typically poor individuals are unskilled and the wages they command are relatively low. Acquisition of human capital in the form of education and/or upgrading of skills is limited by the lack of access to social services. In the absence of both land and skilled labour, self employment might be another option. Here again, activities that can generate high returns are not available to the poor either because they lack skills or because they cannot access the requisite amount of capital to get started. Table 4 gives the distribution of land and human capital between the poor and nonpoor. On average, the amount of cultivable land that poor households have access to is far less than the non-poor households--less than 60%. This is reflected in the fact that in rural areas the poorest group are the agricultural labourers, who do not have access to land. Similarly, in rural areas, 66% of the poor are illiterate as compared to 48% of the non-poor.3 In urban areas, where there are greater job opportunities, the

difference is even greater--45%as compared to 17%. This is manifested in the fact that poverty among casual labourers who are unskilled is almost 45%. However, eligibility criteria of poverty alleviation programmes rarely specify education or land holding as identifying factors. Instead they often specify that priority be given to certain social groups or that there be a reservation for women in the target group, the justification being that these groups are more vulnerable to poverty. Indeed, scheduled tribe (ST) and scheduled caste (SC) households are among the poorest in the population with poverty rates way in excess of the national average. Similarly, there is a fairly large literature documenting that female-headed households tend to be poorer than their male-headed counterparts. Till 1987-88, the difference was significant even after controlling for physical and human capital. However, by 199394, female-headed households were no more vulnerable to poverty than male-headed households, once differences in physical and human capital were accounted for.4 The important thing to remember is that if the problem being attacked is poverty, then that should be the sole objective of the programme. Eligibility and reservations for certain groups often result in additional goals like women's empowerment or uplift of certain disadvantaged groups. This confuses the issue and often results in none of the objectives being met. 3. Poverty Alleviation Programmes Poverty alleviation programmes are more often than not targeted programmes. Identification of the poor is crucial to the success of the programme. Identification can be based on income criteria, indicator targeting criteria or self targeting criteria. In the first, beneficiaries are chosen based on their income being below the poverty line. This criterion, while being the most direct, is often hard to administer due to informational constraints.5 The second method identifies the poor by looking at correlates of poverty like landholding, social caste or profession. Self targeting, in contrast to the first two criteria, does not require identification of the poor. Self targeted programmes are available to all, but are designed such that they are attractive only to the poor. For instance, manual work on public works programmes might not be attractive to the non-poor. The major poverty alleviation programs in India fall into the following categories: l Self employment programmes l Wage employment programmes l Public distribution system (PDS) and nutrition programmes

These are discussed below. Self Employment Programmes The focus of self employment programmes is providing assets or access to assets to poor households so that they can earn a livelihood. These programmes also include training and skill creation schemes that enable individuals to generate self employment. In India, these programmes, like many other poverty alleviation programmes, often also have secondary objectives such as empowering women and other disadvantaged groups by giving them priority or setting separate targets for

them in the list of eligible beneficiaries. Integrated Rural Development Programme (IRDP) The IRDP was the first major self employment programme and started in the 1970s. By 1980, it was being implemented in the entire country. The objective of the programme was to enable families below the poverty line to create income generating assets, so they could cross the poverty line. The funding for the programme came equally from the states and the centre. Assistance was given in the form of subsidies and term credit for the families to acquire employment generating assets. The target group consisted primarily of small and marginal farmers and rural artisans who were below the poverty line. Within the target group 50% of the assistance was reserved for SC/ST families, 40% for women and 3% for the physically handicapped. Moreover, of the remaining 7%, priority was to be given to female-headed households. Table 5 gives some statistics about the progress of the programme. Between 1990-91 and 1998-99, close to 20 million families had availed assistance under the IRDP.6 The last concurrent evaluation of the IRDP, done in 1996, revealed that 14.8% of the beneficiaries were successful in crossing the poverty line. The IRDP has been extensively evaluated, by the government, international organisations and researchers. Among the problems cited with the programme are huge leakages due to misappropriation of funds and selection of non-target beneficiaries, poor quality of assets generated and absence of proper accounts. Dreze (1990) goes one step further and concludes that even if the IRDP had been flawlessly implemented, one could not expect it to bring about a large reduction in poverty. Since poverty is a household characteristic, the rationale for reserving 50% of the assistance for SC/ST families is understandable since caste is a characteristic shared by all members of the household. Given that the probability of an SC/ST household being poor is much higher than that of households in other castes, one can view this as a method of targeting poor households. However, the 40% reservation for women is hard to defend. Who are these women that are being targeted? Clearly, they are not heads of the households since that is a different category altogether. One would expect a male head to send the women in his household to apply for an IRDP loan since they have a higher probability of getting one--40% as against less than 7%. After all, if a woman in the household is poor, so are its male members! If, on the other hand, women in poor households are more reliable borrowers than men, give the IRDP assistance only to women! Such reservations simply confuse the issue, and move the discussion away from the job at hand. Poverty is bad regardless of whether the poor person is a male or a female. Neither lives individually, but cohabits with others in a household, and it is the household that has to be moved above the poverty line. The household should be allowed to decide whether it will send a male or a female representative; it should not be forced to send a woman. Given that the actual economic activity may be finally undertaken by the man, even though the woman may have obtained the credit, such a clause gives a false sense of achieving women's empowerment without actually realising it.

On the other hand, it would be a much better idea to target female-headed households more aggressively, and widow-headed households in particular. The incidence of poverty among the latter is much higher than the average. The incidence of poverty in the currently married female-headed households is not much different from the maleheaded households (Gangopadhyay and Wadhwa (2004)). IRDP beneficiaries are selected on the basis of BPL (below poverty line) surveys, conducted at the beginning of each plan period. The Gram Sabha is supposed to be responsible for the actual selection of the beneficiary families. This is a good idea since it allows for maximum decentralisation. However, various concurrent evaluations of the IRDP showed that a very small percentage of the families were actually chosen by the Gram Sabha. For instance, the figure in Madhya Pradesh was a measly 5.3%. The rest of the beneficiaries were selected largely by block officials. The Gram Sabha was made responsible for identifying the beneficiaries because it has knowledge of the characteristics of the different families in the village and is, therefore, in a better position to gauge their needs. The fact that most of the identification ends up being done by block officials defeats the entire purpose of the exercise. The IRDP is often criticised on grounds of excessive leakage. There is evidence that beneficiaries obtained assistance after bribing bank or government officials. In other words, even though only families below the poverty line were supposed to get assistance, in reality many non-poor families also availed of the programme. This kind of leakage occurs precisely because identification is not done at the village level. Block and bank officials are often willing to grant loans disregarding the eligibility criteria for a minor monetary consideration. For instance, according to the World Bank (1998), in 1993-94 5.6% of the families in the top per capita expenditure quintile got IRDP assistance. However, when considering the extent of leakage, a couple of points need to be kept in mind. First, a beneficiary family may be above the poverty line because it received IRDP assistance. Second, in a poor country like India the cut-off for the top expenditure quintile may be very low. Table 6 gives the rural poverty line and expenditure cut-offs for different percentiles of the rural population in 1993-94 and 1999-00. In 1993-94 more than 75% of the rural population had a per capita expenditure that was below twice the poverty line. By 1990-00, this figure had fallen to about 69%. Given that the poverty line itself ensures a very basic minimum standard of living, the fact that non-poor households also avail of some IRDP assistance should not be cause for much concern. Another common complaint was that income generating assets allowed under the programme, such as milch cattle, sowing machines, etc, did not generate an income stream past the tenure of the programme (5 years). Some of these problems could have been avoided with a more efficient provision of support services like technical guidance, marketing of output, veterinary services, etc. To summarise, the IRDP was not as bad as it was made out to be. If anything, the data

seemed to suggest that we needed to widen the net of the programme. However, spending on IRDP, which was 0.4% of total government expenditure in 1990-91, was halved by 1997-98 (World Bank, 1998). This happened when government expenditure on anti-poverty programmes went up from 5.3% to 6.7%. Training of Rural Youth for Self Employment (TRYSEM) The IRDP had two major supplementary programmes, TRYSEM and DWCRA (see below). TRYSEM was a facilitating component of the IRDP, targeted at rural youths. The objective of the programme was to provide rural youths with basic technical and entrepreneurial skills. The target age group was 18 to 35 years from families below the poverty line. Training was imparted through both formal training institutes as well as informal modes. Two types of financial assistance were provided, for recurring expenses on TRYSEM training and for non-recurring infrastructure expenses. TRYSEM played an important role in facilitating the diversification of IRDP activities. The emphasis was on diversifying away from primary to secondary and tertiary activities. This requires acquisition of new skills and upgrading of existing ones. This programme, therefore, was an important support component of the IRDP. Successful implementation would ensure a continuing means of livelihood for the beneficiaries, since the objective was to generate skills. The IRDP focused on providing income generating assets to the poor. Assets, by their very nature, need maintenance and do not last forever. Skills, on the other hand, have no such problems. Moreover, human capital being embodied in the person, moves with the person, allowing her to undertake economic activities in different geographical locations. As was the case with the IRDP, beneficiaries were chosen on the basis of the BPL survey. Reservations for SC/ST candidates, women and the physically handicapped were the same as for the IRDP, namely, 50%, 40% and 3%, respectively. Whilethe reservation for women was not understandable for the IRDP, it could be easily supported for TRYSEM. First, there is enough evidence that shows that there is a clear gender bias against women in education and vocational skills. Second, skill is embodied in the person acquiring it, unlike physical capital. Consequently, while the credit given to women under the IRDP may end up being used by the men in the household, the woman's skill can be utilised only by the woman concerned. In 1993-94 there were more than 84 million rural poor in the age group 18-35. Given India's demographics, in 1997-98 the number in this age group would have been larger. Nevertheless, in 1997-98, the TRYSEM target was for 0.3 million youths to be trained. The actual achievement was 0.25 million (82.7% of target). Even on the lower 1993-94 base population in the relevant age group, the target proportion was only 0.42% of those eligible. To make matters worse, the TRYSEM target had been falling over the years, at a time when our population was becoming progressively younger.7 Of those trained however, less than 50% (44.8%) were able to find gainful employment. Among the employed only 35% found wage employment--the rest were in the self employed category. Critics maintain that, in terms of its linkage to the IRDP, the performance of TRYSEM was quite dismal. According to the fourth concurrent evaluation of the IRDP, only

3.9% of the families receiving IRDP assistance reported training of any member under the TRYSEM programme. A lot is made of this, implying that a high linkage with the IRDP would be desirable. While one can understand the need for generating human capital to enable proper use of the income generating asset, it is not clear at all why TRYSEM should be linked so strongly to IRDP assistance. Facilitating the acquisition of skills is a desirable goal in itself. TRYSEM was an individual based programme, while the IRDP was a household based programme. Why should it be the case that members of households receiving IRDP assistance were in any sense more deserving, amongst other poor individuals, for getting subsidised training? Development of Women and Children in Rural Areas (DWCRA) This was a sub-scheme of the IRDP, with the specific goal of improving the status of poor women in rural areas. This was because the IRDP and TRYSEM were not reaching out to women in spite of the reservations available for them. Like TRYSEM, here the individual rather than the family was the unit of focus. A group of poor women join to form a self-help group and with the help of the gram sevika pursue income generating activities. The gram sevika trains and nurtures the group for two years. The programme extends to subsidised credit, marketing facilities and other support services. Fifty per cent of the assisted groups were supposed to be women belonging to the SC/STs with priority being given to physically handicapped and rehabilitated women. Once again, instead of following a simple programme, policy makers generated wheels within wheels--there is a reservation for women in the IRDP and the IRDP has a sub-programme directed towards women alone! The District Rural Development Agency (DRDA) was the principal agency implementing the programme. An additional project officer, who was part of the DRDA team, coordinated the implementation process at the district-level, while the gram sevika was involved at the block level. The DWCRA programme was started in 1982-83 and lasted till 1998-99. The total number of groups formed during its tenure was 272,722. In terms of individuals catered to, this works out to 4,144705 rural women. Swarna Jayanti Gram Swarozgar Yojana (SGSY) The Planning Commission set up the Hashim committee in 1997 to review the various self employment programmes. The committee recommended a single self employment programme for the rural poor that focused on groups rather than individuals in its implementation. SGSY was launched in April 1999 after amalgamating the IRDP and its supplementary programmes DWCRA and TRYSEM into a single self employment programme. The aim was to promote micro enterprises and help the rural poor into self help groups (SHGs). It includes capacity building, training, planning of activity clusters, infrastructure development, financial assistance through bank credit, marketing support, etc. The scheme is centrally sponsored with states contributing 25% of the cost. The reservation within the target group was exactly the same as in the IRDP, namely, 50% for SC/STs, 40% for women and 3% for the disabled. In addition, among the groups formed 50% should consist only of women. The subsidy is a uniform 30% of the project cost subject to a maximum of Rs7,500 for individual projects. For SC/ST

projects the limit is higher at 50% of the project cost up to a maximum of Rs10,000. For group projects the scheme funds 50% of the project cost up to a maximum of Rs125,000. The progress of the programme has been slow. In the first year, only 50% of the available funds were utilised. However, utilisation was up to 75% in the second year (2000-01). Even though emphasis shifted to assisting groups, individuals were the dominant group being assisted. According to the government, in the first two years of the programme 493,000 SHGs were formed consisting of 687,000 members. This implies an average group size of 1.39 individuals! Essentially, the SGSY is just an amalgamation of the IRDP and its supplementary programmes, with a new name given by a new government at the centre. Its target group is the same and it is administered in the same way. Therefore, all the issues that existed with the earlier programmes will exist with SGSY as well. Wage Employment Programmes The aim of wage employment programmes is to provide employment to the unemployed. Since this is usually on public works undertaken by the government, they also generate public goods and the workers are paid some basic minimum wage. Since unemployment or underemployment is often associated with the poor, these programmes are also considered important instruments of poverty alleviation. Jawahar Rozgar Yojana (JRY) This programme targets the rural unemployed and underemployed individuals who are below the poverty line. These individuals are given employment in public works at the going agricultural labour wage rate. This also helps in building up rural infrastructure. This is largely a centre-sponsored scheme with 20% of the funding coming from the state governments. In terms of coverage, landless labourers constitute 38% and SCs/STs about 54% of those assisted. On the other hand, women, who have a 30% reservation, obtained only about 17% of the funds. On average this programme generated 5 person days of work for the assisted families during the 30 days preceding the date of the survey conducted by the department of Rural Development in 1992. However, according to the concurrent evaluation done in 1993-94, this figure was 11 person days (Government of India, 2001). The evaluation, however, notes that in some poorer states like Madhya Pradesh and Orissa, JRY workers got less than 10 days per month (Table 7). In 1993-94 the total employment generated was 1000 million person days (Table 8). According to the Planning Commission, programmes such as the JRY should generate about 3000 million person days of employment. This would suggest that these programmes are only covering about one third of the target. The concurrent evaluation found that the assets created under the programme were useful and of good quality. Panchayat functionaries were the executing agency in 77% of the works and they maintained 70% of the works as well. Roads and buildings dominated the public works undertaken. However, other evaluations have found that resources were spread thinly so as to increase the coverage of the programme. Assets

built had no connection with local needs. The timing of works was often during the peak agricultural season, when unemployment is typically low. Corruption was rampant with fudging of muster rolls and books being common. The concurrent evaluation further found that 82% of the workers belonged to poor households. Thus, the leakage at the end of beneficiaries was limited. However, this figure varies a lot across states. For instance, in Andhra Pradesh 52% of the workers were non-poor. Ironically, the number was high in poor states like Bihar and Uttar Pradesh, where such programmes are most needed. In Assam, Gujarat, Orissa, Rajasthan, Tamil Nadu and West Bengal the leakage was less than 10%. Table 8 gives the progress of the programme since its inception. After 1993-94, employment generated fell steadily, so that by 1999-00 it was only about 250 million person days as compared to the 1000 million person days in 1993-94. Throughout the period more than 50% of the employment generated went to SC/STs. Among the other groups that benefited were the landless. Since these groups are the poorest in the rural population, the programme was successful in targeting the poor. The JRY was restructured and renamed the Jawahar Gram Samridhi Yojana (JGSY) in April 1999. The scheme is centrally sponsored with states contributing 25% to the cost. It was implemented by gram panchayats for the creation of durable community assets and providing employment to the rural poor. The panchayats could take up works of up to Rs50,000 independently. Since the focus of the programme was to build rural infrastructure, 15% of the funds were to be used for maintenance of assets built under the programme. Priority was to be given to public works that developed infrastructure for SC/ST habitations, education and health. Twenty two and a half per cent of the funds were earmarked for providing individual assets to the very poor among the SC/STs. This multi-objective approach led to the usual, familiar problems. Also, in practice gram panchayats received barely 10% of the allocated funds which were then left unused since no real assets could be built with such meagre resources at the village level. Employment Assurance Scheme (EAS) This scheme was started in 1993 for implementation in 1,778 identified backward panchayat samitis of 257 districts situated in drought prone, desert and hill areas. In 1997-98 it was extended to all 5,448 rural panchayat samitis of the country. The scheme is centrally sponsored with states contributing 25% to the cost. The programme was set up to provide assured employment of up to 100 days of unskilled manual work for residents of these areas in the age group of 18 to 60 years. The objective was to supplement the incomes of poor households. The evaluation of EAS by the Planning Commission revealed many problems with the implementation of the scheme. Utilisation of funds was extremely low due to untimely release of funds from the centre to the DRDAs, from the DRDAs to the blocks and also due the states' inability to generate matching funds. Coverage of both villages and the target group was far from what was expected--only 32% of the villages and 5% of the target group were covered. The majority of EAS beneficiaries received less than 30 days of employment as against the stipulated 100 days. This could have been because

many of the projects undertaken under the EAS were relatively more capital intensive. The Swarna Jayanti Gram Rozgar Yojana (SGRY) was launched in September 2001. The JGSY and EAS were integrated under this scheme from April 2002. The aim of the programme is to provide wage employment and food security along with creation of durable community, social and economic assets. The Food for Work Programme was launched in February 2001 for five months and then extended. The programme is implemented in eight states (Gujarat, Chhattisgarh, Himachal Pradesh, Madhya Pradesh, Maharashtra, Orissa, Rajasthan and Uttaranchal) with the aim of providing wage employment to augment food security in drought affected areas. Wages are paid partly in the form of food grains (up to 5 kg per man day) and partly in cash, such that the total is the minimum wage. The centre contributes the food grains to the scheme and the states contribute the cash payment. The National Food for Work Programme was launched in November 2004 in 150 backward districts of the country. This is a 100% centrally sponsored scheme. The National Rural Employment Guarantee (NREG) Act which has recently been passed has many features in common with the above wage employment schemes. Under the NREG the government will guarantee 100 days of employment per year to all rural households. The employment will be at the statutory minimum wage of agricultural labourers. This is to ensure self-selection and avoid the pitfalls of targeting and monitoring faced by other social welfare programmes. However, in many states the prevailing market wage for agricultural rural households is less than the minimum wage. This will create problems with self selection (Ramaswami and Wadhwa, (2005)). As in the case of the JRY, employment generated will be used to build community infrastructure assets. Therefore, all the problems that have plagued other such programmes will also emerge here. Public Distribution System (PDS) The government provides six essential commodities--wheat, rice, sugar, edible oils, kerosene and soft cake--at subsidised prices through the PDS. Till the late 1970s, the PDS was restricted to urban areas and food deficit areas with the emphasis on price stability and providing an alternative to private trade. However, the government soon realised that, like all its other social welfare programmes, even this one could be used for other purposes, namely poverty alleviation. In the 1980s rural areas were covered and the 1990s saw a revamping of the system. Till 1997 access was universal. After 1997, it has been targeted at the poor. The PDS has been studied extensively by researchers and most of the evaluations have been negative . The impact of the programme on the poor has been less than expected. Parikh (1994) finds that for every rupee spent less than 22 paise reaches the poor. Machaiah (1995) puts this figure at a measly 13 paise. Radhakrishna et. al. (1997) find that the relationship between poverty and PDS off-take is weak across Indian states. States like Andhra Pradesh and Kerala that are implementing subsidised food programmes show a high off-take while poor states like Bihar, Orissa and Madhya Pradesh have relatively low off-takes. At the same time there has been significant diversion of commodities from the PDS. A

study by Tata Consultancy Services found that there was a 36% leakage in the case of wheat, 31% in rice and 23% in sugar. Gangopadhyay, Ramaswami and Wadhwa (2005) find the leakage to be 50% in the case of kerosene. In 1997 the PDS was converted to a targeted programme (TPDS). BPL surveys were used to issue special cards to BPL families. As the scheme stands now, BPL families are entitled to 25 kg of food grains per family per month at a price that is 48% of the economic cost to the government. Families above the poverty line (APL) can also buy from the PDS, but at prices that are 70% of the economic cost. Apart from targeting issues, very often the poor are required to buy their entire entitlement in one shot and do not have enough cash to do so. A World Bank study (1999) has also pointed out that the quality of food grains available through the PDS is often poor. The grain is at least two years old, 30% of it is 2 to 4 years old and some of it is as old as 16 years. All these problems with the PDS have prompted many to suggest other more efficient and cost effective ways like food stamps to transfer food to the poor (Ramaswami (2002)). An Evaluation of the Existing Programmes There are a few features that all poverty programmes must satisfy. First, poverty as measured in India is a household characteristic, and not an individual characteristic. For instance, the official data used for poverty calculations dos not allow one to estimate the intra-household disparities in consumption. This data set gives the household's total consumption expenditure, not that of the individuals in the household. Therefore, a person is poor because the household she belongs to is poor. Consequently, making the individual rise above the poverty line is not feasible unless the household consumption level rises above the poverty line. Consider two persons, similar in their individual characteristics, but belonging to households that are very different from each other. One household may have more children than the other, or more dependent adults. Similar programmes for both may allow one of these households to rise above the poverty line, but not the other. Therefore, targeting by household characteristics, rather than that of individuals, is the better alternative. Another important thing to keep in mind is the purpose for which the poverty programmes are devised. The focus of the programme should not be the household, but only the poverty status of the household. In other words, a poverty alleviation programme should not also try to achieve objectives like family planning, correcting gender biases, etc. Multi-pronged objectives completely dilute the original purpose of the programme. For instance, in the IRDP, 40% of the beneficiaries had to be women. This becomes a target for the implementing authority. In the process, poverty alleviation itself becomes secondary. Given poor monitoring techniques, it allows the women of not so poor (or even non-poor) households to get IRDP assistance, denying males in genuinely poor households. This is not to say that there is no gender bias in India. Indeed, Gangopadhyay and Wadhwa (2004) show that widow-headed households (as opposed to woman-headed households) are relatively poorer on average. However, that should be tackled as a separate issue. If the government and the researchers are serious about removing gender bias, they should think of innovative policies that attack gender bias directly, rather than piggy-back riding on

other established programmes where the objectives are entirely different. The basic point is that poverty alleviation programmes should be targeted at poor households, and their only objective should be the alleviation of household poverty. Other social objectives should be tackled separately. The reason for this is a simple one: otherwise, there will be leakages. If a poverty alleviation programme has more than this one objective (of poverty alleviation), it is difficult to evaluate the performance of the implementing authority. Since more than one target has to be met, it gives an obvious incentive to the authority concerned to meet the easiest one first. This dilutes the basic motive of these programmes, which is that of poverty alleviation. A single objective programme is much easier to monitor, compared to one that has many, often competing, objectives. If one looks at the history of poverty alleviation programmes in India, we see this story over and over again. Most poverty alleviation programmes have had many objectives. This results in reservations and quotas within target groups which have to be fulfilled and/or targets to be met in terms of number of assets built under the programme in the case of wage employment programmes. These reservations and targets make the task of the monitoring agency easier. Instead of trying to assess the impact of the programme on poverty, which is always difficult, the programme is evaluated on whether these targets were met or not. Since programmes typically have so many objectives, it is likely that some will not be met. The result is that the programme gets restructured, which means that it is given a new name and maybe merged with another programme, and the cycle continues. Traditional poverty alleviation programmes, like the ones discussed above, are implemented by the Government since they are implemented at the national level and require huge resources. International organisations, NGOs and the private sector have, however, tried to introduce more innovative programmes that are often market based and involve community participation. These programmes are usually implemented on a small scale and have been successful to a large extent. One thing to keep in mind when evaluating these programmes is whether they can be replicated on a large scale. For a large and poor country like India, this is absolutely essential. Some of these programmes are discussed below. Other Programmes Micro-Finance Institutions Despite the large size and depth of the Indian financial system, and the thousands of bank branches across rural India, the poor in rural India still have very little access to formal finance. A recent World Bank-NCAER Survey on rural access to finance indicates that 70% of the rural poor do not have a bank account and 87% have no access to credit from a formal source. Informal sector lenders remain a strong presence in rural India, delivering finance to the poor on frequently extortionary terms. Access to other financial services such as savings accounts, life, health and crop insurance also remains limited for the rural poor. The failure of India's rural banks to deliver finance to the poor may be attributed to a combination of factors. Banks find serving the rural poor a high-risk, high-cost

proposition. As far as the poor rural borrower is concerned, banks do not provide conveniently accessible and flexible products and services. Transaction costs are high including cumbersome procedures, hefty bribes, and long processing times. Also, the rural poor can rarely come up with collateral for larger loans. As a result the poor have had little or no access to formal credit.

strong efforts must be made to reform the regional rural banks and commercial banks in rural areas. The focus should be on improving the efficiency of the sector and designing services and products appropriate for small clients. Indeed, India's vast network of rural banks potentially presents a tremendous advantage, and one on which the country could capitalise in delivering finance for the poor.

The past decade, however, has witnessed the emergence of micro-finance institutions, primarily due to the efforts of NGOs. The model seeks to create links between commercial banks, NGOs, and SHGs. The government established the necessary policy framework for SHG-bank linkage very early on in the process and introduced a range of measures to encourage banks to lend to SHGs. The National Agricultural Bank for Rural Development (NABARD) has the task of leading and coordinating SHG-bank linkage.

South Asia Poverty Alleviation Programme (SAPAP) SAPAP was a response to the Dhaka declaration of the SAARC Summit in 1993 on eradicating poverty by 2002 in all SAARC countries. The programme was assisted by the UNDP and its objective has clearly not been fulfilled. In India it was implemented in three poor, drought prone districts of Andhra Pradesh--Anantpur, Kurnool, and Mahabubnagar.

Evidence suggests that the model has effectively targeted poorer segments of the rural population. Surveys indicate that nearly 54 percent of SHG members are from the poorest groups--landless and marginal farmers. Recent analyses show that access for poor households to loans under SHG-bank linkage has improved asset position and increased savings. In 2003, the number of SHGs linked to banks was close to 800,000, compared to just 33,000 in 1999. SHG-bank linkage reaches some 12 million women and their households. However, only about 5% of the rural poor are covered by these programmes. Other institutional structures for micro-finance, notably independent, specialised micro-finance institutions (MFIs) based on the Grameen model in Bangladesh, have also emerged in recent years. But with a few exceptions, most Indian MFIs are small in size, region specific (concentrated in the south) and with a limited collective outreach. In addition to the relatively small scale of their operations, Indian MFIs also tend to have a narrow scope, offering a limited range of financial services beyond credit--only a handful offer savings or insurance as a service. The limited scale and scope of Indian MFIs, relative to the MFI giants in Indonesia and Bangladesh, is largely due to the policy and regulatory framework. If micro-finance is to be effectively scaled up in India, attention needs to be given to various areas. First, the SHG movement has now reached a scale where NABARD needs to revisit its strategy, with an emphasis on how to ensure that high quality groups are promoted and maintained, with adequate attention to financial sustainability of SHG lending. Second, an enabling policy, legal and regulatory environment is urgently needed, particularly for the growth of MFIs. Third, a clear targeting of clients is essential, as in any other social welfare programme. It will always be more profitable to serve richer clients with larger loans. However, that would defeat the entire purpose of micro-finance. Fourth, and most importantly, a long term strategy is needed to serve the financial needs of the rural poor. While micro-finance can, at a minimum, serve as a quick way to deliver finance in the interim, the strategy should be to 'graduate' micro-finance clients to formal finance institutions where they can access standard 'individual' loans, possibly on a fully commercial basis. If the idea of graduation is a serious one in India,

SAPAP is based on two premises, namely, that the South Asian state has been captured by an elite which has appropriated public resources for private gain, and that the state is misgoverned and unaccountable. As a result the poor pay a high transaction cost to access public resources. The poor are not capable of augmenting their production capabilities through enhanced savings and skill formation and any gains they do make are insecure due to a variety of risks emanating from their disadvantaged stature in society. SAPAP, therefore, proposes a process of social mobilisation as a mechanism to organise the poor into SHGs at the grassroots. The collective body facilitates interaction with the government for better access to public resources and acts as a pressure group to keep the government accountable. SAPAP was implemented in collaboration with local NGOs and the state government. The programme has covered 66,000 households that comprise 64% of the target group. Average participation in the SHGs formed under the programme is fairly large at 15{%?}and as many as 5,201 such groups have been formed.8 These groups are federated into 380 village organisations (VOs). Women constitute 90% of the participation in the programme and female-headed households form 17% of the members. Seventy two per cent of the members were poor at the time of group formation.9 The programme has been extensively studied by researchers.10 Among the benefits cited are: l Increase in incomes of participants, though this has been more for the relatively better off among the poor. l Poverty was reduced among 69% of the members. The very poor that constituted 48% of the members were reduced to 18%. However the impact was less among dalits and female-headed households. l Productive assets, mostly livestock, were acquired. Households that had pledged land earlier were able to redeem it. l Members no longer had to rely on usurious money lenders for loans. Negotiations by SHGs to obtain loans from banks, the government and NGOs and the establishment of a women's own bank enhanced the financial position of households.

E-choupals A majority of India's population relies on agriculture for its livelihood. While Indian agriculture has progressed considerably since the days of the Green revolution in the mid-1960s, farmers form a large part of the poor population. Land holding size has been falling since, and Indian agriculture is dominated by small farmers--average farm holding is about a hectare of land (Table 4). As a result, they do not have bargaining power when they buy farm inputs or sell their produce. More importantly, they do not have access to real-time information on prices and weather or news that impact their incomes. There is no market mechanism that brings them customised knowledge to improve their farm yields and the weak rural infrastructure compounds these problems. In reality, the only real option for most farmers is a local middleman who offers them a complete solution--credit, inputs, market access--but appropriates a larger share of the profit for himself. Under eChoupal, ITC, a private corporation, has set up Internet kiosks in villages. Farmers selected from within the community (sanchalaks) are trained and manage these kiosks. Sanchalaks help farmers learn online the best farm practices; the prevailing prices, and price trends for the crop in the Indian and world markets; and the local weather forecast. Access to this information is absolutely free of cost to any interested farmer. Farmers can order quality agricultural inputs online with the help of the sanchalak. Virtual aggregation of such demand effectively reduces the cost of these inputs and ITC ensures that at least three input suppliers are enlisted for each category of input: seed, chemicals, and nutrients. Farmers have the freedom of choice to decide which company's inputs to buy or, if they so desire, just go to any dealer outside the system, after accessing information and knowledge through eChoupal. Additional services include sale and hire of farm equipment such as tractors and harvesters, soil testing, insurance, and a panel of specialists to answer specific queries of individual farmers by email. In the government's auction channel, farmers discover the price for their produce after they have incurred the cost of transportation. Therefore, they end up selling even if they are not happy with the price. By contrast, under eChoupal the price is known in the village before farmers incur any transportation cost. In the process, many overheads such as multiple transportation, handling, and bagging are avoided. As in the case of inputs, farmers are free to sell their produce to ITC or sell through the government auction centre. Farmers selling directly to ITC through eChoupal realise at least a 2.5% higher price for their crops than they would receive through the government auction system because of lower transaction costs. Most farmers using the eChoupal system estimate their total incremental income at over 20%. At the same time, ITC benefits from lower net procurement costs. Procurement costs are about 2.5% lower because of the saving in the commission it would otherwise pay to traders who serve as its buying agents at the government auction. ITC also earns service charges from all participating companies. Companies find it advantageous to participate in the eChoupal system instead of setting up more expensive proprietary distribution systems or being kept out of the rural market

altogether because of high establishment and operating costs. The investment in hardware at each kiosk costs about US$3,000. An equal amount is spent on back-up services that include web portals, training, and communication costs. ITC estimates a payback period of five years on its total investment in the eChoupal initiative. At the end of 2003-04, eChoupal services reached more than 2 million farmers in about 24,000 villages through 4,200 kiosks. Expanding at the rate of seven kiosks every day, ITC intends to scale up the initiative to reach 10 million farmers in 100,000 villages by 2010. EChoupal's potential is being tested through pilot projects in water management and cattle health management with the help of nongovernmental organisations. This new paradigm underscores the critical role that for-profit private enterprises like ITC can play in scaling up poverty reduction. 4. Poverty and Growth The Indian economy has been one of the fastest growing economies in the last two decades. During the same period, poverty has declined significantly in India (Table 1). It is also during this period that the Indian economy embarked on an ambitious programme of economic reforms. It is, therefore, very tempting to attribute both the high growth rate and the poverty decline to the process of liberalisation. However, given that the majority of India's population lives in rural areas and is dependent on agriculture for its livelihood, the agricultural growth rate may have a closer connection with the poverty decline than anything else. In 1980-81, agriculture, industry and services constituted 39.7%, 17.6% and 42.6% of GDP respectively. Over the next two decades, the sectoral composition changed as industry and services grew much faster than agriculture. The shares of the three sectors changed to 23.9%, 22% and 54%, respectively, in 2000-01. Agricultural GDP grew at a healthy rate of 3.4% in the 1980s but at only 2.5% in the 1990s. Industry and services grew at 7.5% and 6.2% in the 1980s and at 5.6% and 7.1% in the 1990s. Since the policies responsible for agricultural total factor productivity (TFP) growth tend to be quite different from those responsible for TFP growth in industry and services, it is clear that different forces were at work during the two decades. According to the NSS data, the share of agriculture in the male (female) labour force has come down from 59.6% (74.4%) in 1983 to 52.9% (72.3%) in 1999-00, while that of services has increased from 26.2% (14.7%) to 32.1% (15.9%). The share of manufacturing has changed very little over the 16 years. There is something remarkable about these numbers: the structural transformation of the labour force has been very slow in India (compared to East Asia) and the fast growth in the nonagricultural sectors' GDP has not translated into fast employment growth in those sectors. This is especially true of manufacturing, which, despite a 6% growth rate during this period, was not able to absorb a greater share of the labour force than it did in 1983.11 The reduction of the share of agriculture in the labour force corresponds closely with the increase in the share of the service sector. The fact that the GDP growth rate increased and the headcount ratio decreased during the same time period does not mean that the two outcomes are results of the same process. It is easy to see how the reforms that expanded the entrepreneurial freedoms

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in the industrial and service sectors caused the growth of TFP in those sectors. However, the reforms hardly touched the agricultural sector. TFP growth in agriculture in the 1980-2000 period may not have had much to do with reforms. It could have been due to a completely independent process, such as through the diffusion of HYV seeds to the eastern states or through a shift to more profitable crops as a result of better access to infrastructure facilities. There is a general consensus in the literature that agricultural productivity increase has a significant impact on poverty through an increase in agricultural wages. Burgess and Venables (2003), Datt and Ravallion (1998), Eswaran, Kotwal, Ramaswami, and Wadhwa (EKRW) (2005), Foster and Rosenzweig (2003) all attest to it. Where there is not a consensus is the relative contribution of agricultural productivity increase to poverty decline. NSS employment data suggest that the non-farm sector has failed to shift a significant amount of labour from farm labour. In fact, land-to-labour ratios decreased in many states between 1983 and 1999 (EKRW (2005)). If farm TFP had not increased, agricultural wages would have fallen. However, agricultural wages (all India average) have increased by about 60% over the 16-year period. Part of this increase is due to TFP growth--in both the farm and non-farm sectors--and part because of the additional use of inputs like capital and fertiliser, which raise the productivity of labour. EKRW (2005) decompose the impact of TFP growth in the farm and non-farm sectors on agricultural wages as follows: If employment in non-farm sectors had not increased at all, the farm sector would have had to absorb the increased numbers in the labour force. They, therefore, give credit to the non-farm sector to the extent that this did not happen. In other words, for a given population growth rate, how much lower (in percentage terms) wages would have been if the non-farm sector had not grown is a good measure of the relative contribution of non-farm TFP growth. By this measure, they find that the relative contribution of TFP growth in the farm sector to be much larger than that in the non-farm sector. EKRW (2005) also examine the relevance of education in the context of poverty decline. NSS data show clearly that the probability of getting employment in the nonfarm sectors is much higher for those with secondary school education. The few jobs that open up in non-farm sectors go mostly to younger cohorts with some education. The only way for the older and illiterate workers to climb out of poverty is through farm TFP growth. EKRW (2005) also investigate the extent to which the growth of the non-farm sector has impinged differentially on the genders. Even the relatively small decline in the share of employment in agriculture has been mainly in favour of males; in aggregate, the share of agriculture in female employment has been relatively stagnant. This is partly because growth in the non-farm sector has tended to absorb educated workers, and Indian females are, on average, less educated than males. To the extent that escape from poverty is tied to moving away from the agricultural sector, females are at a disadvantage. In view of the limited avenues available to them for increasing their

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incomes, females appear to have been even more dependent on agricultural TFP growth than males. 5. Conclusion In this paper we have reviewed various poverty alleviation programmes in India. A common problem with these programmes has been a multiplicity of objectives. Implementing agencies, trying to meet these multiple objectives, often end up meeting none. A clear single point objective should be viewed as a must for any social welfare programme. This makes it easy to evaluate and, therefore, easy to fix if the objective is not being met. However, poverty alleviation programmes are only an interim solution to the problem. In the long run, the poor have to participate in the growth process in order to benefit from it. Since the 1980s India has been going through a process of economic reform. Poverty has also fallen significantly in the last 25 years. However, much more needs to be done. Even today a majority of the Indian people relies on agriculture for its livelihood and 75% of its poor live in rural areas. Add to this the fact that growth in the non-farm sector has not absorbed a lot of the agricultural labour force, and the role of agricultural TFP becomes crucial. Reforms, therefore, need to address the issue of productivity in agriculture which lagged in the 1990s. Finally, the poor are poor because they do not have assets or access to assets. Improving access for the poor to physical and human capital is the other area that needs attention. Labour in the non-farm sector commands higher wages than in agriculture. However, work in the non-farm sector requires skills and human capital that the poor do not have. Therefore, education--in terms of learning and not enrolment--becomes vital to any long run strategy to get rid of poverty. Endnotes 1. The figures reported for 1999-00 are the official figures. These estimates have been a source of a huge debate due the change in the survey design in 1999-00. Researchers have argued that the rate and direction of change in poverty in the 1990s cannot be established in a straightforward way since the 1999-00 estimates are not strictly comparable with the 1993-94 estimates. Adjustments have to be made to make the surveys comparable and this has generated a large debate about the merits of different types of 'adjusted' poverty measures. For more details see, Deaton and Kozel (2004). 2. Ahluwalia (1990). 3. The figures for education in Table 4 are among adults aged 18 years and older. 4. Gangopadhyay and Wadhwa (2004). 5. Since the income criteria is really the ideal way to establish eligibility for poverty alleviation programs, many states in India have undertaken BPL (below poverty line) surveys, so that BPL households can be easily identified. 6. From its inception till it ended in March 1999, about 54 million families had benefited from the IRDP. 7. The total number of youth trained under the program during its existence was 4.6 million. 8. Outreach (2001). 9. UNDP (1998). 10. See e.g., Outreach (2001), Mahendra Dev et. al (2002), Ranjani et. al. (2002) and Radhkrishna and Ray (2005). 11. Employment shares are based on the daily status classification of activity.

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References l Ahluwalia, Montek S., (1990), “Policies for Poverty Alleviation,” Asian Development Review, 8(1). l Burgess, R. and Venables, A., (2003), “Towards a Microeconomics of Growth,” mimeo, London School of Economics. l Datt, Gaurav. and Martin Ravallion, (1998), “How Important to India's Poor is the Sectoral Composition of Economic Growth,” World Bank Economic Review, 10(1), 1-25. l Deaton, Angus and Valerie Kozel (eds), (2004), The Great Indian Poverty Debate, Macmillan: New Delhi. l Dreze, Jean, (1990), “Poverty in India and the IRDP Delusion,” Economic and Political Weekly, 25(39), 95-104. l Eswaran, Mukesh, Ashok Kotwal, Bharat Ramswami, and Wilima Wadhwa, (2005), “The Impact of the Non-Farm Sector on Earnings and Gender Disparities in India: 1983-99,” mimeo. l Foster, Andrew and Mark Rosenzweig, (2003), “Agricultural Productivity Growth, Rural Economic Diversity, and Economic Reforms: India, 1970-2000,” mimeo. l Gangopadhyay, Shubhashis and Wilima Wadhwa, (2004), “Are Indian Female Headed Households More Vulnerable to Poverty?” mimeo. l Gangopadhyay, Shubhashis, Bharat Ramaswami and Wilima Wadhwa, (2005), “Reducing Subsidies on Household Fuels in India: How will it affect the poor?” Energy Policy, 33, 2326-36. l Mahendra Dev, S., S. Galab, M. Gopinath Reddy, K. S. Reddy, C. Ravi, K. S. Babu, and G. K. Mitra, (2002), Baseline Survey Report in Sustainable Livelihood Framework, prepared for the Society for Elimination of Rural Poverty, Centre for Economic and Social Studies, Hyderabad. l Machaiah, M.G., (1995), “13 paise out of a Rupee Spent on PDS Reaching the Poor: A Study,” Indian Express, June 30. l Outreach, (2001), South Asia Poverty Alleviation Programme: Policy Lessons Emerging in Andhra Pradesh in India, Report of the study commissioned by UNDP, Hyderabad. l Parikh, K. S., (1994), “Who Gets How Much from PDS: How Effectively Does it Reach the Poor?” Sarvekshana, 17(3), 1-34. l Planning Commission (2001), Report of the Working Group on Rural Poverty Alleviation Programmes for the Tenth Five Year Plan (2002-07), Government of India, New Delhi. l Radhakrishna, R. and C. Ravi, (2004), “Measurement of Changes in Economic Welfare in India: 1970-2001,” Journal of Quantitative Economics, 2(2). l Radhakrishna, R., and Shovan Ray, (2005), eds Oxford Handbook of Poverty in India, Perspectives, Policies, and Programmes, Oxford University Press: New Delhi. l Radhakrishna, R., K. Subbarao, S. Indrakant and C. Ravi, (1997), “India's Public Distribution System: A National and International Perspective,” World Bank Discussion Paper No. 380. l Ramaswami, Bharat, (2002), “Efficiency and Equity of Food Market Interventions,” Economic and Political Weekly, 37(12), 1129-39. l Ramaswami, Bharat and Wilima Wadhwa, (2005), “EGS: Getting it Right?” Economic Times, March. l Ranjani, K. M., K. Raju and Amitha Kamath, (2002), Towards Women's Empowerment and Poverty Reduction: Lessons from the Participatory Impact Assessment of South Asia Poverty Alleviation Programme in Andhra Pradesh, India, Report of the study commissioned by UNDP, Hyderabad. l Tendulkar, S. D., (2002), “Economic Inequalities and Poverty in India,” in Uma Kapila eds, Indian Economy Since Independence, Academic Foundation: New Delhi. l UNDP, (1998), South Asia Poverty Alleviation Programme, Progress Report, 1996-98, Hyderabad World Bank (1998), “Reducing Poverty in India: Options for more Effective Public Services,” Country Study.

Table 1: Incidence of Poverty in India Year

Poverty (%) Rural Urban

1956-57 1957-58 1958-59 1959-60 1960-61 1961-62 1963-64 1964-65 1965-66 1966-67 1967-68 1968-69 1969-70 1970-71 1972-73 1973-74 1977-78 1982-83 1987-88 1993-94 1999-00

54.1 50.2 46.5 44.4 38.9 39.4 44.5 46.8 47.4 56.6 56.5 51.0 49.2 47.5 49.4 56.4 53.1 45.6 39.1 37.3 27.1

40.4 39.4 42.5 45.7 46.4 48.4 48.3 45.5 44.4 41.5 44.6 49.6 45.2 40.8 38.2 32.4 23.6

Number of Poor (millions) Rural Urban Total 182 172 162 158 141 145 171 184 190 231 236 217 214 210 227 261 264 252 232 244 193

32 32 37 42 44 47 49 47 48 46 53 60 65 71 75 76 67

173 177 208 226 234 278 285 264 262 256 280 321 329 323 307 320 260

Source: Tendulakar (2002) and Radhakrishna and Ray (2005) Table 2: Indices of Poverty and Inequality Year

Head Count Ratio

Poverty Gap Index

HCR

PGI

Gini Coefficient at 1993-94 price structure

Rural

Urban

Rural

Urban

Rural

Urban

1973-74

56.4

49.6

16.24

15.51

28.7

31.9

1977-78

53.1

45.2

17.55

18.35

29.5

33.7

1982-83

45.6

40.8

13.35

12.88

30.0

34.1

1987-88

39.1

38.2

10.09

11.24

29.4

34.5

1993-94

37.3

32.4

7.82

8.36

28.5

34.4

1999-00

27.1

23.6

5.34

5.02

26.7

34.8

Source: Economic Survey 2001-02, Radhakrishna and Ravi (2004) and Radhkrishna and Ray (2005).

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104

Table 5: Progress under IRDP

Table 3: Incidence of Poverty across Indian States State

Rural

Urban

Total

1973-74

1993-94

1999-00

1973-74

1993-94

1999-00

1973-74

1993-94

1999-00

Andhra Pradesh

48.41

15.92

11.05

50.61

38.33

26.63

48.86

22.19

15.77

Assam

52.67

45.01

40.04

36.92

7.73

7.47

51.21

40.86

36.09

Bihar

62.99

58.21

44.30

52.96

34.50

32.91

61.91

54.96

42.60

Gujarat

46.35

22.18

13.17

52.57

27.89

15.59

48.15

24.21

14.07

Haryana

34.23

28.02

8.27

40.18

16.38

9.99

35.36

25.05

8.74

Karnataka

55.14

29.88

17.38

52.53

40.14

25.25

54.47

33.16

20.04

Kerala

59.19

25.76

9.38

62.74

24.55

20.27

59.79

25.43

12.72

Madhya Pradesh

62.66

40.64

37.06

57.65

48.38

38.44

61.78

42.52

37.43

Maharashtra

57.71

37.93

23.72

43.87

35.15

26.81

53.24

36.86

25.02

Orissa

67.28

49.72

48.01

55.62

41.64

42.83

66.18

48.56

47.15

Punjab

28.21

11.95

6.35

27.96

11.35

5.75

28.15

11.77

Rajasthan

44.76

26.46

13.74

52.13

30.49

19.85

46.14

27.41

Tamilnadu

57.43

32.48

20.55

49.40

39.77

22.11

54.94

35.03

21.12

Uttar Pradesh

56.53

42.28

31.22

60.09

35.39

30.89

57.07

40.85

31.15

West Bengal

73.16

40.80

31.85

34.67

22.41

14.86

63.43

35.66

27.02

India

56.44

37.27

27.09

49.01

32.36

23.62

54.88

35.97

26.10

Year

Total

SC/ST

Women

families

(million)

(%)

(million)

(%)

1990-91

2.90

1.45

49.90

0.90

30.88

1991-92

2.54

1.30

51.08

0.84

33.15

1992-93

2.07

1.06

51.43

0.69

33.40

1993-94

2.54

1.35

53.01

0.85

33.64

6.16

1994-95

2.22

1.10

49.80

0.75

33.91

15.28

1995-96

2.09

1.01

48.54

0.70

33.46

1996-97

1.92

0.90

46.52

0.64

33.47

1997-98

1.71

0.79

46.40

0.59

34.33

1998-99

1.68

0.78

46.27

0.58

34.41

Source: Economic Survey 2001-02.

Source: Planning Commission (2001) and Radhakrishna and Ray (2005). Table 4: Characteristics of the Poor in India

Land (hectares)

Rural Non-Poor 1.27

Illiterate <Primary Primary Secondary Higher secondary Graduate

Education (%) Rural Non-Poor 48.35 10.91 11.16 21.93 4.67 3.00

Table 6: Rural Poverty Lines and Expenditure Classes

Poor 0.73

Poor 66.18 10.60 8.69 12.32 1.45 0.76

Urban Non-Poor 17.37 7.77 10.11 33.48 12.84 18.43

% Poor Household Type Self employed in non agriculture Agricultural Labor Other Labor Self employed in agriculture Others

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Self employed Wage/Salary Casual Labor Others

Rural 19.34 33.51 22.34 16.37 12.49 Urban 20.71 9.29 43.71 13.39

Social Group Scheduled Tribe Scheduled Caste Other Backward Class Others

Rural 38.91 30.16 21.13 13.01

1993-94

1999-00

206

328

Cut off for expenditure classes 25% 198

361

50%

269

498

75%

381

740

90%

547

1145

Mean Expenditure

331

649

Poverty Line Poor 45.18 11.56 13.19 23.73 4.11 2.22

Note: All figures are in current Rs.

Urban 32.56 32.98 23.58 10.89

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Table 7: Average Person Days of Employment Generated under JRY, 1993 -94 (During the last 30 days preceding the survey) State Average days in a month Andhra Pradesh

12.53

Assam

17.94

Achieving the MDGs in Bangladesh

Bihar

10.13

Dr Mizanur Rahman Shelley

Gujarat

10.67

Haryana

11.84

Himachal Pradesh

15.00

Jammu & Kashmir

9.65

Karnataka

12.89

Kerala

11.59

Madhya Pradesh

angladesh emerged as a free and sovereign entity in the global scenario after a bloody independence war in 1971. But almost three and half decades later, Bangladesh remains far from its aspirations. Every day the sun rises in the eastern sky to reveal the same poverty and deprivation, the same inequalities, the same squalor that has been the hallmark of our landscape for centuries.

9.34

Maharashtra

Strategic Priorities: South Asia Perspective The struggle against poverty will never succeed if it continues to be an encyclopaedic list of dos and don'ts hopelessly bereft of any sense of strategic priority. Poverty is so pervasive in South Asia that a million priorities would not exhaust the agenda. But to get the momentum going, the energies of South Asian nations have to be galvanised around a few catalytic agendas. These strategic priorities are:1

11.80

Orissa

8.58

Punjab

30.00

Rajasthan

11.02

Tamilnadu

12.30

Uttar Pradesh

12.22

West Bengal

8.52

India

11.06

Source: Planning Commission (2001) and Radhakrishna and Ray (2005).

Table 8: Progress under JRY Year

(%)

Employment Generated (million persondays)

Others

Landless

Women

26632.3

87.12

874.56

36.36

18.12

45.52

47.99

24.54

27095.9

75.38

809.20

37.57

18.57

43.86

44.36

24.59

1992-93

38787.1

81.36

782.10

38.17

18.48

43.35

45.32

24.69

1993-94

42683.3

78.78

1023.23

37.14

18.97

43.89

45.45

25.19

1994-95

44669.1

77.12

949.45

20.84

34.75

44.41

42.97

26.74

1995-96

21639.8

83.77

895.32

37.54

18.77

43.69

45.33

29.09

1996-97

24393.8

84.94

365.82

37.77

18.27

43.96

43.72

30.26

1997-98

25256.1

83.15

393.19

35.63

18.88

45.48

41.04

29.13

1998-99

20352.7

72.80

372.38

36.13

19.55

44.32

41.83

28.78

1999-00

22176.9

93.89

256.69

36.47

19.39

44.15

40.38

29.41

Expenditure

Utilization

(Rs. million)

1990-91 1991-92

% of Employment

Source: Planning Commission (2001) and Radhakrishna and Ray (2005).

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Mobilising the Power of the Poor Empowerment of the poor is the most crucial element of any poverty reduction strategy. Through empowerment, the poor can assert their rights to various resources intended for them and enhance their dignity and self-respect. Empowered poor groups can work in partnership with local governments and community based organisations in various decision-making processes and development activities. The poor are vulnerable and often have to operate under exploitative circumstances, whether in labour, credit, land or product markets. Building organisations of the poor is thus an essential prerequisite for empowering the poor. Forming groups would enable them to overcome the many obstacles they face in their social and livelihood struggles. Such grassroots organisations help the poor strengthen their 'bargaining power', achieve better tenancy rights, improve access to public resources and eliminate unpaid labour.2 Prudent Macroeconomics In all the countries in the SAARC region, economic growth and structural transformation would be accelerated within a market-friendly environment. These economies would achieve a sustainable growth path through policy reforms enhancing efficiency and productivity. In addition, resource utilisation would be increased by expansion of production to cater to export markets. The gross domestic products (GDP) of these countries are targeted to increase to 6% by the year 2010. Achieving high economic growth and meeting the challenges of development in a rapidly globalising world economy requires greater focus on prudent macroeconomic policies. There are several components to such a prudent strategy. An important focus has to be improving the knowledge sector, i.e., new technology, research and

108

development and innovations. Such a strategy would help South Asian nations adapt well to the challenges of rapid technological development and the changing global economic environment. Creating a financially healthy public sector is also crucial to ensuring growth and economic stability. Macro financial policies have to be directed towards achieving stable exchange rates, low-interest regimes and price stability. In addition, various polices are needed to strengthen the revenue flows of the governments and eliminate wasteful expenditure. Such policies would help to keep budget deficits down and keep inflation within control. Another important area for policy attention is incentives to boost foreign direct investment (FDI) and private sector investment, particularly in sectors with high growth and employment potentials. Strategies for promotion and diversification of exports fostering privatepublic partnerships as well as reforms in labour markets and the financial and power sectors must also be considered in line with the needs and priorities of each country.3 Mainstreaming the Informal Economy The growing informalisation of the labour force is an issue of great concern in South Asia. In many countries in the region, employment in the informal sector comprises a significant proportion of total employment. For example, in India the informal sector workforce accounts for approximately 93% of the total workforce. Informal employment is particularly important for women in South Asia. The informal economy contributes directly to poverty reduction in the region by securing the livelihoods of a large proportion of the population. Yet, in many countries, the contribution of the informal economy continues to remain invisible. There is a great need to raise the visibility of the workers in the informal economy and to develop a national policy framework to promote their contribution to GDP, support their livelihood and protect their welfare.

grandchildren will benefit. The world's population is projected to reach nine billion by 2050 and two-thirds of them will live in cities. The demand for water, electricity, housing, education and health facilities will be enormous and South Asia will be no exception. Without prudent policies and institutions, social and environment strain can derail any short-term progress and lead to higher levels of poverty and declining quality of life. The goal of sustainable development requires us to look at development as a multidimensional process embracing the following: l Adequate financial and physical capital. l Effective education and health policies and programmes. l Social capital and the empowerment of the poor. l Sensitive and intelligent natural resource management. l Private sector development. l Innovative technology policy and programmes. l Integration of environment considerations and protection and development of environmental quality, including in the growing urban landscape.5 Enhancing Gender and Other Equities South Asia has achieved significant progress in socio-economic development during the preceding decades, but this progress has been highly uneven. There are large and growing disparities among regional, gender, income and ethnic groups. Inequity in access to resources and social services as well as in participation in economic and political activities has been a major obstacle to faster reduction of poverty in South Asia. Thus, enhancing equity is a strategic priority if the full potential of the growth process is to be realised and the poor are not to be left further behind. Enhancing equity requires attention in many areas including gender, income levels, regions, ethnicity and cultures.6

The key concerns for a strategy to mainstream the informal economy are: i) Reducing various impediments and barriers that stop the informal sector from entering the formal economy, for example, by introduction of a low and fair taxation process. ii) Providing legal identities for informal markets and business through simple and affordable registration procedures and regulations. iii) Providing various infrastructure facilities--these may include roads and other transport facilities; formal markets; street furniture such as benches and storage containers needed by various groups of informal workers such as vendors; and water and electricity facilities needed for home-based workers. iii) Providing social protection, social security schemes and health-care for informal sector employees. iv) Developing support organisations which can facilitate enabling environments and champion the cause of the informal sector. v) Providing financial facilities, training, marketing and other inputs for informal sector entrepreneurs.4

Situation Analysis: Bangladesh The diversity of experience of the poor countries in the world is much wider and sharper than that of the rich countries. This is partly because the number of people and countries that are poor is much larger (and, socially, geographically, and institutionally, far more heterogeneous) than those that are rich. (Parnab Bardhan and Christopher Udry: Development Microeconomics,1999)

Sustainable Development Sustainable development is about improving the living standards of the people, not at the expense of future generations, but in a way in which their children and

As is now widely acknowledged, poverty encompasses deprivation in well-being, not just as measured by income or consumption poverty, but also inferior outcomes in areas like education and health, and in vulnerability and powerlessness.8 This report

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Effective, Harmonious and Co-operation Strengthening cooperation among South Asian countries in the economic, political and socio-cultural spheres is essential to accelerating economic growth and improving the welfare of the people. Such cooperation could strengthen the collective voice of the region and ensure an atmosphere of trust and harmony. Priority areas for regional cooperation include trade and investment, science and technology, energy, poverty alleviation, human resource development, agriculture and rural development and transport and communication.7

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takes this broader view of poverty, both in asking how it has evolved in Bangladesh in recent years, and in discussing measures to tackle it. Despite recent achievements, the analysis reveals that the magnitude of development challenges facing the country is daunting. Livelihood Eradication of hunger and poverty MDG: Halve between 1990 and 2015, the proportion of people who suffer from hunger According to the food energy intake (FEI) method, the poverty tendency was 44.7% in 1999 and fell to 42.1% in 2004 on the basis of the head count ratio at the national level. In the same period it fell from 43.3% to 42.1% in urban areas and from 44.9% to 43.3% in villages. According to the direct calorie intake (DCI) method, poverty fell more quickly, from 46.2% in 1999 to 40.9% in 2004.9

vital area.

(Source: Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-7.)

Table: Comparative picture of poverty tendency on the basis of FEI method and DCI method Area

National Urban Rural

Food Energy Intake (FEI) method Head Count Ratio % 1999 2004 44.7 42.1 43.3 37.9 44.9 43.3

Direct Calorie Intake (DCI) method Head Count Ratio % 1999 2004 46.2 40.9 49.9 43.6 45.6 40.1

(Source: Bangladesh economic review, 2005, p-165.) According to this method hardcore poverty also fell from 1999 to 2004, from 24.9% to 18.7% at the national level10. Table: Hardcore Poverty tendency on the basis of DCI method Hard-core Poverty (? 1805 kilo calorie %)

Area National Urban Rural

1999 24.9 27.3 24.5

2004 18.7 20.8 18.2

(Source: Bangladesh economic review, 2005, p-165.)

(Source: Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-8.)

There are also large differences in child malnutrition rates across economic groups. Child malnutrition is pervasive among the poor. More than 60% of children 6-71 months old suffering from stunting belong to the bottom consumption quintile. Contrary to expectation, however, nearly a third of children from the richest quintile also suffer from malnourishment. This suggests that factors other than income play an important role in this phenomenon.

Prevalence of Underweight Children The prevalence of moderately underweight children (6-71 months) declined noticeably from 67% in 1990 to 51% in 2000, while that of severely underweight children of the same age group fell from 25% to 13% during roughly the same period. Also, the proportion of moderately underweight children under the age of five years fell from 56% to 48% between 1997 and 2000.11

Such factors include per capita household food intake; infant feeding practices; maternal schooling and hygiene practices; access to safe drinking water, sanitation and health facilities; quality of village infrastructure; and protection against natural disasters. The presence of NGOs and public relief programmes has been found to have a strong correlation to reduction in child malnutrition in the lowest consumption quintile.12

Child Malnutrition Despite the progress achieved, child malnutrition in Bangladesh remains among the highest in the world, and more severe than in most other developing countries, including the countries of sub-Saharan Africa. The proportion of underweight children in Bangladesh is 16% higher than 16 other Asian countries at similar levels of per capita GDP. Nearly half of children are underweight or stunted, with 13%-19% being severely underweight or stunted, in terms of being more than three standard deviations below the relevant National Centre for Health Statistics (NCHS) standards. This suggests that children in Bangladesh suffer from acute short-term shortfalls in food intake as well as longer-term under-nutrition. Much remains to be done in this

Halving the proportion of people who suffer from hunger will be a challenging task. Speeding up per capita income growth and pursuing targeted safety net programmes are needed for the expansion of household food intake.13

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A comprehensive programme to address hunger should include the following interventions: 14 l Promoting food security by sustaining strong growth of domestic food production and implementing a liberalised regime for food imports. l Promoting a change in food habits to increase the nutritional intake of vulnerable people.

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l Promoting improved infant feeding practices, including breast-feeding practices. l Supporting maternal schooling and hygienic practices. l Improving access to safe drinking water, especially by addressing the threat of

arsenic contamination of underground water. l Improving access to sanitation. l Improving access to basic health facilities. l Supporting safety nets for protection against natural disasters. l Promoting partnership among the Government, private sector and NGOs in

designing and implementing interventions to promote food security. MDG: Halve proportion of people in poverty by 2015 To achieve the Millenium Development Goals (MDG), Bangladesh must reduce the proportion of its population with an income of less than one US dollar (purchasing power parity) a day from the level of 58.8% as measured in 1991-92 to 29.4%, and the proportion of people in extreme poverty from 28% in 1990 to 14%, by 2015.15 Situational Analysis: Poverty Reduction Bangladesh has made good progress since fiscal year (FY) 1992 in reducing income poverty based on the national poverty line. The country was able to lower the overall incidence of poverty from 58.8% in 1991-92 to about 50% in 2000, or one percentage point per year. Bangladesh's good economic growth performance-with overall GDP growth averaging 5% and per-capita growth averaging 3.3% per annum in 1992-2001-contributed much to this progress. This was achieved despite a rise in inequality during the 1990swith overall Gini coefficient rising from 0.259 in 1992 to 0.306 in 2000 {This statistic is also given in the section after the next one on inequality, and seems more relevant there} which partly offset the positive impact of growth. In spite of the advancement, 63 million people are poor with one-third caught in hardcore or extreme poverty.16

poverty line than at the beginning of the 1990s. It is also worth noting, however, that the distributionally sensitive measures (PG and SPG) declined relatively more rapidly than the poverty headcount rate. On average, rural areas did better than urban areas in reducing the depth and severity of poverty, which implies that growth in rural areas was more pro-poor than in urban areas. The urban poverty gap stood at 9.5% in 2000. Table: Poverty gap and Squared Poverty gap in 1999 and 2004 Area National Urban Rural

1999 Poverty gap 11.1 11.2 11.1

Squired Poverty gap 4.1 4.2 4.0

2004 Poverty gap 10.9 11.1 10.9

Squired Poverty gap 3.9 4.5 3.8

(Source: Bangladesh economic review, 2005, p-165.)

Inequality Income inequality in Bangladesh rose during the 1990s, particularly in urban areas. Inequality in the distribution of per capita household expenditure, as measured by the Gini coefficient, rose from 0.259 in 1991/92 to 0.306 in 2000.

(Source: Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-6.)

The inequality in Bangladesh is explained by the fact that around three-fifths of total income or consumption accrues to the highest two quintiles of the population, while the lowest three quintiles receive about two-fifths. The shares are comparable to other countries of the region. Rural and Urban Dimensions of Poverty Despite good progress in reducing the overall incidence of poverty in the 1990s, the absolute number of poor continues to be around 63 million, with poverty remaining largely a rural phenomenon. An estimated 85% of the country's poor--53.5 million out of a total 62.7 million poor--live in rural areas.

(Source: Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-5.)

Progress in reducing poverty incidence in the 1990s was equal across urban and rural areas, even though average per capita expenditure increased much faster in urban areas. A sectoral decomposition of the change in national poverty incidence suggests that the rural sector, with 80% of the population, contributed 78% of the total decrease in national poverty incidence between 1992 and 2000. The urban sector contributed about 13%, while migration from rural to urban areas, where poverty is lower, accounted for the remaining 9% decline.18

Poverty Gap (PG) and Squared Poverty Gap(SPG)17 Trends in the poverty gap show a drop from 17.2 in 1991/92 to 10.9 in 2004. This suggests that even among the poor, a greater share of people are now closer to the

Various empirical analyses have concluded that economic growth is the most important factor contributing to poverty reduction. Achieving and sustaining strong economic growth will require attention on many fronts, such as:

113

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l Pursuing monetary and fiscal policies that sustain macroeconomic stability. l Improving transparency, accountability and efficiency of the Government in all

key areas, including taxation, public procurement, land administration, law enforcement, administration of justice and regulation of banking, insurance and credit markets. l Enhancing government effectiveness by focusing on core state functions and delivery of public services. l Expanding national capacity to design and enforce policies, laws, and regulations that facilitate private sector investment. l Further liberalising the trade regime to exploit the advantages of the rapidly globalising world economy. l Restructuring and privatising state-owned enterprises and business activities under appropriate incentive and regulatory schemes, and reallocating public resources for the provision of high priority public goods. l Accelerating development of infrastructure in key areas--such as power, ports, roads, inland water transport, and telecommunications--that have been identified as constraints on the investment climate. l Strengthening capacity for enhanced absorption of aid resources. Health Maternal health To achieve the MDGs, Bangladesh must reduce maternal mortality from 574 deaths per 100,000 live births in 1990 to 143 by 2015,19 increase the proportion of births attended by skilled health personnel to 50% and reduce the total fertility rate (TFR) to 2.2 per woman by 2010.20 In addition to the above, a third target for Bangladesh is reproductive health (RH) services for all, which is closely linked to maternal mortality and morbidity. The indicators for RH are maternal malnutrition and median age at marriage. The target is to reduce maternal malnutrition from 45% in 2000 to less than 20% by 2015, and to increase the median age of girls at first marriage from 18 to 20 years.21 Situation Analysis Maternal Mortality In spite of the fact that maternal mortality has declined from nearly 574 per 100,000 live births in 1990 to between 320 and 400 in 2001-322 the maternal mortality ratio (MMR) in Bangladesh remains one of the highest in the world. It is estimated that 14% of maternal deaths are caused by violence against women, while 12,000 to 15,000 women die every year from maternal health complications. Some 45% of all mothers are malnourished. The population of Bangladesh is relatively young, with a third falling within the age group of 10-24 years. Nearly half of adolescent girls (15-19 years) are married, 57% of them become mothers before the age of 19, and half these adolescent mothers are acutely malnourished. Thus MMR among adolescent mothers is 30%-50% higher than the national rate. The chief causes of maternal deaths are haemorrhage, unsafe abortion, and the 'three

115

delays dynamics'. The first delay, arising mainly from poverty, is in seeking professional care; the second delay is logistical as most health centres and private clinics are located in district towns, whereas 70 percent of the population is rural based; and the third delay arises from the lack of adequate human recourses and trained personnel at the service centres.23

(Source: Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-34)

Births attended by skilled health personnel The number of births attended by skilled health personnel increased from 5% in 1990 to 12% in 2000. In the context of Bangladesh, the increase is insignificant as the majority still do not receive such services. However, there are wide variations among income groups: 40% of births in the highest income quintiles are attended by skilled health personnel, compared to only 4% in the lowest quintiles.24 Total Fertility Rate There has been significant decline in the TFR from 6.6 per thousand live births in the mid 1970s to 3.3 in the mid 1990s, with regional variations in the reduction pattern. However, in spite of a steady increase in the contraceptive prevalence rate from 45% in 1994 to 54% in 2000, TFR has plateaued, partly due to adolescent fertility, which is extremely high at 14.4 per 1000 live births. Several measures have been taken to address these problems. The Essential Obstetrics Care programme through Maternal and Child Welfare Centres was introduced in the early 1990s. Subsequently, a more holistic approach was adopted through the National Maternal Health Strategy 2001, which takes a rights-based approach to maternal health with safe motherhood as its central theme. The strategy has been integrated into the Health and Population Sector Programme, (HPSP 1998-2003) and into its follow-up the Health, Nutrition and Population Sector Programme, (HNPSP 20042006). Interventions such as safe motherhood services that provide iron, folic acid and vitamin supplements to the target population have been included in the HNPSP, with the objective of reducing maternal malnutrition to below 20% by 2015. Other interventions under this project include training programmes for skilled health personnel. Both the Government of Bangladesh and donors are giving priority to the promotion of safe motherhood from the grassroots upwards, through antenatal care, safe delivery, pre-natal care, essential obstetrical care and family planning.25 The MDG Bangladesh Progress Report (2005), jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh, identified the

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following five challenges:

children.

Challenge 1: Reduce the Total Fertility Rate If the population of Bangladesh stabilises by 2035, there will be over 40 million women of reproductive age (15-45 years) in 2015 who will be the target population for preventive and awareness raising programmes on safe motherhood. In order to further reduce TFR, studies must be conducted to analyse the causes of its current stagnation. Advocacy programmes must be introduced on population stabilisation.

This can be achieved by providing greater access to higher education for adolescent girls through scholarship and stipend programmes. Such interventions must be accompanied by advocacy and awareness raising campaigns on safe motherhood to promote changes in attitude and cultural behaviour.

Challenge 2: Reduce the maternal mortality ratio to 143 per 100,000 live births by 2015 If MMR is to be reduced to 143 per 100,000 live births by 2015, the decrease will have to be at substantial rates: l During 2005-2008, MMR must be reduced by 5.6 percentage points a year l During 2008-2011, MMR must be reduced by 7 percentage points a year l During 2011-2014, MMR must be reduced by 8 percentage points a year l During 2014-2015, MMR must be reduced by 12 percentage points a year Meeting this challenge will require the following: l Bringing about a fundamental change in knowledge, attitude and behavior

towards safe motherhood and gender equality through an advocacy campaign on safe motherhood involving 13 relevant ministries. l Increasing access to quality health facilities through public, private and NGO initiatives. l Increasing financial investments in the health sector including in skills development. l Specifically targeting the poor for reproductive health interventions, as maternal mortality and morbidity is highest in the lower income groups. l Accelerating the reduction of malnutrition, especially for females of reproductive age. Challenge 3: Rapidly increasing the proportion of births attended by skilled health personnel If Bangladesh's population is stabilised by 2035, 2.52 million children will be born in 2010, 2.56 million in 2013 and 2.6 million in 2015. The 2001 Bangladesh National Strategy for Maternal Health calls for 50% of all deliveries to be attended by skilled health personnel by 2010. This implies that 1.26 million deliveries will be attended by skilled health personnel in 2010.26 To achieve this target, there must be a rapid increase in the rate of growth of births attended by skilled health personnel, which will in turn require an accelerated increase in the number of trained personnel. Challenge 4: Increasing by two years the median age of girls at first marriage There is a significant relationship between delayed marriage and lower fertility and greater health seeking behaviour. Thus, increasing the median age of marriage of girls by two years could significantly lower adolescent fertility, reduce MMR, slow the rate of population growth, and improve the nutritional level of young mothers and

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Challenge 5: Providing reproductive services to all by 2015 In addition to the MDG global targets, Bangladesh will also attempt to: l Halve maternal morbidity; l halve maternal malnutrition; l reduce TFR to 2.2; l improve adolescent reproductive health; and l eliminate violence against women 27 In aiming for such ambitious targets some constraints need to be taken into consideration: l Reliable national estimates are not available for morbidity. Age specific female mortality rates can serve as proxies until better parameters are identified. l The picture of maternal malnutrition is bleak in Bangladesh--45% of all mothers are malnourished and only a one percentage point decline has been achieved per year. In a business-as-usual scenario, by 2015, about 25%-30% of mothers will still remain malnourished. The new HNPSP is expected to address some of the challenges relating to maternal malnutrition. l Adolescent reproductive health (ARH) has to receive increased attention to ensure an improved health life cycle, and to introduce early preventive measures to the threat of the spread of HIV/AIDS. As data on ARH is scanty, teenage (15-19 years) pregnancy and motherhood can be used as a proxy. A survey carried out in 19992000 shows teenage pregnancy to be as high as 35%. A comprehensive strategy has to be developed if it is to be almost eliminated by 2015. l Violence against women is a major concern for health, productivity, dignity and maternal mortality in Bangladesh. It is estimated that 14% of maternal deaths are caused by violence. Inclusion of this indicator when monitoring the MDGs will help raise awareness of this national problem. It will also promote quantitative methods for monitoring progress towards the elimination of violence against women. l

Child Health The mortality rate for children must be reduced from 151 deaths per thousand live births, as measured in 1990, to 50 in 201528 to meet the MDGs. Under-Five Mortality While there has been an appreciable drop in under-five death rates from 151 deaths per thousand live births in 1990 to 87 in 1999, the rate of decline has since slowed considerably, with the figure standing at 82 in 2001. From this base, it will be necessary to reduce under-five deaths by at least three per thousand live births per year to achieve the MDG by 2015.

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(Source: Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-27)

The child mortality rate is a reflection of the care, health and nutrition status of children below the age of five years and also indicates the social, cultural, and economic progress in the country. In the case of under-fives, neonatal and perinatal causes contribute to 48% of deaths. Other factors include very low rates of institutional deliveries (8.6%), low attendance of deliveries by skilled personnel (12%), and low utilisation of antenatal care (48%). More than 71% of these neonatal deaths were due to noncommunicable diseases, mainly birth-related ailments as well as neonatal tetanus. Other major causes of under-five deaths are pneumonia (18%), diarrhoea (6%), injuries and drowning (8%), and measles, with malnutrition underlying most other causes (13%). Poor care-seeking behaviour and practices are also important contributing factors. Only 8% of parents of sick children under the age of five seek care from qualified health care providers.29 An oral rehydration therapy campaign has been in effect for several decades to reduce deaths from diarrhoea. The use of oral rehydration solution increased from 62% in 2000 to 68% in 2003.

(Source: Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-28)

from 52% in 1997 to 45% in 2000, it remains at unacceptably high levels. Since 1997, the prevalence of night blindness, an early indicator of Vitamin A deficiency, has been maintained below the 1% threshold that indicates a public health problem. This success has largely been due to a Vitamin A supplementation programme, which increased coverage from 41% in 1993 to over 85% in the second half of the decade by linking the distribution of Vitamin A capsules with National Immunisation Days (NID). Coverage of iodised salt increased from 19% in 1993 to 70% in 1999, and correspondingly, the prevalence of iodine deficiency fell from 69% to 43%. While these findings are encouraging, they mask the fact that infants and children continue to consume diets that are grossly inadequate in Vitamin A, iron and other micronutrients. Anaemia, which is largely due to iron deficiency, affects about 50% of under-five children, a prevalence level that denotes a severe public health problem. Breastfeeding is rarely exclusive for the first six months of life, and complementary foods are often introduced too early or too late and are of poor quality. There is an urban-rural difference in under-five mortality rates. In 2001, the rate in urban areas was 52% {I think this should be 52 deaths per 1000 births}while in rural areas it was 89%. Similarly, there is also a difference in under-five mortality rates between boys and girls. In 2001, the under-five mortality rate for boys was 84% and for girls 81%. There has been an epidemiological transition of the mortality pattern in Bangladesh. Due to the relative decline in deaths caused by infectious diseases, statistics now reveal that injuries and accidents are also important causes of deaths. For example, 8% of all under-five deaths and 30% of total deaths among children aged 1-4 years have been found to be caused by injuries and accidents such as drowning.30 Infant Mortality The trend shows that there has been a steady decline in the infant mortality rate (IMR) from 94 per thousand live births in 1990 to 56 per thousand in 2001. About two-thirds of infant mortality is from neonatal deaths which are a direct consequence of factors such as low birth weight, pre-term delivery and birth asphyxia. It is estimated that to achieve the goal of 32 deaths per thousand live births, the current rate of decline must be sustained. That is, infant death rates must be reduced annually by at least two deaths per thousand live births between 2005 and 2015.31

Malnutrition contributes to over one half of child deaths, with low birth weight estimated to affect 30-50% of infants. Over the years, appropriate interventions have helped to reduce the proportion of underweight children from 66.5% in 1990 to 51.1% in 2000, and child stunting from 65.5% to 48.8%. In spite of this, the prevalence of child stunting and low weight is still very high according to World Health Organisation (WHO) criteria. To address child malnutrition, it is essential to improve the nutritional status of adolescent girls and mothers, because if mothers are malnourished their children are much more likely to have low birth weight, and to remain malnourished throughout their lives. Although chronic energy deficiency in non-pregnant women has declined,

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(Source: Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-29)

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Immunisation Access to vaccination has been among the foremost interventions to have helped reduce mortality rates in Bangladesh. NIDs have been observed for many years and have proved very successful. Since 2001 not a single case of wild poliovirus transmission has been confirmed in the country. The percentage of fully immunised children increased from 53% in the 1990s to 69% in 2000 but the coverage remains below expectations. In 2003 BCG coverage was 96% while measles coverage was only 69%. The reasons for the low rates from the demand perspective include drop-outs resulting from the lack of awareness of the need for immunisation, lack of information on the medical aspects of the vaccines, and distance from vaccination centres. From the supply side, the low rates arise from the absence of medical personnel in health centres, irregular review of the immunisation programme and inadequate supervision costs. To offset some of these problems, supplementary immunisation activities have been introduced and currently 86% of new-borns are protected at birth against neonatal tetanus. Since 2003, under the Expanded Programme of Immunisation, Hepatitis B vaccination has been introduced, along with the use of auto destruct syringes. The programme has been activated in seven districts and one city corporation, and by 2005 will cover all districts in the country.32 The MDG Bangladesh Progress Report (2005) identified the following challenges: Cost of immunisation The multi-year EPI plan estimates that to fully immunise the under-one population at 80% per annum will require US$57 million per year. An additional $5.2 million per year will be required for scaling up the integrated management of childhood diseases, an important component of the HNPSP that addresses childhood mortality. The nutrition component of the same programme is estimated to cost $36.9 million annually. The cost of other related programmes will add to the financial requirements. Sustaining Success Success has been achieved in Bangladesh because of the close attention paid to infectious and parasitic diseases in the past two decades. This should be maintained. Strategies: To achieve this MDG by 2015 this momentum has to be sustained by: l Consolidating and strengthening achievements in ongoing interventions that

address fundamental causes of childhood mortality. These include routine immunisation, and control of diarrhoeal diseases and acute respiratory infection. l Accelerating the pace of reduction in neonatal mortality by ensuring antenatal care, skilled attendance at birth, and emergency obstetrics care for those in need. l Enhancing the effectiveness of interventions for reducing malnutrition among children and women, with a special focus on adolescent girls, by bridging deficiencies of both macro and micro-nutrients (especially iron and iodine). l Exploring interventions required to address the contemporary causes of mortality,

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i.e., accidents and injuries, especially drowning. l Strengthening partnerships between the Government, NGOs, specialised agencies

and local government institutions. l Integrating vertical programmes for reduction of childhood mortality, such as ARI

and CDD, to achieve efficiency gains for both care seekers and providers. l Focusing on consumer awareness and communication strategies to promote

behavioural change. need-based-targeting of un-reached and un-served populations, especially for area-specific health and nutrition interventions in urban slums, the Chittagong Hill Tracts and coastal areas. l Strengthening the management information system by establishing a database for informed decision support, information gaps, consistency and veracity. l Ensuring

Affordable Health-Care Key targets for affordable health-care set by the Independent South Asian Commission on Poverty Alleviation (ISACPA) include access to primary health-care services of paramedics in every village/island; access to affordable medicine including essential and alternative medicine (i.e. Ayurvedic, Unani and homeopathy); training of rural medical practitioners, including those practicing alternative medicine; and awareness raising programmes to combat major diseases.33 Accessibility of health facilities Data from the rural community questionnaires in the 1995-96 and 2000 Household Expenditure Survey (HES) were used to assess changes in the accessibility of health infrastructure. Not all categories are comparable across the two surveys, though the ones that are do suggest improvements in various health facilities. For example, the average distance to a satellite clinic decreased from 9.9 to 8.0 km between 1995-96 and 2000, when the accessibility of private health care service providers also improved significantly. Pharmacies--the most commonly used health facilities--were also found to be more accessible. However, while community-level data on average distance to health facilities was not collected in urban areas, data from the household survey module indicate that users of government facilities in rural areas on average travel and wait 1.5 times longer than their urban counterparts. Rural residents continue to be comparatively disadvantaged in access to health facilities, though the differential appears to be considerably lower than in many other counties.34 Access to Essential Drugs According to WHO, as of 1997, at least one-third of the world's population still lacked access to essential medicines, either because they were not available, were too expensive, or because there were no adequate facilities or trained professionals to prescribe them. In poorer areas of Asia and Africa this figure may be as high as 50%. Various estimates indicate that in 1997, about 80% of the people of Bangladesh had sustainable access to affordable essential drugs. According to the Directorate of Drug Administration, in 2002, all the essential drugs in the local market were produced locally utilising about 45% of the production capacity of local pharmaceutical industries. About 85% of the raw material used in the

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local production was imported. Being a drug exporting, least developed country, Bangladesh has a unique position in the region of not being required to adhere to the TRIPS Agreement until 2016.35 Challenge 1: Average distance to health facilities should be reduced One of the major problems rural people face in getting healthcare is the distance of the health facilities. In many areas the communication system is not good. This makes it more difficult for the patient to get treatment. Challenge 2: Facilitate required equipment for treatment In many health centres, the equipment required for treatment is not available. Much of the available equipment does not work properly. This scenario should be changed immediately. Challenge 3: Facilitate the treatment of critical health problems that the people mostly suffer in all the health centres In the short-term it is difficult to get specialised doctors for all areas. But we can train health workers in some critical and common health problems, or at least make them capable of giving primary treatment and suggesting further treatment. Challenge 4: Ensuring access to essential affordable drugs The current hurdles to ensuring access to essential affordable drugs include procurement, quality control, distribution and utilisation of drugs. Strategies l More investment is required to establish more health centres and to buy the

required equipment. l A special training programme should be launched to train health workers on

critical and common health problems. l As there are capacity and resource constraints in the public sector, the

Government should do more to involve non-government institutions and grassroots organisations by contracting out provision of services for the hard-toreach poor. l The revised National Drug Policy (NDP) is expected to reiterate the commitment of the Government and the local pharmaceutical companies to ensure access to affordable essential drugs. MDG: Have halted by 2015 and begun to reverse the spread of HIV/AIDS It is estimated that the prevalence rate of HIV infection among adults (15-49 years) is less than 0.1%. As of end November 2003, the Ministry of Health and Family Welfare reported a total of 363 cases. However, as there is no functional reporting system on HIV/AIDS and the information remains incomplete, Bangladesh is classified as a low HIV prevalence country. Nevertheless, the latest surveys indicate a rapid increase in HIV among injecting drug users, from 1.7% in 2000 to 4% in 2002. Such a concentrated HIV epidemic could have far reaching implications on HIV transmission to other vulnerable populations in the community.36 The MDG Bangladesh Progress Report (2005) identified the following challenges and

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strategies to overcome the challenges: l While Bangladesh has a relatively low HIV prevalence, there are many factors that

make it particularly vulnerable to HIV/AIDS. They include socio-economic and cultural factors that can only be addressed effectively through a multisectoral and multi-dimensional approach. Sentinel surveillance remains key to following trends of HIV infection and behaviour change as well as to monitor the outcome and impact of responses to HIV/AIDS. l Essential policy review and legal reform to enhance the enabling environment and the impetus for HIV/AIDS prevention, care and support need to be promoted and facilitated by the different stakeholders. l Initiatives should be intensified to mainstream HIV/AIDS into different public and private sectors and to ensure effective leadership support and involvement at all levels in advancement of appropriate measures to deal with HIV/AIDS. l Since HIV/AIDS is a development concern, all development and health programmes such as the Poverty Reduction Strategy Paper (PRSP), Sector Wide Approach(SWAp)and HNPSP are expected to accord due prominence to HIV/AIDS. MDG: Have halted by 2015 and begun to reverse the incidence of malaria and tuberculosis To achieve this target, Bangladesh will have to halve the one million people annually afflicted by malaria and reduce the number of deaths from 1% to 0.5% by 2015. Also, by 2005, Bangladesh was to have increased the success rate of detection of tuberculosis cases under DOTS from 34% in 2000 to 70%, and the cure rate from 84% to 85%.37 Malaria Malaria is one of the major public health problems in Bangladesh. Out of 64 administrative districts, 13 are in the high-risk malaria zone. An estimated one million clinical cases of malaria are treated every year. In 2002, annual parasitic incidence was 4.2 in the high endemic districts, leading to 61,495 laboratory-confirmed cases, and 598 reported deaths. Plasmodium falciparum is the predominant infection (6171%) and An dirus the principal vector. The current programme aims to reduce by 50% the incidence of cases and the number of deaths from malaria by the year 2015.38 Scaling up the insecticide treated netting programme to achieve coverage of up to 70% of the 14.7 million high-risk population, especially in remote, poor and tribal families, remains a major challenge.39 To overcome the problem of drug resistance, effective treatment and rapid diagnostic tests need to be introduced. To be fully effective, the current programme must substantially increase the number of trained manpower and malaria experts, at various levels. Tuberculosis Bangladesh ranks fourth on the list of the 22 highest TB burden countries in the world. In 2002, the incidence of all cases and of new smear-positive cases was estimated to be 233 and 105 per 100,000 respectively. About 70,000 patients die of TB each year. Bangladesh committed to the 2005 international targets of detecting 70% and curing 85% of the detected smear-positive patients.

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Eighty four percent of cases diagnosed in 2001 were cured under DOTS. In 2002 the case-detection rate of new smear-positive cases was 34%. Of the new smear positive patients, the male to female ratio was 1:0.44, which indicated an under diagnosis of female cases. Increased detection and cure of females would have a considerable impact on maternal mortality as TB has been found to be the major cause of maternal death in high TB burden, low-income countries.40 The major challenge is to simultaneously increase case detection, maintain a high cure rate, and improve the quality of diagnostic services. This calls for strengthening the management at central, divisional and district levels, intensifying effective partnerships and collaboration, expanding diagnostic and treatment services, implementing quality assurance of smear microscopy and BCG strategies, and strengthening monitoring and evaluation. Other essentials include human resources development and uninterrupted supply of drugs and laboratory provisions. Improved Hygiene and Public Health ISCAP identifies some key targets for improved hygiene and health. These include access to safe drinking water and sanitation, raising awareness of important aspects of public and social hygiene such as washing hands after visiting latrines and avoiding spitting and defecation in the open--and effective enforcement of laws on banned substances.41 MDG: Halve by 2015 the proportion of people without sustainable access to safe water and basic sanitation In the case of Bangladesh the target is to increase coverage of safe water from 99% to 100% in urban areas and from 76% (arsenic-adjusted estimate) to 96.5% in rural areas by 2015. In addition, access to improved sanitation must be increased from 75% to 85.5% in urban areas, and from 39% to 55.5% in rural areas by 2015.42 In the case of Bangladesh, this MDG was modified to highlight the crucial role that access to water and to sanitation play in maintaining a healthy and productive population. Besides the global indicator of the proportion of population with sustainable access to an improved water source, a second indicator was included--the proportion of urban and rural population with access to improved sanitation.

Proportion of the urban and rural population with access to improved sanitation In rural areas access to improved sanitation increased from 11% in 1990 to 29% in 2002. In the case of urban areas, however, the situation has deteriorated, coverage dropping from 71% to 56%. This is mainly due to the unbridled and unplanned urbanisation that has been taking place in recent years.

(Source: Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-48)

Although technologies such as sewers, septic tanks, pour-flush latrines, simple pit latrines, and ventilated improved pit latrines contribute towards the achievement of the target, additional factors also need to be taken into consideration. For example, it is essential in the case of simple pit latrines that excreta are adequately treated before being discharged into the environment. Even in towns and cities with sewerage systems, discharges are passed untreated directly into the environment. Solid waste remains an environmental sanitation hazard, especially in urban areas. The Government recognises the importance of increasing access to sanitation. Following a major initiative that culminated in the South Asian Conference on Sanitation in Dhaka in October 2003, the Government declared its own target of achieving 100% sanitation coverage by 2010, and has allocated 2% of its annual development budget for the task.44 Sanitation scenario in Octobor 2003

Sanitation scenario in June 2005 20%

25%

Proportion of population with sustainable access to an improved water source This indicator is defined as the percentage of the population who use any of the following types of water supply for drinking: piped water, public tap, borehole or pump, protected well, protected spring or rainwater. By this definition nearly 100% of the population in Bangladesh has access to water. However, over the last few years thousands of tube-wells have been found to be contaminated with naturally-occurring arsenic at higher than WHO-recommended levels. If quality is taken into account, access to safe water drops to only 72% in rural areas. In spite of the fact that this is good coverage by developing country standards, it implies that 30 million people remain without access to safe water. Coverage in urban areas is 82%.43

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21%

42%

Non-sanitary Latrine

33% Sanitary Latrine

59%

Latrine less

Non-sanitary LatrineSanitary Latrine Latrine less 45

(Source: The Protom-Alo, October 1, 2005 ) In 2003, the occurrence of spitting and defecation in open places was 42%, but it fell to 20% by 2005.

The MDG Bangladesh Progress Report (2005) identified the following challenges. Challenge 1: Ensuring 100% coverage of safe water To be able to ensure nearly 100% coverage by 2015, at least 25 million people must gain access to arsenic-free, safe water over the next 10 years. This is a considerable challenge, since at present there is no effective solution for communities which are

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highly affected by arsenic. Technologies for removing arsenic from water are in the process of being introduced on a large scale. As each option has some disadvantage for removing arsenic, communities and individuals will have to learn to use water from different sources for different purposes, if their water demands are to be met at a viable cost. This requires a level of consumer sophistication which has not been necessary in the past. Resources will therefore be required, not only to support the installation of water sources, but also to raise awareness and train communities in appropriate water use. In the longer term, other issues are likely to arise in relation to access to safe water. In particular, there is growing concern regarding the availability of groundwater. Currently, groundwater is used widely for irrigation, leading to a lowering of the water table. A proper groundwater management strategy will be necessary to safeguard the resource. Other problems include water salinity in coastal areas. Challenge 2: Ensuring access to basic sanitation If the health benefits of sanitation are to be fully realised, good hygiene practices such as hand washing at critical times, are crucial. It is important therefore to monitor indicators that include latrine coverage, the condition and use of sanitary facilities, and the adoption of good hygiene practices. Regular national sanitation surveys can be used for tracking these indicators including the treatment of sewage and the collection and disposal of solid waste. Challenge 3: Resources needed to meet the Target It is estimated that US$64 million will be required to meet the water and sanitation goals by 2015.46 To be most effective, national processes such as the poverty reduction strategy paper, pro-poor strategy and sector development framework should coordinate efforts by the Government, NGOs and other stakeholders to achieve and even surpass the targets for water and sanitation under the various development initiatives. Sections of the population that continue to be excluded from programmes that provide access to safe water and sanitation should be especially targeted. Strategies need to ensure that the poor and marginalised, such as slum dwellers in urban areas, are supported in appropriate ways. Education The Compulsory Primary Education Act, 1990, has made primary education in Bangladesh free and compulsory for all children. The Government is committed to the goals of the Dakar Framework Education for All (EFA), which aims at achieving the MDG targets by 2015. The National Plan of Action (NPA) also aims to achieve the six EFA Dakar goals by 2015. To achieve the MDGs, Bangladesh must increase the primary school enrolment rate from about 73.3% in 1992 to 100% by 2015, increase the primary school completion rate from 62% in 1994 to 100% by 2015, and reduce the dropout rate from 38% in 1994 to 0% by 2015.47

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Enrolment in Primary/Community School for all Children Various data sources indicate that between 1994 and 2003, the primary school net enrolment rate has oscillated around 80% for children aged 6-10. While the range indicates that the rates have been slightly higher for females (83-84%) compared to males (81-82%), the female rates show a plateauing trend. The improvement in enrolment rates was due to an increase in the Government's budgetary allocation for girls' education, free primary education, massive stipend programmes at the primary level, and the Food for Education Programme. In order to promote further equity and access for underprivileged children to primary education, the Government replaced the Food for Education Programme with a fiveyear countrywide Primary Education Stipend Project. In spite of these initiatives, however, some 2.4 million children aged 6-10 are still not enrolled in primary schools. Taking into account demographic considerations and the rate of population growth, it is estimated that to meet this MDG by 2015, the primary school enrolment rate should increase annually at a rate of 1.25 percentage points for girls and 1.5 percentage points for boys.48

(Source: Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-12)

Completion of the Primary Education Cycle While drop out rates in the primary school cycle have fallen from 38% in 1994 to 33% in 2004, the rates have been found to be higher (36%) in government schools than private ones (13%). Among those who are not enrolled and those who have dropped out, a significant number come from poor households and live in rural areas, urban slums, coastal areas and the Chittagong Hill Tracts (CHT). Repetition rates remain high (39%), implying that on average, a child needs 6.6 years to complete a five-year primary education cycle. The attendance rate in 2000 was about 58%, with girls having a slightly higher (60%) attendance rate than boys (57%). Primary school completion depends on the ability of the system to prevent dropouts and successfully deliver education services. Historically there is evidence of a strong up-trend. This has to continue to achieve the targets.49 Adult Literacy Various estimates indicate that adult (15 years +) literacy during 1990-2002 ranged

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between 37% and 61%, with urban rates (64%) higher than rural (46%). In spite of women's literacy increasing steadily since 1990, male rates remained higher (61%) than female (43%) in 2000.50 Quality of Education Although primary school completion rates show an increasing trend, there is concern over the quality of education and the competency level of primary school graduates. The reasons for the lack of quality in education services include insufficient contact hours and unfavourable student-teacher ratios. The contact hours of 120 minutes per day for classes I-II and 240 minutes for classes III-V are significantly lower than those in other countries in the region. Moreover, the 59 students to one teacher ratio is unfavourable. The ratio is more skewed in government primary schools (66 students to a teacher) than in private schools (43 students to a teacher). Population demographics and Government efforts to achieve the EFA targets indicate that this unfavourable trend will increase over the years unless proper balancing measures are introduced. Current Government interventions for improving the quality of primary education are concentrated in five areas--organisational management, schools and classrooms, infrastructure development, support to equitable access, and management and monitoring.51 The Cost of Achieving theGoal In order to estimate the cost of achieving the goal, three population scenarios were considered--the population stabilising by 2035, by 2040, and by 2050. The financing was derived from three primary sources: households, government and external. In the most optimistic scenario of population stabilisation by 2035, to achieve this MDG nearly 17 million children will have to be covered in 2005, and 213 million in 2015. For the least optimistic scenario of population stabilisation by 2050, the target population to be covered will reach 220 million in 2015. Under the circumstances, if the population stabilises by 2035, the total primary education programme will cost $928 million in 2005, steadily increasing to $1.7 billion in 2015. Of this expenditure, domestic financing must cover $564 million in 2005, rising to over $1 billion in 2015. The parallel external financing needs will be $364 million in 2005, culminating at $666 million in 2015.52 The situation analysis of primary education in Bangladesh indicates a positive trend towards the achievement of this MDG. To ensure that this trend continues several challenges will have to be met by the development partners. Challenge 1: Meeting the cost of education Under the most optimistic scenario of population stabilisation by 2035, Bangladesh will need $928 million in 2005, the amount increasing annually to $1.7 billion by 2015 to maintain the momentum for achieving this MDG. About 40% of this will need to come from external financing. That is, external financing needs in 2005 will be $364 million increasing annually to reach $666 million in 2015. The Government share of the cost will be $352 million in 2005, rising to $669 million in 2015.

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Challenge 2: The primary school enrolment rate has to grow at a rate of 1.25 percent a year for girls and 1.5 percent for boys One of the main challenges faced by the development partners is the stabilisation of population to ensure containment of expenditure and to provide quality primary level education. It is estimated that if the population is stabilised at the earliest by 2035, more than 8 million girls and 11 million boys will need to receive primary education in 2015. Taking into account the rate of population growth of relevant age groups, and enrolment and dropout rates, it is estimated that to reach nearly 100 percent primary school enrolment by 2015, the rate has to grow annually at 1.25 percentage points for girls and 1.5 percentage points for boys.53 Challenge 3: The excluded population Among those who are not enrolled and those who have dropped-out, a significant number come from poor households and live in rural areas, urban slums, coastal areas and the CHT. It is estimated that they currently total some 2.4 million in number. These children must be brought into the national compulsory primary education system. Challenge 4: Quality education The I-PRSP projection of public expenditure on education as percentage of GDP indicates a gradual increase from 2.62 percent in FY2004, to 2.81 percent in FY2005, and to 2.93 percent in FY2006. 54 If this scenario is realised, GDP continues to grow at the current rate and the National Plan of Action on education is implemented according to schedule, the quality and quantity of education can be improved to achieve the MDG for primary education. Additional support will, however, be needed for technical and managerial capacity building of government departments and NGOs at all levels. Challenge 5: Late entry into the schooling system Late entry into the schooling system is widespread and potentially curtails enrolment and attainment. Analysing school attendance in Bangladesh by single-year age groups provides some interesting insights into the pattern of school enrolments in the country. Based on data from the 2000 Household Income and Expenditure Survey (HIES), about 90% of children aged 9 years were found to be attending school, but the share was as low as 50% amongst those aged 6 years. The proportion of children attending school rises steadily with age. However, late entry into the schooling system means that overall roughly one out of four children aged 6-10 years are currently not in school, and a sizeable fraction of schoolgoing aged children are enrolled in a grade behind their target-age grade.55 Challenge 6: Governance Governance is a key constraint on improving the quality of education. A recent survey on governance problems in Bangladesh found growing dissatisfaction among parents of school children with the quality of education in general and most acutely with schools at the primary level. Where 22% had registered their unhappiness with education standards in a similar survey five years ago, 30 percent took that negative view in the latest survey. Underlying the dissatisfaction with publicly funded education were some perceptions of corruption and negligence in the Directorate of

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Primary Education, general concerns about the influence of wealth on access to schooling and specific complaints about teachers giving private students priority over public ones. Another weakness in the system appears to be the supply of textbooks, especially in rural areas where 67% of households report difficulties in getting textbooks. The main problems cited were delayed supply (39%), extra payment (40%) and the need to buy textbooks instead of getting them free of cost (17%).56 Strategies 1. Raise the amount of public resources allocated to development of basic education. 2. Continue to improve access and equity. 3. Establish better partnerships with relevant stakeholders (parents, communities, non-government institutions, etc) to improve quality of education services. 4. Provide adequate teacher training and other needed pedagogical inputs. 5. Undertake better assessments of learning and outcomes. 6. Arrange a minimally rational school infrastructure, i.e., one room each for each of the five primary grades. 7. Improve management and accountability, reduce corruption and waste and depoliticise the education system. 8. Decentralise management at primary and secondary levels to improve governance.

2006. United Nations resident coordinator in Bangladesh Jorgen Lissner expressed his guarded optimism over the future investment scenario of Bangladesh. Terming the country an Asian Tiger, Lissner said: " (But) the tiger cannot jump or leap forward." He said Bangladesh has many positive achievements, including laudable export growth, strong inflow of remittances sent by expatriates and comfortable foreign exchange reserves. "Bangladesh could have been a good fisherman had not its rivers been polluted," he said. Lissner said that Bangladesh should address issues such as political disputes, general strikes and corruption to sustain and enhance its achievements.60 Though the WIR 2005 index of UNCTAD indicates Bangladesh has advanced, it still has far to go. The Government of Bangladesh, in its Industrial Policy 1999, offered a number of incentives for private investors, particularly for foreign investors. The key features of the policy are: l Foreign entrepreneurs will enjoy the same facilities as local investors in respect of

tax holiday, payment of royalty, technical know-how, fees, etc. l Full repatriation of capital invested from foreign sources, profits and dividends

will be allowed. Investment Attract investment With the growth of foreign direct investment in the last couple of years, Bangladesh has advanced to 122nd position from its previous 133rd in the World Investment Report (WIR) 2005 index of the United Nations Conference on Trade and Development (UNCTAD). The report said an improved investment environment and the privatisation of assets were behind the high FDI flow in Bangladesh in 2004.57 Net FDI in Bangladesh rose by 72% to $460 million in 2004, up $195 million from 2003, according to the WIR 2005.This was the second highest growth in South Asia, after Pakistan with 74% FDI growth in the same period. The report forecast increased FDI inflow in the coming years primarily because of a rise in investment by India.58 The Board of Investment (BOI) of Bangladesh and Tata Group of India jointly signed an Expression of Interest (EOI) regarding BOI facilitation of a Tata investment proposal of about $2.0 billion. Tata expressed an interest to invest in basic steel, power and fertiliser.59 Egyptian telecom giant Orascom has already invested $150 million in Bangladesh's mobile phone sector and another $150 million is expected by early 2006. The Dubai-based Abu Dhabi Group plans to pump about $800 million into the country's telecom sector and proposes to invest more than $2 billion in the country's burgeoning pharmaceutical and tourism sectors over the next two to three years. In the natural resources sector, the High-Tech International Group of Saudi Arabia is considering a $2 billion deal to set up oil refinery plants in Bangladesh over the next two to three years. Negotiations are also under way with China Metallurgical Construction group to set up a $200 million methanol plant. US oil company Unocal, already a player in Bangladesh's energy industry, is expected to invest more than $40 million this year to develop a natural gas field. The Taiwanese textile industry is also expected to invest up to a billion dollars in Bangladesh's textile sector starting from

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l If foreign investors reinvest their repatriable dividends or retained earnings,

those will be treated as new investment. l Foreigners employed in Bangladesh are entitled to remit up to 50% of their salary

and will enjoy facilities for full repatriation of their savings and retirement benefits. l Work permits will be issued to foreign nationals on the recommendation of investing foreign companies or joint ventures without any restriction. l Prospective foreign investors and their expatriate employees will be issued multiple entry visas. l Foreign investment in small industrial units will be given priority in the allocation of plots in BSCIC Industrial Estates. l Measures will be taken to protect the intellectual property rights of new products and processes. l International arrangements and provisions will guide investment guarantee and dispute settlement. l Duty free import of raw materials, machinery, construction and other materials used in manufacturing will be allowed. l Tax exemptions on interest on foreign loans as well as on profits on account of transfer of shares by foreign companies listed with the stock exchange will be given. Investors are of the view that while government policies look very good on paper, the problems lie in their implementation. There is always a long delay in transmitting policy decisions from the policy-making level to the implementation level. The Government should take steps to properly implement policies. The following recommendations should be considered:

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l All possible measures should be taken under existing laws to improve the law and

order situation and curb political unrest to provide security to investors. l All illegal trade union activities and unfair practices by labour unions/CBAs must

be severely dealt with under existing laws. l The One Stop Service in BOI provided by nine organisations should be made effective by strategic delegation of powers to members of the team and with prompt back-up managerial support from the concerned parent bodies. l All investment related laws which have not yet been updated should be updated at the earliest in the light of present day requirements. Cumbersome legal procedures of dispute settlement should be remedied soon. l The Government should encourage the private sector to promote a congenial working environment for women workers including provision of accommodation, low cost day-care centres and health care for their infant children near industrial centres. l The Government should contract out many of its functions to the private sector, such as collecting, compiling and disseminating data and information on industrial development, tax incentives, monetary and financial matters, etc. l All industrial parks, whether in the public or private sector, should be encouraged to organise their own security systems, and to promote mini-utility companies for reliable supply of power, water, gas and other essential utility services. l Bangladesh's missions abroad should boost and improve the image of the country to attract foreign investment. l Necessary measures should be taken to facilitate the introduction of E-trade and E-commerce to ensure security of transactions and prevent fraud and forgery and strengthen the institutional capacity of business organisations. l The ongoing banking reform programme should be pushed ahead with relentless vigour in order to tackle, as soon as possible, the serious problems of bad debts, inadequacy of capital and classified loans.61 Investment in the Targeted Sector The arms race is increasingly a worldwide phenomenon. It represents a waste of resources and it's a diversion away from the countries humanitarian development efforts and a threat to democratic processes. Exacerbated by the population explosion, the food crisis and the devastations of natural disasters and war, the problems of eradicating poverty and of improving standards of health, nutrition, education and housing have reached a stage of crisis in many parts of the world. No less important are the problems of industrialisation and growth in developing countries, of combating the degradation of the environment, of developing new sources of energy and raw materials while preserving presently available sources, of halting the degradation of cities, and many others. All of these make claims on investment, research and other resources in direct competition with military claims. The vast benefits which could result from even trifling cuts in military expenditure and reallocation of the funds thus saved are obvious.62 There is no doubt that a developing country like Bangladesh does not need to spend so much on the military. Defence and internal security are important, but spending on defence is still too high and must be kept to the minimum.63 Such expenses in unproductive sectors do not add to the growth of production. Statistical data on

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military expenditure in recent years is given below in crore taka .64

Year Budget

2004-2005 Budget Revised Budget 3901 4,115

Taka

2005-2006 Budget Revised Budget 4,320 -

The expenditure has been increasing gradually in recent years. In the 2002-03 budget, 39 billion taka ($645 million0 approximately) was allocated for defence, which was 8.8% of revenue income. For the fiscal year 2005-2006, the proposed budget of Tk 43.2 billion ($720 million) showed an increase of Tk 4.19 billion ( $68 million) over FY 2004-05, which was Tk 39 billion ($652 million).65 B u d g e t e x p e n d itu r e E d u c a tio n a n d te c h n o lo g y In te r e s t

6 .4 1 .3

T ra n s p o rt a n d c o m m u n ic a tio n L o c a l g o v e rn m e n t a n d v illa g e d e v e lo p m e n t E n e r g y a n d e le c t r ic it y

2 .6 4 .2

H e a lth

4 .6

4 .8

1 0 .9

4 .8

A g r ic u ltu r e D e fe n s e s e r v ic e

5 .8

6 .7

9 .9

6 .4 6 .6

P u b lic s e c u r ity S o c ia l s e c u r ity a n d w e lfa r e P u b lic a d m in is tr a tio n P e n s io n S u b s id y V a r io u s n o n d e v e lo p m e n t b u d g e t O th e rs

Fig: Budget Expenditure 66

There are also a huge amount of hidden expenses in the defence budget. In a roundtable meeting on â&#x20AC;&#x153;The revenue expenditure in the non-productive sectors in the national budget of Bangladesh versus human developmentâ&#x20AC;?, Abul Barkat said that the hidden expenditure had never been disclosed to the public. He said that the purchase of 8 Mig-29 planes costing Tk 10 billion by the previous Government was not on the basis of priority. In the roundtable it was mentioned that Bangladesh could have used that money to totally eradicate tuberculosis and leprosy, decrease maternal deaths from 4.33 to 1.5, decrease child mortality from 57% to 35%, employ 15,000 primary school teachers for 20 years, or increase irrigation coverage by 14%, which would increase food production by 20%. The office of Controller and Auditor General (CAG) has raised 31 audit objections involving Tk 483.3 million to the expenditure on defence, in a report placed in parliament, but the defence ministry has not yet replied to any of those.67 The CAG office detected the irregularities mainly in the defence ministry's pooling resources and in distributing those among the army, navy and air force in FYs 1997 to 2002. The report said it found that a loss of TK 100 million was incurred through purchase of

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ammunition Explosive. It procurement office. About army men. 68

that was cancelled by the chief of the Inspector Ammunition and also found that about TK 98.8 million has gone down the drain for of tank transporters, which too was earlier cancelled by the inspection TK 20 million has been wasted by buying adulterated milk powder for

As a poor country, the people of Bangladesh have always fought against poverty. Act 3 of the Social Charter 69 adopted by the 12th SAARC Summit states that state parties affirmed that the highest priority shall be accorded to the alleviation of poverty in all South Asian countries. Recognising that South Asia's poor could constitute a huge and potential resource, provided their basic needs are met and they are mobilised to create economic growth, state parties reaffirmed that the poor should be empowered and irreversibly linked to the mainstream of development. They also agreed to take appropriate measure to create income generation activities for the poor. Bangladesh needs economic reforms to reduce poverty, which is a basic hindrance to development. In light of the above, high military expenditure is needless for the country and it should be reduced and the money thus saved should be spent on various targeted areas such as education, health and income generation initiatives. Infrastructure and connectivity Strengthening connectivity of poorer regions and of poor as social groups Remoteness from the mainstream of economic and social life is an important aspect of the poverty experience. Redressing such remoteness and strengthening connectivity through roads, railways, waterways, telephone, Internet, etc, is a priority. Communication Bangladesh is crisscrossed by thousands of rivers and their tributaries, so waterways are the main way of communication in the country. But in many ways it is halted due to silting and shortage of water. Bangladesh has roads of about 241,000 kilometres. This figure was only 4,000 at independence in 1971. Bangladesh has also railway track of about 2,854.96 km. In fiscal year 2004-2005, the Bangladesh Government allocated Tk 396.841 billion for the development of communication.71 Challenge1: lack of bridge and culvert As Bangladesh is a riverine country, communication through roads is difficult, and building roads is more expensive. Challenge2: reduction of navigability of waterways For various reasons like siltation, withdrawal of water from upstream, etc, the navigability of our waterways has been reduced. Challenge3: built roads on the basis of economic priority Roads should be built on the basis of economic priority. Sometimes roads are built for political reasons. This should be avoided. Challenge4: quality of roads and remove corruption Because of corruption, the quality of roads is not maintained. This should be avoided.

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Strategies l Adopt a rational investment programme. l Increase the navigability of the waterways. l Build bridges and culverts on the basis of priority. l Institutional reform. l Labour rationalisation of the railway. l Remove corruption and ensure quality of roads. ICT sector Information and communication technology (ICT) could help achieve a breakthrough in alleviating poverty in Bangladesh. We can see what this sector can provide by looking at India as an example. In India, the 'E-Choupal' model was developed to leverage information technology to provide farmers information about different products and services that they need to enhance farm productivity, get better prices and reduce transaction costs in input purchases and product marketing. E-Choupal enables farmers to access current local and global information on weather, scientific farming practices, and market prices for inputs and products in the village itself through a web-portal. E-Choupal was first launched in June 2000 in Madhya Pradesh for soybeans. It is presently functioning in over 4,500 villages through 770 kiosks in Madhya Pradesh, Karnatka, Andhra Pradesh and Uttar Pradesh. The Choupals in different states cover different products. Aqua-Choupal in Andhra Pradesh covers fisheries, plantersnet.com in Karnataka is for coffee, and wheat transactions take place in the Choupals in Uttar Pradesh.72 Besides this, we could create a lot of jobs and earn a lot of money by arranging for various ICT related services, e.g., medical transcriptions, data entry, data processing, call centres, etc. By developing the required manpower skills, we could also enter the booming software industry. We could accelerate our business through E-Commerce. Tele-medicine could help the poor get access to better treatment facilities. Through E-Governance, the ICT sector could bring transparency and accountability to governance and also improve the efficiency and effectiveness of the Government. For example, there was a haphazard situation in our country when BTTB began to distribute SIM cards for mobile phones. But when the Government began to use the Internet, it became easier. ICT can also help in times of disaster. After Hurricane â&#x20AC;&#x153;Katrinaâ&#x20AC;? in the USA, ICT helped find the scattered relatives of the victims. The diffusion of personal computers into the Bangladesh user market started in the mid 1990s and progressed at a rate slower than in other countries in the region. From a historical perspective, the first main frame computer was introduced in the country in 1968 and the first PC was purchased in 1981. High cost and limited access to technology slowed the diffusion of PCs in the country. The recent increase in PC density was due to improvements in computing technology leading to a worldwide drop in price, and the Government's withdrawal of all forms of taxes and duties from this sector. Further government reforms to promote this sector include the formation of the Bangladesh Telecom Regulatory Commission, and

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opening up of the fixed phone market to private entrepreneurs. Bangladesh went “online” in mid-1996, at around the same time as most South and Central Asian countries. Reliance solely on satellite solutions has, however, translated into limited bandwidth and slow access speeds. To circumvent such problems, Bangladesh is going to be connected to the global fibre optic link through the submarine cable consortium. To distribute this huge bandwidth, the Bangladesh Telegraph and Telephone Board is actively considering action plans under a project that will connect the national network with the global Internet backbone via a high speed fibre optic link. The Government has also established an ICT Incubator Centre” in Dhaka at Kaoran Bazaar to help this sector.

are given a loan to acquire a cell phone from Grameen Telecom. The operator uses the cell phone as a pay phone for the village population. The women have gained social recognition as 'telephone ladies' in their localities as they are seen to provide a key service to the community, often ensuring that overseas migrant workers can talk directly with their families or farmers can access relevant market information. Indeed, increased labour mobility and greater market integration has created a significant demand for telephone services amongst the rural population including the rural poor. The VPP thus fulfils a growing social need. At the same time, it acts as a direct vehicle for poverty alleviation as it allows the operators to significantly enhance their income levels, often averaging between 100 and 200 dollars a month.73 Table: distribution of the purpose of the last five calls made. No. of cases 74

Challenge 1: Improving infrastructure Though the Bangladesh Government has declared the ICT sector a thrust sector, the required infrastructure has not yet been developed. The Government has to do much more in this sector. Challenge 2: Increasing PC diffusion The growth of Internet users is further impeded by a number of factors, including low PC diffusion in the country; low literacy rate; lack of infrastructure such as teledensity for Internet connections; and lack of localised content and operating systems. However, Internet reach is increasing steadily, mainly due to the proliferation of cyber-cafés and kiosks. Challenge 3:Skilled manpower To develop the required skilled manpower is another challenge. Challenge 4: Language To get maximum benefit from the ICT sector, the local language, Bangla should be introduced. Strategies l Develop infrastructure. l Special measures should be taken to use local software. l Immediate action should be taken to introduce Bangla language software. l Legalise the use of VOIP (Voice Over Internet Protocol). l Start E-Governance.

Telephone Communication Development in the Third World has often meant the emergence of isolated pockets of modernisation, sheltering strata with a different economy and lifestyle. Large swathes of society remain unaffected by new technology and opportunities. Breaking that divide would be hugely beneficial. The introduction of village pay phones (VPP) in rural Bangladesh based on use of cellular technology represents a unique experiment in high-tech communication in a traditional low-tech setting. An initiative of Grameen Bank, VPP has been a successful attempt to leapfrog the technological barrier for rural areas where the prospect for expansion of the government-run telephone system remains rather distant. Poor rural women selected from amongst Grameen borrowers

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Last Five Call 1st call 2nd call 3rd call 4th call 5th call Average

Purpose of calls Business 38.00 35.70 36.10 36.10 39.20 37.02

Official 3.20 3.20 4.40 3.80 3.80 3.68

Social 55.70 58.90 57.60 58.20 55.70 57.22

Health 1.90 0.60 0.60 0.60 0.60 0.86

Political 1.30 0 0.60 0.60 0.60 0.74

The most pronounced impacts were found with regard to a general reduction of transaction costs and uncertainty (reduced need for travel, quicker access to information, more choice). The isolation of many villages has been reduced. The most frequent user groups were traders and businessmen. For women, the VPP was an important channel for family contacts and communications, especially with husbands living abroad as migrant workers. Table: How VPP has changed the life situation of respondents75

Modes of empowerment via VPP Income is increased Gets opportunities to take part in decision making Social networks have been widened Considered as a source of information Involved in business transactions Gets more access to latest information Gets to know to more people

% of owners 95.20 55.40

% of users 43.80 46.90

96.40 75.90 72.30 75.90 96.40

86.70 45.30 58.60 75.80 64.30

% based on cases, not on response. Because of Multiple Responses, total exceeded 100%. Observations of impacts of VPP on the socio-economic and political relations of individuals in Bangladeshi villages suggests a border transformative potential of VPP.

After near stagnation in the growth of telecommunication subscribers, a marked increase was seen from the late 1990s to the early 2000s. This surge was mainly due to the advent of cellular telephony in Bangladesh and the almost exponential increase in the number of cellular telephone subscribers. Bangladesh's cellular phone subscribers outnumber fixed line subscribers and have a compound annual growth rate (CAGR) of 110.5%, a figure that is almost three times the global average.76 This statistic reflects the high demand for telecommunication services, and one that is not being catered to by the fixed line operator. In spite of its

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annual growth rate being almost double the global average, the state-owned fixed line telephone company constantly struggles to meet the increasing demands for its services. From the base year 1990 until 2002, there has been a nearly 600 percent growth in the sector as a whole. Although this growth figure is encouraging, the telecommunication reach, in terms of number of phone lines per 100 population for Bangladesh, still remains one of the lowest in the region. At present, teledensity in Bangladesh is 4.8. Though the number of mobile phones has increased rapidly in recent years, it hasn't reached the satisfactory level yet. At present five mobile operators are working with 5.414 million subscribers.77 The number of subscribers of various mobile phone companies in percentage 5.36%

0.26%

6.56% 28.81%

Teletalk

Grameen Phone

59.01%

Aktel

Citycell

BanglaLink

(Source: Bangladesh Economic Review,2005, p-200) To meet the huge demand for fixed line telephones, the Government has brought private companies to this sector and given 15 companies 37 licences to work in four zones (except Dhaka)78. At present there are 800,000 fixed phone subscribers, but this figure is expected to exceed 2,500,000 within two years.

Challenges Infrastructure: Required infrastructure development is the key challenge of the spread of telephony. Corruption: Getting telephone lines in due time from the BTTB is a major problem in Bangladesh. One of the main reasons for this is corruption. Strategies l Establish digital exchanges in all Upozilas. l Take steps to reduce the call charges of mobile companies. l Reduce government taxes. l Give permission to operate VOIP. l Hand over management of the fixed phone company to the private sector.

Energy sector Bangladesh has small reserves of oil and coal, but very large natural gas resources. Commercial energy consumption is around 66% natural gas, with the remainder mostly oil (plus limited amounts of hydropower and coal). About 20% of the population (25% in urban areas and 10% in rural areas) has access to electricity, and per capita commercial energy consumption is among the lowest in the world. Noncommercial energy sources, such as wood, animal waste, and crop residue, are estimated to account for over half of the country's energy consumption. The World Bank has estimated that Bangladesh loses around $1 billion per year in economic output due to power outages and unreliable energy supplies.79 Bangladesh's Ministry of Energy and Mineral Resources (MEMR) has overall

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responsibility for the country's energy sector, controlling both policy formulation and investment decisions. Within MEMR, the "Power Cell" acts as a single point of contact to facilitate the electricity reform and restructuring process, including the development of independent power projects (IPPs). Energy Supply Biomass accounts for a significant share (55%) in Bangladesh. Biomass fuel is a renewable source of energy consisting primarily of agricultural residues, tree residues, fuel wood, and dung. Commercial energy sources are natural gas (24%), imported oil and coal (19%), and hydroelectricity (2%) (GOB, 1998). Except natural gas, all commercial fuels are imported.80 Natural Gas Natural gas is Bangladesh's only significant source of commercial energy, with 2003 production of 420.2 billion cubic feet (bcf). Bangladeshi natural gas production began in 1960 from the Chattak Field. There is much uncertainty and debate about the size of Bangladesh's natural gas reserves. Whereas 1 January 2005 estimates by the Oil and Gas Journal put the country's proven natural gas reserves at 10.6 trillion cubic feet (tcf), mid-2004 estimates from Petrobangla put net proven reserves at 15.3 tcf. The US Geological Survey has estimated that Bangladesh contains 32.1 tcf of additional "undiscovered reserves". Bangladesh may have the potential to become a major gas producer, as well as supplier to the vast potential market in neighbouring India. Some independent analysts expect Bangladesh's natural gas demand to grow by around 6% annually over the next two decades. Potential uses for natural gas in Bangladesh include petrochemicals, compressed natural gas (CNG) for vehicles, power generation, and fertiliser. CNG is already used to fuel over 20,000 vehicles, mainly in the Dhaka area. Bangladesh also contains around 55 million barrels of natural gas liquids (NGLs), which could be used for petrochemicals production or as a cooking fuel. Besides foreign energy companies, natural gas in Bangladesh is produced by two subsidiaries of Petrobangla--Sylhet Gas Fields Ltd. and Bangladesh Gas Fields Co. Ltd--for domestic consumption. Over 80% of the natural gas is consumed for power and fertiliser production, and the remainder by industry and households. Petrobangla has approximately 20 natural gas fields, half of which are active. The main fields include Bibiyana (discovered by Unocal in Block 12); Titas (the country's second largest natural gas field); Habiganj, Kailashtilla, Rashidpur, and Jalalabad, nearly all of which are located in the eastern part of the country; and the Sangu offshore natural gas field (being developed by Cairn Energy and Halliburton) in Block 16 of the Bay of Bengal, 30 miles southwest of Chittagong. Production from Sangu, Bangladesh's first offshore field and first foreign-run field (with estimated reserves of around 850 bcf), began in June 1998. In January 2000, Shell Bangladesh Exploration and Development (SBED) along with partners Cairn Energy and HBR Energy reportedly discovered a new natural gas field near Sangu (South Sangu-1). In August 2000, SBED announced a $40-$50 million investment in new offshore natural gas exploration projects in Bangladesh, including the Sandwip East 1 well in Block 15.

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Other possible natural gas fields include Shaldanadi (estimated reserves of 500-1,000 bcf), Fenchuganj, Feni, Kumta, and Shahbajpur. In March 2005, Unocal began production from the Moulavi Bazar field in Block 14, which is expected to produce up to 150 bcf per day. Shahbazpur, discovered by Petrobangla subsidiary Bapex (Bangladesh Petroleum Exploration Company) in 1995, is estimated to contain 330400 bcf of recoverable natural gas. In 1998, Unocal and Petrobangla signed a PSC to develop the field. In January 2005, Bapex announced the discovery of natural gas at the Srikail field, with possible reserves of 200 bcf. In March 2004, Unocal, the largest foreign investor in Bangladesh's natural gas sector, shelved a proposal to export gas from the Bibiyana field to India, given the political obstacles to exports. Unocal plans to develop its assets in Bangladesh for sales to the domestic market. India's Tata Group has recently shown interest in Bibiyana gas. In August and September 2003, Chevron Texaco and Shell sold their natural gas assets in Bangladesh to Canada's Niko Resources and Cairn Energy, respectively. In November 2004, Niko Resources and Tullow Oil, the operator of Block 9, reported natural gas flowing at up to 120 million cubic feet (Mmcf) from the Bangora-1 well. In September 2004, Niko Resources announced that its Feni Block test well was producing at a rate of 32 Mmcf per day . In August 2005, Cairn Energy's PSC for Block 16 in the Bay of Bengal was extended until May 2008. Over the next three years, Cairn plans to drill three exploration wells in the block at a cost of $50 million. In 2005, two blowouts occurred at the Chattak-2 well in the Tengratila gas field, operated by Niko Resources under a joint venture with Bapex. The first took place in January and led to $2.5 million in losses and significant damage to the local environment. Although the site was secured, a second blowout occurred in late June. An inquiry committee formed to investigate the incidents has not yet submitted a report. As of early August 2005, the fire from the second blowout reportedly continued to burn out of control. In March 2005, the state-run Gas Authority of India Ltd (GAIL) signed a memorandum of understanding (MOU) with the Bangladesh Business Development Corp Ltd (NNCL) to co-operate gas transmission, pipeline and distribution network development in Bangladesh. This follows a February 2005 MOU signed by GAIL and Bangladesh's Spectra Group to develop CNG pipelines and retail outlets in Bangladesh. Tullow Oil also won state approval in March 2005 to build a pipeline and gas processing plant. In January 2005, Bangladesh agreed to allow a proposed 559-mile pipeline to transport natural gas from Burma (Myanmar) to India through its territory. Bangladesh's approval for the tri-nation gas pipeline, however, was contingent upon several trade concessions including the removal of tariff, non-tariff and administrative barriers to help Dhaka close its trade deficit with India, access to hydroelectricity from Nepal and Bhutan and the establishment of a free trade corridor to these countries. According to the plans, Bangladesh's Gas Transmission Co would manage the 180 miles of the pipeline in its territory and the country would earn annual transit fees of $125 million dollars. As Bangladesh has continued to demand these trade concessions,

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India and Burma have begun to consider alternatives such as a pipeline that bypasses Bangladesh (undersea or on land through northeastern India) or LNG shipments. These options, however, are more costly. While India and Bangladesh continue their bilateral negotiations to resolve these issues, the future of the pipeline project remains uncertain.81 Coal Bangladesh began its first significant coal production in April 2003 at the Barapukuria coal mine in the Dinjapur area of northwest Bangladesh. Around 2,000 million tonnes of coal have been discovered in five close locations, and are in the process of development: l Barapukuria in Dinanjpur district, reserve of 390 million tonnes; l Dighirpar in Dinajpur district, reserve under appraisal; l Phulbari in Dinanjpur district, reserve of 522 million tonnes; l Jamalganji in Jaipurhat district, reserve of 1,050 million tonnes; and l Khalaspir in Rangpur district, reserve of 143 million tonnes. In June 2005, a consortium of the China National Machinery Import and Export Corporation and the Xuzhou Coal Mining Group Company Ltd signed a contract to run the management and production of the Barapukuria mine. The project is expected to produce about one million short tonnes of coal per year, primarily for electricity generation. A possible coal mining project at Khalashpir is also under consideration. In July 2005, Australia's Asia Energy Corp submitted a $1.4 billion plan to develop a coal mine in the Phulbari region. The Phulbari mine, which is located approximately 12 miles from the Indian border, is expected to begin production in 2007. 82 Electricity Bangladesh's installed electric generating capacity in 2003 was 3.6 gigawatts (GW) (94% thermal, 6% hydroelectric), at 18 power stations. However, only two-thirds of Bangladesh's total electric generating capacity is considered to be "available". Problems in the Bangladeshi electric power sector include high system losses (up to 40%), delays in completion of new plants, low plant efficiencies, natural gas availability, erratic power supply, electricity theft, blackouts, shortages of funds for power plant maintenance, and unwillingness of customers to pay bills. Overall, the country's generation plants have been chronically unable to meet system demand over the past decade. With only about 20% of the population connected to the electricity grid, and with power demand growing rapidly, Bangladesh's Power System Master Plan (PSMP) projects a required doubling of electric generating capacity by 2010. In addition, Bangladesh may need to replace 30% to 40% of its current generating capacity due to aging infrastructure. The Padma-Jamuna-Meghna river system divides Bangladesh into eastern and western zones. The east contains nearly all of the country's electric generating capacity, while the west, with almost no natural resources, must import power from the east. A 230-kilovolt power transmission line, completed in 1982, connects the east to the west. The vast majority of Bangladesh's electricity (78%) is consumed in the east, with greater Dhaka alone consuming around 50%.

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Through the Ministry of Energy and Mineral Resources, the Bangladeshi government owns and supervises the Bangladesh Power Development Board (BPDB). BPDB is an integrated utility that distributes electricity to retail consumers, as well as to two other distribution utilities--the Dhaka Electric Supply Authority (DESA, established in 1991), and the Rural Electrification Board (REB, established in 1977). Given Bangladesh's electricity supply shortage, in 1996 the government issued the Private Sector Power Generation Policy of Bangladesh and began to solicit proposals from international companies for IPPs. Among the first IPPs were a 360MW gas-fired combined-cycle plant at Haripur, which began operation in October 2001, and a 450MW gas-fired combined-cycle plant at Meghnaghat, which began operation in November 2002. Both plants were sold to the British firm CDC Globeleq in December 2003. India's Bharat Heavy Electricals Ltd (BHEL) completed a 124MW gas-fired Baghabari generating unit in November 2001. BHEL is currently planning a 280MW gas-fired plant for Sylhet. A power purchase agreement for a barge-mounted unit at Baghabari, which will have a 130MW capacity, was signed with Malaysia's Westmont Power in May 2004. A consortium of Chinese firms concluded an agreement with Bangladesh in June 2001 for the country's first coal-fired power plant, to be located at Barapukuria near the country's main coal deposits. It is expected to start generation in October 2005. In May 2005, US-based Global Vulcan Energy International announced plans to build several power plants with a total generating capacity of 1,800 MW, including at least one 100MW gas-fired plant, which may be online by the end of 2006, and two 450MW coal-fired plants. In 2005, India's Tata Group proposed a 1,000MW coal-fired power plant. In addition to large IPP projects, in April 1998, Bangladesh adopted a Small Power Generation Policy, which encourages development of small local generation projects of up to 10MW in capacity in underserved areas. The country has an active rural electrification programme, which is to receive $280 million from the Asian Development Bank (ADB) under a programme announced in December 2003. All of these initiatives aim to increase power generation and to reduce the country's power shortage significantly, with a goal of universal electrification by 2020. In April 2005, China and Bangladesh signed an agreement on nuclear cooperation. Under the agreement, Bangladesh is to receive Chinese assistance in exploration for nuclear materials and construction of a 600MW nuclear power plant.

What needs to be done? l Attract foreign investment and make quick arrangements to use that investment. l Explore all avenues of alternative power sources e.g. solar energy, biogas, etc.

Consider renewable energy one of the important energy sources in the national energy mix. l Reduce system losses. l Increase the use of energy saving equipment. l Increase the efficiency of energy production and distribution so that the loss of energy can be reduced. l Study the feasibility of the installation of nuclear power plants. l Increase regional cooperation so that one country can use the excess energy of other country. l All contracts in this sector should be made public to ensure they are in the country's interest. Water Resources Management Agricultural production is still the mainstay of the rural population's livelihood system, and therefore Bangladesh's people's livelihoods are still inextricably linked to the nation's water cycle. The nation's water, both above and below ground, provides a multitude of services to the population: water to drink, water for irrigation, fish water and for transport and other uses. These resources are the raw materials that support a population with complex, interwoven and overlapping livelihood strategies and they are being placed under increasing stress. Water resources, present as surface stocks such as lakes or ponds, flows (rivers) or groundwater reserves (aquifers or soil moisture) are all used directly in activities undertaken to sustain a livelihood or, to support ecosystems which in turn support a variety of livelihood activities. The utilisation of these sources by a variety of resource users or "stakeholders" means that multiple interests are operating at any one time. These uses often occur in harmony but can be incompatible, as one use lessens the resource's availability and utility for others downstream. Wisely managed, water means adequate harvests, health, prosperity, peace and a stable environment; badly managed, water brings poverty, disease, disasters, degraded environments, social conflict or dispute and even war. These interactions are shown in the following figure, which is an attempt at a schematic representation of how water resources and their uses are inter-linked in the activities that constitute the livelihoods of rural people in Bangladesh.

Discussions have been underway for several years about the possibility of Bangladesh connecting its electric grid to those of India, Nepal, and Bhutan. Nepal and Bhutan have substantial untapped hydroelectricity potential, which could be exported to India, Pakistan and Bangladesh. In March 1999, India's Power Grid Corporation completed a feasibility study on possible exchange of 150 MW of power between Bangladesh and India. Interconnection points would be Ishwardi, BangladeshFarakka, India and Shahjibazar, Bangladesh-Kurnarghat, India.83 Oil For liquid oil, Bangladesh is almost entirely dependent on imports. For this reason the fluctuation of oil price gratly affected the country's economy.

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production from $40 per acre to over $500. It is believed that Arthur Cotton, a British engineer, first planned for such linking in the 19th century. The period being the beginning of the rail communication era in India, the proposal lost weight. In 1945, the idea again came as a proposal from one Captain Dinesh Daster. His idea was to have two huge canals (one 4,200 km long and 300 metres wide, the other being 9,300 km long and 300 metres wide) to divert waters from the Brahmaputra. The proponent aspired that the link would bring 219 million hectares of land under cultivation and that its implementation would take 3-4 years. Thirty years after the independence of India, the proposal was again brought forward and assessed by ninety experts from all around the world who recommended the same as feasible. According to an estimate of 1974, the cost for implementation of the proposal would be around 240.95 billion Indian rupees. Figure : Water Resources-Utilisation Relationships84

Although abstract, the model is based on the starting point for local people--the use ofspecific resources (an aquifer, a stream or rainfall) for particular uses (irrigation, fishing and drinking) by specific people (farmers, fishermen and women). This is the reality around which decisions on and perceptions of the management and potential of water resources are based; a person is concerned with whether his tubewell will provide enough irrigation water, whether there are fish in the lake or whether the water in a stream is available and clean enough to be used for the family. These resource-use combinations take place within a local social and institutional setting that is crucial in defining how the resources are managed and allocated, and in particular the form that the rights and entitlements of access to the resources held by different sections of the community take. It also defines norms, customs and obligations that may be as important as the formal institutions in moulding the patterns of resource use and management. These local-level patterns of management of water resources, and the context within which they take place, interact with and are influenced by the external legal, policy and institutional contexts that determine many aspects of local change and development. This includes the functioning and impact of the specific areas of policy (water, land, fish, environment and others), also includes markets as well as the wider framework of laws, government policies and the actions of government agencies. Neighbouring India recently finalised a master plan unilaterally to link 30 major international rivers and transfer their flow to central, western and southern India at an estimated cost of $120 billion. The Supreme Court of India has asked the Indian Government to implement the plan by the year 2016. 85 The project aims to connect the rivers in the country for diverting water from 'surplus eastern rivers to water deficit areas' and at improving the flood and drought situation. The project also aims at producing nearly 34,000 megawatts of hydroelectricity and increasing food

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According to the National Water Development Agency (NWDA) of India the origin of the river linking project (RLP) lies in the plan of Dr KL Rao, the irrigation minister of the Nehru Cabinet. The plan of Dr Rao proposed links between the Ganges and the Brahmaputra, Mahanadi and Narmada rivers through canals. It was hoped that the 2,640 km long Ganges-Caveri link canal would bring an additional 4 million hectares under agriculture. The cost of implementing the proposal was estimated at 125 billion Indian rupees. An estimate of 1995 shows that the Ganges-Cuvery link canal alone would cost 700 billion Indian rupees. The institutional process of keeping the RLP alive started in 1980 when the Water Resource Ministry of India adopted a National Perspective Plan (NPP). The NPP consists of two parts, one of which deals with river development of the Himalayas. This part proposes 21 links and it is this part that will affect the rivers flowing through Bangladesh. Subsequently, the NWDA was created to assess the feasibility of link canals under the NPP. The NWDA identified 30 link canals for the feasibility study and has already finalised feasibility reports for six such links. According to the decision of the Water Resource Ministry of India, the 10-year river linking project will be completed by 31 December. The major opposition in the Indian Parliament has already given support to the project. 86 The Supreme Court of India has issued orders favouring implementation of the project.This mega project may interest Indians but it has also generated much concern and anguish in Bangladesh. They believe that if water is diverted from the Brahmaputra and Ganges, which provide 80% of fresh water flow in the dry season, it would threaten the livelihoods of more than 100 million people and cause havoc to the entire ecosystem of downstream Bangladesh. Bangladesh is a deltaic region where 54 international rivers flow into the Bay of Bengal. Bangladesh largely depends on the fresh water of these rivers that enter its territory from India for irrigation and water supply. Of the 1.72 million square kilometre areas of the Ganges, Brahmaputra and Meghna, 8% of these river basins are within the territory of Bangladesh. So, it is clear that any diversion of these rivers from and within India,

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Nepal, Bhutan and China will bring disaster to Bangladesh.87 The diversion of water from the Brahmaputra, as has been proposed under the RLP, is feared will cause huge damage to the environment and ecology of Bangladesh. This billion-dollar project of the Government of India will adversely affect millions of people in Bangladesh.88 The proposed diversion of water through river linking will block the flow of Bangladesh's two major riverine networks, namely the JamunaBrahmaputra and the Ganges-Padma. Since Bangladesh depends most on the river Brahmaputra, which supplies two-thirds of the country's dry season water, withdrawal of water from the river will adversely effect the legitimate interests and rights of at least 100 million people of Bangladesh. The proposed withdrawal of water flow by upper riparian India will have a harmful impact on the climate, ecology, geomorphology, bio-diversity, wetlands and navigational activities in lower riparian Bangladesh. India's search for irrigation water could dry out large areas in Bangladesh for much of the year and affect more than 80% of Bangladesh's 20 million small farmers who depend on water to grow rice. The drying up of rivers will also lead to intrusion of salinity into farming areas. Water diversion from the Brahmaputra by India would severely endanger the sweet water fishery in Bangladesh, the second largest in the world. Such diversion of water will decrease the flow of water to the Sunderbans, the world's largest mangrove forest, a world heritage site shared both by India and Bangladesh, and thus lead to its death. As learnt from the experience of Farakka Barrage built by India, again on a shared river (Ganges), large parts of Bangladesh will face desertification. Increased siltation and less flow of water will intensify natural disasters like flood and drought. A project that could affect 140 million people of Bangladesh, directly or indirectly, may also lead to political instability in the region. In international law, if a river flows through more than one country it is considered to be an international river and the flow of an international river is not within the arbitrary power of one of the riparian states. So, India's unilateral decision to divert 30 common rivers is a clear violation of international law and also an injustice to Bangladesh. The Government of Bangladesh has lodged a protest against the unilateral Indian decision to divert water from 30 common rivers, a standard diplomatic move. Bangladesh is not alone. Nepal has also joined the chorus of opposition. Even the Indian states of West Bengal, Assam and Bihar have expressed reservations over this project, calling it a favour to western and southern India at the cost of the east. In these circumstances, we have several options to convince India to put off this scheme. Since India has river treaties with its neighbouring countries which prohibit Delhi from unilaterally altering river courses, Bangladesh should seek a regional or bilateral diplomatic solution first. The Indian water resource minister has assured Bangladesh that India will not do anything unilaterally. We hope all of us can find a solution and ensure the maximum and equitable use of our water resources. Water resources are so central to the lives of rural people in Bangladesh that anything that affects these resources has livelihood implications. These impacts can be

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immediate and direct, as with land laws and the policy of leasing beels. They can be indirect or periodic in effect: for example, the policy of building rural roads has had major consequences for the livelihoods of traditional boaters, whilst the embankments on which these roads have been built create major disruptions to hydrological systems (as witnessed in the 1998 floods, where they severely impeded the draining away of flood waters in many places). The intimate inter-weaving of water and livelihoods and the impacts of a wide range of policies means that the traditional perception that water equals floods and water policies equal flood protection does not even begin to provide a meaningful policy framework for understanding water resources-livelihood relationships in Bangladesh. This has, to an extent, been realised in the recent policy and planning changes, but there is still only a limited understanding of the full nature of these relationships in policy and planning circles. The steps that we must take are to: l Prepare a water resources master plan for the development of the water resources

of the country with full regard to environmental compatibility and proper implementation. l Determine national policies and strategies for the scientific utilisation and conservation of water resources. l Decentralise the management of water resources and enhance the role of women. l Accelerate the development of both public and private water delivery systems. l Review and evaluate the impact of actions taken by any organisation involved in the development, utilisation and conservation of water resources. l Improve the level of education, training and professional standards related to the utilisation of water resources. l Increase irrigation water supply to areas short of groundwater in northwest and southwest Bangladesh; l Control salinity in southwest and south-central areas in Bangladesh; l Control river bank erosion l Improve navigation on main rivers in and around Dhaka; l Control erosion in the vicinity of barrages l Improve drainage pumping in the wet season. l Collect and review information related to the utilisation of water resources and arrange for its dissemination. l Arrange and conduct national and international seminars, conferences and workshops related to water resources with Government approval. l Resolve all water related problems with other countries. Environment The Government of Bangladesh has been laying special emphasis on protection and development of the environment. Bangladesh is a signatory to 28 agreements, conventions and protocols on the environment. Notable among them are: l Convention on Climate Change. l Agenda 21. l Convention Concerning the Protection of the World Cultural and Natural Heritage.

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l Convention of International Trade in Endangered Species of Wild Fauna and

Flora (CITES). l Convention on Biological Diversity. l Ramsar Convention on Wetlands. l Convention to Combat Desertification. l Marine Pollution Convention (MARPOL). l Global Tiger Forum. A report titled â&#x20AC;&#x153;The State of the Environment: Bangladesh 2001â&#x20AC;?, published by the United Nations Environment Programme (UNEP), has identified five nationally important environmental issues. These are: land degradation, water pollution and scarcity, air pollution, biodiversity and natural disaster. A report of the United Nations University predicts that in the coming five years, 50 million people will be displaced around the world due to environmental disaster. Among them, some 20,260,000 will be from Bangladesh alone.89 Set out below is a summary of the key environmental issues Acceptable Level of Forest Cover Deforestation does major damage to the environment in different ways. The causes of deforestation are many. It is caused by farmers engaged in expanding agricultural production, by logging companies and big fuel-wood collectors. Forests are not just a source of fuel-wood and timber. They also perform a wide range of social and ecological functions. They provide livelihood and cultural integrity to forest dwellers and a habitat for plants and animals. They protect and enrich soils, provide natural regulation of the hydrological cycle, affect local and regional climate through evaporation, influence watershed flows of surface and ground water, and help stabilise the global climate by absorbing carbon as they grow. In spite of these contributing functions of forests, the pace of deforestation continues to be alarming. In 1960, the forest area of Bangladesh was about 20% of the total. Now, this is down to 10%. While the desirable proportion of forestry in the total land area of a country for ecological stability is 25%, the figure continues to decline every year. About 50% of the destruction of forests has taken place during the last 20 years, affecting topsoil and causing land erosion. Social forestry and backyard plantations have not yet been able to compensate for such deforestation. The Government should accelerate social forestry and take measures to stop deforestation. Desirable Level of Water Quality and Quantity The availability and the quality of surface and ground water highly influence the environment, economic growth and development of Bangladesh. Spatial and seasonal availability of surface and ground water is largely dependent on the monsoons and physiography of the country. In terms of quality, the surface water of the country is unprotected from untreated industrial effluents and municipal waste water, runoff pollution from chemical fertilisers and pesticides, and oil and lube spillage in coastal areas from the operation of sea and river ports and ship wreckage. Water quality also depends on effluent types and discharge quality from different types of industries, the type of agrochemicals used in agriculture, and seasonal water flow and dilution by the

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river system. The arsenic concentration in ground water is a major problem in Bangladesh now. High levels of arsenic, if embedded for a long time (from 5 to 15 years), cause serious human health problems including skin ailments, damage to internal organs, skin and lung cancers and eventual death. Recent major studies on arsenic reveal that of 30,000 tube wells studied, 2,000 of them exceeded the national standard of 0.05 mg/l of arsenic for drinking purposes (the WHO guideline is 0.01 mg/l). The problem is acute in tube wells extracting groundwater from depths of 10 metres to 100 metres in the southeast, south-central (the northern part only), and southwest regions and it exists to a lesser extent in the northeast region, and the very southern fringe of the north-central and northwest region along the River Ganges. The most seriously affected districts are in and around Chandpur. It has been estimated that more than 20 million people drink water exceeding the national standard for arsenic levels (WARPO, 2000). Flood Due to the peculiar topography of the country, extensive flooding and inundation occur every year in Bangladesh by bank overflow from the enormous volumes of water which pass through the rivers. In a normal year, more than 18% of the country or over 26,000 square km is flooded, but during abnormally high floods, much more of the surface area is flooded. The extent of flooding was over 36% of the land in 1954 and 1974, more than 40% in 1987, and up to 62% in 1988.90 The flood in 1998 was even more extensive than the 1988 flood in coverage and it inundated 100,000 sq km or 68% of the surface according to the Bureau of Disaster Management (1998), and 84,000 sq km according to SPARSO. This flood was also one of the longest in terms of duration, up to three months in most areas. The damage caused by annual floods and particularly by the abnormal ones are enormous. The 1987 flood completely or partially damaged 2.06 million houses, which was 16.67% of the national housing stock. The 1988 flood displaced and affected an estimated 45 million people and destroyed or partially damaged 12.3 million houses, of which 5.4 million were completely destroyed and 7.4 million were partially damaged.91 The losses of standing crops, livestock and damage to rural and urban infrastructure were colossal. The 1998 flood affected 30.92 million people in 52 of Bangladesh's 64 districts.92 An estimated 916,660 houses were totally damaged with another 1300,000 houses damaged partially.93 The total damage cost in all sectors in the country, as estimated by the UNDP, was $200 million or Tk 10 billion.94

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and diversion of upstream water in the dry season.

Table: Coverage of inundation and Damage Cause by Major Floods, 1954-1998

Year

Flooded area (sq. km.)

Percentage of total area

1954 1955 1956 1962 1963 1968 1970 1974 1987 1988 1998

36920 50700 35620 37440 43180 37300 42640 52720 57491 77700 84000

25 34 24 25 29 25 28 35 38 52 56

Cost of damage (approximately crore taka) 120 129 90 56 58 116 110 2849 3500 10000 10000

Population affected (approximately million persons) 30 20 30 47 (approx.)30

Deaths (number of persons) 112 129 117 126 87 1987 1657 2379 1000

Source: B.W.D.B 1987 quoted by Miah,95 1988(for 1954-1987) Siddique 1996-98 and Bureau of Disaster Management (1998).

Green House Effect The greenhouse gases in the earth's atmosphere are increasing. The consequences will be progressive global warming and climate change. There is apprehension that Bangladesh is one of the most vulnerable countries in the world to climate change and the resultant rise of sea level. The most serious consequences of climate change for Bangladesh would be a rise in sea level along the Bay of Bangal coasts, causing flooding of 10% to 20% of the coastal land including the Sundarbans, as well as saline intrusion in the rivers. UNCED warns that, due to global warming, the sea level will rise 1 metre by 2035. If the sea level rises 1 metre, 17% of our land will be inundated. By the year 2050, the sea level may rise 2 metres, inundating 40% of our land. Table: Possible affect of 1 metre sea level rising on area and people

District Barisal Phatuakhali Khulna Noakhali Comilla Faridpur Total

Affected area ( percentage) 90 100 80 50 15 15

Affected area (square km.) 6,660 4,095 9,734 2,730 990 1,032 24,150

Affected people 4,261,000 1,598,000 289,000 1,448,000 114,700 751,000 11,062,700

Table: Possible affect of 1 meter sea level rising on area and people

Crops (paddy) Amon Aous Boro

Affected area(acre) 3,160,000 99,000 252,000

Percentage 21 12 8

Scarcity of Water Generally, water scarcity is a dry season phenomenon. During this season the availability of water falls short of demand or the quality of the water restricts its use. As a lower riparian country, Bangladesh has 57 trans-boundary rivers, of which 54 are shared with India and three with Myanmar. A significant amount of dry season stream flow is withdrawn and diverted upstream by neighbouring countries for irrigation and other purposes. The Farakka Barrage on the River Ganges is a notable example. Desertification prevails in some northwestern areas of Bangladesh due to withdrawal

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Other important causes of water scarcity in Bangladesh are: i) Scanty, irregular and erratic rainfall in the dry season; ii) Gradual siltation in the riverbed and flood plain and declining river water level; iii) Withdrawal of wetland water; iv) Dry season irrigation; and v) Non-availability of pure water during flood and inundation. Notwithstanding the large number of rules and regulations to protect water from industrial effluents and other pollution and the policies for protecting the environment through dry season augmentation of water, concerns for the future still prevail. These are regarding proper implementation of national policies, due to the lack of institutional capability and awareness to properly address the policy objectives and goals. The emerging issue of climate change and its adverse impacts on water resource needs proper consideration for planning. Earlier analysis of climate change scenarios showed that water scarcity in the dry season would be aggravated and low water flow in the river system would allow saline water intrusion to progress further inland. The adverse impact of climate change on agriculture will put further stress on the country in attaining food sufficiency in the future. Acceptable Level of Soil Quality The quality of soil has deteriorated due to improper use of agrochemicals, unplanned land use, encroachment on forest areas for agriculture and settlements, ineffective enforcement of existing laws and guidelines, and improper disposal of hazardous industrial waste. In addition, sprawling urban areas and infrastructure development have diminished the availability of land. Natural disasters such as cyclones and floods cause erosion of soil together with the degradation of soil quality. Unplanned land use and intrusion of saline water are causing degradation of soil in the coastal area. A study of the Water Resource Planning Organisation (WARPO) on 'Morphological Dynamics of the Brahmaputra- Jamuna River', using remote sensing images, showed that during the period between 1973 and 1996, a total of 73,522 hectares of land eroded while only 10,628 hectares of land have been reclaimed. Aside from its social and environmental impact, land degradation has serious economic implications as well. The Bangladesh Agricultural Research Council (BARC) has carried out an assessment on production loss of crops and additional agricultural input necessary to maintain soil nutrients. The study reveals that the total economic cost of land degradation exceeds $0.2 billion per year. Effective ways to minimise land degradation problems should be based on multisectored, multi-layered, yet integrated approaches. The most important policy measure required for addressing land degradation is an integrated land use policy with respect to agriculture, industry and environment.

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Acceptable Level of Air Quality Air pollution is a manmade environmental disaster that is taking place all over the world. In Bangladesh, as in other parts of the world, air pollution has recently been gaining priority among environmental issues. Exposure to air pollution is the main environmental threat to human health in towns and cities. There are two major sources of air pollution in Bangladesh, vehicular emissions and industrial emissions, which are mainly concentrated in the cities. There are also numerous brick-making kilns working in the dry season all over Bangladesh which are another source of air pollution. Almost all of these kilns use coal and wood as their source of energy, resulting in the emissions of oxides of sulfur and volatile organic compounds. Urban air quality monitoring data reveal that the concentration of suspended particulate matter in Dhaka and Chittagong exceeds the threshold limit set by the Department of Environment. A study on the values for average suspended air particulate mass in rural and urban areas of Bangladesh and average elemental carbon in the fine fraction of airborne particulate matter (APM) in urban areas, showed that the concentration of suspended particles in ambient air is many times higher than normal. It also revealed that the PM 2.5 masses and chemical concentrations are lower in most cases compared to the corresponding PM 2.5-PM 10 values. The ratio of PM 2.5 to PM 10, and the amount of black carbon in the APM are reduced during the high rainfall period in both rural and urban sites by about 25% and 20%, respectively. In urban areas, it was found that the concentration of SO2 also exceed the threshold limit quite often in Dhaka.97 An emerging issue of great concern in cities and towns is the high concentration of lead in the air from vehicular exhausts. The Department of Environment and other agencies and organisations have identified the two-stroke engines used in vehicles as major polluters. Among the polluting vehicles, two-stroke auto-rickshaws have been identified as the worst polluters. Two-stroke petrol engines are less fuel-efficient and emit about 30-100 times more unburned hydrocarbons and carbon monoxide than four-stroke engines. That's why the Government banned them in Dhaka city. They should be banned in the whole country.

habitats for 266 indigenous fish species (belonging to 55 families) and 150 species of birds. Inland water bodies are the habitat of 56 species of prawns. More than 20 species of freshwater molluscs have been identified. In addition, the IUCN Bangladesh Red Data Book (2000) has described 22 amphibians, 126 reptiles, 628 birds (388 resident and 240 migratory) 110 inland mammals, as well as three species of marine mammals in Bangladesh. There are numerous invertebrates in the country that are yet to be identified. Bangladesh supports approximately 5,000 species of angiosperms, among which 300 species are being cultivated. The Bangladesh National Herbarium is currently revising the list of medicinal plants and the number is expected to exceed 500 species. There are 224 species of timber yielding plants and 130 fibre plants found among the flora of Bangladesh. The Sundarbans support a very rich and diverse fish fauna of 400 species, over 270 species of birds and over 300 species of plants. It comprises the largest remaining tract of habitat for the rare Royal Bengal Tiger.98 The depletion of biodiversity is the result of various kinds of human development interventions that impinge on it through destruction and degradation of land, forest and aquatic habitats. These activities encompass the sectors of agriculture, forestry, fisheries, urbanisation, industry, transport, tourism, energy, chemicals and minerals. In the fisheries sector, shrimp cultivation has become a major concern from the past decade. It has caused serious environmental damage that has harmed fish and other aquatic biodiversity significantly. The total area under shrimp cultivation is estimated to be 145,000 hectares, which is about 1% of the total land area of Bangladesh. About 80% of the total shrimp cultivating area is located in Khulna, Satkhira, Bagerhat, Barisal, Patuakhali, Jessore and Noakhali districts and cultivation of food and cash crops has totally or partially been eliminated in these areas. If agricultural production is to be carried out in these districts using the same level of inputs and similar methods of management, the land-output ratio will not be the same as before the switch to shrimp culture activity. The difference between the outputs during the two periods is the loss in production.

The country does have a reasonable number of laws and regulations to address air pollution, such as the Brick Burning (Control) Amendment Act, 1992; Bangladesh Environmental Conservation Act, 1995; Environment Conservation Rules, 1997; and the Environment Court Law, 2000. The ultimate success of any law is the extent to which it translates into action.

A moderate degree of land degradation, which results in a production loss of 45%, is estimated to cause a loss of 146,160 Mt of rice in physical terms and Tk 1237.6 million in monetary terms. This is 0.35% of the agricultural GDP and 0.11% of the total GDP of the country in 1994.99

Conservation of Bio-Diversity Biological resources and their diversity form the basis of both the ecology and economy of Bangladesh. The country's agriculture, fisheries and livestock, along with a number of other sectors, are heavily dependent, directly or indirectly, on biological resources.

Due to the seepage effects of increased salinisation of soils, the rice yield per acre of land adjacent to shrimp farms has been declining significantly. Whereas the per acre yield of Aman production in these lands was in the neighbourhood of 25 to 30 mounds {1000-1200 kg}before the start of shrimp cultivation, it has dropped to 3 to 4 mounds {120-160 kg}only in some cases.

Bangladesh possesses good terrestrial and aquatic environments that provide habitats for a large number of plants and animals. The delta is rich in fish and aquatic resources and other biodiversity. Rivers and other inland water bodies provide

As CPD states, â&#x20AC;&#x153;the coastal shrimp farming areas in the south have suffered environmental degradation; increased salinity of soil, canals and the ponds within the polders; reduction in grazing land and a consequent reduction of livestock;

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destruction of mangrove forests; adverse affects on the potential crop-mix, cropping intensity, crop calendar and the overall cropping pattern in the areas concerned; and a reduction in soil quality. In addition, the shrimp cultivating areas experienced an increase in unemployment and an aggravation of social and economic conflicts and tensions.”100 According to the IUCN Red List, there are 54 species of inland fishes, eight amphibians, 58 reptiles, 41 resident birds and 40 mammals which are threatened throughout the country. Among the marine and migratory species of animals, four fishes, five reptiles, six birds and three mammals are threatened. The Red Data Book on plants, which is still under preparation at the Bangladesh National Herbarium, already lists 96 seed-bearing plant species that are threatened.101 Bangladesh signed the convention on bio-diversity at Rio in 1992 and ratified it in 1994. It declared six areas (Coxes Bazar, Tecknaf sea beach, Cent Martin island, Sonadia island, Hakaluki Haor, Tanguar Haor and Marjat Baor) as 'ecologically critical areas' and took steps to preserve them.102 A focus on biodiversity has been emphasised in the Forest and Environment Policy. However, a separate policy on biodiversity is yet to be formulated and until then various departments of the government are responsible for conservation of biodiversity. There is great potential in Bangladesh for biodiversity- based sustainable development. In spite of the threatened wild fauna and flora, there are nearly 10,000 species of plants, animals and microbial organisms, a good percentage of which are found in superabundance. A wise and sustainable yield and harvest methodology and management plan need to be formulated and applied at the field level so that these biological resources are not over-exploited, and the economy of the country prospers. Governance Discussions of governance often generate more rhetorical heat than empirical light. Governance is defined as “the manner in which power is exercised in the management of a country's eco and social resources for development” (World Bank 1992). During recent years there has been a surge of interest in the consequence of governance. Kaufman (2004) examined the primary data for 150 countries and assessed the variability of the six sets of governance indicators: voice and accountability, political stability and violence, governmental effectiveness, rule of law, regulatory mechanism, graft and corruption.103 The findings of Kaufman's study (2000) have shown that one standard deviation increase in any of the governance indicators causes between a two and a half percent increase in per capita incomes and four fold decrease in infant morality. Improved governance also leads to significant increases in adult literacy, with a one standard deviation increase in governance leading to a 15% 25% improvement in literacy in the full sample of countries.104 In Bangladesh, a number of issues of governance can be put forward that keep a large portion of the population below the poverty line.

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Social and institutional vulnerabilities of the poor, women and children The poor, and women and children in particular, face a number of social and institutional barriers and insecurities in the pursuit of their livelihoods and social life. Removing such barriers and insecurities should be a priority. Targets include eradication of social ills such as dowry, female foeticide, trafficking of women and children, bonded labour, child marriage, hazardous child labour, disadvantages suffered by marginalised and socially excluded people, etc. Crimes of violence against women--rape, acid attacks, beating, murder, abduction and trafficking--have increased greatly in the last few years. Beating and other forms of oppression as a result of dowry disputes sometimes lead to women's death. Giving and taking dowries is illegal but is still practiced widely in the rural areas. Despite the continuing anti-dowry campaign by human rights organisations, NGOs, relevant GOs, and electronic and print media, dowry disputes in 2003 alone claimed 261 lives (Odhikar, 2004).105 Women belonging to low-income groups are particularly hard hit by dowry disputes. Acid violence has also been on the increase at an alarming rate. Acid throwing incidents are motivated by disputes over conjugal, financial or land related matters. From 1991 to 1999, a total of 47,925 women and children were trafficked. Of course, this is an understatement of the actual number due to the illegal nature of trafficking.106 Disabled people have received attention only in the recent past. Even though Bangladesh has signed the Proclamation on the Full Participation and Equity of People with Disabilities in the Asia-Pacific Region in 1993, very few human rights organisations work in this field. And only a handful work for the mentally sick. Since the signing of the Child Rights Convention in 1990, the Bangladesh Government and some NGOs have worked towards the development of human rights for children. A National Plan of Action for Children (1997-2001) was launched in 1999.107 The key aim of this was to ensure better quality of life for children. However, the picture is still very grim. Bangladeshi children are often victims of wide ranging forms of abuse and cruelty. These abuses can be physical, mental and sexual. Four hundred and seventy seven children were murdered in the year 2003 alone (Odhikar, 2004).108 Bangladesh is a signatory of the CEDAW, but is far from proper implementation of the convention. Some steps should be taken immediately such as proper law enforcement, reviewing the existing laws, awareness raising, regional cooperation to stop trafficking, creation of employment facilities, access to justice, empowerment of women, proper treatment facilities for victims, etc. Political Stability Democracy as an institution is new and still in the “process of making” in Bangladesh. In the three decades since independence Bangladesh has witnessed several political hiccups including the assassination of two presidents, two army coups and two major political movements that caused the downfall of political regimes. As a matter of fact,

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Table: Loss of money due to non-availability of quorum

11 th session 2,77,65,000

12th session 1,73,25,000

13th session 13,95,000

14th session 36,30,000

Total 5,01,15,000

(Source: Transparency International Bangladesh, Parliament watch, 2005,p-37)

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Our judicial system has also become corrupted. They recruit on the basis of political will. This speaks of the efficiency of our judiciary system. A judge of the High Court was recently accused of corruption. Another recent TIB study paints a disgraceful and disappointing picture of our government officials. It shows that our police department is the most corrupt department (15.18%). A bus has to pay the police Tk 7,200 as a bribe to make a trip from Kurigram to Dhaka.120 Thus if the fences damage the garden, where will we go? Details of the levels of corruption in various departments are given in the following figure: Corruption of various departments 60 50 40 30 20 10 0

52.32

15.18

10.4

10.1

Others

Each minute the parliament is in session costs Bangladesh Tk 15,000 . Bangladesh has lost Tk 50,115,000 ($0.82 million) from the eleventh to fourteenth session of the 8th parliament because of lack of quorum.116 This is surely a great waste of our country's money.

A recent study shows that, in the “Pouroshovas”, 35% of people gave bribes to build a house, 47% gave bribes to take a certificate for business, even for relief in times of disaster, and 29% gave bribes to elected representatives.119 Thus our elective representatives become corrupt and make the government inefficient.

Health

The parliament is populated by many MPs who have allegedly made financial 'investments' in their nomination by their party and in their subsequent election. A seat in parliament was reported to cost up to $1million in Bangladesh.114 Indeed, it appears that the wealth of candidates is a more important factor determining electoral nomination and success than local credibility or their ability and willingness to represent the interests of constituents. Parliamentary discussions not only lack content, but are dominated by foul language, unparliamentary appellations and intemperate exchanges. Prolonged and periodic walkouts by the opposition, often on unnecessary grounds, characterise the vulnerability and low level of credibility of transactions of parliamentary sessions. The Bangladesh Awami League (AL), the major opposition party, refrained from joining the house. During the 226 workdays of the present parliament (8th Parliament), the AL has so far participated only in 76 workdays, as it frequently boycotted proceedings.115

Combating corruption to prevent the leakage of resources The legislature, judiciary and executive branch are the three principal organs of the state in a parliamentary democracy. In Bangladesh, none of them are efficient enough. Each of the branches is corrupted. Transparency International Bangladesh (TIB) ranked Bangladesh as the most corrupted country four times this year.118

Education

Political parties are organisationally weak and poor agents of democratic transformation.112 Party programmes or ideologies seldom mobilise voters during elections. All major parties bank on the populist approach of rhetoric, symbolism and sentiments as the major instruments for mobilising voters.113 A favourite weapon to harass a sitting government is calling a hartal, a general strike which paralyses most economic activities, especially transport, sometimes for days. The main opposition party enforced 44 hartals in 2004 alone. There were 827 days of hartal during 1991 and 2002 and 147 days between 2002 and 2004. Estimates put the average cost of hartals to the economy during the 1990s at 34% of GDP.

If we cannot bring political stability in our country, our achievement in different social indicators may fade. There is an urgent need for reform in Bangladesh's political system.

Local Government

Both the 1996 and 2001 elections were preceded by a long opposition boycott of Parliament. The opposition was engaged in prolonged violent street agitation, causing considerable damage to the country's economy and its political system. The political culture in Bangladesh is characterised by confrontation and intolerance.110 One observer notes that “…given the recent political history of Bangladesh, the main question is … how the political partiesthe winners and the non-winnerswill behave with one another. Will they cooperate and sit inside the parliament and give the nation a stable democracy? Or will they cry foul, claim that the voting was rigged, point accusing fingers at one another and refuse to accept the verdict of the people, bringing us all back to square one?”111

Although the election manifestos of various parties made general statements concerning the poor and poverty, pro-poor issues did not receive due attention in parliamentary discussions and debates. There were hardly any deliberations on changes in the policy or process or any proposals for new laws or rules to address issues of the poor. A study further reveals that there is a conceptual confusion among MPs in understanding and/or operationalising pro-poor issues.117

Police

Bangladesh has oscillated between autocracy and democratic rule over the last 30 years. 109

(Source: The Daily Prothom-Alo, 29th October,2004) TIB shows for that Bangladesh lost Tk 2,250 million because of corruption from July to December 2003. The sector wise distribution of the losses are given below:

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with the Appellate Division of the Supreme Court.121

Sector wise distribution of loss Government organizations

2.8 3.6 47 41.9

Private organizations NGOs Donor agencies

(Source: The Daily Star, 1st September, 2004.)

Though Bangladesh has figured prominently in TI's corruption ranking in recent years, most of the people in this country are honest. The following may be helpful as preventive measures against corruption: i) Appoint an effective ombudsman. ii) Citizens should be given the option of receiving public services from alternative places and sources to cut down on monopoly power. iii) Strengthen the Anti-Corruption Commission. iv) Anti-corruption laws should be consolidated with new provisions, which may include punishing the corrupt as well as those who instigate/help corruption. v) Break up all utility monopolies and create competing private companies to reduce the scope of corruption {This sounds the same as ii)}. vi) Set up an interactive mechanism with civil society and establish the right to register a complaint, get a quick reply after inquiry and remedies for deviant behaviour of civil servants. vii) Insist on probity and accountability through transparent decision-making. viii)Allow free access to information to concerned citizens and the press. ix) Institute citizens' audit in all service delivery organisations. Ensure access to affordable justice Justice belongs not to this or that class, nor to particular relationships between classes, but to society's functioning as a whole. A lack of safety and security directly affects the welfare of poor people. It can cause injury and death, reduce family income and generate a climate of fear. A backlog of cases and corruption also continue to plague the judicial system, thus reducing the effectiveness of delivery of justice to ordinary citizens. The expeditious and affordable delivery of justice to the poor and vulnerable is one of the criteria of justice. Plato defines justice as what is due to everyone should not be denied. According to him, justice is the mother of all virtues. If justice is expensive and delayed, justice is eventually denied. The courts are unable to dispose of cases within a reasonable time, and this constrains resources. Disposal of cases takes a long time. While addressing a workshop titled â&#x20AC;&#x153;Alternative Dispute Resolution (ADR): In Quest of a New Dimension in Civil Justice Delivery System in Bangladeshâ&#x20AC;? on 31 October 2002, Law, Justice an Parliament Affairs Minster Moudud Ahmed said that nearly one million cases are now pending with the country's courts. Of these 968,305 pending cases, 127,244 are with the High Court Division and 4,946

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Experts believe that certain measures and remedies are necessary to improve upon the present justice system to meet the needs of the poor. One of the ideas recently floated was for an ADR system. There are plenty of skilled persons who have worked intensively on ADR. An inexpensive and speedy justice system needs to be introduced in rural areas so that the poor get proper justice under the country's laws.112About 40,000 cases involving about Tk 100 billion are pending in the Money Loan Courts. Under the Money Loan Court Act, 2003, which provided for ADR, about Tk 3000 million has been recovered since May 2003.123 Another fact is that the poor are often not aware of their legal rights, especially rural women. Dissemination of legal rights constitutes another facet of justice. To be able get justice to the poor, they need to know their legal rights. This is very important because if they are not aware of their legal rights, they will not be able to pursue redress for wrongs done to them. Ensure participation of poor and of women in anti-poverty policies and programs Ensuring a 'voice of the poor' at all stages of anti-poverty policies and programmes-implementation, monitoring, planning and policy formulation--will be critical to building the ownership of the poor over the poverty reduction process. Practice of participatory management in every government institution could play a pivotal role in strengthening the poverty reduction process. Development planners recognise that the uplift of the poor and backward masses is a pre-condition for the overall development of a country. Various development initiatives' successes are limited, due to the lack of participation by the stakeholders--the poor themselves, who have hardly had any influence and control over development initiatives. The people of Bangladesh continue to express high levels of enthusiasm in the political process. This has been borne out by experiences since the resumption of democratic governance in 1991. Various parliamentary, by and local elections during the 1990s together have seen an average turnout of over 70% of registered votes. The parliamentary elections in 1996 and 2001 brought a high voter turnout of over 74%.124 Voter turn-outs in local elections at the union level too are consistently high; the last union elections have been no exception. Clearly, the electorate in Bangladesh is keenly exercising its democratic franchise. Women's participation in local councils received a huge boost with the provision for reserved seats for women in union parishads. This provision came into force in the 1997 elections in which 12,723 women were elected to the reserved seats out of 43,969 who competed. Women are also making inroads into the more competitive general and chairman positions too, as can be seen from the table below: Table: Women's position in Union Parishad Elections

Year 1997 2003

Chairman Competitors 102 207

Winners 20 22

General member Competitors 456 564

Winners 110 79

(Source: PPRC, Working Paper 1: How can the human rights and governance agenda be best served?, p-21)

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But the political representation of the poor through the electoral process in today's Bangladesh remains set in a patron-client framework which tends to militate against any independent political assertion by the poor. This is certainly true for the national level though less true for the local level. The patron-client orientation of the electoral process is additionally compounded by implicit threats of electoral violence that tends to be an inhibiting factor on the political assertion of the poor. The entire process strongly militates against any independent political representation of the poor, and hence, any independent leverage over the setting of policy or programme priorities for the national government. Though some positive opportunities for better political representation are emerging in the local government arena, its significance as to the construction of priorities remains limited given the severe weakness of local governments within the structure of government. In the absence of substantive jurisdictional and representational powers, local government offices have not been able to fulfil their promise of being subservient offices of district administration. Thus, even when people have had the chance to exercise their right of vote for local government, few substantive democratic gains have followed because of the jurisdictional and representational limitations of such offices.

Decisions making

The success of participatory development cannot be harvested overnight. Rather, it is a long term exercise which requires better economic policies and more investment in human capital, infrastructure, and institution-building, along with better governance. Sometimes the ruling party tries to suppress the efforts of participatory development in fear of losing the base of its own power. Genuine public participation in administration and implementation of government programmes can also help smoothen the functioning of democracy, and can otherwise make ground for holding the bureaucracy accountable at the grassroots. As with a glass that is simultaneously half full and half empty, Bangladesh has made significant recent progress in reducing poverty, but still faces the reality that roughly half its citizens live in deprivation.126 Although not properly exploited yet, Bangladesh does have many inherent strengths which can be used as the launching pad for making this country a developed one. To capitalise on these strengths we need a comprehensive roadmap which will carry us to a poverty free world. Avenues of Regional Cooperation Translating the priorities and targets set out above is primarily a matter for national action. However, there is scope for a regional window of initiatives that are easy to implement and have clear potential to boost the attack on poverty. ISACPA recommends the following initiatives to be undertaken at the SAARC-level:

Implementation

Benefit Sharing

Evolution

Figure: People's participation in various levels

There is no denying the fact that popular pressure and participation from grassroots organisations are necessary prerequisites for political change and economic progress. Bureaucratic centralism and control of the local government weakens the educative effects of political participation. The devolutionary system of decentralisation can make bureaucrats accountable in all levels of administration. The system of participative management and decentralisation of policy making authority to the field level and a bottom-up planning machinery can also help in establishing an accountable, efficient and transparent system of public administration. That is why the devolved local government system needs to be responsive to stakeholders, interests and needs, and this requires a participatory approach not only in service delivery but also in planning and decision-making. In this regard, the tasks of local governments are to identify and support the development of local partnerships, for example, with CBOs, NGOs and the private sector, and to ensure commitment to a partnership/participation enabling strategy.125 To develop participation it is essential to support grassroots organisations and

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intermediary organisations such as professional associations, consumer groups and trade unions; to involve all project stakeholders in programme design and implementation; and to ensure better access of marginalised groups to the formal economic and legal system, which requires a change in political and bureaucratic attitudes.

A South Asian Data-Base on Poverty Alleviation Best Practices and Regional Cooperation Program on Dissemination South Asia boasts of a number of 'best practice' initiatives in the field of poverty alleviation, some of which have gone on to earn world renown. The region, however, lacks a comprehensive and credible database on such 'best practices' and in particular on what particular features constitute the 'best practices' in question. The reality of 'best practices' constitutes a garden of hope amidst the dismal record of poverty alleviation in South Asia. The following steps will help operationalise this initiative: i) Creation of an inventory of best practices. ii) Literature review. iii) Development of a generic format for description of best practices. iv) Field work for identification and description of best practices. v) Evaluation and collation of successful models. vi) A regional capacity building programme for dissemination of best practices. vii) Preparation of training materials. viii) Regional and sub-regional capacity building activities. ix) Set up of a website and e-group. x) Country based approaches for replication.127

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Promotion of rural technology in SAARC Development of rural industries and creation of employment opportunities in nonfarm sectors holds the key to elimination of poverty in South Asia. Though the share of agriculture in GDP in most South Asian economies has declined significantly, a commensurate decline in the workforce dependent on agriculture for livelihoods has not occurred. Development of rural industries has been slow and sporadic. These family-owned industries of small size and low technological base lack access to credit and marketing facilities. In spite of shortcomings, they employ a significant proportion of the work force engaged in manufacturing activities. Industries and small and medium enterprises in rural areas face threats from many quarters. They also face major threats from products produced by large domestic enterprises at lower cost and often better quality. Revival of rural industries and their growth critically depends on infusion of fresh technology, capital and other inputs. Technological support to rural industries would need to encompass all aspects of the production process. These would have to cover product design, production process, product packaging and marketing. In addition, a policy environment which enhances access of rural enterprises to material inputs, financial assistance and infrastructure critical to their survival, must be created. The following steps will help operationalise this initiative: Step 1: National initiatives on rural technologies At the national level, the major steps required for technology in rural areas would be i) Identification of opportunities based on which viable and sustainable enterprises could be set up, including identification of industries and clusters which could be promoted in specific areas; ii) Identification and facilitation of transfer of appropriate technologies to existing units; iii) Formulation of a package of development interventions that should include identification, training of potential entrepreneurs in rural areas, provision of financial, technical and marketing linkages; and iv) Creation of a policy environment that is conductive to growth of small enterprises through infrastructure development of rural areas, fiscal and other incentives.

and other agro-based products could benefit from introduction of designs and packaging which cater to market requirements. The advisory group could constitute a sub-group on product identification for intensive intervention. The sub-group should identify such products for each country and delegate responsibility for development of suitable technology to identified institutions. Step 4: Use of information technology to promote rural technologies Development of technology involves questions of intellectual property rights and royalty payments in many cases. However, the technologies that are not proprietary and could easily be put in the public domain need to be propagated in the SAARC region by making available information on these technologies, along with details on how to access them on a website. The website could be created and maintained under the supervision of the advisory group. Review of laws and policies affecting the livelihood of the poor Poverty alleviation and provision of opportunities that enhance the well-being of the poor, power of the people in decision-making, mainstreaming of the informal economy and sustainable development, form part of the strategic vision of SAARC. To achieve this vision, it is imperative that national policies, laws and administrative rules and procedures promote equity and social inclusion. It may be prudent to confine the scope of the analysis of anti-poor laws and polices to a few selected issues which affect a large proportion of the poor. These are listed below for rural and urban poor separately:129 Rural 1. Land tenure laws 2. Laws relating to tribal communities Urban 1. Home-based workers 2. Service providers 3. Street hawkers and (cycle) rickshaw pullers 4. Housing. The following steps could help tackle the above issues:

Step 2: Constitution of advisory group for rural technology Once national level coordination is accomplished and nodal agencies identified in each country, an advisory group of these institutions should be constituted. This group would scan existing technologies that are being used by rural enterprises. Such scanning is an important first step not only for stock-taking but to plan for future technology development appropriate to the SAARC region in order to avoid duplication of effort, time and money. Step 3: Constitution of a sub-group to identify niche products There are many products manufactured in rural and cottage industries in South Asia that have a niche market in the world. Brassware, pottery, and tie and dye silk products are some examples. Value addition to these products could involve greater design inputs. Bamboo products benefit a great deal from design interventions. Jute

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Step 1: Constitution of thematic working groups Working groups on the topics identified above should be set up. The composition of the working groups would differ depending on the theme. Step 2: Identification of key polices on selected themes Each working group would collect and collate policies followed in individual countries on the topic under discussion. Step 3: Regional workshops on identified themes. Cooperation and experience sharing on poverty relevant areas It is necessary to extend the ambit of cooperation in the SAARC region on the issues which are of a pan-SAARC nature and could enhance the region's capabilities and

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bargaining position in international fora. Many issues are amenable to treatment on a regional scale. Some of these are already part of the SAARC mandate. Elimination of poverty and creation of a South Asian Free Trade Area have received considerable attention. Cooperation in the field of energy, transport and telecommunication, fundamental to rapid economic growth, have been attempted in the past at a bilateral level. There are, however, issues that need to be brought into focused discussion. It may also be easier to elicit the cooperation of all SAARC members as these issues are largely apolitical and yet are central to the well-being of the poor and their quest for decent standards of living. The issues on which greater cooperation will yield large dividends are:130 l Agriculture research and extension l Intellectual property rights (IPR) in agriculture and protection of bio-diversity l IPR-protected life saving drugs produced by MNCs l Natural calamities and disaster mitigation strategies l Tourism l Competition policy l Immunisation l Protection against various diseases

Agriculture Research and Extension Agriculture is still the largest employer of the workforce in South Asia. Food grains continue to be the staple diet of the people and providers of not only energy but also proteins. The productivity of agriculture in agro-climatic zones of similar nature in different countries varies considerably. Greater cooperation among SAARC members in agricultural research and extension could considerably enhance the agricultural productivity and food security of the region. Collaboration between national agricultural systems could also avoid duplication of research efforts and release resources for further research. Intellectual Property Rights (IPR) in Agriculture and Protection of BioDiversity IPRs in agriculture are part of the WTO regime. Regional cooperation in evolving a common position on IPRs in agriculture and protection of bio-diversity is of paramount importance as South Asia is one of the hot spots of bio-diversity. Protection of this heritage is closely linked to our food security as well. Alternative Medicine South Asia has a long tradition of Ayurvedic, Unani and other systems of medicines for health care. These cut across country boundaries and a common position on research, support, development of medicines and extension efforts could be evolved to provide health care at affordable prices to the poor. Natural Calamities and Disaster and Mitigation South Asia is the most disaster prone area of the world. The World Disaster Report 2001 identified Bangladesh as the most flood prone country in the world, followed by India. These two countries accounted for a major proportion of global loss of life due to natural disasters. Flash floods, droughts and earthquakes have been occurring in

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South Asia with increasing frequency. An institutional response at the regional level is required for early detection and warning, and for taking up programmes that provide not only immediate relief but also long term rehabilitation and reconstruction. This is especially important in view of the fact that natural disasters affect the poor disproportionately. As there are resource constraints on SAARC countries that limit their capability to face natural disasters like tsunamis or earthquakes, we could make an arrangement to use the resources of others. We saw that if there were more equipment in Pakistan then many more lives could have been saved in the recent earthquake. We could together make a 'SAARC Force' which would work in times of natural disaster and ensure the best use of our resources. This would also bring the people of the region together and help build trust among them. Tourism South Asia has a rich cultural heritage. It has a great tourism potential and could be easily marketed as a composite tourist destination. The sector also has high employment generation potential. Competition Policy SAARC countries have followed a path of integration with the global economy. Direct foreign investment policies differ from country to country depending on the perception of the individual countries of the role of FDI in their economic development. However, there are issues other than direct foreign investment on which regional views may be calibrated. One of these relate to competition policy, which has been discussed in WTO meetings though no specific decision has been taken. Multinational corporations in developing countries could follow policies which drive out domestic firms. They could also follow policies which reduce competition. A clearcut policy in mergers and acquisition and other practices that reduce competition is required. These are related to issues of monopoly power and implications for employment opportunities. Countries in South Asia could work out domestic competition policy in consultation with each other, which would provide protection to domestic industries and eliminate practices which reduce competition. Immunisation Regional countries should set up a joint immunisation programme as this would be more effective. Protection of various diseases Diseases like AIDS and malaria kill many people worldwide. The problem of 'bird flu' rose recently. We have to combat them jointly. The following steps could help: Step 1: Setting up of working groups Working groups on each of the topics listed could be set up as a first step. These groups could be formed by the SAARC Secretariat in consultation with national governments and consist of persons dealing with different aspects of the problem.

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Step 2: Meeting of the working groups The working groups, as a first step, could undertake a stock-taking exercise. They would also identify themes for collaboration on which further work might be required and commission studies and projects in this regard either through regional institutions or institutions located in specific countries. Step 3: Reports of the working groups Each working group would formulate a plan of action within a definite time frame for collaboration among SAARC member countries on specific themes identified by the working groups. Experience Sharing and Cooperation in Social Sector Polices SAARC leaders, in their summit meetings since 1985, have emphasised the imperative of social development. Broad targets on a wide range of specific themes have been set in different summit declarations. A detailed analysis of the SAARC declarations indicates that SAARC leaders have been extremely concerned about the status of children, especially girls, trafficking in girls and sexual abuse, use of drugs and narcotic substances, food security, relief to the disabled and protection to the old and infirm. In addition, access to education, health and other basic needs have been voiced as important concerns. The following steps would help operationalise this initiative:131 Step 1: Constitution of working groups on thematic issues Working groups on the following themes may be set up: i) Status of girl children including trafficking and sexual exploitation ii) Women's empowerment iii) Child labour iv) Old-age protection v) Empowerment of the disabled vi) Nutritional security vii) Health viii) Education ix) Basic needs including water, sanitation, shelter and electricity connectivity. The members of the working group would be nominated by the national governments. While nominating members, the national government should ensure representation from NGOs working in the respective areas along with officials dealing with these subjects in central or state governments. Step 2: Review of progress made on commitments Each working group would review the commitments made on its theme by the national governments in international conventions, as also in the SAARC summit. It would also collate information to the follow-up actions taken by the countries to fulfil these commitments.

themes. An important task of the working groups would be to develop digests of a best practices through commissioned work or other suitable alternatives. Step 4: Propagation of best practices The best practices that are collected and collated by each working group need to be propagated widely so that local governments, community leaders and NGOs can adopt these practices in their respective areas. Media channels could be used for propagation of the best practices. Use of information technology by putting these practices on the SAARC web-portal could also be considered. Sharing of perspectives on multilateral negotiations with poverty implications Several multilateral agreements in recent years have significant implications for poverty alleviation. These include the WTO Uruguay Round, followed by the Doha Ministerial Declaration, in turn followed by negotiations on the Agreement on Agriculture, the Johannesburg Plan of Action on Sustainable Development, the Monetary Declaration on Financing for Development, the (annual) Conference of Parties to the UN Framework on Climate Change, and several others. Similar negotiations in several multilateral forums will continue in the future, either under existing processes, or new ones. The perspectives of SAARC countries on these negotiations are generally convergent. Nevertheless, in some instances, there may be differences in nuance and priorities among the SAARC countries, reflecting their specific socio-economic situation. Identifying areas of convergence, as well as tracing the sources of differing perceptions, may help policymakers and negotiators interact more effectively at such negotiations to reach mutually favourable outcomes. The following steps are envisaged in operationalizing this initiative:132 Step 1: Constitution of an advisory group on multilateral initiatives bearing on poverty alleviation National governments may select members for the advisory group from amongst its senior officials, development practitioners and academics. The advisory group would periodically identify upcoming multilateral negotiations and similar events of interest to SAARC members in the context of poverty alleviation in the region and identify critical themes and issues involved in each of these events, which merit mutual sharing of perspectives. The group may conduct its business by e-group or video conferencing, rather than travelling to formal meetings. Step 2: Commissioning collaborative studies on identified themes and issues The SAARC Secretariat would commission collaborative policy studies on themes and issues identified by the advisory group by established policy research institutions in the SAARC region.

Step 3: Identification of best practices on each theme South Asia already boasts of a number of innovative initiatives on the concerned

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Step 3: Conducting regional seminars on each multilateral event In advance of each multilateral event, a regional seminar would be organised to which key policymakers and negotiators from each of the SAARC members would be invited. Conclusion The countries of South Asia have their commonalties and their differences. The challenges they confront are complex and often intractable. There are issues which bring them together and those which divide them. But on one issue, the interests of the peoples and the governments of South Asia stand clearly fused. This is the issue of poverty. 133 Notwithstanding the despair of poverty statistics, a poverty-free South Asia is not an impossible dream. Such a dream has already found root in millions of hearts across the length and breadth of South Asia. The future has already been dreamt. Realising it is our individual and collective responsibility.

26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36.

Endnotes 1. Report of the Independent South Asian Commission on Poverty Alleviation, 2003, p-66. 2. Ibid. p-66. 3. Ibid. p-67. 4. Ibid. p-70. 5. Ibid. p-70. 6. Ibid. p-71. 7. Ibid. p-73. 8. Document of the World Bank and Asian Bank Development Bank, Poverty in Bangladesh: Building on Progress, (2003), p-2. 9. Bangladesh economic review, 2005, p-164. 10. Ibid. p-165. 11. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-7. 12. Ibid., p-7. 13. Ibid., P-10. 14. Ibid., p-10. 15. Millennium Development Goals Bangladesh Progress Report, (2005), op.cit. p-5. 16. Ibid. p-5. 17. Poverty gap, PG, estimates how far below the poverty line the poor are on average as a proportion of the value of that line. Squared poverty gap, SPG, takes into account not only the distance separating the poor from the poverty line but also inequality among the poor. The poverty gap and the squared poverty gap estimates are calculated using the cost-ofbasic-needs method. 18. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-5.. 19. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-33. 20. The two latter goals are Bangladesh national goals articulated in the Bangladesh National Strategy for Maternal Health, 2001. 21. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-33. 22. Bangladesh Maternal Mortality Survey (BMMS), NIPORT, 2001. A data range is from various sources such as WHO, UNICEF, and GOB. 23. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh, p-34. 24. Ibid. p-34. 25. Ibid.p-35.

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37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47.

48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67.

Ibid.p-36. Ibid.p-37. Ibid.p-27. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh, p-27. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh, p-27. Ibid. p-28. Ibid. p-30. Independent South Asian Commission on Poverty Alleviation (ISACPA), (2004), SAARC Development Goals (SDGs) 2005-2010, p-20. Document of the World Bank and Asian Bank Development Bank, Poverty in Bangladesh: Building on Progress, (2003), p-53. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh, p-62. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-39. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh, p-41. Ibid. p-41. Ibid. p-42. Ibid.p-43. Independent South Asian Commission on Poverty Alleviation (ISACPA), (2004), SAARC Development Goals (SDGs) 2005-2010, p-20. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh, p-48. Ibid. p-48 Ibid. p-48. The Protom-Alo, October 1, 2005 Ibid. p-49. (Source: Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-10.) Ibid. p-11. Ibid. p-12. Ibid. p-13. Ibid. p-13. Ibid. p-15. Ibid. p-17. Ibid. p-18. Document of the World Bank and Asian Development Bank, (2003) Poverty in Bangladesh: Building on progress, p.46 Ibid., p.47. The Daily Star, October 30, 2005 The Financial Express, October 30, 2005 http://www.boibd.org/ The Financial Express, October 30, 2005 Report of the public administration reform commission, 2000, p-123. Economic and Social Consequences of the Arms Race and of Military Expenditure, UN panel of experts, p.1. Peace and Demilitarization, Wali-ur Rahman.2005, p.1 The Daily Phrotom-alo, June 10, 2005 and The Daily Phrotom-alo, June 13, 2003. The Daily Star, June 10, 2005 The Daily Phrotom-alo, June 10, 2005 The Daily Star, June 8, 2005

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68. Peace and Demilitarization, Wali-ur Rahman.2005, p.3 69. Text of Social Charter adopted by 12th SAARC Summit. 70. Independent South Asian Commission on Poverty Alleviation (ISACPA), (2004), SAARC Development Goals (SDGs) 2005-2010, p-19. 71. Bangladesh Economic Survey, 2005, p-125 and 127. 72. Report of the Independent South Asian Commission on Poverty Alleviation, 2003, p-47 73. Report of the Independent South Asian Commission on Poverty Alleviation, 2003, p-47. 74. Aminizzaman, Harald, Istiaq; A study of the Village Pay Phone of Grameen Bank; 2001 p23. 75. Ibid. p-35. 76. Millennium Development Goals Bangladesh Progress Report, (2005), Jointly prepared by the United Nations Country Team in Bangladesh and the Government of Bangladesh,p-33 77. Bangladesh Economic Survey,2005, p-200. 78. Ibid. p-200. 79. http://www.eia.doe.gov/emeu/cabs/bangla.pdf 80. Biswas, Wahidul K, BANGLADESH'S ENERGY SECTOR: THE PAST, PRESENT, AND FUTURE OF RENEWABLE ENERGY TECHNOLOGIES, p-2. 81. http://www.eia.doe.gov/emeu/cabs/bangla.pdf 82. http://www.eia.doe.gov/emeu/cabs/bangla.pdf 83. http://www.eia.doe.gov/emeu/cabs/bangla.pdf 84. http://www.geog.leeds.ac.uk/projects/prp/pdfdocs/bangwater.pdf 85 http://nirapad.org/care_nirapad/Home/Magazine/html/ 6th%20Issue%20 December% 202003/html/news11.html 86. http://www.weeklyholiday.net/120304/env.html 6th%20Issue%20 87. http://nirapad.org/care_nirapad/Home/Magazine/html/ December%202003/html/news1.html 88. http://www.weeklyholiday.net/120304/env.html 89. The Daily Prothom-Alo, October 13, 2005. 90. Islam N., Natural Hazard in Bangladesh, 2005.p-7. 91. Bangladesh Bureau of Statistics (BBS), 1989. Dhaka: Government Of Bangladesh 92. Bureau of Disaster Management, Handout Nov.1998. Dhaka: Government Of Bangladesh. 93. UNCHS, 1998. Post Flood Shelter Rehabilitation Assessment Report, Prepared for UNDP, Government Of Bangladesh. 94. Daily Ittefaq, News Item 19.11.98. 95. Bangladesh Water Development Board (BWDB), 1987. Flood In Bangladesh. 96. Siddique, I.B. 1998. â&#x20AC;&#x153;the longest Deluge '98 Damages and Strategies for Protectionâ&#x20AC;?, Daily Ittefaq, 22 October 1998. 97. UNEP, Bangladesh: State of the Environment, 2001, p-2. 98. UNEP, Bangladesh: State of the Environment, 2001, p-7. 99. UNEP, Literature Review on Bangladesh Shrimp Policy Research for Sustainable Shrimp Farming in Asia, 1999. 100..CPD, Environmental Impacts of Trade Liberalization and Policies for the Sustainable Management of Natural Resources,1999 101. UNEP, Bangladesh : State of the Environment,2001, p-7 102.Bangladesh economic review, 2005, p-215. 103. Kaufmann, Daniel, Aart Kraay and Pablo Zoido-Lobaton (2004), Governance Matters IV: Governance Indicators for 1996-2004, World Bank- Development Economies Research Group (DECRG), World Bank Institute. 104.Kaufmann, Daniel, Aart Kraay and Pablo Zoido-Lobaton (2000), Aggregating Governance Indicators, World Bank Policy Research Paper 2195. 105. The Daily Prothom-Alo, 16th April 2004. 106.PPRC, Working Paper 1: How can the human rights and governance agenda be best served? p-17. 107. Ibid. p-16.

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108.The Daily Prothom-Alo, 16th April 2004. 109.Salahuddin M. Aminuzzaman, Poverty, Politics and Governance: Where does Bangladesh stand and way forward, p.3. 110. Ibid, p.3. 111. Editorial, Dail Star, June 30th 1996 112. Hasnuzzaman, A.M. (1998) Role of Opposition in Bangladesh Politics, Dhaka: UPL. 113. Salahuddin M. Aminuzzaman, Poverty, Politics and Governance: Where does Bangladesh stand and way forward, p.3. 114. The daily Inqulab 24th November, 2001. 115. Salahuddin M. Aminuzzaman, Poverty, Politics and Governance: Where does Bangladesh stand and way forward, p.4. 116. Transparency International Bangladesh, Parliament watch, 2005, p-37. 117. Aminuzzaman, Salauddin (2001), Promotion of Pro-Poor Issues: Role of MPs and Major Political Parties in Bangladesh, Dhaka: ActionAid Bangladesh. 118. The Daily Prothom-Alo, 21st October, 2004. 119. The Daily Prothom-Alo, 14th September, 2004. 120.The Daily Prothom-Alo, 29th October, 2004. 121. The Daily Star, 1 November.2002. 122. http://www.thedailystar.net/law/larchive.htm 123. David P. Hughart, Operations Advisor, World Bank, Bangladesh at the Workshop on Khulna Field Test of Case Management & Court Administration Reforms for the Civil Justice System under the Legal and Judicial Capacity Building Project, on January 15, 2004 124. PPRC, Working Paper 1: How can the human rights and governance agenda be best served? p-20. 125. Edralin Josefa S., Participation of People,1992, p-140. 126. Document of the World Bank and Asian Bank Development Bank, Poverty in Bangladesh: Building on Progress, (2003), p-1. 127. Report of the Independent South Asian Commission On Poverty Alleviation, 2003, p-93. 128. Ibid. p-96. 129. Ibid. p-98. 130. Ibid. p-100. 131. Ibid. p-104. 132. Ibid. p-105. 133. Report of the Independent South Asian Commission on Poverty Alleviation, 2003, p-13.

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fact that China, historically, geographically, geo-politically by virtue of being in Tibet and Sinkiang (Xinjiang) is a South Asian power.” 3

By M.R. Josse

Moreover, as I can personally vouch from a 10-day visit to Tibet with a Nepali press delegation in 2004, Chinese maps show China's eastern frontier with India as lying along the foothills, east of Bhutan, and just north of the plains of Assam. As the SinoIndian border dispute remains unresolved, to date, how can one justifiably assert that China does not possess South Asian credentials?

hina's increasing interest and engagement in South Asia, including in the South Asian Association for Regional Cooperation (SAARC), has been manifest in recent years. While there is now, in an era of globalisation, grudging acceptance that Beijing's growing attention to South Asia and SAARC is quite legitimate such a realisation comes in the wake of sturdy prejudices of the not-toodistant past, not to mention historical misconceptions and assiduously flogged geopolitical myths.

As far as Bhutan whose very etymology 'Bhot Ant' suggests the 'end' of Bhot (Tibet) is concerned, not only do the Himalayas connect it with Tibet but, indeed, “four passes, three in the west and one in the east were once the most important gateways to Tibet.”4Moreover, in Indian eyes, China has possession of a significant portion of the territory of Kashmir she claims as her own. That, of course, is based on the SinoPakistan treaty of March 1963. Logically, therefore, to dispute China's South Asian linkage would be to assert that Kashmir is not within South Asia!

This essay briefly examines the political, historical and geo-political background and implications of China's new-found awareness of South Asia as a whole and her interest in SAARC in particular. It represents, basically, a Kathmandu perspective.

The above considerations apart, there is the geo-political reality that major South Asian rivers and/or their tributaries originate in the high Tibet-Qinghai plateau. The most important in this regard is perhaps the Yarlung Zangpo, known downstream in India as the Brahmaputra and in Bangladesh as the Jamuna.

China in South Asia

What is striking is that although China shares borders with several South Asian states and though there is a long and documented history of trade and cultural contacts between them, it is only quite recently that scholars and others have woken up to that reality. In my mind two events, more than others, have contributed to the belated recognition that China and South Asia are not world's apart. The first is that what is now generally considered as South Asia was directly or indirectly under the sway of British imperialism for long, a period of time when artificial barriers were sought or created between South Asia and China. The second relates to Tibet's separation from Beijing's control, coinciding with much of the British colonial period in undivided India and its immediate neighbourhood. China and South Asia History, geography and culture closely link China and South Asia. Moreover, China borders India, Pakistan, Afghanistan, Nepal and Bhutan. Moreover, China has been associated with the Kathmandu-based International Centre for Integrated Mountain Development (ICIMOD) where, since 1983, she has been a member along with Afghanistan, Bangladesh, Bhutan, India, Myanmar and Pakistan as equal partners in integrated mountain development of the Hindu Kush-Himalayan region.1 Indeed, the Chinese invariably assert China is linked to South Asia by mountains and rivers. As Chinese publications indicate, Tibet is connected by the Himalayas to India, Nepal and Bhutan. At the Karakorom (Kala Kulun in China) her Xinjian Uygur Autonomous Region adjoins Kashmir, a territory disputed between India and Pakistan.2 More pointedly, as a Pakistani scholar has argued, “we must not close our eyes to the

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Chinese publications, besides, point out that: “Great rivers of Asia that find their origin in Tibet include the Ganges, Hindus (Indus), Brahmaputra, Mekong, Salween and Irrawaddy.”5 Several tributaries of the Ganges flow into Nepal directly from Tibet before merging with the river that Hindus regard as sacred. They include the Karnali, the Narayani (Gandak), and the Kosi rivers. The Raibok rises in Tibet, flows through Bhutan, enters India and ultimately merges with the Jamuna in Bangladesh. Furthermore, the Sutlej orginates in Tibet and flows into India before it joins the Indus in Pakistan. The claim that the origin of the Ganges lies in Tibet is, incidentally, not well advertised in India. Yet, on examination of a large-scale physical wall map at the Tibet Environment Administration office in Lhasa, it did appear that the Chinese claim was a valid one. Be that as it may, a turn of events in August 2004 sought powerfully to buttress the China-in-South Asia argument. This occurred when China informed India that “a lake formed by landslides in Tibet Autonomous Region of China is threatening to burst its banks and inundate its hundreds of villages in neighbouring India.” 6 A follow-up news report disclosed that the Himachal Pradesh authorities “reviewed the preparedness to meet any eventuality in case of flood in the Sutlej.”7 This, too, underlines China's environmental linkage with South Asia, as also her role in promoting environmental security in that region. The nexus between China and South Asia has, in recent times, been underlined in other ways as well, some quite unexpected. One example is provided by Indian

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External Affairs Minister K. Natwar Singh's proposal for a common nuclear doctrine between India, Pakistan and China, unveiled at his maiden press conference in New Delhi, following a change in government.8

Argued from another angle, if Nepal is to be considered as a South Asian state, despite possessing trans-Himalayan characteristics, surely then Tibet (or, China more accurately) should also be.

As reported in the Indian media, the proposal represents a refinement to the late Indian Prime Minister Ravij Gandhi's disarmament proposals.9 Despite the initial excitement over the proposal in New Delhi, and some puzzlement or cautious optimism in Islamabad, China soon shot it down. Indeed, Chinese assistant foreign minister Shen Guofeng declared in the Chinese capital that China was not in favour of welcoming India and Pakistan into the international nuclear club. “The international community should stick to the spirit and principles enshrined in the Nuclear NonProliferation Treaty (NPT) as well as on the consensus reached in the UN Security Council resolution 1172.”10 Subsequently, Foreign Minister Singh told parliament that no talks had been held with Pakistan and China on his proposal.11

In any case, the weakness of any terminology that locates states arbitrarily within a single, or convenient, geographical box has by now been discredited. To take the case of Pakistan, surely she possesses Central Asia and even West Asian features as much as she does South Asian ones. In China's case, it is clear that she possesses many South Asian attributes, in addition to those of an East Asian and Central Asian character. In any case, one may now focus attention to the convenient, if erroneous, theory that has tended to project the Himalayas as a water-tight security barrier or cordon between South Asia and territories across the world's highest mountain range to the north and, in so doing, advances the notion that South Asia lies entirely to its south.

Fiction of Separation and Defintional Myths Although Singh's proposal did not take off, inherent to his proposal is a tacit admission by India of China's vital role in matters directly impinging on a vital strategic question affecting South Asia. In other words, it acknowledges that China cannot be viewed in isolation or separately from South Asia particularly in matters relating to comprehensive security in South Asia.

Specifically, let us take the case of the commonly-held view that the Himalayas form a natural or impregnable divide that separates or isolates South Asia from Tibet. Yet, as Noor A. Husain has argued: “As late as the 7th century, Tibetans came right through the Himalayas. The Chinese and Tibetans moved into Gilgit to support the Rajah against an external invasion and stayed there for five years.” 13

Incidentally, the process of globalisation now underway would also tend to militate against the fiction of treating China and South Asia as if they existed on separate planets. In this respect, one has only to recall that post-Deng Xiaoping China has not only morphed from an ideological state into a strictly geopolitical power. As is well known, today China has also become one of the most important players on the global as well as on the broad Asian arena.

Nepal, after unification under the House of Gorkha, launched two military expeditions into Tibet, across the Himalayas: in 1788 and 1791 respectively. In 1792, 10,000 Chinese troops crossed over the Himalayas from the north to assist the Tibetans. It advanced as far as Nuwakot, the northern gateway to Kathmandu, forcing Nepal to sue for peace. In fact, in the instance of Sikkim, conflicts with Tibet were not unknown, including those in 1888 when a British expeditionary force was mounted resulting in the settlement of Sikkim-Tibet hostilities. 14

The latter, one may add, is underscored by the Qingdao Initiative, emerging out of the June 2004 conference in China's Shandong province. Similarly, it is also reflected in China's hosting, since 2001, of the Boao Annual Forum for Asia in her Hainan province. Another concrete development, also in 2004, was the holding of antiterrorism exercises between China and Pakistan, intended “to improve the capacity of jointly combating terrorism.”12 They took place in the mountainous terrain of Taxkorgan Tajik Autonomous county in China's Xinjiang province bordering Tajikistan, Afghanistan and Pakistan. Definitional issues and related myths bearing upon South Asia have in the past led many to uncritically assume that South Asia is a landmass lying entirely south of the Himalayas and physically delineated from China. Before proceeding any further into this discourse, let it be clarified that Nepal, for example, encompasses territory on both sides of the Himalayan range. Thus, if South Asia were narrowly defined and equated with territory entirely south of the Himalayas even Nepal would not be considered as a South Asian country, as a portion of her national territory lies across the Himalayas on the Tibetan plateau.

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Similarly, “five or six times, the Tibetans attempted to conquer Bhutan” in the 16th century alone.15 Moreover, that the Himalayas constituted an impregnable obstacle for the security of India (including British India, in the colonial era) was disproved when the British themselves launched a successful military expedition against Tibet through Sikkim and the Chumbi Valley. As all are aware, that carefully cultivated myth was even more dramatically exposed when China's People's Liberation Army almost reached Tejpur in the plains of northern Assam through passes in the eastern Himalayas, after a short and one-sided armed conflict between India and China in October 1962. Additionally, China's maiden nuclear explosion in 1964, followed subsequently by swift advances in ballistic missile capability, has certainly rendered the theology that the Himalayas constitute an insurmountable barrier between South Asia and Tibet entirely untenable. Likewise, the overt nuclearisation of India and Pakistan in May 1998, and their development of intercontinental missiles capable of traversing the Himalayas may be considered to have given that carefully fostered creed or belief system a final burial.

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In other words, it is logically impossible to reject the argument that China and South Asia are not closely inter-linked. Phrased otherwise, China can no longer justifiably be artificially separated from a region with which she is so intimately connected - by history, geography, geo-politics, ecology, and vital common interests whether they concern military security or combating terrorism. The question of China's interest in and eventual entry as an observer into SAARC may now be examined. China and Saarc: A Prelude For sometime over the past few years, Beijing signaled her interest in forging some form of association with SAARC. For instance, Chinese Ambassador to Nepal Sun Heping in March 2004, responding to a query from a Nepali journal, stated the following: We appreciate that SAARC has made positive efforts to (further) economic development, social progress, and cultural exchange in South Asia. Being (a) close neighbour of South Asian countries, China has always attached great importance to the cooperative relations with SAARC. The Chinese government is ready to work together with the governments of all South Asian countries to promote the cause of peace and development in the region. The time is basically ripe to establish relations between China and SAARC. 16 Equally significant, if less direct, were the observations contained in Chinese Premier Wen Jaibao's congratulatory message to the 12th SAARC summit in Islamabad several months earlier. In that message, Premier Wen declared: Since its founding SAARC has played an active role in enhancing the economic development, social progress and cultural exchange in South Asia thanks to the common efforts of its member states. Today, leaders of SAARC member states meet to discuss major issues of further stepping up South Asian regional cooperation and moving towards common prosperity. I am sure that this Summit will exert a positive influence upon the regional development and cooperation in this part of the world. China and South Asian countries enjoy long-standing friendly relations and cooperation. The Chinese government is ready to work together with the governments of all South Asian countries to promote the cause of peace and development in the region. 17 Ambassador Sun once again took the opportunity to stress that “the time is now basically ripe to establish relations between China and SAARC.” 18 Gradually, South Asian media too became increasingly alive to the nexus between China and South Asia. One newspaper, quoting unidentified diplomatic sources on the eve of a SAARC Council of Ministers meeting in Islamabad, had the following

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disclosure to make: Sources said the foreign ministers of all member states can deliberate upon some new issues such as the expansion of SAARC with more states joining its fold. They said that one such country is China, which is an important regional player, while another can be Afghanistan. Sources said having close friendly ties with China, Pakistan is of the desire that it joins SAARC and it can also lobby for its membership. However, they added that India will feel uneasy about China's possible inclusion in SAARC. 19 In an exclusive PTV interview in Islamabad covered live by India's NDTV channel on 21 July, 2004, Pakistan Foreign Minister Khursheed Mehmood Kasuri, sitting alongside SAARC Secretary-General, Q.A.M.A. Rahim, when queried about China's possible membership in SAARC, in the context of a report that it figured in Pakistan Prime Minister Sujaat Hussain's speech, responded with words to this effect: “It was something that some newspapers had referred to, but it had not been on the agenda which had been finalised months in advance: hence it was not discussed by the Council of Ministers.” 20 Despite that disclaimer, a news anchor of the NDTV channel that broadcast the aforementioned PTV item reported that Pakistan had brought it up recently, at an informal level.21 From the above, one can safely assume that while the subject of China's possible association with, if not membership of, SAARC had not been formally discussed, it had been informally raised by SAARC chair, Pakistan. Winning Observer Status: Inside Story At the 13th SAARC summit held in Dhaka, 12-13 November 2005 China was welcomed into the regional organization with observer status. Article 49 of the Dhaka Declaration, 13 November 2005, entitled “External Profile and Linkages of SAARC”, announced the following: The Heads of State or Government welcomed the request of the Islamic Republic of Afghanistan for membership and invited Afghanistan as a member, subject to the completion of formalities. They also welcomed and agreed in principle with the desire of the People's Republic of China and Japan to be associated as Observers. The Council of Ministers will decide the modalities in this regard at their 27th meeting in July 2006.23 Incidentally, it may noted that the 59th United Nations General Assembly had granted observer status to SAARC that the 13th SAARC declaration “welcomed”.23 In other words, SAARC's proposed expansion, with observer status for China (and

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Japan), came on the heels of UN's recognition of SAARC as a regional organisation with observer status and did not precede it. China's granting of observer status within SAARC as blandly noted in the Dhaka Declaration does not give any hint of the high drama and realpolitik behind it. As a member of the press entourage with the Nepali delegation led by King Gyanendra the author can attest that China's observer status “would not have been possible without Nepal's steadfast backing for the move at the official and ministerial level meeting not to mention the coup de grace by the King at the SAARC retreat.”24 What many covering the event did not know was that “countries that had fiercely resisted earlier, publicly changed stance and made it seem that was what they had desired all along.” 25 “Nepal, in other words, made deft use of the SAARC convention on decision by consensus”26 rather than by majority vote, as per the SAARC Charter. Indeed, as I came to know through personal contacts with the principal players on the Nepali delegation, including Foreign Minister Ramesh Nath Pandey, a former newspaper editor, no member state other than Nepal was prepared to take up China's request for some form of association with SAARC, possibly because of Indian opposition to the same. Even Pakistan, immediate past Chair, did not advocate it, proposing, instead, that Afghanistan's application should be accepted. This proposal was immediately seconded by India and did not meet with opposition, per se. That is significant also because the final declaration issued after the 12th SAARC summit in Islamabad had specifically endorsed, in principle, the idea of exploring possible association with interested countries and organisations. My hunch is that Pakistan, then reeling from the after-effects of the disastrous earthquake in Kashmir just a month earlier, did not think it appropriate to press the case for China, aware that it would not go down with the West on whose largess it was then vastly dependent to alleviate the trauma of the earthquake. Indeed, many analysts in Dhaka believed that the proposal for acceptance of Japan's association with observer status came only after efforts to blackball China altogether failed. “It may be recalled that Pakistan, which had for years resisted the idea of Afghanistan's association with SAARC, actually took the lead in proposing Afghanistan's membership with India predictably seconding the proposal. Some discerned behindthe-scenes American pressure on Islamabad.”27 At this stage, a look back at the situation in India vis-à-vis that question several months before Dhaka should be quite illuminating. Towards the fag end of January in 2005, or weeks before the-then scheduled 13th SAARC summit subsequently postponed twice before it was finally held in Dhaka, 12-13 November 2005 a Nepali correspondent stationed in the Indian capital had reported that “two SAARC member states that are likely to flip-flop on the issue are India and Bhutan.”28 He also disclosed that SAARC Secretary-General Rahim had “visited Beijing, and just

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recently, that SAARC Secretariat is understood to have readied a set of procedures for association with other countries. The set of procedures will likely be discussed at the Dhaka Summit.” 29 Incidentally, both the above claims were separately confirmed by the author in private conversation with Rahim and other SAARC officials at its Kathmandu secretariat much ahead of the Dhaka summit. The correspondent in question embellished his report with references to a front page article in the Indian Express which urged Indian Prime Minister Manmohan Singh “to ask whether it is worth delaying Chinese association with SAARC.” 30 One choice for Singh, it stated, “is to unilaterally promote India's own integration with its neighbors, and leverage the weight of China and other Asian powers to quickly fold South Asian economies into the Indian one.”31 The other, as per the correspondent, “is to stay with the present glacial course on regional trade that squanders India's natural geographic advantage and tries, unsuccessfully, to prevent other powers from joining South Asia in a globalizing world.” 32 To come back, however, to Nepal's position at the 13th SAARC summit on the question of expansion it was based on the following considerations: that China deserved to be associated with the organisation given its proclaimed interest, its close relationship with all SAARC member states, the fact that it directly borders four member states and that her rapid economic rise and international clout would be an asset for the organisation as a whole. 33 When India maintained it could not accept the proposal that China be associated with SAARC, Nepal's position, both at the official level meeting and subsequently at the ministerial level, was that while she did not have any problem accepting Afghanistan's application for membership or that of granting observer status to Japan, she could not accept that if her proposal to grant China association with SAARC was turned down. That position was reiterated at the summit level by the Nepalese King during the retreat. The stalemate was finally broken when India decided to change tack and agree realising that unless she did so, Afghanistan's entry would be effectively blocked. Consequently, it was decided by apex SAARC leaders that Afghanistan would be accepted as a new member while China and Japan would be invited in as observers. Predictably, in speeches at the closing ceremony in Dhaka there was not a whisper of dissension on what had perhaps been the summit's most important outcome. But then, that of course is how diplomacy works! At this point it may be germane to point out that as per the Charter of SAARC all decisions are arrived at through consensus, not majority vote. In effect, this provision gives all member states veto power. It was because of that clear stipulation that Nepal could secure China's association with SAARC with observer status. Later in New Delhi, “MPs had raised questions regarding India's stance on that issue, doubtless having received media and other reports about how the final decision on that and connected questions came about.”36 Indicating that the question would be settled at the next ministerial meeting of the group in July 2006, Indian Prime Minister Manmohan Singh “told parliament that India had no reservations on China

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(and Japan) being conferred the status of SAARC observers.” 37 Reactions and Counter-moves Revealingly, India's premier establishment daily reacted to China's imminent association with SAARC with muted hostility while drawing attention in an editorial to the fact that Nepal had been “one of the most vociferous”38 advocates in that regard. It went on to say that “on the face of it, China as a part of South Asia is absurd”39 but proceeded to argue that “in an era of globalization the Himalayas cease to be much of a barrier, as South Asia must interface with the rest of Asia as well.” 40 Interestingly, the newspaper then turned on another argumentative tack and declared: “If the Himalayas were no longer the natural barrier they once were, there is no reason that only China be invited - Japan and South Korea can be drawn in as well.” 41 Days earlier, a well-known Indian strategic thinker had given vent to his feelings in an opinion piece in another daily when he suggested that Nepal challenged India's supremacy in South Asia at the 13th SAARC summit by threatening to veto Afghanistan's entry as a new member before concluding: “China without even being present at the summit just tore up India's Monroe doctrine.” 42 The fact that shock waves on China's association with SAARC continued to buffet the Indian foreign policy establishment long after Dhaka was evident in other subsequent public comments. One view had it that China could not be the only non-South Asian member but if that were so, “why not bring in Myanmar, and other ASEAN countries, South Korea, Japan, Australia and New Zealand?” 43 A contrasting view in the same daily disclosed that “the move to bring in China as an observer is being viewed in some quarters as a gambit by Pakistan and Nepal to limit India's influence in the region” but then went on to argue that “admitting China would also serve as a superb confidence-building measure, better perhaps than endless rounds of border talks.” 44 Making a virtue out of a necessity, as it were, the author then concluded that “India should carefully explore the possibility of welcoming, and working with, China in SAARC.” 45 Against the above backdrop, it was hardly surprising to learn that not long after the Dhaka summit's decision on China's observer status in SAARC diplomatic moves were underway to dilute its significance. This took the form of applications for similar status from South Korea and, even more significantly, from the United States. Indeed, a meeting of foreign secretaries of SAARC member countries met in Dhaka, 11-12 April 2006 “for a special session to discuss the formal requests from the US and South Korea for observer status in the regional body.”46 Quoting the officiating Nepali Foreign Secretary Hira Bahadur Thapa the news report disclosed that “Washington and Seoul sent formal applications to the SAARC Secretariat last month seeking observer status in SAARC.”47 The Bangladesh Foreign Secretary Hemayetuddin indicated that the meeting would make relevant recommendations to the SAARC Foreign Ministers meeting in July

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2006 in Dhaka. 48 That two-day meeting, among other things, “fixed April 3 and 4, 2007, as the dates for the conference of the leaders in New Delhi.”49 Besides, another important aspect of that meeting was “the decision to admit the US, South Korea and the EU as 'observers' at the SAARC summit.” 50 To be noted is that the EU was now added to the growing list of SAARC observers. If that was “another recognition of the growing acceptance of the SAARC at the international level”51 given the background and behind-the-scenes diplomacy at the 13th SAARC described above, it would not be far-fetched, in my view, to interpret it as a side-development to China's acquisition of observer status in that regional organisation. Also on a personal note, the author wishes to disclose that, months before the 13th SAARC summit opened in Dhaka in November 2005, when he had asked American Ambassador to Nepal James F. Moriarty in a one-to-one encounter at a reception what the official US stance towards SAARC was, Moriarty stated point blank words to the effect that “the US has no position on SAARC”. Clearly, therefore, the US had made a quantum leap from her previous stand-offish position on SAARC after the landmark SAARC decision to bring in China into its fold as an observer. In hindsight, it is clear that King Gyanendra's resolute stance on that issue not only badly rattled the Indian and American cages. Ultimately, it proved to be something of the straw that broke the camel's back as the two, now linked in a strategic partnership, moved to unseat him from power a long, fascinating but altogether different story. Incidentally, the geo-political overtones to China's now imminent association with SAARC in this case, its nexus to India's role in internal Nepali politics has recently been underscored by a perceptive Nepali commentator. Having argued that India used the first ten months of direct royal rule to bargain with the palace, he concludes that “it was only when King Gyanendra led the initiative to grant China observer status in South Asia's premier organization that the Seven Party Alliance-Maoist combine gained traction in New Delhi.”52 However, to resume and update the main thread of this account, it may be germane to mention that when Chinese President Hu Jintao recently paid a state visit to India, a year after the Dhaka summit, he declared: “China is a keen observer of SAARC developments and we will explore possibilities to improve cooperation with our neighbours.” 53 Despite those sentiments, it is instructive to note how, on the eve of Hu's visit to India, a popular Indian weekly negatively projected China's role in SAARC and related questions, including India's new relationship with the United States. Referring to China's winning observer status in SAARC, the write-up argued that “this puts Beijing in a position to straddle a large South Asian political and economic space that India has failed to effectively occupy.” 54 It went on to point out: “Add to this China's consolidation of its infrastructure in Tibet

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and along the border areas with India and you can understand the vague sense of unease among Indian strategists.”55 No less interesting is the suggestion that China would agree to admit India as a member of the Shanghai Cooperation Organisation (SCO), if India agreed to granting full membership to China in SAARC. To substantiate the above theory, Chinese Ambassador to India Sun Yuxi's interview is quoted. In that, Sun answers the query on when an invitation to India would be forthcoming on joining the SCO, thus: “India is already an observer there. To become a full member, a consensus of the present members is needed. It's up to the countries to agree. That will take some time. Now China is already accepted as an observer of SAARC. We are also applying for membership to SAARC. It is up to SAARC members to decide.”56 Later, in Pakistan, Hu speaking on South Asia said: “South Asian countries are close neighbours to China. So as a neighbour and a friend of South Asia, China sincerely hopes to see peace and stability maintained on the sub-continent.” 57 China's impending entry as an observer at the 14th SAARC summit slated for New Delhi in 3-4 April 2007 should in any case mark a high-water point in any review of the history, geography and geo-politics of China's interest and association with South Asia and SAARC. Endnotes 1 Madhukar SJB Rana, “China in South Asia?” Kathmandu Post, 1 June 2004. 2 Tibet, China Intercontinental Press, West China series, June 2001, p. 8. 3 Sridhar K. Khatri (ed.), Regional Security and South Asia, (Centre for Nepal and Asian Studies, Tribhuban University, Kathmandu, 1987, p. 242.) 4 Bhutan: Himalayan Kingdom, Published by Royal Government of Bhutan, 1979, p. 8. 5 Tibet, op.cit. p. 13. 6 Himalayan Times, Kathmandu, 8 August 2004. 7 Himalayan Times, Kathmandu, 9 August 2004. 8 Indian Express, New Delhi, 2 June 2004. 9 Telegraph, Kolkata, 6 June 2004. 10 Times of India, New Delhi, 30 June 2004. 11 Hindu, Chennai, 8 July 2004. 12 Himalayan Times, 30 July 2004. 13 Khatri, op.cit., p. 242. 14 V. H. Ceolho, Sikkim and Bhutan, (Vikas Publication, Delhi, 1970, p. 20.) 15 Ibid., p. 122. 16 People's Review weekly, Kathmandu, 25-31 March 2004. 17 From address of Chinese Ambassador Sun Heping on “China's Foreign Policy in South Asia”, 28 May 2004, Kathmandu. 18 Ibid. 19 Nation, Islamabad, 16 July 2004. 20 Paraphrase of statement heard/seen by author on NDTV channel, 21 July 2004. 21 Ibid. 22 Dhaka Declaration, 13 November 2005. 23 Ibid. 24 M.R. Josse, “A Bountiful Diplomatic Harvest”, Rising Nepal, Kathmandu, 1 December 2005. 25 Ibid. 26 Ibid.

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27 M.R. Josse , “Counterbalancing China”, Rising Nepal, Kathmandu, 14 December 2005. 28 Surendra Phuyal, “SAARC to debate China's association in Dhaka”, Kathmandu Post, 28 January 2005. 29 Ibid. 30 Ibid. 31 Ibid. 32 Ibid. 33 Disclosed to author by high Nepali delegation sources. 34 Ibid. 35 Ibid. 36 M.R. Josse, Rising Nepal, 14 December 2005. 37 Ibid. 38 Times of India, 16 November 2005. 39 Ibid. 40 Ibid. 41 Ibid. 42 C. Raja Mohan, “China just tore up India's Monroe doctrine”, Indian Express, New Delhi, 14 November, 2005. 43 Times View, Times of India, 25 November 2005. 44 Praveen Dass, “Counter View”, Times of India, 25 November 2005. 45 Ibid. 46 “SAARC to mull US plea for observer status”, Himalayan Times, 11 April 2006. 47 Ibid. 48 Ibid. 49 Zaglul Chowdhury, “Productive meeting of SAARC ministers”, Himalayan Times, 11 August 2006. 50 Ibid. 51 Ibid. 52 Maila Baje, “Gripping Giri-isms: Southern playbook”, People's Review, 7-13 December 2006. 53 “Hu seeks better energy cooperation with India”, Times of India, 24 November 2006. 54 V. Sudarshan, “India assesses what China means for its own place in Asia”, Outlook, New Delhi, 27 November 2006. 55 Ibid. 56 Ibid. 57 “Hu speaks same language in Pakistan as in India”, Times of India, 26 November 2006.

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India and WTO: Regionalism and Multilateralism Geethanjali Nataraj and Pravakar Sahoo

the RTAs identified (17 FTAs and 1 customs union) contain commitments on trade in services in addition to tariff concessions on goods. The trend towards the conclusion of free trade agreements, which require a lesser degree of integration and are faster to conclude, has intensified in recent years. In an FTA each party maintains its own tariffs vis-Ă -vis third parties. Customs unions, which provide for the establishment of a common external tariff and harmonization of trade policy, often, take years to negotiate and have (often) long implementation phases. Chart 1- Number of RTAs in Force, as of March 2002, By Type of Agreement Customs union

he exponential growth of RTAs in recent times has led to widespread debate on the issue of regionalism versus multilateralism. Looking from the angle of the multilateral trading system the debate stems from the increased popularity of RTAs in a world trading arena now ruled by an improved and disciplined multilateral trading system. RTAs have been concluded among high-income countries, low-income countries and more recently starting with NAFTA (North American Free Trade Area) between high-income and developing countries. In spite of the success of the Uruguay round and the launching of the Doha round of negotiations, the increase in the number of RTAs continues unabated. Infact, the new RTAs extend much beyond mere reduction in tariffs and granting preferential treatment to members in the group and cover regulatory structures of the parties concerned addressing regulations relating to competition policy, investment, harmonisation of standards etc. Further, the term regional in regional trading agreements has lost its connotation as most of the RTAs are cross regional in nature spanning different continents to build new agreements or creating fusions between existing ones. All but 2 of the 140 plus members of the WTO are party to atleast one and some as many as 26-preferential trading arrangements. As of December 2002, about 250 RTAs had been notified to GATT/WTO, of which nearly 230 were in force by 2004. According to WTO by the end of 2005, the total number of RTAs is expected to reach the figure of 300. It is estimated that by 2007, a further 87 RTA's will be in force, if those being planned or under negotiation are concluded. See figure 1. Figure 1. RTAs notified to the GATT/WTO (1948-2002)

No. of RTAs

300

Establishment of the WTO

250 200 150 100 50 0

1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000

Partial scope

22 46

Free trade

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Spread of RTAs World wide: The greatest concentration of RTAs is primarily centered around Western Europe constituting about 50 per cent of the RTAs currently in force.1 Countries of North Africa are participating in various other regional trade initiatives both in Africa and the Middle East, such as the recent effort launched by the Arab League to establish an Arab Free Trade Area by 2007.2 For their part, Gulf Cooperation Council (GCC) countries are working towards the establishment of a common external tariff by 2005, and are engaged in discussions with the European Commission on the negotiation of a possible RTA. In Sub-Sahara Africa, the regional integration process is gaining depth, although progress is uneven and far from certain due to the complex web of overlapping RTAs membership. In western Africa, countries are working at the completion of the West African Economic and Monetary Union (WAEMU)3 and the Central African Economic and Monetary Community (CEMAC).4 In eastern and southern Africa, members of the Common Market for Eastern and Southern Africa (COMESA)5 are advancing in their objective of creating a free-trade area grouping 20 countries, and similarly, the parties to the South African Development Community (SADC) have been working towards their objective of establishing a free-trade area by 2004, despite difficulties mainly due to overlapping membership with other RTAs, in particular the long-standing South African Customs Union (SACU) agreement.6

Year

Trade between RTA partners now makes up nearly 40% of total global trade and new agreements increasingly address issues beyond trade. Chart 1 shows the typology of RTAs in force as of March 2002. The most common category is the free trade agreement (FTA) which accounts for 72 per cent of all RTAs. Partial scope agreements and customs union agreements account for 19 and 9 per cent, respectively. Eighteen of

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Asia Pacific is a region currently undergoing significant changes with respect to its stance towards regional integration. Japan, Singapore and the Republic of Korea have been negotiating and conducting feasibility studies for the establishment of several RTAs both among countries in the region and cross-regionally. Similarly, New Zealand and Australia are exploring the possibility of several RTAs with regional partners and with countries of the western hemisphere. Singapore and New Zealand already

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concluded a far-reaching FTA and discussions are being held for a Closer Economic Partnership (CEP) between New Zealand and Hong Kong, China. Japan and Singapore recently initiated their own bilateral agreement. A notable development in the region has also been the agreement between the members of the Association of South East Asian Nations (ASEAN)7 and China along with India to initiate RTA negotiations. Japan and the Republic of Korea are also exploring the possibility of similar negotiations with ASEAN. These developments constitute an enormous change in the East Asia. Prior to them, Japan and Korea, along with Hong Kong and one other country, were the only four members of the more than 140 members of the WTO (World Trade Organization) that had not participated in a reciprocal regional trading agreement. Another interesting feature of RTAs is the growing intra-regional trade among the major blocks leading to protectionist tendencies. Neo-protectionism is the order of the day. The following table shows the share of intra-regional exports in total exports of major trade blocks. (2003). Table 1: Share of Intraregional Exports in Total Exports (%): 2003 Region

% Share of intraregional exports in total exports

EU(15)

61.6

NAFTA(3)

56.5

AFTA(10)

24.0

MERCOSUR(4)

11.5

ASEAN(5)

10.2

SAARC(7)

Source: www.wto.org

There is a clear trend towards the larger blocks like NAFTA and EU being more protectionist and trading amongst themselves and restricting trade with the rest of the world as compared to some of the developing country RTAs like AFTA and MERCOSUR. For instance, low intra-regional trade in AFTA can attributed the fact that ASEAN countries are not interested in enhancing intra-regional trade but their basic objective is to make ASEAN an attractive destination for FDI. Therefore, the objectives of developed and developing country RTAs are quite different. Therefore, the configuration of RTAs is diverse and becoming increasingly more complex with overlapping RTAs and networks of RTAs spanning within and across continents at the regional and sub-regional levels.8 The simplest configuration is a bilateral agreement formed between two parties. These account for more than half of all RTAs in force and for almost 60 per cent of those under negotiation.9 The most noteworthy development expected in the next five years is the emergence of a new category of agreement, namely RTAs where each party is a distinct RTA itself.10 At present, there are no agreements of this kind in force, but several are currently under negotiation and this tendency looks set to intensify in the near future. This is a new trend which is a reflection of the growing consolidation of established regional trading relationships (WTO, 2002).

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Theory of RTAs The two general concerns with regard to RTA' are: (1) whether RTAs move towards discriminatory regionalism or (2) RTAs are a vehicle to promote multilateralism. In this context, the theory of international trade says that global multilateral trading arrangements offer the best prospect for reducing barriers to trade and achieving the greatest gains from trade liberalization. Preferential Trading Arrangements (PTA's) are said to be a second best solution of achieving trade liberalization in a context where multilateral negotiations proceed slowly. Empirical research shows that PTAs have generally increased trade both among members and between members and nonmembers, but also supports the conclusion that the effect of PTAs vary significantly, depending upon their particular characteristics. There are several studies with varied views in the literature. Bhagwati (1992), in particular, has raised the question as to whether RTAs pose a threat to the multilateral trading system, and he has initiated a rapid growth in the economic literature on the subject. Bhagwati (1992) and Kruger (1998) express strong concerns about the negative effects of growing regionalism and they worry that RTAs divert attention from the multilateral trading system. Bhagwati, in particular, stresses the benefits of free trade and rejects the arguments about the need for an alternative to the GATT for countries which wish to liberalise faster. He also raises the questions of the compatibility of RTAs with the GATT/WTO system which has served the world so well for the last fifty years. On the other hand, Baldwin (1997) and Ether (1998) and Lawrence (1999) tend to regard regionalism much more as a compliment to multilateralism (building blocks rather than stumbling blocks). Winters (1996) has argued that RTAs are street gangs: â&#x20AC;&#x153;you may not like them, but if they are in the neighbourhood, it is safer to be in oneâ&#x20AC;?. He also argues that, it is not possible to determine whether regionalism encourages or discourages evolution towards globally freer trade, and winters (1998) says that there is no reason to expect a simple answer to this issue. He also believes that powerful coalitions like EU and the NAFTA make negotiations at the multilateral level in WTO more difficult. Simply because, trade between the member countries of the RTAs makes them self-sufficient. Thus, even the literature has many schools of thoughts on the debate between Regionalism vs. Multilateralism. The Rules governing RTAs in the WTO Multilateral Trade System allows the formation of RTAs as an exception to the nondiscriminatory treatment. This exception got incorporated on the belief that increased trade would result in development; the increased trade is expected to come from decreased market barrier; this decreased market barrier is desirable at the multilateral level; however, even at the regional level the decreased market barrier would lead to increased trade within the region and thus foster development. Thus, the basic objective of both the regional economic groupings and the WTO is essentially the same i.e. enhancing trade between countries and the same is explained in Article XX1 of GATT 1994.

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Para 4 of Article XXI of GATT 1994 reads: "The contracting parties recognize the desirability of increasing freedom of trade by the development, through voluntary agreements, of closer integration between the economies of the countries who are parties to such agreements." However, the problematic issue in this comes in the form of trade diversion. Since trade diversion replaces (efficient) non-member producers by comparatively (lesser efficient) member producers in the region, the formation of the regional agreement itself acts as an entry barrier for non-members in the region's market. This entry barrier comes through the preferential trade policy practised by members among themselves. It is an accepted fact that any regional trade agreement is bound to result in some amount of trade diversion. However, the benefits accruing from a liberalised trade regime for the member countries cannot also be denied. So, the way out is to ensure minimisation of trade diversion or to maximise net trade creation. Minimisation of trade diversion would to certain extent ensure minimisation of extra entry barrier for non-members in the region's market arising out of the formation of the regional trade arrangement. In fact, the GATT contracting parties explicitly pointed out that an RTA should serve the purpose of facilitating trade among the member countries and should not pose extra barrier for non-members. This has been explained in Para 4 of article XXIV Para 4 of Article XXIV of GATT 1994 further reads: "They also recognise that the purpose of a customs union of a free-trade area should be to facilitate trade between the constituent territories and not to raise barriers to the trade of other contracting parties with such territories". As such, the provisions of forming an RTA were framed. Article XXIV provides the necessary legal grounds for certain arrangements to be exempted from the principle of non-discrimination. A more general exception to the MFN rule the enabling Clause (1979) was later incorporated into the GATT system with the intent to promoting the trade and development of less-developed countries. It has already been pointed out that the formation of an RTA results in discriminatory treatment towards non-members vis-à-vis members. As such GATT contracting parties incorporated certain conditions along with the provision of forming RTAs to attempt minimisation of the discrimination. Since the conditions are associated with the allowance, a monitoring body is required. That is, to ensure that the provisions and the conditions of the relating to the formation of an RTA are properly implemented, monitoring is required. Thus, the point that comes in is that the multilateral trading system has to be notified regarding the formation of the RTAs. In this context, Para 7 of Article XXIV reads “Any contracting party deciding to enter into a customs union or free-trade area, or an interim agreement leading to the formation of such a union or area, shall promptly notify the Contracting Parties and shall make available to them such information

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regarding the proposed union or area as will enable them to make such reports and recommendations to contracting parties as they may deem appropriate”. Here the problem comes in the clarification. The time at which members should notify an RTA is not precisely formulated neither homogeneously expressed in WTO rules. In practice, many RTAs are notified when their texts have already been sealed or even when the RTA is already in force. This dilutes the watchdog role of the system. The other problem that is experienced is that a number of RTAs currently in force have not been notified to the WTO, in particular preferential arrangements between developing countries. This is often cited as hindering any comprehensive and precise evaluation of the RTA phenomenon vis-à-vis the multilateral trading system. The current practice of raising questions about non-notified RTAs during WTO meetings has been considered insufficient as a means of gathering adequate information. It has been suggested that the possibility of counter-notification of RTAs be provided for. Therefore, along with Sub-Para a, Para 7 of Article XXIV further reads "(b), If, after having studied the plan and schedule included in an interim agreement referred to in para 5 in consultation with parties agreement and taking due account of the information made available in accordance with the provisions of sub-para (a), the Contracting Parties find that such agreement is not likely to result in the formation of a customs union or of a free-trade area within the period contemplated by the parties to the agreement or that such period is not a reasonable one, the Contracting Parties shall make recommendations to the parties to the agreement. The parties shall not maintain or put into force, as the case may be, such agreement if they are not prepared to modify it in accordance with these recommendations". This requires a substantial information base regarding the RTA members to be made available to the multilateral trade system. Full statistical information on trade is needed to conduct an RTA examination. The major problem areas found is available statistics cover only a period prior to the RTA entry into force or the very first years(s) following its entry into force, in particular where significant transition periods are not available. Experience has been that statistics are sometimes hard to obtain and may even prove misleading, given the dynamics of the economic integration. The added problem is that many a time, the trade data are given according to actual trade flows and not on the basis of tariff-line. This hinders the Article XXIV compatibility test of the RTAs. Thus, the first issue comes in terms of clarifying the exact time of notification. That would facilitate the Watchdog role of WTO. The problem has got intensified because of the causal operation of the multilateral trading system also. It has already been pointed out that the multilateral body retains the right to judge the compatibility of the RTA; in case it is found incompatible to Article XXIV, recommended changes have to get incorporated into the regional trading agreements. In reality, however, it is seen that of the GATT working parties formed to review each of the 109 RTA agreements notified to the GATT between 1948 and 1995, only 64 completed their reviews; of those 64, only 6 were able to reach a conclusion on the given RTAs compatibility with the conditionality of Article XXIV. This six does not include European Commission and Free Trade Areas of the

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Americas. Moreover, only two out of the six are still alive. This clearly indicates that the provisions of Para 5 of article XXIV are not being adhered to. (WTO1995, 16).

The above can be summarised as - Free Trade Areas and Customs Unions should Cover "substantially all trade"

Para 5 of Article XXIV of GATT 1994 reads: "Accordingly, the provisions of this Agreement shall not prevent, as between the territories of contracting parties, the formation of a customs union or of a free-trade area or the adoption of an interim agreement necessary for the formation of a customs union or of a free-trade area; Provided that:

In case of an interim arrangement, the member countries should reduce internal tariffs to zero and remove internal quantitative restrictions other than those justified by other GATT articles within a reasonable time frame.

with respect to a customs union, or an interim agreement leading to a formation of a customs union, the duties and other regulations of commerce imposed at the institution of any such union or interim agreement in respect of trade with contracting parties and parties to such union or agreement shall not an the whole be higher or more restrictive than the general incidence of the duties and regulations of commerce applicable in the constituent territories prior to the formation of such union of the adoption of such interim agreement, as the case may be; with respect to a free-trade area, or an interim agreement leading to the formation of a free-trade area, the duties and other regulations of commerce maintained in each if the constituent territories and applicable at the formation of such free-trade area or the adoption of such interim agreement to the trade of contracting, parties not included in such area or not parties to such agreement shall not be higher or more restrictive than the corresponding duties and other regulations of commerce existing in the same constituent territories prior to the formation of the free-trade area, or interim agreement as the case may be; and any interim agreement referred to in subparas (a) and (b) shall include a plan and schedule for the formation of such a customs union or of such a free-trade area within a reasonable length of time". Para 8 of Article XXIV of GATT 1994 reads: "For the purposes of this Agreement: A customs union shall be understood to mean the substitution of a single customs territory for two or more customs territories, so that: duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated with respect to substantially all the trade between the constituent territories of the union or at least with respect to substantially all the trade in products originating in such territories, and, subject to the provisions of para 9, substantially the same duties and other regulations of commerce are applied by each of the members of the union to the trade of territories not included in the union. b) A free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XII, XIV, XV and XX) are eliminated on substantially all the trade between the constituent territories in products originating in such territories.

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The Developmental Dimension of RTAs The developmental aspect can be looked from more than one dimension. In the first place is the increased trade leading to growth and development? Considering this, the formation of RTAs appears to be growth enhancing. In fact to increase trade among developing countries that in turn is expected to lead to growth and development; the enabling clause came into being. Moreover, the enabling clause allowed the formation of RTAs among developing countries without the stringent conditions attached with Article XXIV of GATT to mix the liberalisation benefits of trade along with the domestic development compulsions of the nations. The other dimension is the entry barrier for third countries arising out of the formation of the RTAs. This entry barrier results in trade contraction for the nonmembers in the region's market, thereby having adverse implications on the third countries' external sector. Coming to the first aspect, it might be mentioned that ASEAN has been formed under the provisions of the enabling clause. As such, at the initial stage, the time frame for ASEAN ultimately reaching AFTA was more than ten years. Moreover, agriculture being quite important sector for them, it was kept out as the negative list item which basically implies non-inclusion of the sector under regional negotiations for further liberalisation. Looking from ASEAN side, it matches with the development dimension. But looking from a third country like India entering the region's market, what are the implications? AFTA coming into being would imply an increase in discriminatory environment as member countries would be trading among themselves in zero tariff while India continues facing previous level of tariff if they are not brought down simultaneously. Keeping agriculture outside the ASEAN negotiations implies similar treatment of ASEAN countries and India in the ASEAN market in agro items. Bringing agriculture under the purview of ASEAN negotiations, while fulfilling the substantial coverage condition, would result in the discriminatory treatment in this sector also. Hence, under the enabling clause, moving towards the fulfilment of the conditions result in deterioration for the third country. Though the fulfilment of those conditions implies a movement towards further liberalisation and thus is expected to be welfare enhancing. Moreover, there is no doubt that the welfare enhancing effect for the member countries would outweigh the welfare reducing effects of the third countries. But that does not decrease the adverse implications faced by the third countries in the region's market. So, what is it that one should address during the coming negotiations? Should the negotiating agenda be prepared on the basis of global welfare? Or should a country be more specific and thus concentrate on its own benefits disadvantages only. But even then a country like India cannot deny certain amount of benefits coming out of the

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enabling clause. There might also be certain amount of expected benefit arising as a reaction to the global developments. Coupled with this is the third effect identified by trade theorists as â&#x20AC;&#x153;trade modification effectâ&#x20AC;? of the RTA that might be positive also. Old regionalism Versus new Regionalism The old regionalism theory was based on the concepts of trade creation and trade diversion propounded by Jacob Viner in his seminal work on the theory of customs union. The theory discusses the welfare effects of tariff elimination and but gives no definitive answers as to which effect will dominate. However, to the extent that industries inside the RTA are protected there is trade diversion and therefore preferential trade arrangements are definitely second best to the multilateral trade liberalization. The opposite is true in case of trade creation. The customs union theory fails to take into account the dynamic effects of a customs union such as economies of scale and a stimulating environment for investment. On the contrary, new regionalism theory integrates the dynamic effects of economic integration, the interaction between trade and investment and the role of institutional arrangements as incentives for regional integration. The new regionalism is determined by the structural changes in the global economy in the 1990's brought about by globalization. Following successive rounds of trade liberalization in the GATT/WTO, FDI has become much more important in the global economy; investment flows are growing faster than trade flows. Market size is another factor that encourages FDI. As countries develop and become more advanced and efficient in terms of factor endowments, it is expected that there will be a move from intraindustry trade to intra-industry investment as investment costs such as communication costs are much less than trade costs like transportation costs. New regionalism mainly involves a number of small countries that link with a large neighbouring country to reap the benefits of trade liberalization in investment and services. India and RTAs India is a marginal player in the global trade scenario. Its share in global trade is below one per cent. India is also not a part of any RTA that has substantial influence on world trade. As a part of the integration process with the world, signing of the Bangkok Agreement (India, Bangladesh, Laos, Philippines, South Korea and Thailand) in 1975 was the first initiative. The agreement failed to go a long way in achieving its objective of trade expansion. Recent developments like proposals of accession of China to the Bangkok Agreement have given rise to new expectations. India's second initiative on this front is the SAARC preferential trading agreement (SAPTA) with Bangladesh, Nepal, Bhutan, Maldives and Pakistan in 1997. Due to political tension between India and Pakistan and also for reasons like Bangladesh, Maldives and Nepal have very limited export basket to offer to the comparatively larger economies like India, Sri Lanka and Pakistan, India did not achieve much from this regional arrangement. India is also apart of BIMST-EC with other countries being Bangladesh, Myanmar, Sri Lanka and Thailand. India also entered into a bilateral free trade agreement with Sri

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Lanka and in 2003 signed a FTA with Thailand which is in the first stage of implemention. Early Harvest scheme constituting 84 items is the key feature of the India-Thailand FTA where in tariffs will be reduced on a fast track basis on this 84 items leading to their complete elimination by 2006. India has signed a comprehensive economic cooperation agreement with ASEAN recently and is negotiating FTAs with Singapore, Egypt and also Middle East. A joint study group has also been set up to explore the feasibility of an FTA with China as well. Total SAPTA and BIMST-EC trade constitutes about 1.5 per cent and 2-3 per cent of total world trade approximately. This implies that about 96 per cent of India's trade is outside the preferential zone. More than half of this 96 per cent is with countries that are part of one or more RTAs. For instance, NAFTA and EU constitute 50 per cent of India's exports, 10 per cent goes to ASEAN and another 10 per cent to Japan and South Asia. Therefore on the whole, 70 per cent of India's trade is with countries that are part of strong and well established RTAs. So, with India being part of only SAPTA, Bangkok Agreement and BIMST-EC, and having only FTAs with Sri Lanka and Thailand, the country would have to take a strong view on whether its interest would lie in seeking tighter discipline in WTO on RTAs. Since India is not a member of any RTA that has strong influence on world trade, therefore India will stand to loose because of trade diverting effects of any RTAs and the new formations where it is not involved. The Indian textile sector for instance, has been observed to be affected, since the US gives preferential treatment and duty free access to textile products from Mexico under NAFTA. The question of what should be India's general stand on RTAs is difficult to arrive at. For this India will have to look at whether RTAs promote global welfare or not, i.e. it has to analyse the extent of trade diversion due to RTAs and its impact on Indian exports. However, all its present agreements with the regional partners have opened the markets for Indian goods in the countries concerned. All these agreements constitute unilateral tariff reduction except the India-Sri Lanka FTA. India's overall trade balance with SAPTA is positive Hence its existing and recent initiatives in regional/ bilateral trade liberalization may help to divert some trade of the countries concerned from their other trading partners in favour of India given their supply capabilities, and therefore may be beneficial to India. Conclusion There are no clear cut answers to the debate regionalism and multilateralism. Both are continuing to exercise a strong and powerful influence on world trade. Multilateralism in the form of WTO has gained in popularity in the recent years. The number of countries waiting to seek accession and become members corroborates this. At the same time, regional economic groupings have proliferated at a rate and speed never seen before. However, for developing economies, the key to their success lies in reforming their domestic economies as good trade policy begins at home. Whether one follows the regional or multilateral track, reforming the domestic economy is imperative in order to maximise the gains from trade liberalisation. Seattle, Cancun or Hong Kong, the bottom line is that countries should follow unilateral trade policies suited to their own domestic needs but within the framework of the changing international trade environment comprising both regionalism and multilateralism.

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References l Laird, Sam and Jo-Ann Crawford (1999), “RTAs and the WTO”, Centre for Research in Economic Development and International Trade, University of Nottingham. l Bhagwati, J. (1992), “Regionalism versus Multilateralism”, The World Economy, Vol.15, No.5, pp. 535-555 l Either, W (1998), “The New Regionalism”, The Economic Journal, Vol.108, pp 1149-1161 l Kemp, M C and H Wan (1976), “An elementary proposition concerning the formation of customs union”, Journal of International Economics, Vol 6, pp 95-98. l Kruger, A (1995), “Free trade Agreements versus customs union”, NBER working paper NO.5084, Cambridge, Massachusetts. l WTO (2004), World Trade Report. l B. Bhattacharyya and Parathaprathim Pal (2002), “Trade Creating & trade Diverting”, The MERCOSUR Experience” Focus WTO, IIFT, New Delhi. l Gary Sampson and Stephen Woolcock (Ed), (2004), “Regionalism, Multilateralism and Economic Integration: The Recent Experience”, Bookwell Publishers and United Nations University Press. Endnotes 1 The European Union (EU) is negotiating second-generation bilateral FTAs based on a reciprocal exchange of preferences with partners in the Mediterranean and North Africa, with the objective of a Euro-Med (?) free trade area by 2010. EU is also looking to forge closer ties with emerging markets in Latin America also. Its FTA with Mexico entered into force in mid-2000 and negotiations on FTAs with MERCOSUR (Argentina, Brazil, Paraguay and Uruguay) and Chile have taken place over the past few months. 2 Gulf Cooperation Council members are (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates) plus Jordan, Tunisia, Egypt, Sudan, Syria, Somalia, Iraq, Palestine, Lebanon, Libya, Morocco, Yemen. 3 Benin, Burkina Faso, Côte d'Ivoire, Guinea Bissau, Mali, Niger, Senegal, Togo 4 Cameroon, Central African Republic, Congo, Equatorial Guinea, Gabon, Chad 5 Angola, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe. 6 Members of SACU are Botswana, Lesotho, Namibia (it became a de jure member on July 1990), Swaziland and South Africa. 7 Brunei Darussalam (1987), Cambodia (1999), Indonesia, Laos (1997), Malaysia, Myanmar (1997), The Philippines, Singapore, Thailand, Vietnam (1995) 8 RTAs are increasingly concluded among geographically non-contiguous countries. The term “regional” may soon become an incongruity to describe the plethora of cross-regional preferential agreements linking countries around the globe. 9 This high number of bilateral agreements partly results from regional integration "hub-andspoke strategies" requiring each "spoke" to conclude a bilateral RTA with the hub. The concept has been pushed a step forward by the EC, which (as a "hub") is often linked to "spokes" which also conclude bilateral RTAs among themselves (e.g. the EuroMediterranean Partnership process). 10 Examples include EC-MERCOSUR, CARICOM-CACM, SACU-SADC, to mention some. 11 Seminar on Regionalism and the WTO, Trade Policy Division, WTO, April 2002.

Political Impasse in Bangladesh Sayeed Iftekhar Ahmed

ragmentation of the elites has once more created a situation of political confrontation in Bangladesh over the issue of the upcoming parliamentary election.1 The political perturbation that has swept the country over the expectation of election fraud under the caretaker government has already cost more than 70 lives.2 The Awami Leagueled fourteen-party alliance (known as “secular” Bengali nationalists) and other centrist and leftist political parties are demanding the replacement of election commission officials and a good number of personnel working in various branches of the government.3 They were appointed by the former ruling four-party alliance led by the Bangladesh Nationalist Party (BNP, known as Islamic Bangladeshi nationalists).4 The fourteen-party alliance claims that the four-party alliance appointees are manipulating the upcoming election. Although the caretaker government has removed or transferred some of the government officials, the fourteen-party alliance claims that these measures are not sufficient for conducting an unbiased election. Moreover, they are also demanding an upgrade to the voter list and a delay in the upcoming election. The Awami Leagueled coalition also questions the validity of the chief adviser of the caretaker government and doubts his neutrality. They threaten to boycott and resist the upcoming election if these officials are not removed and the rest of their demands are not met. In contrast, the four-party alliance supports the president's move to take over the caretaker government and most of his actions. To show their support they have organized rallies all over the country; the activists of both alliances have attacked each other's rallies in various parts of the country, which cost many lives. As a result of their conflicting positions, the upcoming parliament election and the continuity of the constitutional system have an uncertain future. The objective of this article is to analyze the genesis of the present crisis, which is rooted in the reinvention and reconstruction of nationalism in the post internal colonial state of Bangladesh. Instead of sharing their national imagery, the fragmentation of the elites regarding the issue of identity has caused a dual “nationbuilding” process, unique in South Asian history.5 Both of these “normalizing projects” have faced resistance not only from the fragments of the nation but also from each other. The failure of the elites to reconcile their positions on identity, nation, and nationality has led to mutual distrust and disbelief. As a result of this distrust, they have been unable to take a unified stand on the important issues. Genesis of the Present Crisis The genesis of the current impasse in Bangladesh politics is deeply rooted in the country's fractured imagining process; the elites had failed to come up with a shared

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identity long before the country gained independence. Bangladesh gained independence from the internal colonial structure of Pakistan after a nine-month bloody civilian war in 1971. After gaining independence, Sheikh Mujib, the supreme leader of the liberation movement, and his party the Awami League undertook reconstruction of the nation according to the European “modular” form, which imagined all the population living in a particular territory as a nation, while denying the existence of various fragments within it. Ignoring the differences, the nationalist imagination in Bangladesh posited an identity which is based on the Western form of secularism. As a result, we observed numerous protests from various fragments against the nationalist project. The major opponents of this project also adopted a colonial model to incorporate Islam into their reinvention of a nation. A section of the elites who were against the Bangladesh movement supported this process of the recreation of a nation where Islam is the significant component of national identity. In essence, both the groups wanted to implement the totalizing claims of the nationalist project through an available “set of modular forms” which they inherited in a postcolonial state from the colonizers - one using secularism and the other using Islam.6 It was unfortunate that instead of resisting the “totalizing claims” of the normalization process of reimagining nationalism, the subalterns adapted the policies of recreating nation into their political discourse due to their inability to develop their own independent political domain, although some fragments of the subalterns, especially the adivasis, are still resisting the process.7 The secularists who identified themselves as Bengali nationalists initiated their reimagination project of creating a nation after the country gained independence, even though this process had started long before independence in the “cultural domain” of the middle class in East Pakistan. The idea of remaking the nation by including the identity of Islam is rooted in the colonial history of British India. It is interesting to observe that at one point both the groups of elites relied on an undemocratic method to implement their vision of creating a new nation - the secularists introduced oneparty rule in 1975, while the Islamists relied on military rule.8 Islamists, who are known as Bangladeshi nationalists, got an opportunity to execute their agenda after the overthrow of the Mujib regime by a bloody military coup in August 1975. Like the secularists, the Islamists initiated the totalizing claims of the nationalism project, while denying the fragments as well. By doing so, they invented a new term for nationalist identity, i.e. Bangladeshi nationalism. The concept of Bangladeshi nationalism has been invented and manipulated by the military-created Bangladesh Nationalist Party (BNP) to construct religious “minorities,” adivasis, and secularists as “others” in remaking the nation by excluding them from the nationalist project. Jamaat-e-Islami, the largest Islamic party in Bangladesh, and other Islam-based political parties and the former military dictator Gen. Hussain Mohammad Ershad's Jatiya Party are in favor of this Islam-based nationalism. This exclusionary nationalist discourse has also been used to overcome the hegemonic crisis of the military rulers and their political parties. The incorporation of Islam into the nationalist project and the making of a “Bangladeshi

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nation” by reconstructing the “fragments” within the rubric of the colonial module of nationalism and “shared imaginaries” has created a different type of state that was different from the imagined state of the secularists. This Islam-based nationalism divided the entire “nation” on the issue of identity and nationalism, which ultimately helped the alliance of the civil-military bureaucrats and their political parties to maintain their political power at the expense of fragmenting the nation into the two major opposite camps. The concept of the caretaker government itself was the outcome of the fragmentation of the elites on the issue of nation, nationalism, and identity formation and their failure to speak for the nation. There was widespread election corruption and distrust among the elites; as a result, in independent Bangladesh, no election had wide credibility until the formation of the caretaker government in 1990. Formation of this government was an outcome of a temporary alliance between the secularist and Islamist camps, which was due to their common struggle against military rule in the 1980s. The Caretaker Government Distrust among the elites led to the demand for a “neutral” caretaker government during the military regime of Ershad in the 1980s. Since independence, none of the governments had been able to conduct an election without electoral fraud. Every ruling party, whether they represented secularists or Islamists, tried to manipulate election results in their favor. Hence, the subalterns lost confidence in elections under ruling parties. Ershad broke all previous records for election manipulation. Therefore, during the peak of the anti-Ershad movement, civil society and various political parties demanded a caretaker government. Due to disappointing past election experiences, this demand was also popular in subaltern domains. The subalterns played a heroic role not only in organizing the anti-Ershad movement in the 1980s, but also in pressing forward the demand for a caretaker government; failure of the elite political parties to conduct a free and unbiased election motivated the subalterns to support this issue. Distrust among the elites motivated the major political parties to also accept this concept. Contrary to the elite historiography of the caretaker government, the subalterns' role in establishing the caretaker government was not peripheral or adjunct; instead, they played a significant role in the establishment of this demand. Without their sacrifice, it would have been impossible to institutionalize a caretaker government. Ershad was thus overthrown by a mass movement at the end of 1990. Before he was removed from office, he handed over state power to the nominee of all political parties, Chief Justice Shabuddin Ahmed. However, there was no constitutional basis for a caretaker government, and the legality of it had not been established. After the election in 1991, the fifth Jatiya Sangsad (National Assembly) ratified the caretaker government. On the 26th of March 1996, the sixth National Assembly approved the Thirteenth Amendment bill by a 2680 vote. The prime duty of such a government is to conduct a free, fair, and unbiased parliamentary election within 90 days, and that would be the basis of peaceful legitimate change of government. Articles 58 (B), (C), (D), and (E) of the Thirteenth Amendment require that (1) an eleven-member

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nonparty caretaker government will be formed after the dissolution of the parliament, headed by the chief adviser, (2) the members of the caretaker government will collectively be responsible to the president, (3) the head of state that is the president will appoint the chief adviser, and not more than 10 advisers will be selected by counsel with the chief adviser, (4) the status of the chief adviser will be equivalent to that of the prime minister, and the other advisers will be equal to ministers, (5) the caretaker government will act as an interim government and will not take any major policy decision unless needed, (6) the duty of this government is to help the election commission conduct a free, fair, and impartial parliament election, and (7) this government will be dissolved on the day that a new prime minister is sworn in.9 Beginning of the Present Crisis The current crisis started when the Awami League-led alliance and some other leftist and centrist political parties raised objections about the appointment of the last retired chief justice, K. M. Hasan, as the chief adviser of the caretaker government. President Ahmed proposed him as chief adviser of the caretaker government, the fourparty alliance supported his move, and the fourteen-party alliance rejected it outright. They were against his appointment because they considered him to be a partisan person, associated with BNP politics. As a result of the failure of the secularists and the Islamists to reach a consensus, Hasan refused the office. The opposition instead proposed the names of retired justices Mahmudul Amin Chowdhury or Hamidul Haque, and they also proposed that if none of the retired justices agreed to take the position, the president should appoint a new person after consulting with the major political parties. Instead of consulting with the major opposition parties, however, President Ahmed himself was sworn in as chief adviser on the 29th of October, 2006. The BNP-led alliance naturally welcomed his appointment, and although the fourteenparty alliance at first rejected his appointment, later they accepted him on the condition that he had to prove his neutrality to retain his post. The appointment of President Ahmed as the chief adviser was clearly a violation of the constitution. According to the constitution, the chief adviser should be accountable to the president. If the president himself assumes the position of chief adviser, he cannot be held accountable to anyone for his actions. Moreover, it altered the basic principle of the constitution - that is, the parliamentary form of government which was reintroduced after the overthrow of the last military dictator Ershad. The provision of the caretaker government was set up in accordance with the parliamentary system. The role of the chief adviser is synonymous to that of the prime minister, accountable to the president. President Ahmed himself was a partisan person - before becoming president, he was a leading member of the university teachers' organization of the BNP. Therefore, his appointment violated the condition of neutrality for the chief adviser. Also, the chief adviser is supposed to take an oath from the president, but when Ahmed became the chief adviser he had to take an oath from the chief justice, in further violation of the constitution. Allowing the president to be the chief adviser of the caretaker government, an unprecedented situation in Bangladesh, made Ahmed the most powerful person in the country's history. Even Mujib did not have that much power

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when he introduced one-party rule in 1975. None of the previous military rulers in the country had that much power. Ahmed's self-appointment as chief adviser was clearly a move by the Ismalists to retain power during this interim time, and in doing so they wanted to secure their return to power. Before the formation of the first caretaker government in 1990, the party in power in Bangladesh had never lost an election. President Ahmed also violated the constitution by asking major political parties to supply the names of the 10 advisers. According to the constitution, the president must appoint the advisers in consultation with the chief adviser and these advisers have to be “neutral” persons. Moreover, he retained in his own hands all the vital ministries: Chief Adviser's Office, Armed Forces Division, Cabinet Division, Election Commission Secretariat, NGO Affairs Bureau, Defense Ministry, Establishment Ministry, Bangladesh Public Service Commission, Ministries of Foreign Affairs, Home Affairs and Education, and so on. Retaining most of the significant ministries in his own hands raises further questions concerning how efficiently he would be able to administer them. The situation of political deadlock worsened after the resignation of four advisers from the caretaker government. They were trying to mitigate the situation by proposing a “package deal,” under which the election officials, whom the fourteen-party alliance did not like, would take voluntary leave and that would open an avenue for the alliance to take part in the election. Although President Ahmed at first agreed with the proposal, he later suddenly disagreed with it. Moreover, without any consultation with his advisory council, he decided to deploy the military all over the country. As a result, the four advisers chose to resign; they considered the decision to deploy the military without their consent to be a humiliation to their position. After their resignation, the president appointed four new advisers. These appointments were criticized by the fourteen-party alliance and other political parties and civil society groups because according to them, they were all either partisan or loyal to the four-party alliance politics. Further, they said that after appointing them as advisers, this caretaker government lost its neutral character and therefore it is impossible to expect a free, fair, and unbiased election under this government. The four-party alliance supported the president's appointment of the four new advisers. They also claimed that an environment for free and fair election prevails in the country and hence all the political parties should participate in the election to maintain constitutional continuity. Moreover, they mentioned that it is the caretaker government's constitutional responsibility to conduct an election within 90 days. The fourteen-party alliance and most of the political parties are now demanding the resignation of the chief adviser because they now do not consider him to be a neutral person. The BNP-led alliance is opposing the removal of the chief adviser and election officials, and they also promise to organize a movement if these officials are removed. During this confrontation between the Islamists and the secularists, we observed divisions among the totalitarian Islamists. The syncretic and the totalitarian Islamists (followers of both Deobandi and Mawdudi) in the country have different positions on the issue of the nature of “true” Islam. They each consider the other's beliefs and

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practices to be deviations from Islam. The Mawdudi and the Deobandi Islamists formed a coalition with the BNP before the last parliament election in 2001; the syncretic Islamists kept a distance. The syncretic Islamists have moved closer to the fourteen-party alliance during the current impasse in Bangladesh politics.10 A significant number of Deobandi totalitarians have left the four-party alliance and established a liaison with the fourteen-party alliance. Some completely abandoned their ideology concerning the establishment of a theocratic state. Others did not quit their ideology and still want to implement the ideals of Islam in the state and society through the fourteen-party alliance. Factions of IOJ such as Azizul Haq and the Mufti Ijhar Group left the four-party coalition recently over the failure of the former ruling alliance to implement the ideals of Islam. However, critics believe that they left the coalition because none of their members were chosen for the cabinet during the time of four-party government. It is interesting that the leaders of these Deobandi Islamic groups supported the movement of the fourteen-party alliance after they left the fourparty coalition. Another group from the IOG left the coalition under the leadership of Misbahur Rahman. They formed a separate IOJ and are now organizing a movement for fair elections with the fourteen-party alliance. Instead of implementing the ideals of Islam, they are now asking for the restoration of the ideals of the war of liberation. They are also in favor of secularism and want to amalgamate secularism and women's liberation with the ideals of Islam. Several other leading members and parliamentarians from the BNP also quit the party over the allegations of massive corruption by some party members, including the son of the party president and the former prime minister Khaleda Zia. They also claim that instead of taking action against the Islamic terrorists who organized several bombings in various places in the country in the last five years, which claimed hundred of lives, the Zia government patronized them. These members are also vocal against the politics of Jamaat. They formed the new Liberal Democratic Party (LDP) and want to restore the ideals of liberation war and secularism. LDP members are jointly organizing a movement with the fourteen-party alliance. The Jatiya Party has also joined the movement with the fourteen-party alliance, after the court handed down a two-year jail sentence to its party leader Ershad due to corruption - buying Japanese boats when he was president of the country. They consider this judgment an outcome of Ershad's interest in joining the fourteen-party alliance. According to the party leaders, the BNP influenced the judge to decide against Ershad to prevent his participation in the upcoming election as a measure of resistance against BNP's proposal to join the four-party alliance. Another phenomenon of the current impasse in Bangladesh politics was the shifting of the positions of the Islamists. Although some shifted their positions because of an ideological change, such as Misbahur Rahman of IJO, for most this move was just a tactical political move. Secularists also did not hesitate to set up alliances with the Islamists. In this strategic game the Islamists are apparently the losers, even though the next election would determine who are the ultimate losers. However, the future of

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the upcoming election depends on whether a consensus is possible between both groups of elites regarding the issue of the removal of the election commission officials as well as the chief adviser himself. At present, a good number of political parties, including the Jatiya Party, the LDP, and other Islamic parties (who are not part of the four-party alliance) are in the process of forming a grand coalition with the fourteenparty alliance. It is apparent that the political power balance is shifting towards the secularist camps. The political deadlock will certainly be prolonged if Ahmed continues to resist the demands of the fourteen-party alliance for his resignation and that of the election commission officials as well. Concluding Remarks It is unfortunate that on the issue of imagining nation, the “subaltern conscience is subject to the cathexis of the elites,” leading to their inability to take an independent stand in this current political impasse.11 As a result of their inability to speak for themselves, fractured elite political domains were able to dominate the political scenario and their historically rooted fragmentation and distrust are hindering them from establishing consensus on the upcoming election. Their failure to build a Bengali nation on the basis of shared “collective consciousness” is the core cause of the current political impasse. Therefore, even if the deadlock could be broken either by reaching a minimum agreement between the two factions of elites or by a massive upsurge by the secularists, the root cause of the contradiction would not be eliminated: failure to share and incorporate the various fragments into the national imagination. Until the elites are able to speak for an entire nation, they might be able to temporarily solve the current political deadlock but it would emerge again sometime in the near future. Endnotes 1. The concept of elite usually signifies dominant classes and groups. In Bangladesh, various sections of capitalist classes (regardless of lumpen, national or comprador), commercial class, high-ranking government officials, leaders of political parties, lawyers, etc. are known as elites. Most of the political leaders from the major political parties came from either capitalist or commercial class backgrounds. Despite their same class affiliation, they are fragmented on the issue of nation, nationality, identity, and the role of secularism and Islam in the state and civil society. This division shows that instead of “collective consciousness” as a class, the elites like the subalterns are guided by the subjective consciousness. As a result of their split positions and the inability of the subalterns to put forward their own nationalist agenda free from the domain of the elite nationalist discourse, the nation of Bangladesh remains fragmented. 2. Data compiled from various Bangladeshi newspapers published from October 29, 2006 to December 21, 2006. 3. The fourteen-party alliance is a coalition of the Awami League, the eleven-party alliance, the National Awami Party (NAP), and the Jatiya Samajtantric Dal (JSD, National Socialist Party). Originally the eleven-party alliance was a coalition of the leftist and centrist parties. The Communist Party of Bangladesh (CPB) and three other small leftist parties quit this alliance over the issue of forming a fourteen-party alliance with the Awami League. 4. BNP, Jamaat-e-Islami (the largest Islamic party in Bangladesh), Islami Oikkyo Jote (IOJ, a Coalition of Islamic Parties), and the Jatiya Party (BJP) originally formed the four-party alliance. 5. Modernist scholars use the term “nation-building” in accordance with the colonial model of nationalist project in the contexts of postcolonial states. For a modernist interpretation of nation, see Rupert Emerson, From Empire to Nation: The Rise of Self-Assertion of Asian

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and African People (Cambridge: Harvard University Press, 1960). For the nation as an “imagined community,” see Benedict Anderson, Imagined Communities: Reflections on the Origin and Spread of Nationalism (London: Verso, 1991). 6. Partha Chatterjee, The Nation and Its Fragments: Colonial and Postcolonial Histories (Princeton, New Jersey: Princeton University Press, 1992), 5. 7. “In the context of Bangladesh, the term 'subaltern' refers to various marginalized groups and underclasses, workers, day laborers, middle and small peasants, the rural proletariat, women, various native and 'tribal' peoples, and 'minority' religious groups and communities. The position of subalternity is relational and relative; therefore in some local or regional situations or under certain circumstances any of them could act as or for the 'elite.' Like the elites, there are fragments within the various subaltern groups. The relationships between and within the various subaltern groups and fragments are both contentious and harmonious, depending upon the context, locality, and situation. In the questions of nation, nationality, identity, secularism, and religion, the subalterns are also divided, like their elite counterparts. Subaltern cultural practices in the Bengal region are generally syncretic; that is, in their everyday lives, Hindu and Muslim and other minority and local religions and practices are all intermingled. Subalterns are also divided on the role of religion in the state and civil society and there is no apparent homogenous or monolithic subaltern culture in Bangladesh.” Sayeed Iftekhar Ahmed, “Resurgence of Islam in Bangladesh Politics,” South Asian Journal, Issue 11, January-March 2006, End Notes. 8. The term Islamists refers to those who wanted to incorporate the identity of Islam in the normalizing project of reinventing nation in postcolonial Bangladesh. However, they are not the same as the groups who are identified by most of the Western scholars as “Islamic fundamentalists.” Islamist is a broader termanyone who wants to incorporate any form of Islam in the identity formation process is identified as Islamist. Instead of using the term Islamic fundamentalist, I refer to them as totalitarian Islamists because they want to establish a totalitarian state based on Islamic identity. In Bangladesh, there are two groups of totalitarian Islamists: followers of Sayyid Abul Ala Mawdudi and followers of the Deobandi school of India. In addition, there are other groups of Islamists whom I identify as syncretic Islamists. In their religious practice, they recognize the syncretic tradition of Islam in Bengal whereas both the Deobandi and the Mawdudi followers deny the existence of syncretic practice in Islam. However, they are also divided regarding the nature of an Islamic state, democracy, politics, and the role of political parties and the practice of Islam. Totalitarian Islamists do not support territorial nationality; instead they believe in the concept of Islamic Ummah, which imagines all the Muslims around the world as one nation. For the syncretic tradition of Islam in Bengal, see Asim Roy, The Islamic Syncretistic Tradition in Bengal (Princeton, New Jersey: Princeton University Press, 1984); for the nature of Islam in South Asia, see Asim Roy, Islam in South Asia: A Regional Perspective (Denver CO: International Academic Publishers, 2001). 9. For details, see Chapter II A, “Non-Party Care Taker Government, Articles 58 (B), (C), (D), and (E)” The Constitution of the People's Republic of Bangladesh (As modified up to 17 May, 2004). 10. The Jaker Party, under the leadership of Mostafa Ameer Faisal, is one of them. In addition, another small faction came out from the BNP under the leadership of Nazibul Bashar Maizbhandari. They formed a political party called the Tarikat Federation. They are in favor of syncretic Islam in society rather than an Islamic state. They are also in favor of the ideals of liberation war, secularism, and also organizing a movement for free and fair elections with the fourteen-party alliance. 11. Gayatri Chakravorty Spivak, “Subaltern Studies: Deconstructing Historiography,” in Ranajit Guha and Gayatri Chakravorty Spivak, eds., Selected Subaltern Studies (New York, Oxford: Oxford University Press, 1988), 11.

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The Death Penalty in Pakistan Dr. Anne-Christine Habbard1

akistan ranks among the top countries in the world for the number of prisoners on death row: currently, over 7,400 prisoners have been condemned to capital punishment 6,985 in the province of Punjab alone as of October 2006.2 Over the years, Pakistan has witnessed a significant increase in charges carrying capital punishment, in convictions to death, as well as in executions around 50 to 60 executions per year. Executions are carried out by hanging, although death by stoning is also provided for by law, as is the case for rape and Zina (sexual intercourse outside marriage) under Hadd. 3 The application of death penalty in Pakistan falls far below international standards. It is most disquieting to note that convictions to capital punishment often occur after botched police investigations and unfair trials, where possibilities of corruption, coercion, intimidation of witnesses and of police officials, and political or social pressure, among others, happen at every stage, thus allowing for unacceptably high probabilities of miscarriage of justice, which is even more scandalous when the punishment is irreversible and irreparable death. The very serious defects of the law itself, of the administration of justice, and the cultural prejudices affecting women and religious minorities further make capital punishment in Pakistan discriminatory and unjust. At every step, from arrest to trial to execution, the process shows systemic flaws, the safeguards against miscarriage of justice are weak or non-existent, and the possibility that innocents have been or will be executed remains frighteningly high. It appears that Pakistan's special courts are even more prone to such injustices, with overall unacceptably low safeguards of constitutional rights for defendants and of guarantees of a fair trial. The recent war on terror has added to the concerns of the human rights community, with anti-terrorist courts summarily trying defendants without proper guarantees of due process of law. The Anti-terrorism laws have also tended to shift the burden of proof from the prosecution to the accused. Defects in the Law, and in the Judicial Practice The provisions of the law leave much to be desired: laws are made on a ad hoc basis rather than on systematic, rational and just grounds, leading to a haphazard and anarchic lawmaking process which has witnessed a preposterous inflation of charges carrying death penalty in recent years, without contributing to the rule of law. While at the time of independence, only 2 charges carried death penalty (homicide and treason), today, 27 different charges do so, including blasphemy, stripping a woman of her clothes in public and sabotage of the railway system. This goes far beyond the scope of the expression “most serious crimes” for which death penalty should be reserved under international law,4 and which is interpreted as meaning that death

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penalty should not be awarded for crimes beyond intentional crimes with lethal or other extremely grave consequences. Several charges carry mandatory death penalty, such as blasphemy. The recently adopted Women's Protection Bill,5 though a welcome step insofar as it eliminates mandatory death penalty for gang rape, still falls far below international standards on the matter, and does not provide the necessary safeguards against discrimination or an unfair application of the law. It has to be said, though, that the vast majority of death sentences in Pakistan are in fact issued for murder. Many of these new charges were introduced during the 1977-88 reign of Zia Ul Haq, which also represented an all-time high for executions and an all-time low for human rights. Besides his Islamisation drive (notably with the introduction of the Hudood Ordinance as well as the initiative to change the penal offences of murder and hurt, which were eventually introduced in 1990 with the Qisas and Diyat Ordinance), Zia Ul Haq is also largely held responsible for “breaking the back” of the judiciary, and the legal profession in general. And indeed, there is little doubt that one of the main obstacles to a fair trial in Pakistan is the historical weakness of the judiciary, the independence of which has been incrementally curbed over the decades to make it inordinately submissive to the executive. Death penalty has also been strengthened in the country by a series of rulings by higher courts, including the Supreme Court, which have repeatedly stated that death should be the “normal penalty” for murder. In 2003, the Supreme Court again ruled that, in cases of murder, “the normal penalty of death should be awarded and leniency in any case should not be shown, except where strong mitigating circumstances for lesser sentence could be gathered”.6 Sentences other than capital punishment are consequently handed only exceptionally in cases of murder. This amounts to a reversal of the former case law, where life imprisonment was the norm for murders, death sentence being handed only in exceptional cases (“the rarest of the rare”). This means that today, in Pakistan, sentences other than capital punishment are handed only exceptionally in cases of murder. The lack of consistency of Pakistani courts is to be noted: depending on the judge, on the province, on the political situation in the country, a defendant will be treated differently. Other Supreme Court rulings have also contributed to expanding the scope of death penalty and limiting the grounds of acquittals, while a Federal Shari'at Court (FSC) ruling limited the possibilities of pardon by the President, in spite of the constitutional provision that grants him the right to do so. The FSC ruled that, according to Islamic law, the legal heirs of a murder victim are the sole persons entitled to grant mercy to the culprit. Such a ruling is to be viewed in the context of a general privatisation of justice in Pakistan, whereby crimes are less and less considered as offences against the State, and more as disputes between individuals or families. A recent case of a Briton condemned to capital punishment, Mirza Tahir Hussain, who was granted clemency on 17 November 2006 by President Musharraf after massive international pressure and against the wishes of the victim's family, shows, however, that a double standard applies, and that the President still retains the right to pardon when the political circumstances demand it, in spite of claims by various officials that he was no longer empowered to do so, which reportedly explained why he rejected all mercy petitions.

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Furthermore, in 2003, the Supreme Court ruled that “courts are duty bound to take into consideration the deteriorating law and order situation and increase in the crime rate which has to be curbed with iron hand”.7 Such a “duty” has hardened the courts' stance on death penalty, even if it is in contradiction with the principle of separation of powers: the situation of law and order is the responsibility of the executive, or of the legislative but not of the judiciary. A public prosecutor commented that “judges have started feeling like policemen, as if their duty was to impose law and order. They have definitely strayed from their responsibility of interpreting the law”. In 2001, a Lahore High Court ruling imposed death penalty on two defendants who had been condemned to life imprisonment at trial stage, on the grounds that it was important to “arrest the rising spiral of crime in our society which has reached alarming proportions (…). If the Court of law at any stage relaxes its grip, the hardened criminal will take the society on the rampage (…). Courts cannot sacrifice this deterrence and retribution at the altar of mercy and expediency”.8 Unfortunately for such advocates of the “iron hand”, the argument of death penalty as deterrent has proved to be factually baseless. Systematic studies undertaken in a number of different countries show that imposition of the death penalty does not contribute to a reduction in the crime rate. In Canada, for example, the homicide rate per 100,000 people fell from a peak of 3.09 in 1975, the year before the abolition of the death penalty for murder, to 2.41 in 1980. In 2000, the rate of homicides was 1.8 per 100,000 people in Canada, where death penalty is abolished and 5.5 in the United States, where it is applied. States in the US which have reinstated capital punishment following the Supreme Court ruling Gregg vs. Georgia on 2 July 1976 have not seen their crime rate drop. Conversely, the states which did not reinstate it have not witnessed an increase in the crime rate. Europe, which imposes a ban on death penalty as a condition for becoming member of the Union, has a lower crime rate than the US. In Pakistan, similar studies have shown the crime rate to be rising, in spite of the death penalty being in force and systematically applied: the systematic and generalised application of death penalty has not led to an improvement of the situation of law and order in the country. It is no small irony that while Pakistan has one of the highest rates of conviction to capital punishment in the world, the situation of law and order in the country remains problematic. This conclusion should not be unexpected: all studies show that the deterrent factor is the certainty of conviction, not the harshness of punishment. A panel of the National Academy of Science in the US concluded in 1993 that a 10% increase in the probability of apprehension would prevent twice as much violent crime as the same increase in the severity of punishment. In some cases, harsher penalties may actually undermine the deterrence, as in cases of mandatory death penalty for all offenders: judges, who then lack judicial discretion, frequently balk at convicting and demand a higher standard of proof, which often leads to no conviction at all. A typical example is the former provision of mandatory death penalty for gang rape in Pakistan; a Lahore judge ruled in 2002 that “no doubt offence of gang rape is considered extremely heinous in any society (…), and it is treated as most detestable and abominable crime and obviously for that reason the extreme penalty of death has been provided (…). But practically it has been noticed that whenever heavy punishment especially the

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sentence of death is provided and there is no alternate punishment either, the number of acquittals are bound to increase”9 and he went on to acquit the defendants. The same thing happened in the much famed Mukhtara Mai case in 2005 at appellate stage. Death penalty may hence paradoxically contribute to the rise of impunity. In particular, in Pakistan, it thus appears that not only has the massive application of death penalty not strengthened the rule of law, but its application has, much on the contrary, weakened it substantially. This affects all citizens of the country, but even more so those who face a judicial procedure. The lack of consistency of Pakistani courts and the historical weakness of the judiciary, submissive to the executive as well as plagued with systemic corruption, gravely jeopardises the possibility of a fair trial. Furthermore, the very low salaries of the judges exposes them to pressure and bias both in “political” cases, or in cases where one of the parties is wealthy. The by now routine habit of the executive “rewarding” or “punishing” compliant or resistant judges has seriously undermined the independence of the judiciary. The specific impact of the Qisas and Diyat Ordinance on death penalty This sad situation is aggravated by the specific impact of the Criminal Law [Amendment] Ordinance, commonly referred to as the Qisas and Diyat Ordinance.10 It redefined the offences of murder, manslaughter and bodily harm and their punishment in Islamic terms; it also introduced new punishments for these offences. First introduced in 1990 as an ordinance, it was repeatedly repromulgated until it was passed by parliament in 1997. The Qisas and Diyat law regards the offences of physical injury, manslaughter and murder as directed essentially against the person of the victim, and only subordinately against the order of the state, which is the reason why the aggrieved party is given precedence to choose the penalty for the culprit. Under Islamic law, the punishment can either be in the form of qisas (equal or similar punishment for the crime committed) or diyat (compensation payable to the victim's legal heirs). All offences under the Ordinance are hence compoundable, i.e. can be settled ex curiae. The Qisas and Diyat Ordinance has had an adverse impact on the rule of law, on the administration of justice, and on the application of death penalty. By allowing for the possibility to pay “blood money” to relatives of the victim in lieu of execution, the Ordinance has paved the way to a nefarious privatisation of justice, as the State withdraws from one of its main responsibilities, since it no longer is the guardian of the rule of law through the exercise of justice. In Pakistan, crimes are less considered as offences against the State than as disputes between individuals or families: one of the fundamental tenets of punishment, that it is due to society in order to protect it as a community, as well as to preserve the rule and the meaning of law, has been eliminated. Such privatisation of justice means a general pollution of the rule of law, and damage to the legal framework. The life of an individual now hinges more on the persuasive powers of his relatives than on the norms of justice. When the heirs forgive a murderer, he is usually acquitted and immediately freed: in practice, blood money means immediate acquittal and impunity. It has to be said, however, that such impunity is essentially due to the judicial practice: the State retains the possibility to punish the criminals (art. 311 of the PPC)11 albeit not to capital punishment. In effect,

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however, the courts have only exceptionally maintained a sentence after waiver by the heirs, just as they never verify the free and willing nature of the compromise. This privatisation of justice does not only modify in depth the role of the judiciary, but it also limits the power of the executive. As stated above, pardoning a condemned prisoner, in cases of murder, now rests solely with the heirs of the victim, rather than with the President, contrary to art. 45 of the Constitution, although he remains formally empowered to exercise this right. The Ordinance has contaminated the sanctity of the murder trial, as the possibility of compromise has de facto lowered the standards of evidence required for conviction. In addition, coercion appears to be routinely used to force the legal heirs to accept compromise. There is no transparent and objective procedure to ensure that the compromise is entered freely, willingly, and without intimidation or pressure. Such coercion on the family of the deceased, which can easily be threatened with yet another murder if they do not accept the deal, has become routine practice. On 18 January 2006, the brothers of a murderer awaiting his execution kidnapped a nephew of the victim in order to force the family to accept a compromise. This was not the first time the murderer's brothers had used such tactics: they had earlier abducted the son of the victim, in order to coerce the family into compromise, already then. In a most surreal twist, the press reported that the police had seized a Motorway Police personnel said to be a relative of the kidnapping gang, in order to “ensure the safety” of the abductee. The possibility of compromise thus opens the door to such illegal tactics and multiple threats. The pressure to enter a compromise often stems from the local law enforcement agencies, who have an interest in a quick settlement, in order to decrease their caseload; they are often corrupt and would be paid a bribe to ensure the victim's family agrees to the compromise. It is indeed very often the police itself which puts pressure on the complainants to enter a compromise. To make matters worse, the courts seem to take an attitude of benign neglect when it comes to the coercion taking place for a settlement to be reached. One of the reasons is that such compromises contribute to allaying the task of courts, by disposing of cases. Needless to say, the social hierarchy, especially in small communities, is of enormous importance. As stated by a judge, “the right to pardon by heirs puts a premium on murders”: if a defendant is rich enough, or if he comes from an influential family, he is near certain to get away with murder. Another human rights activist adds that “the law as it stands amounts to a licence to kill”. The Qisas and Diyat Ordinance therefore adds a further element of social discrimination in an already biased process, as poorer defendants might not be able to gather the funds necessary for the required compensation. The law hence discriminates in terms of the financial capacity of the offender. Those who cannot afford to pay to save their lives will be executed. Money is not always the only “compensation”: the introduction of a compromise has informally revived or strengthened age-old practices banned by law, such as demanding, besides blood money, a woman in marriage, or the permanent exile of the defendant. The lack of effective judicial supervision of the negotiations has direct

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bearing on the multiple irregularities of such procedures, and the open possibility of coercion and intimidation. In November 2000, the Peshawar High Court held that in cases of diyat, the handing over of a woman shall not be a valid form of compensation and lower courts shall not accept such agreements. This judgement has been ignored as the practice is reported to persist. The discrimination is not only social, it is also relative to gender: for example, in cases of “honour killings”, there is virtual impunity. In such practices it is family members who conspire to kill a woman on suspicion of immorality and thereafter they forgive the relative who killed the woman. Human rights organizations protested against this law and an amendment was adopted in 2002 granting courts discretion to punish the offender despite a compromise. So far the courts have not exercised this discretion and generally maintain a general hands-off, no-interference policy in such settlements. From arrest to trial to execution, a faulty and discriminatory process Capital punishment in Pakistan is also adversely affected by the weakness of the police service: convictions to capital punishment often occur after trials based on severely deficient police investigations, where incompetence and possibilities of corruption, coercion, intimidation of witnesses and of police officials, and political or social pressure, among others, happen at every stage, thus allowing for unacceptably high probabilities of miscarriage of justice. In spite of recent changes brought about by the Police Order 2002 (which, amongst others, set up Public Safety Commissions (PSCs) and Police Complaints Authorities (PCAs) to provide citizens with a mechanism to have their grievances against the police heard and redressed), the police in Pakistan is still ruled by a culture of violence, intimidation and coercion; torture is routinely used to extract information or confessions from suspects, and illegal detentions are common. Extrajudicial killings happen frequently. The police is poorly equipped, poorly trained, corrupt, underpaid, susceptible to local power politics. Police officials acknowledge that the PSCs are highly ineffective, and, worse, are often perceived as an instrument of strengthening the stranglehold of local elite and politicians, who collude with the police to further their interests. The inefficiency of the police starts from the very onset of the investigation: for example, the rules regarding the filing of a First Information Report (FIR), which should only be a first step before the actual investigation, are routinely violated, as there is a definite tendency by police officers to file FIRs only after the investigation, once the “culprit” has been identified. This is clearly a negation of the law, but can be explained by the decision to base police promotion on solved cases and the pressure to get better results. Similarly, the final report of police investigation, filed under section 173 of the Criminal Procedure Code, called the “Challan” and which forms the first basis for the court case, is by law supposed to be submitted at the latest 14 days after the FIR has been filed.12 However, this rule regarding the submission of the Challan is almost never followed. “I have yet to come across a single case where the Challan was submitted in time. The whole thing is a mockery”, says a criminal lawyer. On 15 May

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2006, it was reported that the police had submitted the interim Challan in a case of kidnapping of 9 people in Hyderabad…. 8 years after the facts. An added impediment to proper investigations is the fact that the evidence is usually collected piecemeal, and haphazardly, over several days or weeks. Only very seldom is a systematic, coordinated and speedy investigation led and that only in high profile cases. The lack of training and expertise in forensic techniques among Pakistani police officers certainly does not help; police officers themselves decry the lack of formal training procedures for investigations. Certes, some technological improvements have been made recently, such as the extension to all districts of fingerprinting identification devices; but more modern techniques, such as DNA testing, are used only in exceptional or high-profile cases. The delay in obtaining the results of ballistic or other forensic analysis further impedes the investigative process. In criminal cases, there is furthermore a strong tradition to rely much more on oral evidence than on material evidence, which greatly increases the pressure on witnesses, as well as the possibility of testimonies dictated by local or family politics. It is very difficult to have independent witnesses testify, for fear of retaliation against their family, or because of fear of getting involved with the authorities and the police. Coercion or corruption of witnesses can stem from the police, from the powerful local families, from the culprit's relatives, or even from the victim's party. This gravely jeopardises the right to a fair trial. There is no witness protection programme in Pakistan. Add to that the growing tendency to shift the burden of proof onto the shoulders of the victim; many investigative agencies seem to see it as the victim's duty to find the witnesses. In effect, and since most death penalty verdicts are handed for murder, this means that the chance of miscarriage of justice is very high. Nowhere in the world is there ever a foolproof investigation, which could guarantee with absolute certainty the culpability of the defendant; in Pakistan, however, given the immense fallibility of police investigations, the certainty of culpability dwindles to a preposterously low proportion. More generally, the generally hierarchical and unfair social structure inevitably skews police investigations and judicial proceedings in favour of the wealthy and influential; discrimination pervades the whole system. As stated, the Qisas and Diyat Ordinance has institutionalised discrimination against poorer defendants, although the recent Supreme Court ruling ordering the State to pay the diyat in case the defendant is indigent, is a most welcome step in this regard. But this is not the only, nor the first obstacle for poorer defendants: they are also victims of the paucity of legal aid: there is no proper provision for effective legal assistance at the state expense for those who can not afford it on their own. The closest that the system comes to legal aid is the Pauper Council: the High Court Rules13 provide that in cases where the punishment is 'death' or 'imprisonment for life' and the accused/defendant is unrepresented, the court shall engage a lawyer for him or her at State Expense. Now the problems with the Pauper Council are multiple:

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l The lawyers appointed 'at the State Expense' are selected from list, maintained by

High Court Judges and appointed by the Advocate General's office, of lawyers who volunteer their services for this purpose. It is unsurprisingly enough mainly composed of either young and inexperienced lawyers, or briefless ones. l As the 'expense' is meagre and seldom paid or always with an important delay , it comes as little surprise that few lawyers are willing to serve as Pauper's Councils. “In the end, the loser is always the accused”, says a prominent Lahore lawyer. l The Pauper Council is appointed only in the case of death penalty which means that many condemned prisoners have not been represented at the stage of trial. In other words, legal aid is provided only once the verdict of death has been handed. l This adds to an already skewed police and judicial process, where the powerful and wealthy can easily thwart a procedure in their favour. Sadly, citizens are not equal before the law in Pakistan. Discrimination is not limited to social and financial grounds. It appears that although there are far fewer female condemned prisoners than male, the punishment meted out will be harsher, and the judges, overall less inclined to grant them mitigating circumstances. The authors of “honour killings” of women are still considered leniently by the courts. The progressive Islamisation of the State has translated into an institutionalisation of religious discrimination. In particular, the laws of blasphemy, which carry mandatory death penalty has been used against NGOs, minorities, academics and journalists sometimes after grossly unfair trials. In 2005, two persons have been convicted to death on the charge of blasphemy. Yet another problem in the application of death penalty in Pakistan is the length and conditions of detention. Some condemned prisoners linger on death row for 10 to 15 years, given the time it takes to exhaust all appeals and the overburdening of courts. Furthermore, the prisons in Pakistan are notoriously overcrowded official figures dating from August 2005 stated a jail population throughout the country of 86,194, for an official capacity of 36,825. This naturally affects death row inmates as well. In Kot Lakhpat Jail, Punjab, for example, the official capacity for condemned prisoners is 261 for 532 actual death row inmates. Death row inmates are submitted to a different regime than other prisoners. They are not allowed to work on the jail premises, and have restricted outdoor possibilities. In Punjab, they are allowed a half hour's walk in the morning, and another half hour in the evening, while other inmates have the right to stay outdoor for several hours. It appears that condemned prisoners are also submitted to a different regime as far as visits are concerned, which are restricted. The parlours are also separate, not allowing for physical contact. A former death row inmate said he had been chained in iron ankle fetters for three consecutive days in Sahiwal Jail; he went on a hunger strike to protest. They were later removed. Special Areas, Special Laws Pakistan presents the added specificity of having some parts of its territory subject to a different legal regime than the rest of the country. These are the tribal areas in NWFP

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and in Balochistan. The Tribal Areas have a semi-autonomous status, administered through a separate legal system, known as the Frontier Crimes Regulation, which, surprisingly enough, has remained unchanged since 1901. It is marked by the virtual absence of any of the fundamentals of any sound democratic institutions: elected government, separation of executive, judicial and legislative; autonomous judiciary; judicial review, legal and human rights protections. Though part of Pakistani territory, the inhabitants of FATA are denied the guarantees enshrined in the Constitution of Pakistan in effect, not all citizens are equal in Pakistan. The FCR blatantly contravenes most of the provisions of the UDHR. Under the FCR, the Political Agent, a civil servant, simultaneously acts as prosecutor, investigator and judge. He nominates and appoints the Council of Elders, known as the Jirga (section 8), to enquire into a dispute however the Political Agent is not bound by the rulings of the Jirga. The decision to disregard the Jirga's finding cannot be challenged in any court (section 10, 60). Legally, death penalty does not apply in these areas; however, since ordinary courts have no jurisdiction over these areas, and are replaced by tribal jirgas, which do not hesitate to order executions as part of a settlement, one cannot but be deeply concerned about the illegal executions being undertaken there, with no oversight whatsoever by the state authorities. Although it happened in a PATA (Provincially Administered Tribal Area), i.e. not in an area submitted to the FCR, the following example is significant: on 28 April 2006, Malik Faiz Muhammad, a member of the Nihag-Wari jirga in Upper Dir said that anyone reporting an honour killing case to the police of filing the case with the court will be killed by the jirga, since the publicising of such cases had brought a bad name to the area. Two weeks prior to this announcement, the jirga had issued a verdict in favour of honour killing, declaring it a permissible act. Malik Faiz Muhammad stated that “we stick to our verdict that honour killing is permissible and those who commit it will not be liable to any punishment. We will also not allow the aggrieved party to report the case to the police of file a case before a court. We will kill those who will violate the jirga verdict”.14 There is quite an ironical paradox about such a situation in the tribal areas: while many officials and legal actors interviewed by the delegation were of the opinion that death penalty supposedly helps stop such executions by clans or family, the delegation was repeatedly told that the perseverance of such executions in the tribal areas was a legitimate substitute for capital punishment in areas where it does not exist. It appears that all these “condemned” individuals were denied even the minimal legal safeguards available to persons accused of crimes in the tribal areas of Pakistan. Unfortunately, the list of woes for Pakistani defendants does not end here. The AntiTerrorism Act (ATA), adopted in 1997 with the aim to “provide for the prevention of terrorism, sectarian violence and for speedy trial of heinous offences and for matters connected therewith and incidental thereto”,15 explicitly overrides all other legal provisions (section 32), and applies to the entire country (section 1(2)). It appears to further curtails the guarantees of fair trial, especially in death penalty cases, as the ATA de facto shifts the burden of proof from the prosecution to the accused resulting

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in a presumption of guilt. The definition of terrorist offences is inordinately wide, and can cover almost any violent crime The ordinance includes within the ambit of terrorist acts “violence against a person” or a property that “create[s] a sense of fear or insecurity in society”16 or “acts intended or likely to stir up sectarian hatred”.17 In one case of multiple rape, for instance, the prosecution argued that the crime had “caused [a] widespread sense of insecurity and harassment [sic] in society” and hence classified the crime under the ATA.18 There is some concern about the discretion police have to decide whether to bring cases before ordinary or anti-terrorism courts; they are also concerned about the lack of legal safeguards for defendants before these courts, as some of them are explicitly suspended. When arrested, defendants lack the guarantees to a fair trial: l They may only be tried by Special Courts directed to be set up by the Act (section

12); l Special Courts may hear cases in any place the federal government may consider

appropriate, including mosques or the places where the offences were allegedly committed (section 15). l Special courts may also try suspects in their absence (section 19(10)) but must then appoint an advocate to defend him. l Trials have to be concluded within seven days (section 19(7)). This time limit may only be extended if strictly required and only for two days. l The judgement of a special court, subject to the result of the appeal to the Special Appellate Tribunal, which has to reach a decision within seven days, is final (section 31). More generally, it appears that there is very little independence of the judges, who are submitted to considerable political pressure. Several lawyers complained of the absence of proper communication between attorney and client. There is often interference of high ranking officials in the course of the trial, or tampering of the evidence. “It's quite uncanny how often evidence favouring the accused disappears in such trials” says an attorney.

Endnotes 1. Professor of philosophy at Lahore University of Management Sciences (LUMS), Pakistan, and chargé de mission for the International Federation for Human Rights (FIDH). This article is a shortened version of a report on death penalty in Pakistan by the same author jointly published by the Human Rights Commission of Pakistan (HRCP) and the FIDH, January 2007. 2. Figures given by the IG Prisons of Punjab. 3. An Islamic punishment only enforced under strict evidentiary requirements. It is a fixed punishment, meaning that the judge cannot adapt it to the particular circumstances of the case. It has to be noted that death by stoning has never so far been carried out, though the law entered into force in 1990. 4. General Comment on International Covenant on Civil and Political Rights, art. 6(2). It should be noted, however, that Pakistan has not ratified the ICCPR. 5. Adopted in November 2006. 6. Badar Munir v. State, 2003 YLR 753(G) 7. Case Ghulam Nabi v. State, 2003 PCrLJ 2021, ref. to PLD 1976 SC 452. 8. Muhammad Asghar v. Muhammad Riaz and others, 2001 YLR 715 9. Mst. Robeena and others v. The State, 2002 MLD 1193. 10. We will refer to it as such in the rest of the article. 11 Confirmed by the Supreme Court, which stated that courts were not bound by a compromise, and could in any case order another sentence than death penalty. 12. However, the police has three days after the expiration of the 14-day deadline to submit an interim Challan, explaining the reasons why the complete Challan could not be completed in time. 13. West Pakistan High Court Rules as adopted by the provinces. The High Court Rules are made by the respective High Courts of each province under powers delegated by the Code of Criminal Procedure, 1872 for safe administration of Justice. 14. Quoted in « Jirga to kill anyone reporting honour killing cases to police », in Daily Times, 29 April 2006. 15. Introductory paragraph of the Act 16. Anti-Terrorism Act 1997, Act No. XXVII of 1997, §6(1)(b) and (2)(b)-(c). 17. Section 6 (5) 18. "Defence plea for case shifting dismissed", Dawn, 25 August 2004, p. 5. See also Human Rights Commission of Pakistan, State of Human Rights in 2002 (Lahore, 2003), p. 74 (noting use of antiterrorism courts by police officers seeking to evict peasants from their land).

Conclusion There is little doubt that the application of death penalty in Pakistan does not, at the present stage, conform to relevant international standards on the matter. The very grave flaws in the investigative and judicial processes, as well as in the law itself, currently make it an arbitrary, socially discriminatory and unfair punishment all the more unacceptable as it is irreversible , in a general context of lack of judicial independence, of erosion of the rule of law, of corruption of investigative agencies, and where social structures reduce equality before the law to mere wishful thinking. In the words of a prominent Supreme Court Advocate: “The judicial process is now so flawed in Pakistan that death penalty amounts to murder”.

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Bangladesh's economy grew at 6.7 percent, although there are fears that a campaign of strikes and blockades spearheaded by a prominent political alliance led by Awami League ahead of next year's general elections may slow down growth. However, economists warn that South Asia continues to grapple with problems that could impact future growth.

2006: South Asia in Review

006 has been an important year for South Asia. The pro-democracy movement restored the Parliament and started a new era of democracy in Nepal. Bhutan also started its journey towards democracy in a restricted framework. Bangladesh has seen a rise of religious right and a successful crackdown against the extremist forces. It was business as usual for Sri Lanka -- civil war and violence dominated the news headlines for the country. The year 2006 was the bloodiest for the war-shattered country of Afghanistan since the ouster of the Taliban regime in late 2001, with a high death toll. The chances of peace between India and Pakistan are better now than they have been for decades. With the two nations needing each other in energy and regional cooperation, India-Pakistan peace process was resumed after a brief suspension in the aftermath of Mumbai railway bombings. Signs of Indo-Pak thaw were the flagging off of the first Srinagar-Muzaffarabad bus service in 57 years on April 7. However, there were some impediments in the peace process like the blast in New Delhi and Mumbai. The blasts put to test the peace talks between the two countries. The peace process came almost to a halt after the July 11 Mumbai bombings, leading to postponement of foreign secretary-level talks. As the year ends there is optimism with Pakistan's President General Pervez Musharraf telling NDTV that he is ready to give up Pakistan's claim on Indianadministered Kashmir if India accepts his four-point proposal that includes a joint supervisory mechanism, self-governance, demilitarisation and making the Line of Control irrelevant. Manmohan Singh has given a guarded welcome to the 'new ideas' and called for a treaty of peace, friendship and security between India and Pakistan. Speculation is rife about a possible deal on demilitarizing the Siachen glacier. This may form the highlight of Manmohan Singh's expected visit to Pakistan in the year 2007. South Asia posted strong growth in 2006 despite political turbulence in some of the countries in the region. But poor infrastructure and widespread poverty continue to bedevil many South Asian economies. The World Bank estimates that South Asian economies expanded at a rate of 8.2 percent in 2006, among the fastest in the world. India and Pakistan took some important steps in improving economic ties. India led the way, racing ahead at nearly 8.7 percent as both the service and manufacturing sectors boomed. Pakistan also fared well, with growth estimated at 6.6 percent. Other countries in the region also showed strong growth, despite political tensions and civil conflicts.

Poverty in the region remains another key concern. South Asia is home to nearly 40 percent of the world's poor. Nearly one-third of the region's 1.4 billion people live on less than one dollar a day. The rising economies are denting poverty - but not fast enough. The World Bank says economic growth has intensified inequalities in many countries, and is calling for policies that will lead to more inclusive growth. Economists say most countries in South Asia need to expand their services and manufacturing sectors to create jobs for the millions of unemployed or underemployed people in the region. Afghanistan More than 3,900 people, including over 1,000 civilians, were killed in the militancy in 2006, four times the death toll of 2005. March saw the first visit of US President George W Bush who said in Kabul that, five years down the line, he was still confident that bin Laden 'will be brought to justice.' But soon after his visit, Taliban-led militants intensified their insurgency, mainly in the southern and eastern parts of the country, after the snows thawed. Five years on, the Taliban managed to capture control of two districts in the volatile southern province of Helmand in July. The militancy got bloodier when NATO, which took over the command of UN-mandated International Security Assistance Force (ISAF) in 2003, took charge of security in the southern provinces, bringing the security responsibility of the entire country under its command in October. The insurgency included over 100 suicide attacks, a tactic that Afghans had never experienced before 2003, which left over 270 Afghan civilians and 17 international soldiers dead this year, according to figures provided by ISAF. The Afghan officials accused Pakistan of not doing enough to stop cross-border infiltration by the Taliban, whom they believe get training, financial support and motivation in madrasas (religious schools) located on Pakistani soil. Relations between the two main allies of the US in the war deteriorated as a result of mutual verbal attacks by Afghan President Hamid Karzai and his Pakistani counterpart Pervez Musharraf. The growing insecurity in the southern and eastern regions of the country also hampered rehabilitation and reconstruction efforts in Afghanistan, a country badly devastated by three decades of war. The lack of improvements in the lives of the ordinary people, despite billions of dollars having been poured into the country by donor states, tempered the legitimate hopes of Afghans with signs of frustration, hopelessness and disillusionment. Afghanistan registered a record in 2006 as opium cultivation was found to have increased by over 60 per cent since 2005.

In Sri Lanka, where growth picked up to a healthy seven percent after the tsunami, resumption of ethnic conflict is casting dark shadows over the economic prospects.

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Bangladesh The road to elections to the Bangladesh Jatiya Sangsad (the Parliament) in January 2007 is expected to be chaotic, considering the intensity and spread of violence that rocked the country for consecutive days starting October 27, 2006. Political opponents fought prolonged pitched battles. By November 5, 2006, 30 persons had been killed, and scores injured. Amidst political wrangling over the choice of the Advisor to the Caretaker Government that takes charge three months before elections are held, Iajuddin Ahmed, who held the country's mostly ceremonial role of President, named himself leader of the interim Government on October 29. While the Bangladesh Nationalist Party's (BNP) nomination of former Chief Justice K.M. Hassan was not acceptable to the Awami League (AL)-led 14 party alliance, the BNP rejected the candidature of both Justice Mahmudul Amin Chowdhury and Justice Hamidul Haque, as proposed by the AL. The countdown to elections has also set off the inevitable chain of political matchmaking, with each combination containing significant potential for violence. Protesting against the 'record corruption' and 'dynasty' in the BNP over the last five years, 102 of the party's leaders, including 13 incumbent lawmakers (counting a minister and a deputy minister), under the leadership of former President Prof. Badruddoza Chowdhury and freedom fighter Col. (Retd.) Oli Ahmad, on October 26, 2006, announced the formation of the Liberal Democratic Party (LDP). It is the largest splintering in the BNP's history. Although former Prime Minister Khaleda Zia has asked her party leaders to 'manage' the defectors, leading to a series of attacks on LDP leaders' houses in various Districts, the split could affect the electoral prospects of the BNP. The LDP has already started courting the AL-led alliance. Before Bangladesh could go to voting, the Awami League-led alliance decided to boycott the elections demanding replacement of Iajuddin Ahmed as chief advisor, revision of electoral lists and re-formation of the Election Commission. Earlier in the year, mounting international pressure and the threat of disruption of international aid forced the government to act against the Islamist extremists. On May 4, 2006, State Minister for Home Affairs, Lutfozzaman Babar, said the government had achieved 'satisfactory success' in combating militancy in the country. â&#x20AC;&#x153;Bangladesh is a terrorism-free nationâ&#x20AC;?, declared an ecstatic Prime Minister, Khaleda Zia, in a televised address to the nation, after the March 2 arrest of the JMB chief. Speaking again on March 7, after Bangla Bhai's arrest, she added, albeit with greater moderation, that the government would 'succeed in destroying the terrorist networks and arresting the remaining terrorists'. Most positive development of the year was the award of the Nobel Peace Prize to Dr Muhammad Younus for his and his Grameen Bank's successful venture of microcredit that helped alleviate poverty in Bangladesh. Bhutan Bhutan's tryst with democracy began with elected representatives questioning royal commands even before the Himalayan kingdom could formally shift from absolute monarchy to parliamentary democracy. The National Assembly or parliament saw

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unprecedented ruckus by representatives over refusal by the chief election commissioner to get their endorsement before the controversial Election Bill becomes legislation. From 2006 June to August, Bhutanese refugees in Nepal demonstrated over several weeks to press for third-country resettlement. In September 2006 preparations started in earnest for first ever elections in 2008. Officials began training for the polls which would appoint a government to take over from the absolute monarchy. In December King Jigme Singye Wangchuk abdicated and Jigme Khesar Namgyel Wangchuck, the crown prince, assumed the throne. The former monarch had been expected to stay in power until 2008. India It was a defining year of risk taking for Indian diplomacy as India and Pakistan, despite a serious trust deficit between them, set up a pioneering joint anti-terror mechanism and Washington changed its decades-old law to reopen doors of nuclear commerce with New Delhi. The year gone by could also be measured in India forging strategic ties with the other two pillars of an Asian 'strategic' architecture: China and Japan. These found expression in Chinese President Hu Jintao's visit to New Delhi in November and Prime Minister Manmohan Singh's trip to Tokyo in December. In a significant step, President Hu, during his visit, announced that Beijing and New Delhi were 'partners, not rivals' in an emerging Asian century. They agreed to double their bilateral trade to $40 billion by 2010 and agreed to resolve the decades-old border row as the strategic objective of their relationship. But it wasn't just the US and China that engaged energies of the foreign policy establishment in India: a volatile neighbourhood goaded New Delhi's diplomacy to be innovative and relevant to evolving geopolitics of the region. Clearly, civil nuclear cooperation with the US, first agreed in principle on July 18, 2005 and firmed up during a visit by US President George W. Bush here in March, dominated headlines and kept pundits busy for most of the year, with doubters making sure that the proponents of the deal were subjected to a most unsparing inquisition. After a dragging process in the US Congress swarming with non-nuclear proliferation hawks and critics in India decrying the deal as a sell out, the 18 months of intense negotiations culminated in Bush signing the deal into law on Dec 18 at a White House ceremony. But the government's Left allies and the Bharatiya Janata Party (BJP) were not convinced. Prime Minister Manmohan Singh had to assure them that the deal will not compromise India's nuclear weapons programme. In the last 12 months, India also revitalised its relationship with Russia, the Middle East and East Asia. In the first visit by a Saudi monarch in 51 years, King Abdullah came to India early this year and was chief guest at the Republic Day function. However India's candidate for the post of UN secretary general, Shashi Tharoor, lost out, withdrawing in favour of South Korea's Ban Ki Moon. New Delhi showed its appetite for a global role and flair for working in regional groupings by re-energising

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its ties with not only NAM but emerging groupings like IBSA, which is made up of India, South Africa and Brazil.

peace depends upon the success of transition and completion of the job by yet-to-beelected constituent assembly that will decide the fate of the monarchy as well. According to the National Human Rights Commission (NHC), 43 persons were killed in six months after the ceasefire came into effect at the end of April.

BBC called 2006 as India's year of judgement. It was a year in which the law caught up with some of the country's most powerful people and at last restored the faith of most Indians in its creaky justice system. For the first time, Shibu Soren, a serving cabinet minister was convicted and sentenced to life imprisonment for murder. Less than a fortnight later, a well-known cricket star and MP, Navjot Singh Sidhu, was also convicted and sentenced to jail for manslaughter. Nearly a quarter of the country's MPs are facing criminal charges ranging from murder to extortion and even rape.

The peace accord of November 21 described by most Nepalese leaders as a 'historic' event formally ended the Maoist insurgency that began in February 1996 and claimed over 13,000 lives. But the formal end of the conflict has meant little to Nepalese in rural areas. The odds are stacked high but the prospects for peace are good and this is what counts.

Judges have been helped in part by an active - if sometimes over-enthusiastic - media. A prolonged and feverish campaign by some of India's relatively recent television news channels led to the reopening of two high-profile murder cases in the capital, Delhi. Manu Sharma, the son of a Congress party politician was found guilty of murdering a model in 1999, after earlier having been acquitted. In October, the son of a senior police official was also convicted for the rape and murder of a college student a decade ago - again after initially having been acquitted.

Pakistan Pakistan continues its battle against extremists of various hues in its was against terror. With allies still asking the country to do more even it was not in its capacity, President Pervez Musharraf took initiative in showing flexibility over Pakistan's dispute with India over Kashmir. The new year being an election year carries a promise of possible change as also overriding concerns about fairness and impartiality of the polls if Gen Musharraf remains in uniform.

The other big issue that dominated the year was that of affirmative action. In its last sitting for the year, the Indian parliament voted through a bill which sets aside seats at some of the country's leading professional colleges for lower castes and other disadvantaged groups. India already has a "reservation" policy in which more that a quarter of government jobs and places in state-funded colleges are set aside for lower castes. Under the new law, that figure will almost touch 50 percent.

The 2006 years began while the nation was grappling with the terrible impact of a horrific earthquake a few months earlier.

The Sachar Commission report on the plight of Muslims dubbed the minority community in a condition worse than even the low-caste Hindus, called the untouchables or Dalits. The Manmohan Singh government resolved to implement the recommendations of the Commission to alleviate the sufferings of Muslims. Islam is the second-largest religion in India (after Hinduism - 76.5%), where Muslims number around 138 million (13.4%) in 2001*Census of India. Current Projected Population is 155 million.

There were nationwide protests over publication of the Danish cartoons. These demonstrations took an ugly turn on St. Valentine's day in Lahore which was overtaken by hooligans from religious parties who trashed the city at will. The clergy also forced Musharraf to retreat on the question of celebration of Basant in Lahore that was fast becoming an international festival drawing thousands from abroad. Intervention by the Supreme Court to save people of the killer strings used in kite flying also restricted festivities. But the clergy was dealt a severe blow in the Parliament which adopted the Women's Protection Bill in November which is being hailed as a landmark development in the struggle for safeguarding women's rights.

Nepal A mass uprising in April virtually dethroned King Gyanendra and ended his 14-month old direct rule. But eight months into what Nepalese political leaders fondly describe as a 'new era' in Nepal, things are getting streamlined despite some thorny issues between the political parties and the Maoists.

A bright soot on the national scene during the year 2006 has been a more vigorous pursuit of judicial activism by the Supreme Court to address myriads of social issues including environment, women's plight, executive's excesses, mysterious kidnapping by security agencies without any charges, corruption, hike in prices and rising crime. The court dealt a big blow to the government by annulling the privatization of Pakistan Steel Mills following reports that the deal was mired in corruption and irregularities.

The year 2006 will be known as one in which Nepal's democratic parties hooked up with Maoists to end King Gyanendra's direct rule. With the international community arrayed against King Gyanendra, the turnout in the streets of Kathmandu with the support of the Maoists in the middle of April sounded the death knell for the king's rule. It could well mean the end of the 238-year- old monarchy in Nepal. With the Seven Party Alliance (SPA) and the Maoists set to form an interim government, the Nepalese hoped that the days of uncertainty, insecurity and intolerance would be a thing of the past. The guns have been silent since the end of April, but a permanent

The year had some high points for the opposition parties. Exiled premiers Nawaz Sharif and Ms. Benazir Bhutto, the erstwhile rivals, buried hatched and signed a Charter of Democracy in London in May 2006 vowing to end military predominance. Then the opposition united to move a no-confidence motion against Prime Minister Shaukat Aziz in the aftermath sensation disclosures of sugar, stock market, oil, cement and other scams topped by Supreme Court verdict on Pakistan Steel Mills. The killing of Baloch nationalist leader Nawab Akabar Bugti during military operation in Balochistan further cemented the opposition unity. The motion was defeated as

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expected but the government was put in a tight corner with growing chances of the opposition parties forming a grand alliance to dislodge Musharraf. However, the Women's Protection Bill proved a catalyst in again dividing the opposition. Ms. Benazir Bhutto's PPP voted with the government while the Muttahida Majlise Amal of religious right opposed it and gave the threat of resignations from the assemblies. The entire episode has caused deep fissures within the combined opposition, as also alliances like the ARD and the MMA. Ms. Bhutto's covert contacts with Musharraf and Maulana Fazlur Rehman's pragmatism have further deepened schism within the opposition. Pakistan's economy delivered yet another year of solid economic growth at a rate of 6.6 percent underpinned by dynamism in industry, agriculture and services. The economy weathered the crises created by the earthquake and the steep rise in oil prices at international level. The year marked emergence of a new investment cycle with investment rate reaching new height at 20.0 percent of GDP. Foreign direct investment touched $3 billion mark while overseas workers' remittances at all time high of $4.8 billion continued to be one of the largest sources of external finance for the country. The government signed a peace accord with militant tribal leaders in Waziristan out of necessity to pull back the army from a bloody war. The pact became one of the reasons behind deterioration of Pakistan's relations with Afghanistan. Sri Lanka The year 2006 saw several major battles at Muhamalai, Muttur, Sampoor and Mavilaaru. The Sri Lanka Air Force was widely used to carry out retaliatory and offensive strikes during 2006. The Sri Lankan government reported 954 servicemen and 2097 LTTE cadres had died during 2006. The LTTE however placed its own losses at the figure of 818 dead. The LTTE lost ground in Mavilaaru,Sampur and Muttur. However the government did not loose any of the areas under its control. Attacks by the LTTE on Jaffna and Muttur were repulsed by government forces. The LTTE succeeded in killing the target in only one out of four suicide bomb assassination attempts this year. [74]. However the LTTE was able to kill over 100 mostly unarmed Sri Lanka Navy sailors by a suicide truck bombing at Digampathana. Both the Sea Tigers and Sri Lanka Navy suffered heavy losses during battle at sea in 2006. Sri Lanka sank at least one LTTE arms trawler. In February, the government and Tamil Tigers declared their respect for the 2002 ceasefire at talks in Geneva. In April explosions and rioting in Trincomalee, in the north-east, left 16 people dead. Police blamed Tamil Tigers for the blasts, which came amid a marked escalation in deadly violence. A suicide bomber attacked the main military compound in Colombo, killing at least eight people. The military launched air strikes on Tamil Tiger targets. In May, Tamil Tigers attacked a naval convoy near Jaffna. International monitors described the deadly attack as a "gross violation" of the 2002 ceasefire. In June, 64 people were killed in a mine attack on a bus in Anuradhapura district. Days later, more than 30 people were killed in a land and sea battle between government forces and Tamil Tigers. Tamil Tigers insisted that most of

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the 65-person Sri Lanka Monitoring Mission be replaced in light of an EU terror ban against the rebels. In August, Tamil Tigers and government forces clashed in the north-east. It was the worst fighting since the 2002 ceasefire. Hundreds of people were killed and the UN said tens of thousands had fled their homes. In September, the government said it had pushed Tamil Tigers from the mouth of strategic Trincomalee harbour. This was seen as the first major capture of enemy territory by either side since a 2002 ceasefire. In October, a suicide bomber attacked a military convoy, killing more than 90 sailors. Tamil Tigers attacked a naval base in Galle, the southern city frequented by tourists. Peace talks resumed in Geneva but failed over the Tamils' demand that the government reopen a key highway to Tamil-dominated Jaffna peninsula that was closed owing to fighting in August. Compiled from various sources by Waqar Mustafa, Editor, southasianmedia.net.

Bangladesh in 2006: A Year of Hope and Despair Lailufar Yasmin Since its independence in 1971, Bangladesh has experienced political instability of one form or the other. The restoration of democratic rule and institutions in 1990 raised much hope for the continuance of a stable political environment; however, the antagonism between the two major political parties, have not been able to sustain a period of tranquility in the national politics. As the year 2006 wraps towards an end, it has witnessed political unrest and violence more than the recent years as a national election is in the offing in 2007. Along with political instabilities, the issue of corruption and power failure, which sparked violent protests, are among the major incidents of the year at the national level. However, this year also marks a tremendous success on part of the government as they succeeded in capturing the topmost Islamic terrorists who led the viscous bomb attack on 17 August, last year. At the regional level, Bangladesh sought to improve relations with both India and Pakistan as the Prime Minister paid visit in both countries in the first half of the year. This year has brought another great success for Bangladesh as Dr. Muhammad Yunus and Grameen Bank jointly received Nobel Peace Prize, Dr. Yunus being the first Bangladeshi ever to earn such an honour. It was anticipated from much before that the year 2006 would be turbulent given that the elected government was supposed to hand over power to the caretaker government for the purpose of holding election in early 2007. The13th Amendment of the Constitution of Bangladesh has made it obligatory for a ruling party to hand over power to a non-party caretaker government for a period of 90 days to hold a free and fair election. The culture of mistrust in politics has made it impossible to have faith on the capacity of an elected government to carry on such responsibility. The non-party caretaker government would be headed by the Chief Adviser (generally the last retired Chief Justice) and would be managed with the help of other ten advisers, all of whom have to be non-partisan. The Bangladesh National Party (BNP) came to an end of its term in power in October and the time came for the hand over of power to a non-party caretaker government. This process of transition was not smooth and was rather marked by unprecedented violence of recent times. The main opposition party Awami

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League (AL)-led coalition 14 Party raised the question of reliability of the last retired Chief Justice on the ground of his past affiliation with the BNP and refused to accept him as the Chief of the non-party caretaker government. As the BNP, the 14 Party and other major parties failed to resolve the issue within a certain time, a widespread violence broke out as the 14 Party initiated aborodh (blockade) of the capital city Dhaka that claimed as many as 25 lives within a few days only. As the situation rapidly started to go out of hand, the last retired Chief Justice KM Hassan declined to take over the charge of the Chief Adviser. Under the circumstances, the President Iajuddin Ahmed, took over the charge as the Chief Adviser of the country to administer for a 90 days period. Even though the Awami League led coalition accepted the President as the Chief Adviser for the time being, they raised the issue of reconstitution of the Election Commission (EC), with the major demands of the removal of the Chief Election Commissioner (CEC) MA Aziz and other members of the election commission and correction of the voter list. Thus, the country witnessed several rounds of blockade, which severed the capital city Dhaka from the rest of the country as well as the shut down of the land and sea ports amidst the failure of the major parties to reach to a conclusive agreement. To end the impasse, the Chief Election Commissioner was sent on a leave and two new election commissioners were appointed to make the Election Commission more credible. However, even the two new election commissioners were not deemed as neutral and the 14 Party and some other political parties asked for their departure as well. Even before resolving these issues, the election date was announced by the Election Commission, which heaved new tension as the Awami League and other like-minded political parties wanted the resolution of their demands before declaring the poll date. Under such a volatile political climate, some of the advisers were given the task of initiating dialogues with the major political parties, in order to learn their views and to come at a resolution, which will be acceptable to all the political parties. As a last resort to put an end to the problem, four advisers came up with a “package proposal”, which however, failed yet again due to the inability of the major political parties to reach to a solution. In the mean time, the President and the Chief Adviser deployed military to oversee the law and order situation. The situation became more critical as four of the ten advisers resigned from their posts on the ground of unilateral decision taken by the President on the matter of deploying troops and also the failure of implementing the “package proposal”.1 On the next day, President appointed four new advisers. At the same time, all the major parties agreed to start a discussion on materialising the package proposal. However, again a new demand was raised by the Awami League to defer the election date for 46 days as they claim that this much time has been wasted to create a congenial environment to hold a free and fair election. At the time of writing this report, this issue has remained unsettled. In the meantime, ambassadors of different countries repeatedly met leaders of both Awami League and BNP to resolve the political crisis. The United States' government sent envoys like US Assistant Secretary of State Richard Boucher and Deputy Assistant Secretary for South and Central Asian affairs, John Gastright to express their concern about the political stalemate in the country. The former UN Secretary General Kofi Annan also sent his envoy Craig Jenness, Director of the UN Electoral Assistance

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Division to hold talks with the different bodies to ensure a free and fair election in the country. Three writ petitions were filed against the President on his assuming the charge of the caretaker government. On the day of the ruling, the Chief Justice issued a 'stay order' on the proceedings of the court, which has been unprecedented in the country's history. However, what followed was also incomparable as the lawyers started agitation and vandalism of the different sections of the Supreme Court. After days of inactiveness, though the courts have started to function but the incident has brought a negative blow for the country's image.2 This whole narrative about the political situation actually provides a sad account, that is, politics has become too much unpredictable and it has brought about misery for common people. Common people's desolation regarding the mainstream politics was a frequent item of report in the national media, both electronic and print. While Bangladesh's common people have always remained much concerned about political developments and have actively participated in the process, the political development of this year has rather set off negative attitude of people towards the political process as it has crippled the daily activities of common people. Moreover, the uncertainty of the politics itself has raised the question of sustenance the caretaker system and overall democratic procedure in the country, as no party is willing to cooperate with each other. This has indeed brought about a big setback about the future of mainstream political process in Bangladesh. Under this situation, some eminent persons of the country came up with the proposal of establishing a national government to put an end to the present crisis. However, the major political parties were not interested to discuss the matter. The year 2006 is also marked by the police brutality on several occasions. The first such incident took place in Kansat, an area in the Chapainawabganj district, where from January to April, 20 people were killed while agitating on the demand for more electricity supply. In April, the local police of Chittagong beat up photojournalists over a trivial issue. In October, shooters of the National Shooting Complex also faced police wrath as they were trying to save the guards' of the building being beaten up when they protested over an unauthorized parking of a vehicle in front of the building. Even under a democracy, these incidents show how the members of the law-enforcing agencies can break laws yet seldom are brought into trial as the responsible officers were at best transferred from their present positions or were just given warnings. The Berlin-based organisation Transparency International named Bangladesh as the most corrupt country in the world first time in 2001. Unfortunately, since then, Bangladesh has been holding the position till 2005. However, this year Bangladesh graduated from first place to the third place, receiving 2.0 point out of 10 in the corruption perception index (CPI). Even though this may look like an improvement, but in reality this does not mean that corruption in Bangladesh has gone down. Bangladesh, for last several years, has been marred with a spate of negative news in the international media in which there was an effort to promote the country as a failed

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state. Such trend continued even this year. In August, The Washington Post published an article titled “A New Hub of Terrorism? In Bangladesh, An Islamic Movement with Al-Quaeda Ties is on the Rise”, which has hinted Bangladesh's linkage with global terrorism. However, the well-written article has missed to provide concrete evidence and rather based on “groundless” comments of secondary sources.3 This issue of Bangladesh's Islamic militants having global connection is yet a matter of vigorous research, which is absent in the article. While Bangladesh is constantly battling with such negative image in the international media, 2006 will be remembered in the history of Bangladesh ever shining as Dr. Muhammad Yunus received a Nobel Peace Prize for his immense contribution in relieving poverty in Bangladesh along with his organisation Grameen Bank. Dr. Yunus brilliantly initiated the idea that the “poorest of the poor” can come under loan schemes of a bank without any collateral, an idea impossible to float in the traditional banking system. Dr. Yunus received his prize in Norway in December and provided much-needed boost to Bangladesh's image from a positive point of view. Even though Bangladesh is often termed as a country plagued by Islamic terrorists, unlike many other countries, Bangladesh has been able to trace the founders of Islamic terrorism in the country and incarcerate them. This was another big success for the country in 2006 when the government captured the notorious leaders of the Jama'atul Mujahideen Bangladesh (JMB) Shaikh Abdur Rahman and Siddiqul Islam alias Bangla Bhai within the span of only four days in March. Both of them were the masterminds behind the countrywide series bomb attacks of 17 August, 2005. After this incident, the government banned the JMB and launched a serious effort to capture the top leaders who were behind the attack. It took some time, but at last the government was highly successful to capture the top leaders along with their other associates. The arrests of the top leaders of the JMB were highly appreciated both nationally and internationally. It was anticipated that the arrest would diminish the activities of the Islamic terrorists in Bangladesh. The US State Department also praised such an achievement, which they thought to be “an important step in combating extremism” in Bangladesh.4 However, the major opposition party Awami League termed it as a “drama” set to eyewash the general people before the electionyear.5 A much-talked incident of the year was surrounding TATA, a big Indian conglomerate's investment issue in the country. There was a massive $3 billion investment proposal put forward by TATA to the government. However, due to lengthy negotiation process, this proposal did not materialize this year. The Prime Minister this year visited India in the first half of the year in order to improve bilateral relations. During the visit, two agreements were signed - the revised Agreement on Trade and the Mutual Cooperation for Preventing Illicit Trafficking in Narcotic Drugs and Psychotropic Substances. Despite the visit, the Indo-Bangladesh relations remained tensed and the blame-game of harboring terrorism against each other's interest continued. Moreover, the border clashes also continued throughout the year. The Prime Minister also visited Pakistan, a visit carried out by any

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Bangladeshi high-level official in 13 years. Four deals on cooperation in tourism, agricultural research, economic cooperation and promotion of standardization and quality assurance were signed while leaving the contended areas on repatriation of refugees or property sharing issues between the two countries. On the financial sector, Bangladesh has done quite well in 2006, despite the debacles faced in last few months of the year. In the last fiscal year, the GDP growth was 6.7 percent. However, it has been predicted that the “political unrest may cause the economy to lose around 0.2 to 0.5 percent of the possible GDP growth in the FY2007.”6 Moreover, foreign aid has also dropped to 53 percent in the first three months of the current fiscal year. This indeed provides a gloomy picture for the next year.7 The year 2006, altogether, can be termed as a year, which has given us much hope for the future, yet the political instability gives us a gloomy picture! While the Nobel Peace Prize winning has given a new identity for Bangladesh in the international arena as a forerunner in eradicating poverty, the unstable political atmosphere equally poses a great danger on the future of democracy in the country. While democracy is in the essence of agreeing to disagree in a non-violent way, it seems that our politicians have forgotten the spirit of democratic disagreement. Unless the politicians understand this fact, there will only be more trouble for Bangladesh in the coming year. Endnotes 1. In the web edition of The Daily Star, <http://www.thedailystar.net/2006/12/ 12/d6121201011.htm>; accessed on 12.12.06. 2. Dainik Prothom Alo, a Bengali daily, 01.12.06. 3. Shahedul Anam Khan; Strategically Speaking 'A new hub for terrorism?' in The Daily Star, 10.8.2006. 4. In The Daily Star, <http://www.thedailystar.net/2006/03/04/d6030401097.htm>; accessed on 13.12.06. 5. Ibid, < http://www.thedailystar.net/2006/03/03/d6030301044.htm>; accessed on 14.12.06. 6. Ibid, <http://www.thedailystar.net/2006/12/04/d61204050263.htm> accessed on 04.12.06. 7. Dainik Prothom-Alo, 01.12.06.

Nepal's dizzying transformation: Will 2007 stabilize the achievements of 2006? Prateek Pradhan In January 2005 Nepal was a kingdom with King Gyanendra acting as the head of the nation and the head of the government. The political parties were discredited as corrupt, anti-national and inefficient. The pro-monarchs claimed Nepal as "a country with unique geo-political realities that only the 238-year old monarchy could handle". Most of the political party leaders were imprisoned or were under house arrests. The Maoists were termed terrorists trying to establish an authoritarian communist rule. The Maoist leaders were wanted fugitives, who were compared with the Taliban and Bin Laden.

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In January 2006 Nepal is a new country. The head of the government and head of the country both is Mr. Girija Prasad Koirala, the president of Nepali Congress Party, and the leader of the seven-party alliance that fought for the restoration of democracy. The king and monarchy are labeled as the culprit for corruption, feudalism and backwardness of the country. Those who supported the king's autocratic rule are socially boycotted. The king is helplessly awaiting the day when he will probably be shown the way out from the posh Narayanhiti Royal Palace, which is most likely to happen after the Constituent Assembly gets elected hopefully in June 2007. The Maoists have silenced their guns and are all set to store their arms under the UN supervision. Very soon the Maoists are sending their representatives to the interim parliament, and then to the interim government. The change in Nepal has been nothing short of unprecedented. This small Himalayan country in South Asia situated between global giants India and China has proved that no dictator and autocrat can stand against the people power. The revolution and struggle for power is not a new phenomenon in the history of human civilization, but Nepal's case became unique because in 19-day of revolution and with the sacrifice of 23 lives, the people brought the king to his knees and at the same time put the full stop on the bloody insurgency that had already taken over 13,000 lives. The democracy has prevailed over both, the extreme rightists and the extreme leftists. Most probably, the monarchy will bid farewell to the country, and it is most likely that the Maoists will enter into multiparty, democratic political system, bidding adieu to their philosophy to establish a proletarian-ruled, one-party communist country. The year 2005 began acrimoniously for the supporters of democracy as the king was at the helm of his "conceived" popularity. The royal stooges were successfully attracting big number of poor people where ever the king took trips in the rural areas. The king was basking on the fake glory, and making tall claims that Nepal needed a democracy suitable for its soil (meaning king heading the state and the government and rest of all being elected). In the capital city the political parties were frustrated for not being able to bring enough people in the street demonstrations. The parties were bickering among themselves alleging each other not using their full strength. The two biggest allies of the seven-party alliance, Nepali Congress (Democratic) and CPN-UML (Communist Party of Nepal-Unified Marxist and Leninist), had rejoined the alliance after being sacked from the power by the king. Only Nepali Congress had been against the king's autocratic rule, throughout. In the beginning of 2005 the only crowd puller force was the civil society groups, mainly Civil Movement for Democracy and Peace. The civil society mass meetings attract hundreds of thousands, and they entertained people through satirical poems, songs and comedies. In the meantime the media also became a powerful lobby to support restoration of democracy. The press played crucial role in raising the awareness of the people in favor of democracy, and exposing the royal government's embezzlements of national coffer and abusing of human rights. Moreover, as the government tried to muzzle the press by silencing the FM radios from broadcasting news, the media became more aggressive and sharpened its criticism against the royal

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government. When the civil society and the media were drumming up in support of democracy, the political parties were awaiting opportune moment to initiate the movement. In fact, the political parties were expecting the king to relent, and fulfill their demand of restoring the House of Representatives that was dissolved in 2002 October. In the meantime, the political parties had signed a 12-point agreement with the Maoists (In November 2005), as per which they had agreed to wage a joint movement to dislodge the monarchy and establish a multiparty democratic system in Nepal. The irritatingly repeating commitment of the king to democracy and peace (which was never experienced), the failure of the royal government to deliver, and the movement of the civil society and the media created a ripe situation for the revolution. On top of that Maoist leader Prachanda's commitment to peace and stability and willingness to lay off the arms for the larger interest of the country, and the signing of 12-point agreement convinced people that the king was the only stumbling roadblock for the peace and progress. Hence, when the political parties announced the general strike and mass movement against the monarchy beginning April 5, people willingly participated. The residents of the capital cities (Kathmandu, Lalitpur and Bhaktapur) who are famous for hoarding and panic-buying during scarcity of any object showed exemplary resistance to 19-day of roadblock and shortage of everything. Moreover, many people started joining the protests to shorten the labor pain the country was going through. The king would never have been cornered the way he has been now, had he relented on April 14th (the Nepali New Year's Day). Every year on the day of Nepali New Year there was a tradition of the king addressing his "subjects". The people and the parties were impatiently expecting the king to relent. Unfortunately, as it happens to all despots, the king showed signal of tightening his grip. That proved to be the last opportunity for the king, which he utterly spoiled. Within a week, the king realized that things had gone out of his control, and he tried to mend it by inviting the political parties to form the government on April 21st, but it was already too late. People and the parties vehemently rejected the offer. By that time many lives had been sacrificed for the restoration of democracy in the country. Kathmandu city was under tight security of the army, but the ring road surrounding the city was full of protestors for many days. On April 22 about half a million people broke all the barricades of the army and swarmed the heart of capital city. The move was basically against the king's offer made the day before. If nature had not come to the king's rescue, there was a chance of big bloodbath on the day as the protestors were preparing to break the palace. About 3:30 in the afternoon, when people from outskirts had reached inside the city and were wooing the mass to break the army posts surroundings the royal palace, there was huge rain and thunder storm with hailstones. The unusually large hailstones and heavy rain proved natural redeemer for the king as the crowd got dispersed. On 24th again about a million people covered almost 27-km. long ring road and vowed to do away with monarchy. The country supposed to revere king as a reincarnation of

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lord Vishnu (Hindu deity) had turned out totally against the monarchy. People were demanding immediate ouster of the king and chanting slogans to hang him. The king himself observed the rally from his private helicopter, and decided to give in everything. About 20 minutes before the midnight of 24th April, the people of Nepal restored democracy for the second time within 15 years and king's spell of direct rule lasted only 15 months. Dizzying Transformation No sooner the king surrendered, the political parties aptly took charge and drove the process of transformation. The month of April passed on the initial preparations. However, by the end of May people had started criticizing the government for not moving the things in the anticipated pace. But when the government expedited the process unassumingly fast from June, people again started complaining the pace as dizzying. It became difficult to comprehend the political development for the people, because so many historic decisions were coming up one after another. On April 30 veteran leader Girija Prasad Koirala, 85 became the Prime Minister. Soon the Maoist rebels and the government reached into an agreement wherein the rebels would not raise arms. On May 18 the parliament stripped the king of all his executive powers. The restored House of Representatives took many major decisions through various promulgations to empower the people and to restore their sovereignty. The parliament released Royal Nepali Army from the clutch of the palace and rechristened it as Nepali Army. All "Royal" organizations (Royal Nepal Airlines Corporation, Royal Nepal Academy, Royal Chitwan National Park) lost "Royal" from their names. Other institutions bearing late king's names like Mahendra Sanskrit University etc. were also renamed. The parliament announced Nepal as a secular country (Nepal was the only Hindu nation in the world), and declared that 33 percent women participation in the politics and bureaucracy would be ensured. Moreover, they took historic decision by declaring that a child could become Nepali citizen if one of the parents is Nepali (earlier only father could give their name to the children). In addition, citizenship rights have been conferred to all who have been living permanently in Nepal since 1990 and earlier. It opened a discussion about Nepal's perceived nationalism. As estimated 4 million people of Terai people (called Madhesis) got right to apply for Nepali citizenship, some sections of the society raised a doubt about being overwhelmed by India. These people had been deprived of citizenship by the kings in the past in the name of preserving the nation from being overrun by the people of Indian descent. However, majority of Nepalis support bringing Madhesis into the fold, because these people are aboriginals of Nepal's southern plain that occupies about 16 percent of the country's land. On June 16 the until-then-underground Maoist leader met with the Prime Minister at his official residence and later in the evening they issued joint press statement, which was the first public appearance of the rebel leader. Maoist leader Prachanda said that his party would soon enter the government, and the parallel government of the Maoists would be dismantled.

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Though the Maoists' entry into the government has not taken place yet, both the sides have moved forward quite briskly. They signed the Peace Agreement and decided that the Maoist militants would be corralled into the cantonments and the UN would be supervising the army of both sides. As per the agreed upon schedule, the Maoists would have entered into the government by December 1, five days before that the interim parliament was to be formed and five days before that Maoist arms would be managed. However, logistically it was impossible to meet the schedule. The UN was not at all equipped and prepared to move that fast. As a result the cantonments are still being constructed in the seven different places of the country (three sub camps around each main camp), and the UN is likely to attain its objective only by the end of January 2007. This delay in the management of arms has delayed the formation of 326-member interim parliament (205 existing House members, 73 members from the Maoists and 48 from other fields of the society). The delay in the interim parliament has delayed the entry of the Maoists into the government. Thankfully they have been able to agree on the draft interim constitution on December 16, which will be promulgated by the existing House and accepted by the Interim Parliament. Challenges for 2007 As things are not moving as per the schedule, the confusion and mistrust is slowly cropping up. The Maoists created a hullabaloo protesting the government decision to appoint 14 ambassadors. They reacted violently by calling general strike and vehicle strike in Kathmandu on December 19th. This act of the Maoists really terrified people, and they have again become apprehensive about the future of the peace process in Nepal. The fact is that the Maoists have become frustrated and also nervous. They are not finding a clue how to behave as a responsible political party. The Maoist leadership is under heavy pressure from the cadres to show the characteristics of a revolutionary party, which means violence, strikes and instability. At the same time the top leaders are under constant pressure from pro-democratic forces, international community and the intellectuals to behave more responsible. The Maoists leader knows that if they are to leave the arms for good, they have to win the heart and mind of the people and not terrorize them. However, due to the threat of losing their radical members they cannot explain it openly and in as many words to their cadres. This confusion and duality among the Maoist will keep a hanging sword above the future of this country, at least until the elections of the Constituent Assembly. The year 2007 is going to be very crucial for Nepal because the election to the Constituent Assembly is expected to take place by mid-June. The CA election is important because the Maoists might turn their back if they lose in the elections. If so happens, the conflict will resume again. On the other hand, if the Maoists win with majority there is a risk of the country falling into the trap of another type of autocracy. However, at present it is safe to assume that the Maoists wouldn't go back to jungle even if they lose elections because they have already given up the mentality of winning the power through the gun. On the other hand the Maoists are not expected to gain majority, because people are not going to accept them so easily. They will be haunted

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by their bag of violence, murder, extortion, rape and all sorts of excesses, which people have not forgotten. So, it is safe to be optimist. Most likely, Nepal will institutionalize peace in 2007 and it will move forward for economic growth like its neighbors India and China.

India in 2006

perceived as programmes of 'affirmative action' by the country's urban middle classes. Doctors at New Delhi's prestigious All India Institute of Medical Sciences were among those who vociferously protested the government's policy of reserving seats in educational institutions describing these as instances of 'negative discrimination' that were inimical to establishing a 'meritorious' society. Nevertheless, large sections of the political establishment supported these policies.

Paranjoy Guha Thakurta During 2006, the rapid growth rate of the Indian economy attracted considered international attention. The centre-left United Progressive Alliance (UPA) coalition government headed by Prime Minister Manmohan Singh completed half its five-year term without too many hiccups. Since the survival of the federal government in New Delhi depends on crucial 'outside' support extended by the Left to the Congress partyled UPA, the influence of the Communists on policy formulation remained rather pronounced. With the principal opposition party, the right-wing Hindu nationalist Bharatiya Janata Party, in the throes of an apparent internal power struggle, much of the opposition political space was ironically sought to be appropriated by the Left. Congress President Sonia Gandhi continued to call the shots from behind the scenes while not holding any official position. Among the important dignitaries who visited India during the year was China's President Hu Jintao. This was the first visit in a decade by the head-of-state of the world's most populous country to the world's largest democracy. The visit did not resolve the long-standing territorial disputes between India and China, but on the trade and economic spheres, two of the fastest-growing economies perceived opportunities to go beyond competition and collaborate with each other. India signed a controversial civilian nuclear cooperation agreement with the United States, even as New Delhi took a tough position against America in the World Trade Organization (WTO) on the issue of farm subsidies. At the same time, India took South-South economic cooperation more seriously by seeking to forger closer links with South Africa and Brazil. In Mumbai, India's largest port and commercial hub, a series of bomb explosions inside crowded trains in July killed nearly 200 commuters. The terrorist attack strained the country's relations with Pakistan (that had appeared to be slowly improving) because the Indian government suspects that Pakistan has covertly assisted those responsible for the blasts. New Delhi maintained more than an armslength distance with Colombo as ethnic unrest escalated in Sri Lanka, continued to hold Dacca responsible for 'supporting' militant groups and separatist organizations in the north-eastern part of the country in the run-up to elections in Bangladesh and rather belatedly welcomed the demise of the monarchy in Nepal. The UPA government's decision to reserve seats in institutions of higher learning to those belonging to 'other backward classes' or OBCs (a euphemism for individuals belonging to the middle castes) as well as its attempts to convince private corporate bodies to recruit more employees from the socially-underprivileged scheduled castes and scheduled tribes (comprising roughly a fourth of the Indian population), were not

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Two unusual films, 'Rang De Basanti' and 'Lage Raho Munnabhai', with strong political messages became extremely popular, especially among the country's youth who were presumed apolitical. The first film portrayed examples of young people relearning their history and expressing violent rage against corruption in high places, while the second movie sought to spread the message of the 'father of the nation' Mohandas Karamchand Gandhi on fighting injustice in a non-violent manner in a contemporary context. (India is the world's largest producer of feature films and its demographic profile places it among the youngest countries on the planet.) The question of whether elected representatives of the people should be allowed to hold 'offices of profit' created a major political storm in the country. On the economic front, for the first time in 2006, resident Indians invested more outside the country than the amount that flowed in as foreign direct investment a consequence of the pro-liberalization policies of the Union government and the fact that India holds hard currency reserves in excess of a record US $ 160 billion. The competitive abilities of the country's entrepreneurs were recognized worldwide. Lakshmi Niwas Mittal acquired Arcelor, Europe's largest steel-making conglomerate, making him the head of the world's largest steel manufacturing group amidst allegations of racial discrimination. The Tata group put in a bid to take over the AngloDutch steel major Corus and liquor baron Vijay Mallya expressed his ambitions to control 10 per cent of the world's alcohol business. Despite persistent poverty (one out of four Indians lives below the internationallydefined poverty line of one US dollar a day), widening inequalities (the top ten per cent of the population hold more than half the nation's total wealth) and sharp regional imbalances (with the north and the east lagging behind the rest of the country) sixty years after India became politically independent in 1947, the country was extolled as an incredible 'growth story' by international commentators. For the first time ever, the Indian economy grew by an annual average of 8 per cent four years in a row. The rate of growth of gross domestic product (GDP) could go up even higher. India's economic growth was, however, neither even nor inclusive. Whereas manufacturing industry as well as the services sector each burgeoned by around 8-12 per cent a year in this period, agricultural production stagnated or barely grew by 1.5-2 per cent. Though the share of agriculture in the country's GDP has come down from roughly 40 per cent to 20 per cent over the last two decades, the share of the Indian population directly or indirectly dependent on agriculture for their livelihood has decreased at a relatively slower pace over this period, from around 70 per cent to 60 per cent.

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As malls and skyscrapers of concrete and steel mushroomed across urban India, thousands of farmers committed suicide in villages because of their inability to repay loans obtained from usurious moneylenders. The gap between the rich and the poor in India did not narrow perceptively two out of three individuals in many metropolitan areas owned mobile phones city as large tracts of rural India remained in darkness, literally, denied access to power and basic amenities like primary health-care, basic sanitation, clean drinking water and elementary education.

tied up with Brazil and South Africa at a summit meeting in September. At the conclusion of the meeting, Indian Prime Minister Manmohan Singh, the President of Brazil Luiz InĂĄcio Lula da Silva and South African President Thabo Mbeki adopted a declaration on a range of issues: from economic cooperation, reforming the United Nations, international terrorism and the Millennium Development Goals to human rights, peaceful uses of nuclear energy and the conflict among Israel, Palestine and Lebanon.

More than half of those who join school do not complete eight years of education and many schools in rural areas remain without a teacher or a blackboard, leave alone a nutritious mid-day meal for students. The student drop-out rate in India is currently the highest in Asia. At the same time, institutions of higher education in the country such as the Indian Institutes of Technology and the Indian Institutes of Management continue to attract the best students, many of whom end up working abroad. Among such bright students are computer software engineers whose talents are lauded in developed countries. India's share of world trade in information technology products and services has grown impressively from next to nothing in 1995 to over 17 per cent a decade later. As India's talented computer engineers claim that they are no longer 'cyber coolies' but 'knowledge workers', the country remains highly stratified and hierarchical. It has become a clichĂŠ to remark that India entered the new millennium with one-third of the world's computer software engineers and one-fourth of the world's malnourished.

The visit of Saudi Arabia's King Abdullah bin Abdulaziz to India, after almost half a century, raised high expectations among the intelligentsia of the six Gulf Cooperation Council countries, which saw it as a path-breaking event that could set the course of a new round of engagements between the oil-rich Middle East and India that imports three-fourth of its requirement of crude oil. Despite apparent US opposition, India, Pakistan and Iraq agreed in principle to build a cross-country natural gas pipeline. However, a sticking point remains the price of gas that Iran wants and which is considered too high by both India and Pakistan. Meanwhile, the interest shown by Russia in helping the three countries build this ambitious gas pipeline may see this project come through in the foreseeable future.

The UPA government started an ambitious rural employment guarantee scheme in early-2006 that has, 'for the first time in the world', tried to make the right to work a legally enforceable right. The government claims the scheme is the world's 'biggest social security' programme. The employment guarantee programme has been welcomed by the Left while its critics have argued that the scheme could be misused by corrupt official functionaries. A new law that provides citizens the right to information is aimed at making Indian society more transparent thereby reducing the incidence of corruption. While there is no dearth of critics of these two laws and whereas doubts have been expressed about how well the legislation would be implemented on the ground, the job guarantee programme as well as the right to information act have the potential to significantly transform Indian society. In view of the agrarian crisis in large parts of India, it is not surprising that there has been considerable opposition to fertile farmland being acquired to set up industries. The government's policy of setting up special economic zones has been opposed on the ground that such exclusive areas for export-oriented industrial ventures set up with the help of generous tax concessions would end up becoming enclaves of affluence in a sea of deprivation. In Communist-run West Bengal, there was a huge hue and cry when the local government allegedly forced farmers to sell their land for a car factory. The stagnation in agriculture indirectly prompted the Indian government to take a tough position in the Doha round of negotiations at the WTO against subsidies given to farmers by the US government. India managed to rally much of the developing world on this issue resulting in multilateral trade negotiations breaking down. India

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More significantly, reversing decades of American policy, President George W. Bush ushered India into the world's 'exclusive' nuclear club in March 2006 by signing a landmark agreement to share nuclear reactor technology and enriched uranium fuel in return for New Delhi's acceptance of international safeguards. India agreed to separate its tightly-entwined nuclear industry -- declaring 14 reactors as commercial facilities and eight as military -- and consented for the first time to open its civilian nuclear facilities to international inspections. The deal, approved by US lawmakers in the Senate and Congress, remains rather controversial in India with both the political Right and the Left expressing apprehensions that the UPA government would compromise the country's sovereignty and strategic options, allegations that are predictably refuted by functionaries of the Manmohan Singh government, including the Prime Minister himself. The outcome of the April-May elections to the provincial legislative assemblies of states such as Tamil Nadu, Kerala, Assam and West Bengal, did not weaken the UPA government in New Delhi although the Congress party lost to the Left Front in Kerala, failed to improve its position in West Bengal and barely scraped through in Assam. West Bengal continued to remain a unique state in the country of 28 states in which anti-incumbency sentiments were conspicuous by their absence. The Left Front improved its position in the West Bengal assembly and won elections for the seventh time in succession since 1977 a world record of sorts with the non-Left vote getting completely split down the middle. (Since 1996, between 40 per cent and 50 per cent of legislators at the central and state levels fail to get re-elected, indicating strong antiincumbency sentiments in most parts of the country.) Jammu & Kashmir, the northern-most state in India and the only one with a Muslimmajority, remains a troubled area. Hardly a week goes by when there are no major incidents of violence. Left-wing extremist violence showed few signs of abating in a

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large geographical area in east, central and southern India, often dubbed as the 'red corridor' starting from Nepal in the north and running through parts of the provinces of Bihar, Jharkhand, Chhatisgarh, West Bengal, Orissa and Andhra Pradesh from the Himalayas to the Bay of Bengal. Prime Minister Singh described the Naxalite problem as India's main internal security problem.

Book Review

An important trend that was witnessed in India during 2006 was growing judicial activism. For the first time, a Union Cabinet minister (Shibu Soren) was jailed and sentenced to life imprisonment for conspiring to kill his personal secretary 12 years earlier. Other high-profile criminal cases saw the Indian judiciary playing a proactive role in prosecuting influential individuals, including the children of prominent politicians and police officers. India's independent media too played an important role in raising public awareness on these and other issues. While around 300 million out of more than a billion Indians continue to live in abject poverty, a similar number belonging to the affluent and upper-middle classes (more or less equal to the population of the US) are increasingly flaunting their wealth and arrogantly displaying their belief in a culture of consumerism. The second mostpopulous nation-state on the planet remains true to its reputation of being a country of amazing contrasts.

Yoginder Sikand From Behind the Curtain: A Study of a Girls' Madrasa in India Author: Mareike Jule Winkelmann Publisher: University of Amsterdam Press, Amsterdam Year: 2005 Pp: 175 ISBN: 90-5356-907-3

hile considerable literature exists on boys' madrasas in South Asia, almost nothing has been written about madrasas for girls, a relatively new but expanding phenomenon. This book is probably the first published work on girls' madrasas in India. In contrast to most other writings on madrasa education, the book is a detailed, empirically grounded study of a single madrasa, providing interesting ethnographic details and insights that are often missing in generalised accounts of madrasas. The focus of the study is on the role of girls' madrasas in fashioning notions of what the author terms as 'Islamic womanhood'. For this purpose, the author takes as her case study one such madrasa, which she refers to as the Madrasat ul-Niswan (not its real name). The madrasa, founded in 1996, is located in the Basti Hazrat Nizamuddin Auliya, a largely Muslim and relatively impoverished locality in New Delhi. The author argues that the establishment and expansion of girls' madrasas in India must be seen in a wider context, reflecting the influence of earlier Muslim reformist discourses as well as other complex factors relating to changing notions of Muslim community identity in post-1947 India. These include the fear of cultural absorption or Hinduisation, advocated, in different ways by the state as well as right-wing Hindu groups, processes of upward social mobility expressed in the form of efforts of 'low' caste Muslim groups seeking to emulate the norms associated traditionally with the ashraf, Muslims who claim foreign origin, as well as efforts to promote alternate and, in some senses, more culturally appropriate forms of 'modernity'. Besides, because most of these madrasas provide free education, they are a particularly attractive option for the largely poor and lower-middle class Muslim families whose children study in them. Girls madrasas of the sort the book looks at also reflect a certain form of 'Islamic womanhood' that is crucial to a particular form of Muslim identity that their founders

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and managers wish to promote. They are seen by those who control them as an appropriate form of education for Muslim girls, being routinely contrasted with 'regular' schools that are often seen in negative terms: as promoting licentiousness, worldliness, immorality, competition, irreligiousness and 'Hindu' values. The author relates this to the worldview of the traditionalist 'ulama, to the Indian Muslim minority predicament and to fears of Muslim identity being under threat from a host of quarters. The madrasa the author studies is associated with the Deobandi-inspired preaching movement, the Tablighi Jamaat. The Tablighis have a particular understanding of normative Islamic womanhood, which is clearly reflected in the curriculum, educational ideals and mechanisms of control and disciplining employed in the madrasa. The ideal Muslim woman as the Tablighis see her, the author says, must observe strict pardah and not appear or even speak before 'strange' (ghayr) males. Her primary sphere is her home and her principal role in life is being a good, dutiful mother and wife in conformity with the rules and principles laid down in Tablighi tracts and in the widely-read treatise for women, the Bahishti Zewar, penned by the Deobandi scholar Ashraf Ali Thanvi. At the same time, the Tablighis also insist that Muslim women have the same right and obligation to receive education as men do, and they offer the example of certain learned females of early Islamic history as models for Muslim women to emulate. The author then sets about discussing the madrasa, its managers, teachers and students. The madrasa is housed in a cramped structure, and consists of only a few rooms, which serve as classrooms, dining halls and dormitories. This reflects the fact that its founders are of humble origins as well as the fact that the state has done little at all to promote education in this largely Muslim locality. The founder of the madrasa, the manager and several of what the author calls 'core families' associated with the madrasa are from the 'low' caste Ansari community, whose traditional occupation is weaving. They are all associated with the Tablighi Jamaat, which provides them a unified worldview as well as connections for funds and students for the madrasa. The madrasa's founder teaches at the Kashf ul-'Ulum madrasa attached to the Tablighi Markaz, the Tablighi Jamaat's international headquarters, situated in the vicinity of the girls' madrasa. The female principal of the madrasa is the daughter of its founder and wife of its manager, reflecting the fact that many madrasas are associated with particular families and are, in a sense, family concerns. The majority of the madrasa's roughly 200 students and many of its teachers, the author writes, come from lower or lower-middle class families. Most of them are also of 'low' caste origin. In many cases, their male relatives as involved in the Tablighi Jamaat and it is through them that they first heard of the madrasa. The students range from between twelve and seventeen years of age. All the students reside inside the madrasa itself, most of them being from outside Delhi. For many of them education in the madrasa is a socially sanctioned means for postponing an early marriage even as it opens to them prospects of finding a 'better' groom, including, some of them hope, a husband who works abroad, preferably in the Gulf.

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As in other 'traditionalist' madrasas of this sort, the syllabus of the madrasa is based on the dars-e nizami, the somewhat standardised syllabus used in most Indian madrasas for men. Yet, it departs in some significant respects from the dars-e nizami, reflecting, the author says, what the male managers of the madrasa feel Muslim women ought to learn, at the same time as they insist that Islam ordains education as much for females as for males. Thus, the focus of the teaching of fiqh or Islamic jurisprudence is on issues specifically related to females, in addition to rules about prayer and other ritual obligations. The marasa also claims to teach English, Hindi and Science, but the last two subjects, the author says, are actually conspicuous by their absence, as a result, the author was told, of the inability of the madrasa to acquire the services of good teachers for these subjects. The teaching of English is, the author comments, poor and inadequate, and even the teacher employed for the purpose is not comfortable in the language. Further, the texts used for the subject do not readily appeal to the students, as they reflect a very different (middle-class, Western and Hindu) ethos, with which the students are not familiar. Moreover, the author adds, the texts, as well as English as a language, are also somehow associated with what is seen as an 'un-Islamic' milieu, which is seen with some degree of suspicion and scorn. Yet, the author adds, the males in-charge of the madrasa believe that Muslim girls should acquire 'modern' education, including knowledge of English, till the age of puberty, after which they should confine themselves to what is seen as Islamic education. In fact, the daughter of the principal herself studies in the Delhi Public School, a school run by a non-Muslim educational foundation, situated not far from the madrasa. However, at the same time, the author notes that few of the teachers and even fewer of the students have any substantial exposure to and understanding of non-religious subjects and their non-Muslim surroundings, while, being groomed in a particular fashion, they are indeed aware of happenings in the 'Muslim world', including in far-off Iraq and Palestine. This, she suggests, is perhaps a reflection of the worldview cultivated by the Tablighi Jamaat, which displays a certain indifference, if not hostility, to things it considers as 'un-Islamic'. In addition to an interesting discussion of the formal curriculum of the madrasa, the author describes in detail what she labels as the madrasa's 'informal curriculum'. This is the set of codes, values and norms that the madrasa seeks to inculcate in the students through what the author refers to as 'disciplinary mechanisms' in order to produce a particular sense of self and morality. These include intricate rules of morality and culture related to Tablighi notions of Islamic womanhood in line with what the madrasa sees as its 'civilising mission'. These are not taught just as a subject but, rather, also permeate all academic and other aspects of life in the madrasa. These are reinforced by daily readings from the Fazail-i Amal, a ponderous tome of the advice literature genre used in Tablighi circles, that specifies carefully calculated amounts of merit supposedly acquired for every pious act. Girls are taught that the acquisition of the knowledge that they receive in the madrasa is a religious duty and mission, which would earn them merit in the Hereafter. This is contrasted with the education imparted in 'regular' schools, which is seen as focussing on this world alone.

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Teachers see their work in similar missionary terms and their approach to their students is generally marked by concern rather than criticism. Aggressive competition is not encouraged, and girls help each other in their work, for they see themselves as engaged in a religious task. Simplicity is stressed and lavish weddings and other 'un-Islamic' customs are strictly frowned upon. As part of the 'disciplinary mechanisms' deployed by the madrasa, particular focus is paid to certain understandings of modesty, expressed, for instance, in strict rules regarding pardah or gender segregation. The girls are not allowed to step out of the narrow confines of the madrasa at any time, being permitted to do so only during vacations or on emergencies, and that too in the company of mehram males, close relatives whom they are not allowed by Islamic law to marry. Their voices, too, must be kept in pardah from 'strange' males. No men may enter the portals of the madrasa. The madrasa's only male teacher is not allowed to see them girls and nor are they allowed to see him: he speaks to them through a microphone while seated in a different floor of the school building. Evaluating the sense of self and the particular form of Islamic womanhood that the madrasa seeks to promote, the author engages in an interesting discussion of what precisely this means for the questions of autonomy, agency, subordination and the possible public roles for women that the madrasa envisages. She argues that the dominant feminist notion of agency, in the sense of working to promote a certain vision of 'progressive' change, is not applicable in this context. While some might remark that the madrasa is geared to promoting a conservative notion of Islamic womanhood, rooted in a patriarchal worldview, the author withholds her judgment. Instead, she says, the madrasa promotes an alternate form of agency and a certain limited pubic role for its students: the girls are given the opportunity to enter a restricted section of the public domainthat of other Muslim womenby reciting religious poetry, delivering lectures on religious topics (often related particularly to women) and preaching the doctrines of the Tablighi Jamaat to Muslim women at special Thursday meetings organised at the madrasa, which, the author says, also provides them one of the few socially accepted means of emotional expression in public. In this limited public role the girls believe they are following the footsteps of noted early Muslim women and are engaged in a socially useful and religiously important missionthat of reforming Muslim society, for which they expect rewards in the afterlife. Likewise, although their future career options are restrictedmany of them will simply go on to get married and, the madrasa managers hope, become good Muslim wives and motherssome of them hope to become teachers in girls' madrasas or engage in Tabligh work among Muslim women, thus affording them a certain public presence. Yet, the author also adds, the primary role of the education that the girls receive is to prepare them, not for participation in the public sphere, but, rather, for domesticity, as good Muslim wives and mothers as the Tablighi Jamaat defines these roles.

This is part of the process of what sociologists have termed Ashrafisationemulation by 'lower' status Muslim groups of the norms and cultural codes traditionally associated with the ashraf, Muslims who claim foreign, and, therefore, 'higher', social status for themselves. In addition, the education imparted at the madrasa also enables those who receive it to assert a subaltern counter-culture and a 'counter-public', rooted in a particular form of Muslim-ness that is set and, in many ways, defined against the dominant non-Muslim 'Other', including the 'West' and the Hindus. If the latter two are seen as more powerful, in the worldly sense, than Muslims, Muslims who abide strictly by the dictates of the traditionalist 'ulama, as the madrasa encourages its students to, can take pride in the belief that they are following God's path, and, in contrast to the 'Other', will probably be saved on the Day of Judgment. Although the madrasa aims to be what the author labels as a 'total institution', governing every conceivable aspect of the students' lives through its various 'disciplinary mechanisms', some students devise their own subtle means to articulate their individuality within the given constraints. Thus, while the madrasa, in line with the Tablighi Jamaat, frowns on all 'un-Islamic' customs, some students expressed to the author their delight at the Hindu festival of lights, Diwali. While the madrasa frowns upon photography, seeing it as 'un-Islamic', the principal of the madrasa herself admitted to keeping passport sized pictures of her children with her. The madrasa, in line with the general Deobandi position, is opposed to birth control but some teachers evinced interest in knowing more about child spacing methods. And so on. In this way, the author argues, the madrasa's aim of serving as a 'total institution' is only partly successful, being resisted, at certain points, by both teachers and students. This pioneering work on girls' madrasas is a welcome addition to the growing literature on madrasas in South Asia. The sense of balance and empathy that is evident throughout the text is remarkable, as the author seeks to provide an insight into the ways in which those associated with the madrasa themselves imagine their world. That said, some lacunae remain. The author's discussion of the form of 'Islamic womanhood' that the Tablighis seek to promote is interesting, although somewhat inadequate. A close examination of Tablighi texts about the ideal Muslim woman (and the ideal Muslim man) would have made the discussion more grounded and meaningful. A discussion of ongoing debates among Muslims in India today on appropriate forms of education for girls would have also added to the value of this work, highlighting the fact that the Tablighi approach that the Madrasat ul-Niswan advocates is just one of many, each of which defines itself as Islamically 'authentic'.

At the same time, for these girls, most of whom come from poor, 'low' caste Muslim families, the sort of education they receive will perhaps enable them, and, through them, their families, to assert a higher status for themselves within their communities.

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