Sunday, September 15, 2013

Beyond smarts . . .

Reading the New York Times (30th Aug 2013) article, "Why India's economy is stumbling," should remind us of the challenge we face and how much work it demands. (For example: How prepared are we for 2015 or the Asean integration given that "Singapore, Malaysia and Thailand dominate inter-Asean trade at about 70 percent," as reported by Business Mirror, 2nd Sept 2013, when like India we are "deficient in both transparent rules and reliable infrastructure," imperative to a manufacturing industry? And like India, we remain poverty stricken!) And it would remind me of the decade when I covered the region, and how the countries then compared and contrasted. And the article, sadly, brings no surprise. Yet, there is no question that the Indians are very smart people. But the common good demands more than smarts, i.e., a community sense. (Which reminds me of a Jesuit friend [May he rest in peace!] who bent my ear about "reality" and still I was clueless; and so he would define it simply as not being "plastic." Apparently, I wasn't alone in my cluelessness because he would chuckle and ask me to look around, "Do you see "plastic"? And not surprisingly Cardinal Tagle would ask us to walk with the poor in calling attention to the pork scam?)
Reads the New York Times article by Arvind Subramanian: But India’s problems have deep and stubborn origins of the country’s own making. The current government, which took office in 2004, has made two fundamental errors. First, it assumed that growth was on autopilot and failed to address serious structural problems. Second, flush with revenues, it began major redistribution programs, neglecting their consequences: higher fiscal and trade deficits.”
“Structural problems were inherent in India’s unusual model of economic development, which relied on a limited pool of skilled labor rather than an abundant supply of cheap, unskilled, semiliterate labor. This meant that India specialized in call centers, writing software for European companies and providing back-office services for American health insurers and law firms and the like, rather than in a manufacturing model. Other economies that have developed successfully — Taiwan, Singapore, South Korea and China — relied in their early years on manufacturing, which provided more jobs for the poor.”
“Two decades of double-digit growth in pay for skilled labor have caused wages to rise and have chipped away at India’s competitive advantage. Countries like the Philippines have emerged as attractive alternatives for outsourcing. India’s higher-education system is not generating enough talent to meet the demand for higher skills. Worst of all, India is failing to make full use of the estimated one million low-skilled workers who enter the job market every month.”
“Manufacturing requires transparent rules and reliable infrastructure. India is deficient in both. High-profile scandals over the allocation of mobile broadband spectrum, coal and land have undermined confidence in the government. If land cannot be easily acquired and coal supplies easily guaranteed, the private sector will shy away from investing in the power grid. Irregular electricity holds back investments in factories . . . India’s panoply of regulations, including inflexible labor laws, discourages companies from expanding. As they grow, large Indian businesses prefer to substitute machines for unskilled labor. During China’s three-decade boom (1978-2010), manufacturing accounted for about 34 percent of China’s economy. In India, this number peaked at 17 percent in 1995 and is now around 14 percent.”
“In fairness, poverty has sharply declined over the last three decades, to about 20 percent from around 50 percent. But since the greatest beneficiaries were the highly skilled and talented, the Indian public has demanded that growth be more inclusive. Democratic and competitive politics have compelled politicians to address this challenge, and revenues from buoyant growth provided the means to do so . . . Thus, India provided guarantees of rural employment and kept up subsidies to the poor for food, power, fuel and fertilizer. The subsidies consume as much as 2.7 percent of gross domestic product, but corruption and inefficient administration have meant that the most needy often don’t reap the benefits.”
Do we read much of PHL in the India experience? Do we wish to learn from them? For example, "inclusive" which has a nice ring to it must be given substance and meaning – and not be held hostage by platitudes and "pa pogi,” i.e., tooting our horn with our GDP numbers because benchmarking is foreign to us? We need a generation to right the PHL ship but not at the rate we’re shooting ourselves in the foot?

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